I’ll share one more idea from Las Vegas, then I’m going back home to where the men are men and the women are symmetrical.
Start with this: Condotels. This is the utterly brilliant scheme by which I reap the financial benefits of owning a hotel suite while foisting off on you all the risks of owning that suite. When business is slow, neither one of us makes money, but you incur all the costs. Very gracious of you to underwrite my business in this way.
This of course is the time-honored business strategy that I call Socializing the Risk. I may give up some portion of the profits I might have made, but I absolve myself of all the risks associated with ownership while retaining some, most or even all of the predictable rewards. You in your turn acquire all right, title and interest in and to the unpredictable rewards — e.g., future appreciation — along with all of the costs and downside risks of ownership.
Which of us is getting the better deal?
Who pre-printed the paperwork?
In many of the newer, larger casino hotel resorts, you will see fake structures like this. This is at Paris, but you can see the same kind of faux-cade at The Venetian or Caesar’s Palace or Planet Hollywood. What we have is a ground-floor retail establishment with apartments overhead, just like back in Europe or Olde Boston Towne.
Here’s my question: Why are those apartments fake?
Why aren’t they condos or condotels or even just hotel rooms? Why not condotel whole structures, with the resort deciding who gets to lease the retail space? Living inside a casino would be too loud and too smoky for many people, but there are others who would love it, if not as a full-time residence then as a getaway home.
This retro mode of residential-space-over-retail-space is already happening at Kierland Commons-style outdoor malls. You can find it in Las Vegas at Green Valley Ranch, and no doubt elsewhere. It’s too late to do it in extant resorts, but it might be a fun idea to try in newly-built facilities.
Too much Disney for my tastes, but that’s what makes horse races. And for a short stay, living over a shop right on the casino or shopping mall floor might be a hoot.
Lisa Merritt says:
Thank you Greg, for waking me up! I realize that I have been a small-time real estate investor. I have nearly bought individual condo hotel units in the past, but never did it occur to me to look at it from the perspective of the owner of the entire hotel. Hah!
Thanks, Lisa
PS – There’s an entire hotel in St. Pete, FL for sale on my site. Want to invest?
July 6, 2007 — 8:32 am
Brian Brady says:
“Living inside a casino would be too loud and too smoky for many people, but there are others who would love it, if not as a full-time residence then as a getaway home”
Yep. Not only would they love it, they’d pay a huge premium to be “near” the action. Great observation.
I made a comment last month when I was at the Venetian (I’ve also been to the Paris). I overheard a cornfed tourist describing to his wife that the best thing about the Venetian was that the water didn’t smell. Then it hit me.
Why would anyone ever go to Europe? It’s all going to be right on the Strip in the next few years. Parisians hate Americans but Las Vegans love us. The canals at the Venetian Resort don’t smell. Everybody speaks English in LV. Europe is expensive, dirty and takes 6-8 hours to get there.
Who needs Europe anyway?
July 6, 2007 — 8:58 am
ed says:
HI Greg:
Yes you have seen what makes timeshares and the newest way to seperate you from your money “Condotels” one the hottest things going.
I cant belive poeple think its a good deal to give away 50% of the rev, plus mgt fees, plus association and maintence fees to some developer. Also keep in midn that the hotel brand names are mgt companies in most cases and like all comapnies some are bad and some are good.
Also it remains to be seen if this assest class does indeed act like tradional real estate and appreciate. In any event its a the gift that keeps on giving if your adeveloper of these properties. Nothing like a long term revene residual stream.
July 6, 2007 — 10:24 am
Benjamin Bach says:
Hey Greg
‘Condotels’ are all the rage up north, specifically in Toronto. Not all of them are fairing well, but the offerings from Four Seasons and Ritz Carlton should fare better than old Harry Stinson (“Toronto’s Donald Trump”) over at 1 King West.
July 6, 2007 — 10:35 am
Robert Kerr says:
FYI, typically, the 2 floors directly above the casino floor are filled with casino-related equipment and personnel: the soft count room(s), data center(s), surveillance equipment and the people who perform thosose duties.
So, in the case of Paris, that’s just one floor available for occupancy.
July 6, 2007 — 7:52 pm
Charleston real estate blog says:
Greg, great point. I thought the deck was stacked against the buyer of a condotel when they were first introduced in Charleston. Now the latest and greatest real estate innovation is garages for sale at the airport. And I’m supposed to want to buy my own garage for what reason?
July 8, 2007 — 5:05 am