Hotel residences: All the perks with none of the work
— -- For most vacationers, second homes are an alternative to staying in hotels. But for a rapidly growing minority, hotels are their second homes.
The hotel-residences trend is notably different from its predecessors such as fractional/time share hotel units, which are not wholly owned, or condo hotels, which are wholly owned hotel rooms without, for example, kitchens. Not only do hotel residences have kitchens and everything else an owner would expect in a typical abode, they also include amenities such as maid and room service, plus restaurants, spas and gyms.
These residences offer truly turn-key second-home ownership and, in some cases, can create an income stream by letting the hotel rent the apartment when the owner is not there. Another advantage is that some hotel companies allow owners to trade and use residences at other locations.
"People like the services. You buy it, you don't have to worry about it," says Kimberly Hehir, vice president of strategic planning for Leading Hotels of the World, which sees more of its member hotels going the residence route.
Typically, residences are on the top floors of hotels, reachable by controlled-access elevators, but make up only a fraction of the building. For instance, the Park Hyatt Beaver Creek in Colorado has 15 residences atop 190 hotel rooms.
The chains that have been most successful with the concept are luxury and boutique brands. Hehir singles out Ritz-Carlton, along with the likes of Auberge Resorts, Setai, Conrad, Four Seasons and St. Regis. However, the idea also is catching on with midmarket names such as Hilton, which recently launched its Hilton Club concept in New York City.
"I think it's a great idea, and if I wanted a second home in a place like Las Vegas, I would do it," says real estate and hotel investor David Kelsey, president of Hamilton Capital. "It's great to have the services and the spa. Also notably, I haven't seen any examples of it failing, or any hotels getting into trouble with it, which happens in every other sector of the hotel and real-estate business."
Three considerations for buying hotel residences:
•Location. Like the luxury hotels that gave birth to the concept, hotel residences originally were found in upscale beach and ski destinations and large cities. Hot spots have been Aspen/Snowmass, Colo.; Jackson, Wyo.; Miami; Las Vegas; New York City and Mexico, but the trend quickly has spread. Conrad Hotels, for example, built 15 residences in its new Indianapolis property. "The majority sold before the hotel was even completed," says general manager Greg Tinsley. "We virtually have no competition in the city as there is nothing else like it here." Likewise, Westin has rolled out residences in Detroit, Tampa Bay, Raleigh, N.C., and Edina, Minn., a suburb of Minneapolis.
•Know what you're getting into. According to real-estate and hotel expert Kimberly Hehir, important questions to ask are: How easy is it to sell or get out of? Are you allowed to rent your unit, and if so, how easy is it? Are guests allowed to use it when you're not there? The most important question probably is about hidden fees: "People sometimes think they're buying a complete package, then get hit with all these à la carte fees for services and management."
• Nail down definition details. Many hotel properties define residences as synonymous with fractional or time-share units. The latter are shared with other owners, so you cannot redecorate or make changes. Alternatively, some developers are constructing residence properties minus the hotel. Aspen's most famous luxury hotel, Little Nell, for example, is building the Little Nell Residences in neighboring Snowmass, a development that will include hotel-style amenities but is hard to differentiate from what used to be called simply a luxury apartment building.