What Is a Condotel?

Father, mother and two young daughters walking into hotel unit
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DEFINITION
A condotel is a hybrid between a condominium and a hotel that lets owners enjoy the unit (and the property’s on-site amenities) themselves as well as generate income by offering it as a short-term rental property.

A condotel is just what it sounds like—a cross between a condominium and a hotel. Individual owners have units, but they have access to hotel amenities like housekeeping, a concierge, and front desk service. What also makes a condotel unique is that owners can not only occupy the unit personally as a vacation home, but they can also rent it out short-term to vacationers who want a hotel experience.

Learn more about how condotels work, the benefits and drawbacks, and if it’s something worth considering.

Definition and Examples of Condotel

A condotel is a hybrid between a condominium and a hotel that lets owners enjoy the unit (and the property’s on-site amenities) themselves as well as generate income by offering it as a short-term rental property.

  • Alternate name: Condo-hotel units

Condotel owners purchase the property just as they would with other types of real estate, and they pay maintenance fees to the hotel management company for the upkeep of shared areas. Owners also agree to let the hotel rent out the unit, and the hotel and owner split the revenue at a set percentage.

How Condotels Work

The concept of condotels began as a way for hotel builders to offset some of the risks of investing in large, luxury properties. On the buyer’s side, they offer an opportunity to purchase a luxury hotel vacation experience while agreeing to rent out the unit for an agreed-upon amount of time per year.

Many of the major luxury hotel chains manage condotels, mostly in prime vacation locations like Florida, New York, Las Vegas, Hawaii, and other major metro areas or tourist hotspots.

Condotel vs. Condominium

Despite their similar names, condotels should not be confused with condominiums. Here are some of their key differences.

Condotel Condominium
Generates short-term rental income Cannot rent out short-term
Includes housekeeping, concierge, and other hotel amenities May have some shared amenities (pools, tennis courts, etc.)
Government-backed conventional mortgage loans are not available Can use traditional home loan programs
Can purchase as a vacation home Can purchase as a primary residence or a second home
Comes fully furnished but with very little flexibility to personalize Owners have full control of the interior look and design of their unit

Pros and Cons of Condotels

Before jumping into condotel life, consider both the benefits and the drawbacks of owning such a unit. 

Pros
    • Live the luxury hotel life
    • Earn additional income without the hassle

Cons
    • Many complex details to work out
    • Financing the purchase can be a challenge
    • Income is inconsistent

Pros Explained

  • Live the luxury hotel life: Get the experience of living in a hotel and enjoying all of its amenities, from housekeeping and concierge services to a pool and fitness center. If you’re looking for a vacation home without any upkeep, this could be a great option.
  • Earn additional income without the hassle: Are you thinking of venturing into the short-term rental market? It can be a lot of work to market your home, find renters, and then have to deal with all the transactional details. Condotels take those burdens off your hands in exchange for a percentage of the revenue. Your unit will become part of the hotel’s public rental offers, and they will handle the marketing, bookings, transaction, and maintenance of the property.

Some condotels may allow you to book rentals yourself or through platforms like Airbnb. Determine if you’re someone who prefers to have more control of these bookings.

Cons Explained

  • Many complex details to work out: There is usually a lot of fine print involved with a condotel purchase. Each condotel has its own rules and regulations, and rental agreements can vary widely. For example, some buildings might stipulate that owners must rent the unit during peak rental season so they can get the highest possible rates. Be sure you do a lot of research, and work with someone knowledgeable who can guide you on what to look for regarding maintenance fees, how rental revenue is split, who manages the property, rental restrictions, etc.
  • Financing the purchase can be a challenge: You won’t be able to get a traditional mortgage for a condotel purchase. That’s because a condotel is “primarily transient in nature,” meaning its predominant use is as a short-term rental of fewer than 30 days, as opposed to a regular condominium that is used as a primary residence.
  • Income is inconsistent: Condotels let you earn passive income that can help offset your costs, but don’t expect to get rich. If you’re relying on rental income to cover bills, it can be a risky endeavor. Hotel rates can fluctuate widely based on seasonality or travel trends.

Condotels tend to be available and have more income potential in popular tourist destinations. Keep that in mind if you’re looking for the ideal place for your vacation home.

Is a Condotel Worth It?

If you’re someone who wants a vacation home that offers luxury hotel amenities plus the opportunity for some rental income, then a condotel could be a good purchase for you.

Just remember there may be restrictions on exactly when you can be there. Income potential is highly dependent on tourism trends, economic conditions, and a slew of outside factors out of your control—everything from hurricanes to pandemics. Furthermore, if you’re purchasing a condotel, don’t expect to have access to traditional home loan programs.

Key Takeaways

  • A condotel is a hybrid of a hotel and condominium in which a person owns a unit but also rents it out to vacationers.
  • Condotels are meant to be vacation homes that offer hotel amenities, plus a chance to generate some passive income.
  • Buying a condotel can be a risk with lots of fine print that varies by property.
  • You can’t use traditional financing to buy a condotel.

Article Sources

  1. Condo Hotel Center. “Condo Hotel FAQs.” Accessed Dec. 9, 2021.

  2. Freddie Mac. “Condominium Project Review and General Condominium Project Eligibility Requirements.” Accessed Dec. 9, 2021.

  3. Fannie Mae. “Selling Guide.” Accessed Dec. 9, 2021.