After spending the week researching hotel condo developments in downtown Chicago, we realize that it is a venture that is not for the faint-hearted. The idea is so new to Chicago and there are many unknowns in the equation for potential buyers to consider over the next few years.
What occupancy rate will your hotel have? What kind of rental rates will the rooms command? How exactly will the rental pools work? What if your hotel operator isn’t very good? What kinds of increases will there be in hotel operating charges over time?
The city apparently hasn’t even decided whether it will tax the hotel condos as hotel rooms or as regular residential condos, so it is hard to even run the numbers on potential monthly expenditures.
We also notice that many of the hotel operators in question are newcomers. Some of them have managers at the helm who have considerable experience in the industry, but even so, there isn’t the comfort of knowing that you have a large hotel chain, with experience and cash reserves, behind you.
Interestingly, the three buyers we spoke to this week were all real estate agents themselves. Our conclusion was that potential hotel condo buyers need to be financially secure, investment-savvy, prepared to lose some money in the short term at least, and of strong constitution. On the upside, they’ll enjoy some great vacations in downtown Chicago, and presumably some decent appreciation when the time comes to sell their units.