The emergence of the condominium hotel sector is becoming ever more apparent in the European hotel investment landscape. This alternative investment vehicle is already well established in the US and Asia and is set to become a part of the European hotel scene. Interest in the European condominium hotels sector has increased significantly in the past two years following many years of intermittent development and association with other shared ownership vehicles, says Jones Lang LaSalle Hotels in its recent research report: 'Condominium Hotels-Europe's Latest Hotel Phenomenon.'
Ian Chappell, Senior Vice President, Investment Sales, Jones Lang LaSalle Hotels explained: 'A condominium hotel is a hotel operating unit which is sold to individual equity investors, where each owner acquires a room, suite or studio whilst the whole enterprise is managed as a hotel operation under a single brand. We have seen new players entering the market such as GuestInvest and Galliard Homes, as well as the already established names like Pierre et Vacances. The model is similar to the serviced apartment or apart hotel sector and is suitable for an investor who wants to test the water in hotel investment. They may want a pied-à-terre in a prime city centre location, while making a sound investment managed by a reputable brand. '
Saar Sharon, an Associate in Corporate Advisory, Jones Lang LaSalle Hotels said: 'We are seeing more and more sophisticated customers coming to the market and a change in demand patterns; the traditional timeshare products seem past their prime. This, plus an increase in investment appetite for the hospitality sector, suggests that the condominium market looks set to grow.'
He continued: 'Many international hotel brands have also declared that the European hotel landscape is ready for condominium hotel developments, either in conjunction with self-contained hotel operations, as fully self-contained condominium schemes or as a part of a mixed-use development scheme.'
Condominium hotels are significantly less developed in Europe than in the US, in part owing to Europe's timeshare focussed market and similar products, as well as the large market share of tourist accommodation held by privately operated serviced apartment and hotel groups.
A new ownership base
Alternative hotel ownerships are featuring more and more in the hotels sector, with the rise of condominium hotels and a shift in investor strategy, thus creating a new investor profile. At the moment, the European condominium market is being targeted and driven by private retail purchasers, typically high net worth individuals attracted by a city centre or a resort investment foothold. London and Paris are particular favourites as an investment destination. There is room for a wider pool of institutional and real estate investors to invest in a portfolio of condominium units or the establishment of an investor-developer partnership.
Part of the success story for this sector will be the education of a whole new investor base previously accustomed to buy-to-let residential schemes or conventional commercial real estate investments, together with the emergence of a secondary market to demonstrate transparency and liquidity.