Condo Hotels Overbuilt in Orlando Vacation Home Market
July 15, 2006. Orlando's condominium-hotel market is rapidly becoming overbuilt, with at least 17,300 competitive condo-hotel rooms in the pipeline, a study by a national group has concluded, according to a report by Bob Mervine in the Orlando Business Journal.
The study, conducted by the national Association of Condo Hotel Owners, suggests the market is ripe for serious financial difficulties for buyers looking for a quick buck. The study calls Orlando "the seasoned host" in the condo-hotel market, with more development projects embracing this form of ownership format than any other U.S. city.
Abe Pizam, dean of the Rosen College of Hotel Management at the University of Central Florida, says the study confirms his hypothesis. "I've said for a while that this is a bubble that will burst, and people are taking a great risk." Pizam believes many condo-hotel buyers have had unrealistic expectations, and it appears they are making a prestige buy for bragging rights instead of making a rational investment decision.
We at VRO have long cautioned about buying condo-hotel units or any other kind of vacation rental property where most of the decisions that determine profitability are not completely in the hands of the individual property owner. When there is a market situation where supply outstrips demand, the owner of individual vacation rentals is better able to make marketing and management changes to cope with changing conditions than are owners of units in condo-hotels. In the case of down markets the condo-hotel management may be more interested in raising their own fees to maintain profits than in making sure that their individual owners are protected.
