‘Condotels a growing investment option’


Condominium units used for short-term guests, otherwise known as “condotels,” are an increasingly attractive property investment, online property listing site MyProperty.ph and developer Sta. Lucia Land said.

MyProperty.ph said the rise of hospitality service websites like Airbnb is part of the reason the condotel trend is growing, as travelers are increasingly drawn to alternatives to traditional hotels, particularly for longer visits.

Condotel units are typically individually owned and included in a property management program, with the manager handling renting out of the unit (along with regular building management and maintenance services) and retaining a percentage of the rental income as payment for services.

A bedroom in one of Sta. Lucia Land’s Sotogrande condotel properties in Cebu. Condotels are becoming an increasingly popular real estate investment, driven in part by growing tourism in the Philippines. STA. LUCIA LAND PHOTO

“The main advantage of owning a condotel unit is its ability to generate passive income. Depending on its location and season of the year, it can potentially earn a lot of money,” MyProperty.ph said.

The growth in tourist arrivals surpassing 600,000 in January of this year, about ten percent more than in the same month last year, is one factor that makes condotels a potentially lucrative investment, the online listing service added, particularly in peak seasons. Locations near airports or near popular tourism areas are the most likely to generate the highest incomes, it said.

Benefit for OFWs
Imee S. Yu, who is the general manager of Sta. Lucia Hotel Management Group explained in a post to the company’s website that investing in a condotel is particularly beneficial to overseas Filipino workers, who wish to own a property but are unable to oversee their investments in the Philippines.

“The target market of (Sta. Lucia Land Inc. president Exequiel) Robles was the OFWs. The condotel concept is a hassle-free investment for them because even if you’re out of the country, somebody can manage it for you. Someone can market it for you. You don’t need to worry about unit maintenance and in fact, the amount that you can earn can also help pay for your dues, taxes and other expenses,” Yu said.

MyProperty.ph added, “For overseas Filipino workers (OFWs), having a condotel means getting to stay for free in a stylish unit that is ideally close to everything whenever they are in the country. It also gives their family here at home the chance to ‘check in’ whenever they are in the mood for a staycation without having to pay for a hotel.

How it works
Although property managers differ in the terms of their programs, the one offered by Sta. Lucia is a typical example. The developer currently has five condotel properties, two in Mactan, Cebu, and one each in Quezon City, Cainta, Rizal, and Tagaytay.

Under Sta. Lucia, Yu explained that the unit owner will have to enter a 15-year leased-back agreement with the group, under which the owner will receive a rent income based on the floor area of his unit.

70 percent of the net profit of the whole condotel property is divided among unit owners, in proportion to the unit sizes; thus, larger units earn a larger share. The dividends are paid quarterly, after monthly dues and realty taxes are deducted.

The condotel unit is also entitled to 30 room nights per year for his own use, but must make prior arrangements so the unit is not rented out at the same time.

Meanwhile, the hotel operator will manage the leasing of the hotel rooms, the maintenance, refurbishment and improvements, as well as their operating expenses, association dues, real property taxes, common area charges, utilities, insurance and other expenses.

Yu said that with increasing tourist numbers, returns on investments have been healthy for owners in its properties.

“The Sotogrande Hotel alone would hit 80 percent occupancy rate and that’s why some of our earlier investors managed to receive dividends within the same quarter that the hotel started to operate,” Yu said.

“Ownership is 100 percent hassle-free as all maintenance and rental issues are handled by hotel management company,” Yu added. “At the same time, there is a cash flow or an income that can help pay for your expenses. Of course, how much you’ll earn will be subject to occupancy rates, inflation, and foreign exchange movements.”

Potential risk
While the dividend structure used by Sta. Lucia and most other property managers provides a little income even at times a unit is unoccupied, the biggest risk noted by both MyProperty.ph and Sta. Lucia is long idle seasons, such as monsoon season in summer destinations, when income is likely to be low.

MyProperty.ph also pointed out that condotel units tend to be more expensive than regular condominium units at the outset, which could make it more difficult to sell the unit later on if the owner wishes to divest.

Property management fees can also cost a significant part of one’s income, usually ranging from 30 to 60 percent, which the unit owner would have to judge whether or not is reasonable for the services provided.


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