In the case of Vdara, there’s no casino. Otherwise the project is, as you describe, a condo-hotel, one of several built in Las Vegas in recent years. Condo-hotels already in operation include Platinum, Signature at MGM Grand (built on the site of the former MGM Grand theme park), Palms Place, and Trump International. Like Vdara, none contains a casino, although Palms Place is connected to one and several other projects were planned as casino/condo hybrids.
We put your question to the best real estate reporter in town, Tony Illia of the Las Vegas Business Press. He explains, "A condo-hotel allows homebuyers to rent out residences as hotel rooms when not in use in order to generate income. But the homeowner must pay for booking and maintenance fees, as well as property and income taxes. Typical revenue sharing splits end up 60/40 or 70/30 between the hotel and homeowner."
"They remain attractive today mostly to a small segment of the real estate market," the Las Vegas Sun's Liz Benston wrote in May 2008, "wealthy vacationers who want a more upscale version of a timeshare and long-term equity. Why stay at a noisy congested hotel if you can live in a quiet fully equipped Strip-front condo —- and rent it out when you’re not in town?"
Which means that, if you hope to realize the most income off your condo unit, forget about staying in it during peak-demand periods like New Year’s Eve week. Those are the times you’ve got the best shot at making a return on your investment, if that’s how you see your condo unit. Trouble is, fluctuations in hotel rates can mean that your next-door neighbor was able rent out his unit for $399 per night, while you got only $299 per night, because you rented out your unit too early, before availability tightened.
These kinds of rental discrepancies are at the heart of a lawsuit between MGM Mirage and a group of Signature owners. The latter expected their hotel-condo units to be a lucrative source of income and have been litigiously disappointed. They accuse MGM of over-promising; the company retorts that they’re the victims of excessive expectations. Or as MGM spokesman Alan Feldman told the Sun, "Some owners made some fairly wild assumptions about how this was going to work."
The risk for the condo-hotel developer is that until the sale of a unit has closed, it cannot be rented out. Builders greatly overestimated the demand for condominiums in Las Vegas and the first few condo-hotel projects scooped up most of what market there was. For example, Trump Internatonal has closed on fewer than a quarter of its 1,282 units and is switching over to a pure-hotel business model.
For purposes of, um, research –- yeah, that’s the ticket –- we spent a night in a corner unit of Trump International. The views were spectacular, but the place was a ghost town. The unit itself was a three-room suite plus kitchenette, although more heavily furnished than a hotel suite would be. Its salient feature was a bathroom that was by far the most spacious we’ve seen in Las Vegas.
Perhaps ironically, the condo-hotel craze in Las Vegas coincided with an explosion in the number of regular hotel rooms, further diluting demand. Signs of retrenchment are everywhere. Would-be condo owners at the stymied Cosmopolitan are trying to get out of their contracts and Fontainebleau hasn’t even put any of its condo units on the market, even though the property is officially scheduled to open this fall. Condos at Palms Place are starting to be resold, but at a loss.
In short, the condo-hotel is a Vegas concept whose time has either not yet come, or which came and went in the blink of an eye, or was an ill-conceived concept to begin with.
