‘Condotel’ investment 101
It’s a simple concept that packs a punch, investment wise.
For Edgar “Injap” Sia II, famed founder of fast food chain Mang Inasal and now chair of DoubleDragon Properties Corp., their own version of the increasingly popular “condotel” concept is simple to understand, yet a practical and efficient investment option that offers a lucrative proposition to all the stakeholders involved.
A condotel is a term coined to mean a condominium with hotel units and facilities.
It has emerged in recent years as an alternative platform for investment as it’s supposed to be a relatively hassle-free way of making real estate assets earn for you—you buy a unit, you sign a management contract, you let the company rent it out as a hotel room and you wait for your share of the rental income.
This is the same concept being applied to the Hotel 101 brand of Hotel of Asia Inc., the hospitality arm of DoubleDragon—but further simplified.
“We studied the condotel concept prior to building Hotel 101 Manila. (We found that) some concepts (being implemented) are complicated because in some cases, it’s optional, which may not be sustainable because there won’t be enough scale or volume,” Sia explained in an interview with the Inquirer.
Sia pointed out that in some cases, the units offered under the condotel concept vary in sizes (floor area), and in design, which usually reflects the owner’s taste. This means that some rooms are more preferred than the others, thus posing difficulties on how the income will be divided among the unit owners.
This also gives rise to concerns that one’s unit is not being offered as frequently as the others’ due to certain biases.
Other complexities and confusion meanwhile stem from the fact that in certain cases, a unit owner’s share is based on the net income. This means that you will have to wait until all the other costs and expenses have been reflected before you can get your fair share.
Sense of predictability
Hotel 101, however, aptly addresses such concerns as it offers the same type of room in terms of size and design.
“We call it the ‘Happy Room’ and this is the only type of room you will have at Hotel 101 because all the rooms there have the same size, design—same everything. We have a signature product that is not too small nor too big at 21 sqm,” he explained.
“So we create that sense of predictability which we think is important. Just like in fast food, it’s the same thinking—the Mang Inasal here should have exactly the same store ambience and food as in Zamboanga or Davao or anywhere else. We have a similar mindset as the fast food chains: product should be signature and typical to create predictability and efficiency in all aspects,” Sia further said.
In terms of income sharing, Hotel 101’s scheme is simple enough: 30 percent of the gross revenues from the prior month will be divided among all unit owners, regardless of whether or not their rooms were booked. The income share is usually credited to their accounts every 16th of the following month.
“Everybody gets exactly the same amount. It’s so simple to understand, simple to audit, simple to check, and so easy to implement,” Sia added.
But just how practical and profitable is this model? Well, the proof is in the numbers.
The unit owners at Hotel 101 Manila, the flagship property located near the Mall of Asia Complex in Pasay City, already saw a 6.08 percent yield last year.
“Hotel 101 Manila has been open for one and a half years and we saw that the model worked. In the last 6 months of 2017, (the unit owners) got 6.09 percent yield, but our expectation was just about 4 to 6 percent. And even for our management company, Hotel 101 Management Corp., we’re quite happy with our margins at 8 percent,” Sia disclosed.
“So now we got the model right and we’re at this stage that we’re ready to aggressively roll out and duplicate the concept nationwide. That’s where we are now—we’re ramping up the expansion because we have the confidence (on the back of) a working prototype that is Hotel 101 Manila,” he added.
Following the success of Hotel 101 Manila, the subsidiary of DoubleDragon is now ready to start pre-selling units at the Hotel 101 Fort, a 33-storey business and leisure hotel set to rise within the bustling business district, Bonifacio Global City.
“We started construction in May last year and we will finish the hotel by mid 2020. We will start pre-selling units here on March 14,” Sia said.
Hotel 101 Fort will offer 606 rooms that will cater to business travelers and tourists alike. The tower will have a three level podium wherein the first two floors will have specialty retail shops and restaurants, while the third will house well designed amenities that offer convenience and comfort to guests.
Unit prices, according to Sia, would usually vary depending on the hotel location. On the average, each unit is priced approximately P5 million.
Following the purchase of a unit, the owner will have to sign a 25-year agreement with the management company,a contract that can be renewed for another 25 years.
Indeed, Sia is well on track to hitting their target of having 3,000 rooms under the Hotel 101 brand by 2020. DoubleDragon is likewise targeting to have 2,000 rooms for the Jinjiang brand, for which the company holds the master franchise in the county.
As it is, there are a total of 2,637 rooms on the pipeline for Hotel 101. The one in Manila, which is already operating, has 520 rooms; Hotel 101 Fort has 606 rooms; Hotel 101 Boracay, 1,001 rooms; and Hotel 101 Davao, with 510 rooms.
According to Sia, he needs one more hotel to complete the original target of 3,000 rooms for the Hotel 101 brand by 2020. While he did not elaborate, Sia mentioned plans of setting up a Hotel 101 in Bohol.
“I have to add one more project to complete our commitment. We will announce soon. Right now, we’re finalizing the property. We’re at the land acquisition stage,” he said. “Hopefully by this year, we will be able to launch all the 3,000 rooms.”
That 3,000-room commitment has a total project value of about P15 billion.
“Our aspiration for Hotel 101 is to be the largest hotel chain in the Philippines and the most relevant, that will be top-of-mind of the market. It will be like the Mang Inasal or the Jollibee of hotels,” Sia concluded.
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