Yesterday in the Vallarta Opina there was an article about the Grand Venetian, Peninsula and Tres Mares developments looking to change the zoning of their property so they could function as “condo hotels”. This is one way for the three projects to handle the downturn in the economy but removing some of their inventory from full-time (where they may have units just sitting empty), to now functioning also as a hotel. This offers potential purchasers not only use of their condominium but also the ability to rent out their units through the hotel rental program. This has been working at resorts such as the Velas Vallarta hotel for years. Actually, this is how Velas became a hotel. When full-time sales slowed down back in 1995, they resorted to timesharing and functioning as a condo-hotel.
This can prove positive to the local market in a number of ways. First, with regards to the Grand Venetian, the current litigation going on is with regards to the zoning of the property. It was supposed to be for only hotel development, not for condominium or residential development. By functioning as a condo-hotel, this may be a solution to the problem, one that I brought up with the president of the Hotel & Motel Association a number of months ago. We’ll have to wait and see how this pans out.
This also is positive as it will take a large number of condominiums (at least those offered as full-time condos) off the market. Going into 2008 there were approximately 8,000 condos, new product, on the market for sale. Sales have not been strong for developers so inventory hasn’t been diminished much through sales, but rather through condo-hotel conversion and the fact that a number of projects hadn’t broken ground yet so they could cancel the project or put it on hold. We don’t have the numbers yet (we survey developers in early January), but I believe we will have substantially reduced the number of units on the market. Los Veneros followed suit early this year by selling out a portion of their development to the hotel operator Grupo Posadas.
And lastly, we’ve been in need of new hotels in Vallarta, as the last time a hotel was built here was pre-2001. This will deliver, or should deliver, hotel operations in the Five-star or Gran Turismo category. At Tres Mares in Marina Vallarta, Marriott is taking over some of the towers. We are not sure at this time what brand Marriott will be offering here, but we are hoping its their new luxury boutique hotel line that they have been working on with Ian Schrager.