by Diogo Canteras - Founding Partner, HotelInvest

In countries where credit is expensive, or where non-recourse project financing is simply not available, the Condo Hotel stands out as the smartest and safest funding strategy to finance hotel projects. This is because the Condo Hotel is a way to make hotel projects viable free of debt – 100% equity.

This explains why the Condo Hotel has been widely used in Brazil for over 30 years and more recently in other Latin American countries.

Essentially, the Condo Hotel is a regular hotel, with all the typical facilities and equipment of a hotel. The only difference is that its construction is funded through the selling of its rooms to individual investors, thus making it a co-owned development, with all the challenges that these multiple owners entail.

Making a Condo Hotel viable starts with a real estate development, that is, before it is a hotel business, the Condo Hotel is a real estate development business, and it is crucial to maintain a balance between these two businesses. This ensures that not only does it become a good real estate business, but it also ends up being a good and solid investment product for the final investor.

In Brazil, the regulation of the Condo Hotel by the CVM (the Brazilian SEC) has been very efficient in guiding developers to deliver a good real estate investment product to the final investor.High interest rates and the lack of project financing continue to drive the Condo Hotel as the leading funding alternative for hotels in Latin America for the coming years.