Seventy percent of the 52 residential villas under construction at the Arizona Grand Resort in Phoenix have already been snapped up by buyers.
Hip, urban downtown Scottsdale hotel Valley Ho has sold 24 of 37 condos and three of the seven penthouses in its residential tower.
At the posh InterContinental Montelucia Resort & Spa in Paradise Valley, 26 of the 34 housing units have been sold, and 18 owners have already moved in. One-third of the home closings in Paradise Valley since January have been at Montelucia, said Rick Carpinelli, senior vice president of residential development for resort owner-developer Crown Realty & Development Corporation.
Throughout the East Valley, hotel homes are selling well despite a real-estate slump.
And the resort condos are commanding hefty tabs of $400,000 to $6 million when other types of residences can't find buyers at greatly discounted prices.
"There is no question the real estate downturn affected everybody. But no buyers have dropped out, and we've had no price reductions," said Matt Crow, president of Grossman Company Properties, owner of the Arizona Grand.
Grossman bought the aging Pointe South Mountain Resort and is redoing the sprawling property as the Arizona Grand, adding residential units as part of the massive makeover.
The villas sell for $400,000 to $700,000 now, but the company is planning a price increase in January, Crow said.
As soon as 90 percent of the first batch of villas is sold, Grossman will start building more, he said. Another 150 residential units are planned.
So why are pricey resort condos selling at a premium, while other Valley homes are losing 20 percent to 30 percent of their value and can't find buyers?
DEMAND TOPS SUPPLY
For one thing, there aren't very many resort condo options in the Valley, so demand significantly tops supply, said Jay Butler, director of real estate studies at Arizona State University.
Virtually every upscale full-service U.S. hotel or resort planned during the last five years has included residential units, but hardly any new properties have been built in the Valley during that time, he said.
Montelucia and the W Scottsdale are still under construction. Other properties such as the Ritz-Carlton Paradise Valley and Mountain Shadows haven't made it from drawing board to groundbreaking. The condo-laden Renaissance ClubSport in Chandler is in limbo. Le Meridien in Tempe is off the table.
Resort-based residences have a different target buyer, Butler said.
And those target buyers tend to have sufficient resources to buy - even in a down economy, he said.
The resort condos appeal to people looking for services such as security, room service, housekeeping, concierges and resort amenities like golf courses, restaurants, a variety of pools and water parks outside their back door - things you probably won't find in a regular home or condo complex, Butler said.
"At about $400 a square foot, Arizona Grand villas are less expensive than condos at the Scottsdale Waterfront, and you can go horseback riding on your property," Crow said.
Resort amenities are especially appealing to seasonal residents, who can hand over the upscale housing units to the hotel to rent out on the nights when owners aren't using them, helping recoup some of their cost, Butler said.
That concept sold Tom and Diane Bell of Edmonton, Alberta, Canada. The Bells bought a villa at the Arizona Grand.
One of the first to sign on the dotted line, Tom Bell was a longtime visitor to the sprawling resort in its previous guise as Pointe South Mountain, and he brought Diane there recently to get married.
The newlyweds had been looking for a winter getaway that would become their retirement home in a couple of years, Tom Bell said. They saw the condos under construction and snapped one up.
"We were looking in Mexico and decided to buy here instead," he said. "With the dollar at par (with the Canadian dollar), it was a bonus."
INVESTORS VS. RESIDENTS
At the Valley Ho, nearly all the condo buyers, so far, have added their properties to the hotel rental pool, said hotel general manager Andrew Chippindall.
"It offers a lot of positives for the individual investor who has to be in Scottsdale several times a year," Chippindall said. "It's a way to stay in your own home and earn a return when you are not in town."
The pricey penthouses and the two-story lofts - two of six have been purchased - are not suitable for nightly hotel rental, he said.
But the tabs for those - $2 million to $6 million - have not dissuaded buyers, he said.
Chippindall said the central Scottsdale location and the hotel services have been key in selling the units.
"There just isn't anything like it in downtown Scottsdale," he said.
There will be soon. The W Scottsdale will debut this week with 18 condos sharing the top two floors.
None have sold yet, said Michael Mahoney, chief executive officer of TriYar Hospitality, owner-developer of the first Arizona version of the New York-based hotel brand.
Mahoney said once the hotel opens and potential condo buyers see what they could own a piece of, he's confident the units will sell well.
Chippindall said he's not worried about the competition. He said there is plenty of demand for both properties.
He doesn't consider the big condo tower projects without a hotel affiliation to be competition, however.
Montelucia doesn't either, Carpinelli said.
Buyers of the posh Paradise Valley resort's $2.5 million to $4.5 million villas are planning to be full-time residents or second-home buyers who won't rent their villas to resort guests, he said.
They bought because they are choosing to live a luxury lifestyle, with such options as 24-hour room service, housekeeping, even in-home spa services, Carpinelli said.
Those are services they can't get in the dozens of posh condo towers rising above downtown Scottsdale, Tempe and Phoenix, he said.
"I think the differential is the level of service," he said. "We have a staff of 300-plus in the business of providing services for guests. Our residents can even get daily turn-down service or have a private chef from one of five restaurants cater dinner in their home."
Montelucia home owners also get preferred status at InterContinental resorts around the world, he said, and that's a big selling point, since the well-off Montelucia home owners are typically world travelers.
OLD IDEA, NEW TREND
So what's fueling the sudden surge of demand for hotel living?
Finances, of course.
Not those of buyers, but of hotel builders.
The resort condo is not a new concept. The venerable Camelback Inn was a pioneer in selling its rooms and suites to individual owners, although all are part of the hotel pool, and no owners get to choose to live in their casitas full-time.
The concept of selling hotel residential units has come into favor in the last few years as a way to finance new high-priced properties or pay for major renovations.
"For a resort, you just can't make the numbers work without some residential component," said Mark Grenoble, president of Scottsdale-based hotel company Enchantment Group.
Enchantment, which owns the Enchantment Resort in Sedona and a new brand of destination spa resorts, Mii Amo, just bought a historic Virginia inn. The company is renovating the old hotel and adding a marina and 65 condos, Grenoble said.
The Ritz-Carlton project hinges on neighbors agreeing to planned residential villas, according to Scottsdale-based Five Star Development. Some naysayers who want the resort but not the villas, are trying to quash the development plans.
Like other trends, there could be a flurry of new hotel-with-condos building when the credit crunch ends, kick-starting stalled projects.
Eventually, supply could overcome demand, leaving a glut of pricey resort condos on the market similar to the current glut of single-family homes.
It's difficult to predict if and when that could happen, Butler said.
"Nobody knows how big this market is," he said. "But there are a lot of hotel projects now on hold."
As more projects get built in the Valley and other sun destinations, the competition will heat up, and amenities and price could become big factors, he said.
"Housing, even for the wealthy, is a set of trade-offs. Everybody is looking for the edge that will make the deal," Butler said. "The W is expensive. Is it worth it, or, if I'm a seasonal visitor, do I really want a golf course?"