What Is a Condotel in Waikiki?

Have you heard the word “condotel” while looking at Waikiki condos and wondered what it really means? You are not alone. Many buyers want both a vacation home and rental income, and condotels can offer that mix if you understand how they work. In this guide, you will learn what a condotel is, how it differs from a conventional condo, how rental programs and taxes work, and what to expect with financing in Waikiki. Let’s dive in.

Condotel basics in Waikiki

A condotel is a condominium unit inside a building operated like a hotel. You own your unit, while the building provides hotel services such as a front desk, centralized reservations, housekeeping, and on-site management. Most condotels place units into a rental program for short stays. Nightly or weekly rentals are common.

This setup differs from a conventional condo. Standard condos are primarily residential and often limit short-term rentals. Many associations in non-resort areas do not allow transient stays. In Waikiki, resort and hotel zoning is common, so buildings that run like hotels are part of the local landscape.

What governs your rights is the building’s declaration and house rules. Those documents spell out rental rules, owner-use limits, management agreements, and fees. In Waikiki, city zoning and the Waikiki Special District also set the framework for short-term use. State transient tax rules apply when you rent to visitors.

How condotels operate

Ownership and use

You typically hold fee simple ownership of your unit. Most condotels give you a set number of owner-use days each year. Blackout dates can apply during peak seasons. Some buildings require your unit to be in the rental pool. Others allow you to opt out or rent independently, but many do not. Always confirm these rights in the declaration and management agreement before you write an offer.

Rental programs and fees

When your unit is in the rental pool, the building’s management markets it, handles bookings, checks guests in, and coordinates housekeeping. Owners receive a share of gross rental revenue. Your net is your gross revenue minus a hotel management commission, housekeeping, marketing costs, hotel service fees, and any special assessments tied to hotel operations. Some buildings also charge a separate resort or amenity fee. Utilities and linen replacement may be handled centrally and billed back.

Important items to confirm in writing:

• The revenue-sharing formula and how gross revenue becomes owner net
• Booking priority for owners versus public reservations
• Owner-use calendars and blackout periods
• Housekeeping and inventory fees per stay
• Which channels the building uses for marketing and distribution
• Who collects and remits taxes, the manager or the owner

Taxes and compliance

Short-term rentals in Hawaii are subject to state Transient Accommodations Tax (TAT) and General Excise Tax (GET). Rental income is also taxable for state and federal income tax reporting. Many condotel managers collect and remit TAT and GET for stays booked through the program, but you must verify this and understand how taxes appear on your owner statements. Confirm that your unit is permitted for transient use under Honolulu zoning and that any required registrations or numbers are in place.

Condotel financing in Honolulu

Condotels are often considered non-warrantable by mainstream mortgage investors because of hotel-style operations and transient rentals. This can limit conventional loan options. Expect fewer lenders, higher down payments, and stricter underwriting than a standard condo purchase.

Why lenders treat condotels differently

Investor and hotel characteristics can lead to higher perceived risk. Many projects have a high share of non-owner occupants and short-term rental income. As a result, lenders look closely at the building’s legal documents, budget, reserves, and the management agreement.

Common loan options

• Portfolio loans from local banks that understand the Waikiki condotel market
• Non-conforming conventional programs from specialty lenders
• Investor or commercial-style loans, sometimes interest-only or adjustable
• DSCR loans that consider the property’s rental income differently
• Cash purchases, which are common when financing is not feasible

FHA and VA loans have strict condominium project rules and typically do not include hotel-type projects. Always confirm current program guidance.

What lenders will ask for

• Full project documents, bylaws, house rules, budget, and reserve info
• The rental-management agreement and rental pool terms
• Historical or projected rental statements for the unit or unit type
• Information on assessments and litigation, if any
• Owner-use rules and occupancy allowances
• Your cash reserves and proof of liquidity

Speak to lenders with Hawaii condotel experience early. A targeted pre-approval can save time and help you focus on buildings that fit your financing plan.

Where condotels cluster in Waikiki

Waikiki is Oahu’s visitor hub, with a dense mix of hotels, dining, and beach access. Condotels are most common in the resort core along Kalakaua Avenue, Kuhio Avenue, and Lewers Street. These corridors were designed for transient lodging and have the services that support it.

Nearby areas vary. Ala Moana has a mix of commercial, residential, and resort properties, and short-term rental rules can differ by building. Kakaʻako and Kapiʻolani lean more residential and mixed use. Diamond Head and Kapahulu are primarily residential with stricter limits on short-term rentals. The takeaway is that Waikiki offers the broadest supply of condotels, while nearby areas require closer review of zoning and building declarations.

Is a condotel right for you?

A condotel could be a fit if you want part-time use and the convenience of on-site management. It may also suit an investor seeking income in a location with strong tourism. Consider these pros and cons to test your fit.

Advantages

• Strong visitor demand that can support higher gross income during peak seasons
• Hotel-style services that reduce your time commitment
• Owner-use flexibility for personal stays, subject to building rules

Disadvantages and risks

• Higher operating expenses and management commissions reduce net income
• Financing can be harder and more costly, which can narrow the resale buyer pool
• Exposure to tourism cycles and outside shocks such as travel restrictions
• Association control over rental programs and owner use
• Higher wear and potential capital costs in high-occupancy resort buildings

Due diligence checklist

Use this checklist before touring or making an offer:

• Verify transient use: confirm zoning, Waikiki Special District status, and building permits
• Read the declaration, bylaws, house rules, and public offering statement
• Obtain the current rental-management agreement, including revenue split and fees
• Request 12 to 36 months of rental statements and ADR and occupancy data for the unit or unit type
• Review HOA financials, reserves, special assessments, and any litigation
• Compare occupancy and revenue for similar units across peak and shoulder seasons
• Confirm who collects and remits TAT and GET, and how taxes appear on owner statements
• Check insurance requirements, both building master policy and owner liability
• Speak with experienced lenders and secure a pre-approval for condotels
• Assess resale marketability and the likely buyer pool for your unit
• Inspect physical condition and ask about upcoming capital projects

Practical tips to improve your outcome

• Decide your priority first: maximum owner use, maximum net income, or a balance
• If income matters, focus on unit types with strong historical performance and favorable fee structures
• Ask for a clear owner net sheet that includes all recurring and per-stay costs
• Build a conservative pro forma that accounts for seasonality and reserves for maintenance
• Start financing conversations early to avoid surprises during escrow

Next steps

If you are considering a condotel in Waikiki, get clear on how you plan to use the property and what net income you need. Then align your search to buildings that legally permit transient use and offer a rental program that fits your goals. Review documents closely, verify taxes and fees, and speak with lenders who underwrite condotels every day.

When you are ready to tour, bring your short list of buildings, your pre-approval, and your due diligence questions. With a process-first approach, you can choose a unit that supports both your lifestyle and your financial targets.

Ready to explore condotels in Waikiki or compare them to conventional condos? Schedule your free consultation with Andrew Leitheiser at Unknown Company. You will get clear guidance, document review support, and a plan that fits your goals in Waikiki’s condo market.

FAQs

What is a condotel in Waikiki?

• A condotel is a condo unit in a building run like a hotel, with centralized reservations, housekeeping, and a rental program for short-term guest stays.

Can you live full-time in a Waikiki condotel?

• It depends on the building’s declaration and local zoning, so confirm owner-occupancy rules before you buy.

Can you manage a condotel unit yourself on Airbnb?

• Many buildings require bookings through the on-site program and prohibit independent listings, so check house rules and the management agreement.

How do Hawaii taxes work on condotel rentals?

• Short-term stays are subject to state Transient Accommodations Tax and General Excise Tax, and rental income must be reported on state and federal returns.

How hard is financing a Waikiki condotel?

• Financing is available but more limited, often through portfolio or specialty lenders with higher down payments and stricter terms.

Are Waikiki condotels profitable?

• Profitability varies by purchase price, occupancy, average daily rate, fees, financing costs, and building maintenance, so rely on actual historical unit statements when evaluating.