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study by hospitality consulting firms Horwath HTL and C9 Hotelworks states that domestic buyers, mostly from Jakarta and Surabaya, dominate 80 percent of the condominium hotel (condotel) or residential hotels market in Bali.

“We expect the trend to continue,” Bill Barnett, C9 Hotelworks’ managing director, told The Jakarta Post recently.

The condotel is a real-estate concept that sees hotels selling units to function as vacation homes to the public. When not in use by the buyer, the units are rented as hotel rooms.

Barnett added that property laws in Indonesia that prevent foreigners from owning land had contributed to the trend. Foreigners are prohibited from owning land, and therefore, property. However, the Building Ownership Certificate (SKBG) allows foreigners to own condominiums for 60 years, extendable by an additional 60 years.

Moreover, European buyers were still feeling the pinch of the financial crisis and had backed down from investing in property in Bali, Barnett added.

The penny-pinching European is in contrast to the crop of “aspiring buyers” from Indonesia’s emerging middle class, who, after self-imposed austerity during the 2008 economic crisis, were now searching “to buy the next big thing”, he said.

Barnett added that with entry prices from US$3,000 per square meter, condotels were popular among Indonesian buyers, who bought them to support their lifestyle and as an investment

“The most popular units are the ones with one bedroom because of their lower price point,” he said, adding that “depending on management over a period of five to six years they can offer up to an 8 percent guaranteed yield from profit or revenue from leasing the units,” he said.

Data from the organizations study showed 56 percent of units of hotel-managed condominium and apartment projects in Bali were studios, with another 30 percent consisting of one room.

The current number of studios available is around 300,000 units, while the number sold is slightly above 400,000. The number of one-bedroom units available is close to 200,000, with roughly the same number sold.

Other issues dampen the condotel market. Barnett pointed out that many condotels were “not a stellar investment” due to the locations, usually away from the prime areas.

As a result, condotels could lose out to hotels in strategic areas near the beach when attracting tourists.

The study reported that 12,000 new hotel rooms are in the pipelines as developers prepare for a surge in occupancy brought about by the Asia-Pacific Economic Cooperation (APEC) meeting this year.

Developers are also in a frenzy to build hotels because, in lieu of APEC 2013, the Ngurah Rai Airport will be upgraded to raise capacity to 25 million passengers a year. This would mean a greater influx of tourists in the coming years.

Furthermore, Barnett added, the management of condotels must secure permission from multiple unit owners to invest in the renovation of degraded facilities. Hotels, with singular ownership, were exempted from the hassle of reaching a widespread consensus.

“Condotels may become rudderless ships,” he said.

Barnett said there was the possibility that condotel buyers dump property once their initial investment was returned. This would create a secondary market of used condotels competing with new ones in the primary market.

“This is the problem with inexperienced property developers,” he said.