It is said that there’s a possible return of the condo-hotel concept. For many people, they are just hoping this doesn’t signal the return of the problems and controversies that ever appeared in its market.

Perhaps it will be different this time, but news of the return of condo-hotel development brings back bad memories of the past decade’s debacle.

I shuddered a little last week as I read contributor Brendan Manley’s story in Hotel News Now proclaiming a possible return of the condo-hotel concept as a viable way to shepherd hotel projects over the hurdles of financing. I’m just hoping this doesn’t signal the return of the problems and controversies we’ve seen previously with this development model.

During most of the early 2000s, condo-hotel projects were sprouting up in every gateway and resort destination market in the United States and Caribbean. The concept seems simple and elegant: A developer pre-sells condo units to investors and uses the proceeds as equity to build the property and to entice lenders to contribute to the deals. Investors often placed their units into rental pools as a way to offset their investment and operating costs.

According to a 2006 story in Forbes, buyers purchased more than $250 million of condo-hotel units that year, and nearly 100 projects were under development.

Of course, there is no such thing as a free lunch, and over-ambitious developers and investors with get-rich-quick visions quickly soured the concept. Too many projects were built or proposed, creating a glut of rental units in markets like Miami Beach and elsewhere. Also, some investors bought units to quickly flip them to new owners at a profit. Not surprisingly, that kind of pyramid scheme left many investors with overvalued units in an overbuilt market.

Around that time, I knew the concept had reached an absurd level when I heard about a proposed condo-hotel development in Duluth, Minnesota, a fine city but not known as a prime resort destination.

Of course, the final nail in the coffin was the recession, which killed most new development proposals and left some developers with unsold units and investors with over-priced vacation homes. All was quiet on the condo-hotel front until recently.

But, as Manley points out, the condo-hotel concept is back and seems poised for another boom. We can only hope, perhaps foolishly, that developers and investors learn from the mistakes of the past and rein in their zeal for the product.

Recent changes in U.S. Securities and Exchange Commission laws seem to take some of the risk out of the concept, and some of the developers who have returned to the game surely remember the issues of excess that brought down the segment during the past decade. Of course time will tell, but I’m not hopeful.