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04/01/2005
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| Notes from the first International Fractional Interest Conference. |
| text by: |
Susan Kime |
| photos by: |
Randy Lyhus |
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An intriguing convergence of resort real estate, international investors and
private residence club entrepreneurs exchanged ideas at the first International
Fractional Interest Symposium, held in Windsor, England, in November 2004.
Richard Ragatz, president of Ragatz Associates, the research division of Cendant
subsidary RCI, organized this first-ever event.
 For those already involved
in this emerging, explosive market, the most recent Ragatz statistics validate
the growth:
> 151 fractional interest resorts existed as of March 2004, up from
138 in 2003.
> Sales totaled $513 million in 2003. Sales volume
forecast will expand from $750 million by the end of 2004 to $1 billion plus by
the end of 2005.
> Sales volume overall has grown 219 percent since
1999.
> In Europe, there are 40 fractional interest residences thus
far. Areas of great interest are in the south of Spain and France. (Click image to enlarge)
Such solid numbers have not surprised the international community, as
time-sharing—the idea from which luxury fractional ownership derived—was
originally a European concept. Yet the North American and Canadian fractional
products have taken the definition and operation to new levels and are creating
a major paradigm shift in the second-home market. As Greg Doman, vice president
of Fairmont Heritage Place, the vacation ownership component of Toronto-based
Fairmont Hotels, stated, “No one has to buy a second anything.” This idea
encapsulated the industry shift from a culture based on commodity acquisition to
one based on the accumulation of experiences. The fractional-ownership industry
is creating a wealth of positive leisure lifestyle experiences by having members
live well in elegant residences and apartment suites located in resort and urban
areas.
And with that comes the importance of understanding and assessing
lifestyle in the success of each vacation club. Eulogio Bordas, president of
THR, an international tourism consultancy firm in Barcelona, spoke of the
movement in society that values leisure time and presented a business model that
included lifestyle as a primary dimension. Robert Miller, president of Marriott
Leisure, spoke of customer differences between the Ritz-Carlton Clubs and the
Marriott Grand Residence Clubs, and how their brands were designed to reflect
the differences. Brian Martin, managing developer of Craggenmore, a Scottish
private residence club firm, explained the pro-cess of creating the Borgo di
Colleoli, a fractional residence facility in Tuscany. Paul Dean, CEO of Dean
& Associates, a financial consultancy firm in London, discussed the product
evolution in vacation residence clubs from first generation to second
generation, and how lifestyle has played into both.
From resort time-share
to hotel condo to private residence club, the following practices appeared as
the common denominator:
> It is often better to have a new brand associate itself with a
well-known brand; this allows for immediate name
recognition.
> Location should be in a high-priced, scarce
market.
> There should be year-round demand with at least two high
seasons.
> There should be extremely limited or no competition in the
area.
> Marketing to lifestyle is a necessary adjunct to the success
of the PRC.
“What struck me at the conference,” says Len Silverfine, president and
chief operating officer of the Big Idea Co., a marketing consultancy firm
based in the San Francisco Bay area, “was the convergence of product. We usually
think of equity fractionals as different from non-equity destination clubs. In
reality, the assortment of choices—resort time-share, fractional interest, PRCs,
hotel condos—are all shared-ownership products. This bodes well for the
industry, as the market is more fluid than first thought. And, of course, at the
high end, there is always room for greater themed ideas and customization.”
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 Counting in Fractions
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Counting in Fractions
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Private Residence Clubs
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Private Residence Clubs
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Pezula Private Residence Club, South Africa
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