The Evolution of the Private Residence Club
Notes from the first International Fractional Interest Conference.
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ShareApril 1, 2005
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.; function voidFunc() { } voidFunc();)
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.”
Ragatz Associates
541.686.9335, www.ragatzassociates.com
