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Industry News
FRACTIONALS
EXCEED HALF BILLION IN SALES
Highlights
From the Fourth Annual Ragatz Associates Fractional
Interest Symposium
Fractional ownership of vacation residences
reached over a half billion dollars in sales in 2003,
stimulated by growth in independent development of
private membership clubs, according to research presented
at the fourth annual Ragatz Associates Fractional
Interest Symposium held in San Francisco, Calif.,
March 29-31, 2004.
"Last year was an explosive growth
year for fractionals," said Sarah Rezak, research
manager at Ragatz Associates, who leads the company's
fractional interest and private residence club business
initiatives. "The market for fractionals in 2003
jumped 40 percent reaching $513.3 million in sales,
an increase that included a strong showing from private
membership clubs which accounted for over one-quarter
of sales volume."
The "private membership club"
is a relative new concept first offered five years
ago featuring the privileges of high-end vacation
club membership but without involving the legal ownership
of real estate. Similar to a non-equity golf club,
where members can resign and their membership can
be resold, private membership club members pay a one-time
initiation fee, annual dues and assorted other fees
in exchange for a set number of weeks in an inventory
pool comprised of luxury homes and condos in select
locations.
Other key findings from the symposium:
- Industry size: 151 fractional interest
resorts have been identified as of March 2004, an
increase from 138 resorts in 2003.
- Consumer recognition increasing:
Acceptance by consumers can be attributed to the
perception that fractionals are legitimate forms
of real estate purchases. In 2003, the sale of fractionals
has been supported by several national advertising
campaigns, editorial coverage in major consumer
newspapers and an increase of fractional projects
located in ski, golf and beach resort locations
that have collectively persuaded high-end consumers
to seek second-home real estate.
- Resales: Indicators suggest that
a secondary market is taking hold, with $25 million
in fractional inventory changing hands through resales
last year. The majority of secondary market fractionals
sold at a price higher than the owner purchased
it for from the developer. Resale has always been
a critical concern in the sales process for consumers
who desire an exit strategy, if needed, from fractional
ownership.
- Satisfaction: 96 percent by those
who own luxury fractionals reported that they are
satisfied with their purchase, citing pleasure in
buying a higher quality product for a lesser price
than whole ownership.
- Growth Opportunities: There is
evidence to suggest that fractionals work very well
with other types of resort developments. Fractionals
are being paired with hotels and whole ownership
sales in master-planned communities. The growth
of mixed-use in resort development provides stability
and profitability to developers.
- Market potential: Fractionals are
poised for tremendous growth. It is estimated that
within the next three years fractionals will surpass
one billion dollars in sales.
- Buyer profile: The primary distinguishing
characteristic of fractional interest owners is
their high household income at a median of $500,000
in the luxury segment and $250,000 in the more moderately
priced segment.
Fractionals, as they are often referred
to in the resort development industry, are available
at a variety of quality levels. At the upper end of
the segment, private residence clubs provide owners
with the benefits and amenities normally associated
with five-star hotels combined with the space and
accommodations typical of a luxury vacation home.
"The 2004 Fractional Interest
Symposium brought together over 350 participants representing
the full spectrum of the luxury segment consisting
of developers, financiers, marketers and managers
of fractional interest properties throughout the world,"
Rezak said.
About Ragatz Associates:
Ragatz Associates is a leading global provider of
research services to clients from all segments of
the leisure travel industry, with particular expertise
in timesharing and other forms of vacation ownership.
Founded in 1974, Ragatz Associates has specialized
in providing market research, feasibility analysis
and comprehensive consulting services to established
timeshare resort developers, marketers, operators
and prospective industry entrants. Based in Eugene,
Ore., Ragatz Associates is the research division of
RCI and a subsidiary of Cendant Corporation (NYSE:
CD), a provider of travel and residential real estate
services.
For
more information on fractional ownership units, please
call Condo Hotel Center at (305)
944-3090 or send an e-mail to info@condohotelcenter.com.
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