Fractional ownership adds up
to affordable luxury
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Taunovo Bay Luxury
Resort Homes on Viti Levu Fiji are being offered with Fractional
Ownership
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Who doesn't long for the comfort, privacy
and prestige of a luxury vacation home? The problem: If you're
still gainfully employed, it's likely your ski-in chalet or
bungalow on the beach will remain empty for a large chunk of the
year. Hence the rise of private residence clubs, fractional
interests and destination clubs -- the newest and hottest
segment of the luxury travel market.
Three years ago, if you put all three categories together, they
accounted for about $530-million of sales volume, according to
Richard Ragatz, president of Ragatz Associates, an international
consulting company in the resort industry. "Last year it was
about $2-billion," he says. "So it's growing rapidly."
The concepts bear a passing resemblance to time-shares, but
these clubs target the well-heeled buyer, often with swishy
properties in one-of-a-kind locations. The main selling point:
You buy the block of vacation time you need and don't pay for
time you don't use.
At the more affordable end of the spectrum, fractional ownership
is the equivalent of sharing a cottage or ski chalet between a
number of families. You buy deeded ownership in a property,
ranging from two weeks to three months of annual use. But
instead of getting a flimsy shack furnished with beer-cap
coasters, hand-me-down furniture and a bathroom sign that reads
"if it's yellow, let it mellow," these vacation homes are
luxurious affairs with all the amenities.
Toronto-based International Projects Marketing Ltd., for
example, sells five-week blocks at its Muskokan Resort on Lake
Joseph for $135,000. The semi-detached cottages have lake views,
vaulted ceilings, grand Muskoka fireplaces, marble bathrooms and
gourmet kitchens.
Private residence clubs operate on the same principle of
fractional ownership, says Mr. Ragatz, but they are a higher end
product. "Once you're paying over $1,000 a square foot, we call
them residence clubs." A good example: Fairmont Heritage Place,
the private residence club for the Fairmont hotel chain.
Launched in 2004, it targets the top 2% to 3% of the population
(by income and assets) with swish properties in Acapulco,
Telluride and San Francisco (in mid-2008). Projects in South
Africa and Dubai are scheduled to open in 2010. Rather than
buying the vacation homes outright, purchasers pay a fee
(typically about US$200,000 and up to a four-week block) to buy
in, plus annual dues of roughly $7,000 to $12,000.
The homes vary in style and size, but at Fairmont Heritage Place
Acapulco Diamante, for instance, two-storey beach-front homes
boast more than 3,000 square feet of indoor space and a further
1,500 square feet of outdoor space, including a private plunge
pool and patios overlooking Acapulco Bay.
In the end, sums up Mr. Ragata, you don't buy into a fractional
scheme of any kind for the resale value, "you buy it for use."
But, he says, "at least you're not going to lose money. All the
evidence we have is that the resale value is very good. Unlike
time-shares, where you can lose 40% to 60% on the value of the
purchase the day after you buy it, resale prices for this
category have been slowly escalating."
Originally reported on
http://www.ottawacitizen.com/ ,
July, 2008 |
