A Slice Of The High Life

Despite constant media reminders that we’re experiencing a credit crunch and a recession is on its way, statistics prove that one sector of the leisure real estate industry seems to be showing a healthy resilience to the economic downturn – and that is fractional ownership. And several European fractional pioneers believe affiliation to The Registry Collection, Group RCI’s luxury property exchange platform, provides a further and compelling sales incentive.

Fractional sales are flourishing, particularly in the US where they have increased by 20 per cent on the previous year, hitting almost $2 billion in 2007. The figure is taken from a report, by NorthCourse Leisure Real Estate Solutions, the consultancy arm of Group RCI, which also found that sales of wholly-owned vacation homes in the US during the same period suffered a 30 per cent decline.

Owning something for the number of weeks of the year you can use it – as opposed to year-round whole ownership – is the basic premise of the fractionals model and it applies to everything, from real estate and luxury holiday homes to jets, yachts and luxury cars. Peter Giamalva, president and managing director of NorthCourse Advisory Services, comments: “The fractional product is clearly robust and set to grow. It appeals to people who want to purchase leisure real estate without the expense and aggravation of a wholly-owned second home, even though they can afford one.”

The current economic uncertainty appears to be having a positive effect on fractional sales, as the managing of expenditure and the value of investments becomes more important than ever. Industry expert Piers Brown, founder of web portal Fractional Life said: “Given the credit crunch and economic uncertainties, it’s clear that property values are far from guaranteed and consumers are questioning the value of 100 per cent ownership of many luxury items.”

The fractional model benefits buyers by enabling them to purchase higher quality products than they might otherwise be able to afford or wish to maintain. For developers, advantages include increased profitability due to a bigger and more diversified market, and a more cost-effective marketing and sales operation because fractionals yield a higher profit per unit sold than timeshare. In addition, because the period of use being sold is far longer, there are less sales to be made before the property is sold out.

Encouraged by the tremendous success enjoyed by the fractionals model in the US, European developers are now showing a keen interest in its potential. One such fractionals pioneer in Europe is Ward Woods, CEO of Spain-based Regency Resorts who entered The Regency Country Club, located in southern Tenerife and an associate of The Registry Collection, Group RCI’s luxury exchange platform, into fractionals sales. Commenting on his initial experience with the fractional product, Woods said: “There’s a tradition in Europe of affluent people owning a holiday home. It’s a traditional aspiration of most people and the fractional model just makes it all the more practical and easier to access.”

Woods believes affiliation with The Registry Collection, gives vendors a unique selling point to offer purchasers. The Registry Collection focuses on opulence, luxury and exclusivity, key elements when marketing to potential fractional purchasers. Ward comments: “The clients feel they’re a cut above the rest and want to go to properties where they’ll be surrounded by people of a similar mindset.”

Membership of The Registry Collection gives fractional owners the opportunity to exchange into some 120 luxury properties across the globe and is a useful sales incentive, according to Woods. “Most clients are primarily buying to visit a chosen property, but the possibility of being able to exchange is great and is an excellent sales proposition. Being able to whiz off to experience other worlds and adventure further afield adds an element of freshness to the holiday home experience for purchasers.”

Stefano Tosato, managing director of Relais Villa Petrischio in Tuscany, Italy, a full affiliate of The Registry Collection, agreed that economic uncertainty could have a positive affect on fractional sales. He said: “Some buyers will see fractional ownership as a better and lower-risk investment than buying wholly-owned holiday property. The fractional product requires a lower capital investment which will act as an incentive in the current economic climate.”

Ron Haylock, chairman of Borgo di Colleoli, also in Tuscany and a full affiliate of The Registry Collection, said people are rethinking their purchasing decisions. “People who have been considering buying whole-ownership units are starting to ask themselves why they need a whole apartment year round when just five weeks will do,” he said.

When asked about the important factors to consider when selecting a luxury exchange partner, Gregg Anderson, vice president, global product management, The Registry Collection, cited a proven track record of success, strong infrastructure, established property portfolio and a solid business plan as key to ensuring developers are in a position to offer their owners true benefits in their purchase. Gregg said that affiliating with an exchange company is a very important step for a developer and he or she needs to have all the pertinent information and history needed to make the right decision for their project and for their current or potential owners.

Anderson said: “It’s important for developers to determine how an affiliation with an exchange company can help sell their property faster and more competitively. When the developer puts the end user’s hat on, it becomes clear that exchange membership only works if there are enough properties in destinations that members want to visit.
Having ‘dots on the map’ is important, but for these buyers, enjoying positive experiences with great amenities is a critical element to success. We continually research which locations our Registry Collection members tell us they want to visit and the type of experiences they are looking for, and then we actively seek out those properties we feel are the right match.”

For more information call Paul Mac Sherry on +44 (0)7710 372 994 or Nick Turner on +44 (0)7960 034 933 or visit www.TheRegistryCollection.com

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