Summary
Fractional interests, residence clubs, and other "Shared Ownership" ventures are risky business. European developers wanting to give their standing inventory a change of clothes may find themselves longing for the cozy warmth of the frying pan. While a seductive idea, consider the premise: A builder who cannot find a buyer for necessary shelter, seeks a solution in finding four buyers for its discretionary use. Residential developers will need a new math. Four Seasons, Starwood, Marriott, and Fairmont enjoy the marketing muscle of their guest lists, the credibility of their brand, and deep pockets. Timeshare intervals notwithstanding, efforts have not produced to expectation in this market segment. Projecting a bountiful European market defies all that has transpired. Demand for fractional ownership is not naturally occurring. It is created by massive marketing investment. A scheme to bail a builders bacon, perhaps. An industry? I doubt it.
Analysis
Marriott recently announced its exit from the residential market.
Its luxe fractional offering, Ritz Carlton Residence Club has not
taken hold after eight years, despite premier destinations, a second to none marketing
and sales organization, and a long list of financially qualified and
profiled prospects.
Similarly, Starwood is ending its residential pursuits.
Fairmont Hotels quietly launched it Heritage
Place concept. A minimum fraction of 5 weeks, flexibly applied to the
owners use schedule. Chic and urbane in every way. Takers are few.
These
and others offer not just residential occupancy, but the opportunity to
click off a portion of the annual time allotment at hotels and resorts.
Despite
their best attempts at characterizing these concepts as "different than
timeshares", the fact of the matter is they are timeshares.
The difficulty, it turns out, was not marketing and selling them as timeshares. The world is indeed round!
Weekly intervals offer what "fractionals" mistakenly avoided. Flexibility, and incremental expansion or contraction of time owned.
Starwood Vacation Ownership sells its weekly intervals as "floating" use.
An owner may reserve any week in the season owned. But, for an additional premium the owner can "fix" the occupancy to a specific week of the year, forever. This simple alternative transforms the weekly timeshare interval into a precise , tailor- made increment of an owners vacation home. Those who wish to occupy 4 consecutive weeks in February, may buy precisely that. It can then be incrementally added to, or sold in weekly slices. As each weekly interval is individually deeded, a decision to sell need not be an all or nothing proposition. Likewise, they pass into ones estate, making allocation of assets easier.
Marriott has recently announced that its fractional offerings will be transformed into a Points based ownership concept. Again, the emphasis is on flexibility, and easy expansion or contraction of an owners holdings.
The big guys have finally figured out that selling the public what they want to buy is easier than pounding a square peg into a round hole.
Anything that can be sold in weekly increments can also be sold in multiple weekly increments. Optionally fixing use rights creates the perfectly tailored, owner defined 'fraction".
It makes too much sense. After 20 years of product evolution, the circle is complete.
Now, various European resort
developers, deal makers, and residential builders with vacant standing inventory, look forward to exploiting the "not timeshare" market.
The only thing worse than not knowing the ropes, is not knowing the ropes with the wrong product.
But, fear not. Guns are for hire.
The convention goers are getting in line.
Looks like a bunch of money is going to be spent.
