1.  Fractional is Practical

Practical is becoming a popular word in this market.  More vacation home buyers will be looking for practical uses of their discretionary income coming out of the recessed economy.  Be prepared to offer them something.  Convert a portion of your inventory to a fractional club and you should benefit from more sales in 2009 and 2010. 

2.  Fractional is Profitable

Fractional sales revenues can be far greater due to the whole ownership multiple which (realistically in today’s market) is a bump of somewhere between 1.5 and 1.8 - in 2005 it was 1.7 to 2.0.  Sales and Marketing costs will be a bit higher than you would expect with traditional whole ownership but not even close to 50 or 80 percent higher - less than 20% of total revenue in fact.

3.  Fractional is “Green”

Some believe that global warming is our fault and some believe it’s just part of the Earth’s normal pattern.  What everyone believes however is that it doesn’t hurt to continue to move toward more efficient uses of energy while reducing the amount of waste we all use.  This is what fractional offers and you will continue to hear about it in the years to come as demand for Green building increases.  If 100 boomers decide they all want to buy their own second home then we are using materials to build 100 homes and those 100 homes will use more energy to regulate the temperature while the homes sits around unused.  If 100 boomers buy into a Private Residence Club  however (a form of fractional ownership) then we are looking at possibly 12 to 14 homes.  It doesn’t take a genius to figure out the energy savings that occurs, not to mention the land that could be saved for “Greener” uses. 

4.  Fractional is Convertible

If sales are slow or the developer wants to switch a portion of the fractional development back to whole ownership then it’s not a problem.  The units are closed in a pre-determined order that will allow for the developer to change directions if need be with little or no negative affect on previous buyers.  Furthermore, club documents will typically provide the developer the option to change the owner to residence ratio if they choose to.  The opposite effect is in play for whole ownership projects that want to convert to fractional.  The condo docs typically have to be changed to transient use which represents a “material change” and gives owners the ability to bail out of their whole ownership contracts.  In Florida for example, there must be a 100% vote of the owners and mortgagees to allow for conversion from whole ownership to a transient use plan.  Long story short:  start fractionally with all or a portion of your project and you have the flexibility to convert to whole ownership down the road if you choose. 

5.  Fractional is Mainstream

Fairmont, Capella, Ritz Carlton, St. Regis and Viceroy to name a few… they all sell fractionally now.  Enough said.

For more information on Eric Pierce and Pierce Group, LLC please visit www.PierceGroupConsulting.com

Foresight Costs Less Than Hindsight SM