While the fractional ownership industry has been getting a lot of press lately and many believe (as do we) that it will lead in bringing back the resort real estate market, resort developers should keep in mind that there is still room for whole ownership.  And while whole ownership sales levels are expected to remain lower than in years past, it still has a place.

Let’s review the most common objections that fractional sales teams hear:

1. I’m looking for my own place
2. I don’t like to share
3. We want to be able to come for several months
4. We want to be able to send anybody we want
5. We want to be able to rent out to cover some of our costs

For those prospective buyers that continue to harp on these needs and insist that fractional ownership is not for them, why not have offer something else?  Many developers are either purpose-building or converting 100% of their units to sell fractionally and therefore risk losing prospective buyers to whole ownership competition.

There are several safeguards that must be in place to pull off a multi-use residential sales plan so let’s review them here.

1. One sales team for each product offering - no exceptions
2. Separate the residences - Physically and legally
   • A whole ownership buyer will not be paying fractional dues multiplied by 8 - two separate HOA’s will be needed
   • By no means should the opposing sales teams be selling the same product.  This gets ugly… very ugly, no exceptions here either.
3. Cost per night must make sense - The price points should be structured so that fractional ownership on a cost per night basis is still a better alternative than whole ownership with rental revenue.
4. Structure the legal documents - allow for flexibility in the contracts for altering the product (residence) mix if need be.
5. Create a strong referral program - a little competition between sales teams isn’t bad, as long as it’s a little.  An internal referral fee between sales teams is a good idea.

If the fractional and whole ownership products are structured properly, there are benefits to multi-use residential sales.

1. Fewer contracts to sign - if a project has 20 residences and they are all sold at 8:1 then there are 160 contracts that need to be signed.  If 10 of those however are sold wholly, then only 90 contracts would need to be signed.
2. Faster sell out - in the example above, the sales teams have 44% less sales to make which should translate to a sell out period that is at least 44% shorter.
3. Lower carrying costs - Real Estate 101, sell faster and watch expenses disappear.
4. Higher closing percentage - it only seems logical that if a buyer is firing away with those common objections they will likely go to nearby whole ownership competition.  Be that competition.
5. Larger target audience - Let’s face it there are those who choose not to buy fractionally.  In their minds they have earned the right to have a home sit vacant for 11 months every year.  Provide something for them as well.

Of course, proceed with caution when putting together co-existing fractional and whole ownership programs.  Common mistakes can be made up front that can extend the sales cycle thus shooting expenses into orbit.

The Bottom line:  the market will recover, be ready.

The first step in being ready is a proper feasibility analysis.  Discover Pierce Group’s comprehensive and affordable feasibility study here.

FORESIGHT COSTS LESS THAN HINDSIGHT^SM