If you’ve been on the front lines during a typical fractional real estate sales process you will concur that there are any number of objections that are consistently fired at the sales team.  Without going through each and every concern, we can safely say they all have one underlying meaning:  “I am uncomfortable with this decision”.  Usually buyer discomfort is related to a lack of understanding and experience with the product which is another way of saying “I am worried about the risk”.  Heck, nervous buyers will find a way to communicate this trepidation through the thread count of the bed sheets if they have to.  So why does dropping the price remain the first knee-jerk reaction to closing prospects?

The answer is this:  price incentives are often a good urgency tool, and creating urgency is commonly confused with eliminating anxiety.   More often than not, if a fractional ownership prospect isn’t pulling the trigger it is not due to price, it’s something deeper than that - perceived risk.  Tackle the risk and price isn’t an issue.

So how do we provide comfort with perceived risk?  Look at developer buyback options; look at methods to provide customers the option to purchase “risk insurance” at closing and consider installing bonus interest opportunities for buying early.  These tools transfer some additional risk to the developer of course, but that’s the name of the game.  Show me a developer who isn’t comfortable taking risk and I’ll show you a future Starbucks barista.  Assuming that the product has been created properly with the essentials in place for a successful Private Residence Club, virtually eliminating buyer risk will drive stronger sales.  A project that sells is one that eliminates risk to the developer as well.

Now for the secret sauce:  use risk mitigation measures to effectively create urgency.  Let’s not forget that if you (the seller) are going to give something away (a buyback plan for example), you must get something in return; this is basic Integrity Selling and the buyer will appreciate it and respond to it.  Pierce Group has a buyback plan that can be used specifically for this instance.  Instead of offering a price discount, offer incentives centered on the buyback; but do it in return for signing the dotted line within a short period of time.  Set aside all of the money that you would have given away in discounts and use it as a personal insurance policy for your buyback plan.

Disclaimer: Don’t bring up risk!  Only use this strategy when it is an issue with the buyer. At this point in the process the sales executive should already have a strong understanding of the buyer’s objection and a good idea of the direction to take if there is hesitation in moving forward.

Create the right product, virtually eliminate the risk and make it easy to buy - As Yoda once said, “urgency these are not, for they create it”… or something like that.

For more on risk mitigation and the Clearview Sales Process^TM visit PierceGroupLLC.com

Foresight Costs Less Than Hindsight^SM

Last week I was working to bring on a new client, I do this often, but this one stands out because it brings a lot of potential.  The developer understands sales, is well funded and is building an unbelievable fractional ownership resort in an unbelievable location so it’s undoubtedly something that Pierce Group needs to be a part of.

I was faced with a problem however, I had assembled many valuable pieces to the fractional sales puzzle including knowledge, experience, expert sales training, and lead generation programs but frankly, developers are sick of hearing that.  They are looking for something quantifiable and a share in the risk, i.e. more than just a promise of sales success.  The former consulting model of large upfront “professional fees” and huge monthly “professional advances” is all but gone unless it can be backed up with a tangible deliverable - either additional revenue sources or a reduction in sales and marketing expenses.

But then it happened.  I stumbled across the key element that I so desperately needed - the tangible deliverable.  It’s the glue that holds all of our sales techniques and programs together while delivering a real, quantifiable deliverable.  It greatly reduces expenses via a shortened sales cycle and far fewer glossy “coffee table” brochures that need to be printed and delivered.  It will generate stronger referral business thus saving even more expenses.

What I am referring to is a long overdue sales accelerator technology that is absolutely ideal for the resort real estate sales business.  Of course it has to be used appropriately or the tangible deliverable will not reach its potential.  So I spent six solid days in my office with a gallon of coffee a day working on the whole puzzle.  This also helped me avoid the H1N1 that my kids came down with so it wasn’t all that bad.  Special shout out to my wife by the way… couldn’t have done it without you babe!

I have finally put together a decent corporate presentation of Pierce Group’s scope of services including our new and improved ClearView Sales System^TM.  The presentation uses the new technology so I’ve killed two birds with one stone, you’ll get a free demo.

ClearView Sales System

Simply put, fractional ownership real estate developers could save thousands… make that hundreds of thousands of dollars by implementing our process.  I welcome developers to reach out and have a conversation.  Whether your project is still on the drawing board or you’re in the middle of a campaign, the process provides real tangible value.   Contact Us to receive our corporate presentation.

Eric M. Pierce

President - Pierce Group, LLC

www.PierceGroupLLC.com

Arguably the most valuable service provided by any reputable real estate consultant is the ability to prevent costly mistakes for their clients.  Not only does this apply to the fractional consulting industry, it’s magnified.  Our industry is still relatively young compared to its predecessor, the timeshare, and the majority of real estate developers have yet to embark on the development, sales and marketing of any type of fractional ownership real estate.

If I had a nickel for the number of times I’ve heard this: “We’re going to sell this project out through the local real estate community”, I could retire and buy fractional interests around the world!  This brings me to the list of most common mistakes made by new fractional real estate directors.

Mistake #10:  “We’re going to go with Super Duper Advertising Company because they have sold more than $10 Billion in luxury real estate.”

Not so fast.  It might sound logical at first, but selling out a project in 2004 was about as difficult as selling a cheeseburger at McDonalds.  Look for companies that have had some traction this year - yes they do exist.  The ability to defy the odds and sell real estate today indicates that the advertising company has the ability to adapt to different markets and reach out to buyers no matter how difficult.  This quality is very valuable so pursue these companies even if they have never heard of fractional ownership.  The fractional expertise is what you have Pierce Group for!

Mistake #9:  “It didn’t sell wholly so it will sell fractionally.”

Not Really.  Is there a chance that your stalled condo project could sell fractionally?  Of course.  Is it a lock?  Absolutely not.  Often times a traditional real estate development won’t sell because of traditional issues, or traditional errors.  If the project is a mile and a half from the beach and all you have is a tennis court then it probably won’t sell fractionally.  Before you convert it, seek out an expert opinion.

Mistake #8:  “We’ve set aside the traditional 5% for sales and marketing.”

Wrong.  A fractional real estate sale is a different animal.  No longer are we selling marble countertops and hand-crafted cabinetry.  This is a lifestyle message that requires more explanation around the effortless experience and practicality of ownership.  When was the last time you saw the explanation of a reservation system on the web site of a typical whole ownership gated community?  Your costs will be significantly higher for more advanced brochures and web content.  Additionally, more outreach is required.  The MLS (in most cases) won’t even bring 5% of your sales.  The real estate community won’t be your answer either - reference Mistake #2 - so a full on-site sales team is needed and there are plenty of extra costs associated with that.  Don’t worry developers; the difference will be made up in higher sales revenues.  We’ll leave that for a different article.

Mistake #7:  “We’ve decided to leave out the exchange program; it sounds too much like a timeshare.”

Incorrect.  The key difference between timeshare exchange and fractional exchange is that timeshare buyers more often make their purchase decision based on the exchange component.  The reverse is true for fractional buyers - they purchase because they love the location - the exchange is simply a bonus.  Your sales team understands this and never leads a conversation with an explanation of the exchange benefit.  The exchange affiliation is a tool that can add credibility to your project and help get your prospects over the goal line.

Mistake #6:  ”One sales team will be responsible for selling all of our residential products.”

Don’t do it.  One team should sell your fractional product; another should sell your whole ownership product and so on.  Each team should be masters of their own product and be able to handle product specific objections.  A little competition is healthy.  Of course, gun slinging and infighting among sales teams doesn’t do any good so set the ground rules from the start, put together a good internal referral program and it shouldn’t be an issue.

Mistake #5:  ”We are hiring local real estate agents to run the sales office.”

Not so fast.  While some local real estate agents might be well qualified, many are not - I’ve seen both.  The fractional sales position requires skills like… listening.  This is not an easy skill to learn and many sales people will simply never be able to grasp this concept.  Vomiting features and benefits all over prospective fractional buyers is as effective as a two for one special at a super-yacht dealer.  Reach out of the box when hiring your sales team and don’t concern yourself so much with whether or not the candidate has a real estate license.

Mistake #4:  ”We have rock solid legal documents that protect us no matter what!”

Go easy here.  Typically, legal documents are written by attorneys hired by you, the developer.  So it is your attorney’s job to protect you, their client.  This is completely understandable but at the same time it is to your advantage to make sure the documents are sales friendly - i.e. free of sales land mines.  In the case of fractional sales, the documents are lengthy and include things like Public Offering Statements and references to timeshare.  Our industry still falls under timeshare regulation; actually a good thing for the buyer but can look scary nonetheless.  Buyers will have their own attorney’s, accountants and/or financial advisors look through them.  So get those sales land mines out of there by having your trusty fractional consultant review them.

Mistake #3:  ”We already know our ratio is 8:1 and what our price will be, we don’t need a feasibility study.”

Never skip the feasibility.  Why did you choose 8:1 and not 6:1 or 10:1?  What criteria did you use in setting your price?  There are reasons why we come up with the appropriate owner to residence ratio as well as the reservation system.  These reasons come out of research performed during valuable feasibility studies.  Remember, a project cannot be sold by even the most skilled sales people if the product is structured incorrectly or priced incorrectly.  Spend a few bucks up front to ensure that you are starting off on the right foot; it will save you oodles in the long run.  We like to say it this way: “Foresight Costs Less Than Hindsight^SM“

Mistake #2:  “We’re going to sell this project out through the local real estate community.”

No you’re not.  Don’t confuse this with Mistake #5; here we are referring to spending very little on traditional marketing avenues and re-directing those resources towards educating the local real estate community to sell for us.  Sounds decent in theory but never works.  To go this route assumes that the real estate community is willing to spend their valuable time and energy learning a new product with a sale price equivalent to a “fraction” of a traditional whole ownership sale.  Commissions are lower so an agent’s interest and excitement is usually lower as well.  This is not to say that there are not local agents that will understand the product and embrace the opportunity to offer a practical alternative to their trusted client list.  It is simply not a strategy that can be used to sell an entire project.

Mistake #1:  “We’ve read this article, bought a couple fractional books and have now gathered all of the information we need.  We no longer need a professional consultant.”

Not so fast.  First of all, we have just scraped the surface in this article.  You will be faced with hundreds of decisions that can prove costly if not handled correctly.  The majority of what you will face throughout the project development, sales and marketing lifecycles cannot be found on the internet.  Second, selling this product requires extensive training, followed by more training and then additional reinforcement training.  Explaining the fractional concept to buyers is an art and must be done at the right pace as to not confuse them and send them away without completely understanding what you have to offer.  See To Vomit or Not to Vomit.  Third,   every project is different and you should not be expected to understand the intricacies of how each reservation system is designed and why.  Stick with what you do best, find attractive properties and put together the right team that can work interdependently to create something special.

In summary, eliminate mistakes and save money by reducing costly expenses associated with errors that could have been prevented at the start.  Fractional ownership is not only a practical decision for your buyers but for you as well.  Learn it, love it, embrace it; do it right the first time and watch your profits grow!

More information here:  Pierce Group Feasibility Study and Pierce Group Project Development Services

Some intriguing numbers…

Let’s take a look at how the Shared (Fractional) Ownership industry compares to the Whole Ownership industry today and in 2004. We know that both industries grew during 2005 and 2006, started to decline in 2007 and experienced a virtual stand still towards the end of 2008.  However, what we see here is that Shared is holding its own and has actually gained a percentage point in market share from Whole.

Shared Ownership                    Whole Ownership

2004     $1.54 B                                     $165.7 B

2008     $1.52 B                                     $76.8 B

%              -1.3%                                        -53.7%

*Shared Ownership numbers from Ragatz & Associates and includes Fractional, Private Residence Club and Destination Club sales.

**Whole Ownership numbers from National Association of Realtors® annual Investment and Vacation Home Buyers Survey

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

The dissemination of information at the early stages of the sales process has long been debated and there are believers in both sides - holding back information and throwing it all out there.  Let it be heard (read) here, times have changed and the process in which we provide information to interested prospects is a crucial element of the sales process.  Fractional sellers need to provide a wealth of information so buyers can educate themselves.

The typical perception is that the information might be too complex and too confusing, or the reader might directly relate the project to timeshare and thus lose interest before completely understanding it.  So marketers will throw a little bit of information out there with the hope that enough interest is created resulting in more inquiries.  Therefore, the sales process is often extended into months rather than weeks.  We all know that this industry is nothing like timeshare and these fears must be conquered.  The prospect must be provided the information needed to make an educated and informed decision in a reasonable amount of time, a 90 day forecast to contract is nonsense.

The debate is this: if we present too much information too fast then the vomit effect comes into play and the sale is lost.  Most sales people who have been subjected to any type of basic sales training course have likely been introduced to something similar to what I like to call the “Vomit Crevice”.  It’s not pretty, but “Vomit Crack” was even worse.

The premise is that sales people stand on the edge of an empty crevice which lies between them and their prospective buyer.  This crevice represents the buyer’s lack of understanding of the product or service they are considering.  The only way to facilitate a connection between the buyer and seller is to fill up that void with valuable and relevant information that is important to the buyer.  Each valuable and relevant question answered represents a large boulder that is tossed into the crevice.  The result is a crevice that has been filled with a solid foundation of boulders (information) thus giving the prospect the means to walk across and shake hands - a closed sale.

However, many young sales people are hell bent on spewing as much information as humanly possible regardless of whether or not the buyer actually cares about any of it.  This is a classic rookie move.  The default for freshly-trained sales people is to vomit every bit of detail about their product or service that they have just learned in their product training classes.  (This is where it gets really gross.)  A crevice full of vomit is nothing but a disgusting pool that the prospect will sink into when attempting to walk across and therefore results in a lost sale for the sales person.  Needless to say, no buyer is going to shake the hand of someone who just led them into a pool of vomit.

How does all of this apply to fractional ownership sales?  Easy; fractional sales people have a more challenging task than a typical real estate agent.  Fractional folks don’t play in a world of just granite countertops, cherry wood floors and 5,000 square feet.  That stuff is easy.  In the fractional world the prospective buyer must completely understand everything from why it is a logical real estate purchase, to the unmatched experience provided in residence, to the fair and flexible reservation system and why it’s not a timeshare.  You can see why it becomes very easy for a fractional sales person to become completely immersed in all of this information and commence vomiting all over the place.  Information starts flowing about the Residence Club’s logarithmic tie-break system when the prospect simply wanted to know if they could go skiing next year.

So, you’re thinking the clear lesson here is to make sure that your sales people do not spew all of their information up front and take it one step at a time, easing the prospect into those nitty-gritty details.  Not so fast.  There is another factor at play here; closing the deal while the iron is hot.  This is a major rebuttal to the vomit crevice.  After all, in similar fashion to the “first 48″ that cops have to catch their criminal, sales people have a limited window to reel in their interested buyer as interest can fade almost immediately.

This is basically a catch 22.  It seems as though the answer is to proceed with information overload to try and bring in the sale while the prospect is hot.  Actually, this is correct.  The way to do it is with coordinated messaging between your sales team and your sales materials.  When I refer to sales materials I mean marketing brochures, FAQ’s and the website.  A second document entitled Advanced FAQ’s should also be considered for those hot leads in the final stages of the sales process.

Too many times I look through web sites of Private Residence Clubs that have literally no information except the beautiful mountain surroundings and granite countertops.  This is the “tease strategy” and the idea is to get the buyer interested enough to make the phone call so the sales person can take over.  The result…  vomit.  The poor prospect has now been completely overwhelmed with (deep breath) planned vacations, space available vacations, the flexible tie-breaker system, pricing, supply and demand, HOA dues, consumer financing, the daily tidy vs. the mid-week clean, the reservation deposit, no pets but your brother can use it but only on planned vacations, and I almost forgot - the upcoming price increase.

Next will surely come those famous words: “I’m not interested in a timeshare”.

Don’t go this route.  Give the prospect more information before they call.  An informed prospect is a valuable prospect.  Put the price on your website!  Yes, I’ll say it again.  Put the price on your website! If the price is surrounded by valuable information regarding how the club works along with the unmatched experience that is provided then the price will look great and the phone will ring.  What you don’t want to do is vomit all over your website, there is a happy-medium here.  Simply put, there is stuff that can go on the site and there is stuff that can’t.  For example, explaining how the “rotating priority tie-breaker to be fair to everybody” policy works should NEVER be explained in any detail on the web site.

The sales team should work in concert with the marketing team on the dissemination of information to the buyer.  The sales person should hang up with an excited buyer, not confused.  They should be anxious to read more detail on the website or in the e-brochure that has just been sent to their inbox.

In summary, we must vomit to a point; a point that creates excitement and moves the sales process forward in an efficient manner.  However, the spewing should be done by the marketing materials and the web site in addition to valuable information from the sales team.  As the sales process moves along the questions and answers will become more advanced and cover more detail.  It’s much easier to explain the “rotating priority tie-breaker to be fair to everybody” policy when the buyer is already excited for their first trip.

Now start spewing.

FORESIGHT COSTS LESS THAN HINDSIGHT^SM

“Conspicuous Leisure” was a term coined by American Economist Thorstein Velben.  Per Wikipedia: “The term denotes visible leisure for the sake of displaying social status. The term is generally reserved for those forms of leisure that seem to be fully motivated by social factors, such as taking long vacations to exotic places and bringing souvenirs back.”

It appears that we are shifting away from this “Conspicuous Leisure” and its parent, “Conspicuous Consumption”.  Yes, our retirement portfolios have taken a hit and it’s a lot more expensive to fly privately and to relax in fully stocked, wholly-owned pied-a-terres but I think it goes deeper than that.  Add the “Green” element – i.e. waste conservation et al – and conspicuous consumption just isn’t cool anymore.  To put it another way, I doubt John McCain is too thrilled about owning seven homes right now. 

What is cool?  Sharing is cool.  Fractional is now hybrid; it’s the Prius.  Sure, mega rich socialites in Hollywood could afford any gas guzzler of their choosing but that’s not cool to them.  It isn’t cool because it isn’t right.  Not only is it trendy to proclaim multiple second homes as waste dumps, it’s accurate.

Private Residence Clubs, the top shelf answer to fractional ownership, offer the best of both worlds; high-end vacation digs in a responsible fashion.  In most cases, the residences are ultra upscale, furnished as beautifully as your own home would be.  Owners are pampered as they would be in a five-star resort and typically the reservation system allows them to use the club as they choose.  BUT, the owners are sharing this real estate and conserving valuable resources, there is nothing un-cool about that. 

In just one Private Residence Club development a couple hundred boomers, Gen X’rs, Hollywood moguls and professional athletes can all enjoy the same high-quality accommodations and services as they would have with their own home.  No one has to watch several hundred acres of beach front being converted to enormous second home properties that sit empty for 48 weeks per year with the A/C running. 

A note to you socialites and pro athletes:  many (if not most) Private Residences Clubs will still offer the privacy you’re looking for.  Now you can have your gorgeous second home (or seven of them if you choose) without all of the extra cost, waste and un-cool conspicuous consumption that goes along with it.  A little (organic) food for thought.

Eric Pierce

We still have a lot of work to do folks! 

The article (below) by Lisa Fickenscher that recently ran in Crain’s New York Business on Hyatt’s expansion plans in New York innocently refers to fractional ownership as being synonymous with timeshare by saying “If the fractional units (known as time share) in the Midtown property…”. 

While many of us understand the vast differences between the two industries, the overwhelming majority of the article-writing world is in the dark.  We can assume that Journalists (usually) do research on what they write about which means they (usually) will have a more advanced level of understanding of the topics they write about as compared to John Q Reader.  So if Journalists are still in the dark about the fractional ownership and Private Residence Club industries then John Q. Reader can’t possibly be up to speed on them - especially their differences from timeshare.

No, this is not a bad thing.  It’s actually somewhat exciting.  The article reinforces the notion that our smart little industry is still literally in its infancy in the grand scheme of things.  Sure we’ve seen strong growth and more and more people are talking about it and why it’s a more practical form of second home ownership.  But when you compare the two industries on simple overall public awareness, fractional is to timeshare as the Boise Hawks are to the New York Yankees.  I would guess that maybe 1% of the U.S population is familiar with the Boise Hawks but they are a good product and priced right for the current economic situation - yes, I’m stretching but you get the idea.

To make a long story short, we are poised for strong growth but awareness is still quite low.   Everyone in this industry needs to continue to work hard at explaining the differences to those who are still in the dark. 

I have offered any assistance needed to Ms. Fickenscher if she would like to clarify to her readers the real differences between timeshare and fractional ownership.

Read the article here:  http://www.crainsnewyork.com/article/20090417/FREE/904179977

Eric Pierce

I recently wrote a pretty in depth article on our Feasibility Analysis for FractionalReport.com.  I cleverly called it: “The Fractional Feasibility Study - What Is It and Why Is It Important?

Here is the start…

A feasibility study is an extensive and detailed review of all aspects related to the development and financial feasibility of a fractional project.  All facets of the project are weighed, analyzed and provided in an easy to understand format for developers, owners, lenders or private equity investors.

It’s pretty safe to say that the reduction of costly expenses and the realization of stronger profits is the ultimate goal of any real estate developer.  So what is the number one killer of the ultimate goal?  Mistakes.  Based on this logic, the top priority for real estate developers should be the elimination of as many mistakes as possible.

Of course, not all mistakes are preventable.  Some things just happen that no one can predict; take credit swaps and sub-prime lending for example.  Those mistakes were made by others and were completely out of our control.

That being said many mistakes are of our own doing and can be prevented with up front planning, i.e. foresight.  In the fractional real estate business, foresight is a bit more complex, as most land owners and developers simply are not familiar with what it takes to properly structure, market and sell a Private Residence Club (PRC).  While their goals of minimizing mistakes are the same, the importance of mistake-minimizing tools is much greater.

Here I will provide a more detailed review of a crucial mistake-minimizing tool:  the fractional feasibility study.  I will review the logistics involved and list some of the important elements included in the study.

Get the rest of the article here:

http://www.piercegroupllc.com/core-services/fractional-services-in-focus/fractional-feasibility-study.html

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