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Is Now the Beginning of the End for Fractional Real Estate?

After the difficult market of the past several years, it is understandable if fractional real estate developers, like many other business people, become so accustomed to the status quo that they accept tough times as a “new normal.”

So, amid a constant flow of negative news, it’s a good idea to step back occasionally from the day-to-day and re-examine what’s going on in the market overall. 

Spring, a time of re-awakening and rebirth, is an especially good moment to conduct a re-evaluation to determine if changes in your market area call for revisions to your business strategy.  And, if times have changed for fractional real estate, this leads to the obvious question, “How may I take advantage of it?”

Market-watchers would do well, therefore, to pay attention to reporting on two recently held, influential fractional industry conferences:

Fractional Summit Europe 2012,  February 27-28, London, England

In a Fractional Trade article headlined, “New developers flock to London for Fractional Summit Europe 2012,” Editor George Sell reports that a significant number of developers new to the fractional industry attended.

Sell writes, “The145 delegates came from Italy, Spain, Qatar, France, Portugal, Malta, Ireland, USA, Cyprus, Russia, Italy, Bahamas, St. Lucia, Barbados, The Netherlands, Philippines, Switzerland, Lithuania and the UK.”

Sell offers an important insight into the data: “It was telling that timeshare developers who are launching fractional products and upgrading their timeshare clients are a major new force in the industry, a trend that looks set to grow over the next few years.”

2012 Ragatz Fractional Industry Conference, March 12-13, Scottsdale, AZ

Fractional Life, a consumer website, ran an article on the Ragatz conference under the headline, “Ragatz report indicates light at the end of the tunnel.”  The article states, “While the numbers reported aren’t going to result in the popping of champagne corks across the industry, there are definitely signs of those elusive green shoots of recovery.”

According to the article, “Ragatz estimates that 1,925 fractions were sold in 2011, a four per cent increase from 2010’s 1,850.  Total sales volume was $552 million, a four per cent increase on the 2010 figure of $530 million.  Significantly, this is the first increase in overall volume since the peak year of 2007, when sales totaled $2.3 billion.”

In Fractional Report, a trade website, Nick Copley cites a survey from the Ragatz report finding that, “Overall the developers are optimistic with more than 60% feeling positive about 2012.”

So, what may be a reasonable conclusion from the general economic news available as well as these industry-specific findings?

While optimism is guarded, it’s starting to look like the beginning of the end of the recession’s impact on the fractional real estate industry and the start of a recovery, at least in some places in the world.

And what are some action steps that developers might pursue to profit from an anticipated increase in the demand for fractional real estate?  Following are a few steps to consider:

1. Convert existing, unsold resort and urban real estate, such as single-family homes, condominiums, condominium-hotels and even hotels to fractional ownership—assuming that there is documented sufficient demand to absorb the supply—and re-launch fractional properties that have stalled.

(Note:  Examples of developers already pursuing these initiatives can be found in March articles in Fractional Life, Fractional Trade and Fractional Report.)

2. Explore new markets that are “under-developed,” in terms of supply of fractional product, if one’s present markets are under-performing.

(Note: The countries cited by George Sell in Fractional Trade’s Summit coverage are excellent starting points to explore, but do not comprise a definitive list.

Even the fledgling website, The Fractional Consultant (“TFC”) has had visitors from virtually all these countries and others, too distant perhaps from London to send conference delegates.  TFC has had visitors from Thailand, Indonesia, South Africa, Namibia, India and more. 

The world hungers for information about fractional second home ownership!)

3. Prepare your current sales agents, by training—or retraining—them to satisfy even more effectively what many expect to be the coming pent-up demand for fractional ownership property.

4. Change your mind set to meet current business conditions, and raise goals and expectations, as appropriate. Some developers may now be asking, “How can we generate more qualified leads?”  Before long, the $64,000-question may be, “Where can we find enough competent sales agents to handle all our traffic?” 

It is possible that, in the future, competition for additional high-performing fractional sales agents may become as stiff as competition for buyers is today.

5. If enough fractional agents cannot be found, consider looking to the timeshare industry as potential new, in-house fractional sales hires. 

I believe that the agents who may likely be trained or retrained most easily for fractional sales may be found from among timeshare’s top-performers.  These tested sales agents, having proved their mettle, may want to move to the higher price point and more affluent clientele of fractional ownership.

While fractional property developers have traditionally sought the sales co-operation of outside whole ownership agents, this has often proved disappointing in practice.  Whole agents have tended to perform below expectations due to their reluctance to work at lower commission amounts.  (Of course, efforts to co-operate with whole ownership agents should nevertheless still be made.)

In conclusion, fractional property developers who want to profit from today’s dynamic economic conditions need to stay ahead of the curve and plan now for future changes.  This will position developers to reap the economic benefits as economies start slowly to rebound.

Several years of pent-up demand for fractional vacation home property will gradually start exerting a positive impact on the industry as growing numbers of fractional ownership prospects start appearing once again in sales offices worldwide.

Is the fractional real estate market in your area rising or falling?  Our readers are keenly interested in knowing.  Please share.

David M. Disick, Esq. helps clients in the US and abroad secure financing, attract more buyers, close more sales and earn more profits.  His fractional expertise is recognized internationally.  He is an industry thought leader through his authoritative writings and his book, Fractional Vacation Homes:  Marketing and Sales in Challenging Times.  Connect with him at:

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