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Selling the Dream, a Piece at a Time

October 6, 2010

The Fractional industry is poised for tremendous growth on the back of a changing market which has seen the ending of the consumer’s love affair with whole ownership. Trophy acquisitions are replaced by the more fundamental drivers of spending time together in a world where time has become the most precious commodity of all and where the definition of ‘family’ is fundamentally changing. Find out how the Fractional developers are preparing themselves for selling to the new consumer and where the many opportunities lie for the future of ‘de-risked ownership of lifestyle real estate’.

Bryan Lunt – Absolute World Group
Chris Boulton – Yoo Ltd
Darren Ettridge – Interval International
Fulvio Di Rosa – Borgo di Vagli

Moderated by Pete Jones, Partner Generator Systems.

Di Rosa: “All our customers share the desire for a second home; they want something very special, in our case restored 14th century hamlet; and they want to share passions with other likeminded people.”

“It doesn’t matter where they come from because they all share these common experiences. Fractionals are experiences; timeshare is vacation.”

“They treat it like their second home. Our owners want to come back and come back.”

Ettridge: “Every fractional project I’ve seen is completely different. Mechanics, product, systems, all different.”

“Fractional projects need to engage with potential consumers and do more market research. Never assume that your project will work based on another, even if that is next door.”

Boulton: “We’re a business on the periphery of this industry, focused on two things – helping developers sell faster, for more money.”

Yoo now in 23 countries, designing hotels and now involved in fractionals both with Lunt and in Marrakesh.

“Customers love the experiences, luxury and the designers we work with – including Jade Jagger. They want to live the lifestyle of Jade Jagger.”

“Building has to fit together well, the functionality must be spot on.”

Lunt: “Fractionals are definitely lifestyle enhancement. It’s a second home, needs wow factor. Timeshare isn’t something you wake up in the morning with a penchant to buy. In the new climate, fractionals are something people definitely consider a good idea.”

Jones: “How do you stay flexible in fractionals?”

Di Rosa: “Our fractional is 1/10th and we have very diverse customer base – mostly US and UK. Their holiday plan during the year is very different, through our reservation it’s unlimited access. They have the possibility to come when they want.”

We don’t have peak season in July and August like timeshare, says Di Rosa. If customers stay less, others can stay more. Got a real sense of being a second home.

Lunt: “We have many different types of fractions. When we started Yoo Phuket project with Chris is we were selling quarter shares. Fixed time, fixed unit, fixed resort with The Registry Collection added as the benefit. Typical buyer of fractional as former timeshare owner upgrading their ownership and lifestyle, now own real estate.”

Jones: “What’s role of exchange within fractional project?”

Ettridge: “It’s important to be considered. Every salesperson in the room gets objections from prospects. Unless you have an alternative exchange option that customer may walk out and you’ve lost the ability to sell. Every bit of research I’ve read will stress the importance of exchange. You must make sure your owner gets a comparable unit in exchange.”

Jones: “For what key reason do fractional players engage with you?”

Boulton: “Our role is to help the developer stand head and shoulders above the rest. We create features that knock your socks off. We’ve created the world’s longest swimming pool, the world’s largest chandelier.”

“Over the past two years we’ve been working much more with the fractional industry because people want this extra degree of design and luxury, a sense of the unusual.”

Yoo brings “a 10-15% premium” to developers based on initial appraised revenues from projects.

Boulton: “You’re driving sales faster, too, because together we’re raising your profile. It’s not really about the design part, it’s wholly about what appeals to your market.”

“Extreme levels of PR – essentially free advertising” is the result of working with Yoo and its celebrity stylists and designers. “It’s a magic mix” – Boulton.

Yoo will work with a developer producing a Dubai project. “They recognise the value of working with us, and they see opportunities in the UAE.”

Lunt: “Hype, buzz” is critical to success.

Ettridge: “Whatever it is you create, make sure it’s something people understand and it works for them. If trying to sell products that don’t fit their lifestyle, you’ll soon run out of money.”

“Would you buy what you’ve created? Is there a market big enough to buy your product?”

Jones: “How important are rentals and exit strategies to buyers?”

Ettridge: “We mention investment. It depends what you’re trying to create to sell. If an investment, needs explanation of how people are going to get their return. How it’s got a chance of increasing in value. If selling as an investment, need very clear resale strategy.”

Lunt: “Got to look good, got to look good value. If investment, got to be over 8 to 10 years. 12 to 13 owners, going to be well maintained. If bought a month, need to let out a month, most sensible companies will share out the revenue. These are extra selling tools.”

Di Rosa: “I started selling timeshare. That’s my problem, in fact…”

“It’s very difficult to mix fractionals and timeshare. If the project and the architecture is exactly the same, we have a problem. The flexibility that fractional gives you. Timeshare decreases in value as it gets older. A real fractional grows in value.”

Boulton: “You have got a communication problem with your customer. With fractional you’re getting a slice of real estate – with timeshare you’re buying a slice of time. Sounds like timeshare and fractional is the same thing.”

Lunt: “Dick Ragatz did Fractional 101 presentation. Timeshare is sold at that price; fractional is sold at this price; destination club from this to that; and then Private Residence Club from that to that. It’s a piece of a holiday home. You pick whatever name you like.”

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