JANUARY 2012 |
www.opp.org.uk WORDS | George Sell New opportunities
New ideas and opportunities are the lifeblood of any business, but they are especially important in the fractional world, where the property industry’s traditional model is changing fast. OPP fractional columnist George Sell summaries some new approaches in the Middle East and in the USA that are well worth investigating.
be full of challenges. Let’s be frank, despite annual proclamations that ‘this is the year that the fractional property market will take off’, the last three years haven’t panned out the way we thought they would. The fractional market has taken just as much of a hit from the global recession as any other area of the property world. The Americas market for instance (US, Canada, Mexico and the Caribbean) has seen its sales contract from $2.3 billion in 2007 to just $530 million in 2010. It has been a very tough period indeed. In the heady pre-crash days, there were lots of bold claims made about how the sector would grow to a similar size in Europe, while gradually colonising all points around the globe. I’m fairly sure this would have happened if we hadn’t witnessed the economic meltdown which is still sending its aftershocks across the world. But, as always, tough times call
T
for clear heads and bold thinking, and the fractional sector – which I defi ne as including private residence clubs and destination clubs as well as straightforward fractional freehold – is having to innovate and come up with new models to keep its ever more discerning customers satisfi ed. In the astoundingly opulent surroundings of the Burj Al Arab in Dubai at the end of November, I was fascinated to listen to a variety of delegates attending the Shared Ownership Fractional Summit MENA, and what their take on the future was. One thing that particularly struck me was the presence of some big hitters from various disciplines of the real estate world, all coming to the shared ownership concept from a different angle. The idea is starting to have a much broader appeal. Delegates from companies such as Qatari Diar, Colliers
his is going to be an interesting year for the fractional ownership sector. 2012 will
International, RERA, Quintessentially and Deloitte all came together in Dubai to debate the future of shared ownership in MENA and its signifi cant potential for growth in the region. Interestingly the hotel sector was well represented, with attendees from Wyndham Hotel Group, IFA Hotel and Resorts and Sol Melia among others. There were also several of the region’s big timeshare players, including Arabian Falcon Holidays and Emirates Vacation Club.
The key take-away for me, and by
far the most important inference that I drew from many conversations that I
hotel markets - whether for leisure tourism, religious tourism or business use - and all these visitor groups can be attracted by fractional or timeshare developments if targeted correctly. Dubai already has Shariah-compliant
fractional developments, and there is a recently launched fractional scheme in Iraq that specifi cally targets the 18 million annual visitors to Karabala, a holy site to Muslims. New ways of thinking, new products
and new markets – these new avenues have got to play a big part in the future of fractional. Places that have done well
George Sell is the editor of Fractional Trade. Visit:
www.fractionaltrade.com
clubs. Eschewing ownership of the properties, Inspirato controls in favour of long-term leasing arrangements and has managed to avoid the hefty upfront joining fees which have been the downfall of so many destination clubs in the recessionary era. Members pay a US$9,500 initiation fee, plus an optional annual renewal fee of $2,500. Then they pay a market-based nightly
“Avoid the hefty upfront joining fees which have been the downfall of so many destination clubs”
Convergence | Fractional’s disparate strands are coming together in the hotel sector
had at the event, was that once-disparate strands of the industry are converging in the mixed-use arena, and that Dubai is a prime market for this to happen. A good example of this is the
Bonnington Tower, a fi ve-star hotel in the Jumeirah Lakes district which also incorporates whole ownership units for sale and timeshare apartments operated by Arabian Falcon. The way in which the fractional concept could grow in Dubai is illustrated by Jalil Mekouar, managing director of Jones Lang LaSalle Hotels, who argues that several of the area’s important destinations, including Dubai, Sharm El Sheikh and Makkah, have signifi cant potential for future fractional and vacation ownership development. All have strong existing
out of the traditional whole ownership model might be about to fi nd that they can be even more profi table moving the shared ownership sector. Back in the US, some equally
intriguing new models are beginning to emerge as well, typically based around the concept of a “vacation currency”. The common theme here is to offer the consumer as much fl exibility as possible. Nightly valuations and bookings, rather than weekly bookings, are becoming more popular as are hybrid ownership structures and models. A good case in point is Inspirato, the “luxury vacation club” started by Brent Handler, one of the original founders of Exclusive Resorts, the biggest (and one of the few surviving) non-equity destination
accommodation fee for the properties they use. This averages around $1,000, but can be less in low season. Members make their reservations on the club’s website – which displays availability and the nightly rate, with prices affected by factors such as how far in advance reservations are made, travel dates and length of stay. Members pay only for the nights they use, and there is no limit to how often a member can travel. Inspirato says its model combines the
best of vacation rentals – fl exibility and pay-as-you-go structure – with the best of private vacation clubs – company- controlled luxurious accommodations, custom designed interiors, dedicated on- site concierge service, and world-class amenities – but without the six-fi gure upfront fee, long-term commitment or restrictive booking policies.
It is a concept that many developers should take a careful look at as the New Year begins. There could be big opportunities here. Whatever 2012 brings, it is a safe bet that the fractional sector’s innovators will be the ones leading the way.
BUSINESS
Developer profi le
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