The 11th annual Ragatz Fractional Interest Conference concluded less than a week ago. As always, the conference opened with Dick presenting his preliminary findings from his state-of-the-industry survey. Not unexpectedly, the data indicates that sales volumes declined further from the 2007 peak of $2.3B. The complete report will be available in the coming weeks and can be purchased from the Ragatz Associates website. An abbreviated mid-year report is also available for free.
The survey tracked the 2010 results at 66 Fractional Interest projects. Aggregated sales volumes exceeded $100M, but are projected to be down almost 30% from 2009. The average per week sales price will likely come in between $17,000 and $18,000, and average per week maintenance fees are expected to have increased somewhere in the 15%-20% range.
Private Residence Clubs
The 38 PRCs in active sales are expected to have generated aggregated sales in the $225M-$250M range, a decrease from 2009 that could exceed 50%. The average per week sales price for 2010 is projected to be between $55k and $60k, while average per week maintenance fees will likely show a slight decrease.
Putting The Numbers In Perspective
It is difficult to reach definitive conclusions about the Fractional/PRC market by simply looking at year-over-year sales figures. Results can vary significantly depending upon the number and quality of projects being introduced into the market in any given period. It also goes without saying that the availability of financing has an outsize impact on sales. Here are just some of the trends/variables the Hospitality Lawg will be tracking as it tries to get a better handle on the health of the market:
- Fractional Interest and PRC projects are generally marketed as an alternative to vacation home whole ownership. To determine the relative health of the Fractional/PRC market, it is necessary to look at vacation home sales figures from the same period. As such, we will be anxious to see the results from the National Association of Realtors Investment and Vacation Home Buyers Survey for 2010.
- Foreclosure rates in vacation-destination states remain high. As a consequence, consumers searching out whole ownership "deals" may be less attuned to the Fractional/PRC value proposition. We will be looking for signs that developer marketing strategies can gain a foothold and prove to be effective in this environment.
- The number of PRC projects in sales is down significantly from 2007. Further, Ragatz reported that only 9 new Fractional/PRC projects started sales in 2010. A thoughtful look at the size and age of the PRC projects included in the Ragatz survey will be important when judging 2010 sales.
- Projects introduced into the market in 2004 or earlier are likely exposed to downward pricing pressure as original owners look to sell into the resale market. While this should be an expected life-cycle dynamic with deeded real estate, we will be closely scrutinizing the Ragatz data for information indicating that this pressure is being mitigated.