Fractional industry gathers in London to focus on the future

Fractional industry gathers in London to focus on the future

More than 250 fractional property industry professionals gathered in London last week for the fourth annual Fractional Summit.

Delegates from countries as diverse as the Seychelles, Thailand, Portugal, Italy, Spain and the USA, were treated to two days of thought provoking presentations, Q&A sessions and panel discussions.

Fractional Life founder Piers Brown kicked off proceedings by introducing the theme of the conference – Changing Times, Changing Markets. He explained change is the one constant in everybody’s life, and that businesses and individuals can either embrace change and use it to their advantage, or become a victim of it.

Piers was followed by one of the most respected figures in the fractional and resort development world, Dr Richard Ragatz. He presented his “Fractional 101” model, which gave a concise and honest representation of the pros and cons of fractional schemes for both consumers and developers.

Luca Franco of Luxury Leisure Properties International then gave a talk about the best way to convert suitable whole ownership resorts in to mixed-use developments incorporating fractional ownership properties.

The first panel discussion of this year’s Summit focused on the lessons the US can teach other markets. The US fractional industry has endured two tough years following a phenomenal period of growth. Panellists were in agreement that the slump has been caused by general economic circumstances rather than industry-specific problems. Wally Hobson of Hobson Advisors said: “US consumers are not buying any discretionary products right now – it’s not just limited to real estate. The psychology needs to change – people don’t feel wealthy at the moment, even if they are.”

Gregg Anderson of The Registry Collection said he expected to see the first signs of a recovery in the second half of 2010, while Hobson and Wayne Sobien of First American Title Insurance Company thought it would be 2011 or possibly even 2012 before we see any significant improvement in the market.

Luca Franco said that an increase in both consumer finance and consumer confidence were essential to recovery, while Dick Ragatz pointed out that around 25 per cent of US fractional buyers already own timeshare, and that this is a market which could well take off in Europe too.

The next presentation, by Nick Turner of the Registry Collection, looked at the value of rental programmes and exchange programme to fractional developments. Turner was followed by a Legal Q & A which discussed trustee ownership, developer funding and business models.

After lunch, three brave developers submitted their business models to the fractional world’s answer to Dragons’ Den, with Jerry Cobb of FOC, Peter Kempf of Peter Kempf International and Peter Hutchinson of Citadel Trustees all giving their frank opinions on the suitability of the schemes for fractional ownership, as well as examining the strengths and weaknesses of each proposition.

James Bacon, UK account manager for Google Property then gave the audience a snapshot of the rise of online video and how it is being harnessed commercially in the property industry and other sectors. He gamely showed delegates some examples despite a less than co-operative Wi Fi connection in The Marriott’s ballroom.

Continuing the online theme, a panel of new media experts debated the relative merits of SEO and social media, with the consensus being that an optimised balance of the two is needed to ensure your business can reach as many potential consumer as possible.

The first day was rounded off with a rousing call to action from Paul Gardner Bougaard, chairman of FSOTA, who urged developers to join and support its trade association for the good of the industry.

Any cobwebs which might have resulted from Thursday’s Johnnie Walker whisky tasting night were soon blown away during the first session of day two, when Valerie McDermott of 47 Park Street gave a dynamic presentation on selling fractionals to high net worth consumers. “The ability to deal with the customer is as important as the product itself,” said McDermott, adding that “transparency is key when dealing with luxury buyers”.

Friday’s first panel discussion examined the potential of mid-market fractionals. Paul Owen of the Association of International Property Professionals said: “Gaining the trust of a public who are very risk averse is going to be key over the next two to three years if mid-market fractionals are going to take off.”

Robin Barrasford of Barrasford & Bird Worldwide warned the audience that “overpricing could kill this industry, and there are people out there doing it now”, and tipped fractional schemes in the UK as a big growth area. Bryan Lunt of Absolute World said that the majority of his fractional customers are existing timeshare owners.

The next session focused on the role of agents in selling fractional property. The overall conclusion was that there is a lot of education to be done before agents understand fractionals and sell them properly. Richard Edgar of the National Association of Estate Agents warned that many agents have started selling fractionals because they saw it as an easy sell, when it’s actually much more complicated. Charlotte Rose Melsom of yooPhuket reminded the audience of the need to do your homework: “Developers need to do due diligence on agents and vice versa.”

A panel discussion on resales then followed, with Peter Kempf saying that in-house resales can be a good revenue stream at established resorts, while Andy Sirkin of Sirkin Fractional Lawyers said: “Buyers and sellers are both increasingly moving towards fractionals with an exit strategy, largely due to the effects of the recession”.

The winners of the 2010 Fractional Life Awards were then presented with their prizes, with Pestana Golf, yooPhuket and The Registry Collection the triumphant trio this year. yooPhuket won the Readers’ Choice award with an impressive 60 per cent of the votes cast.

The final session was a Q&A discussing the future of fractionals. Nick Turner pointed out that buyer demographics were changing: “The majority of fractional buyers over the next few years are going to come from Europe, including Russia and Eastern Europe, and to a lesser extent from the Middle East,” he said.

But the session was dominated by finance, both for developers and consumers, and how banks’ lack of understanding of fractional ownership was preventing the sector from significant growth. Piers Brown said he would endeavour to get representation from the banking fraternity at next year’s event, so they can see for themselves the potential fractional ownership has, as well as commissioning further detailed research into the sector for developers to present to their bankers.

Fractional Summit 2010 provided a good barometer for the state of the market, and the increased attendance showed that an appetite for fractionals in Europe is truly here.

Forthcoming events from the Fractional Life team include Fractional Summit USA, to be held at the InterContinental Hotel in Miami from August 31st to September 1st 2010, and the Fractional Expo 2010, the UK’s only B2C fractional exhibition, to be held at Broadgate Event Venues in the heart of the City of London from 13th to 15th September 2010.