33 FRACTIONAL CONCEPT OF THE PROJECT Fractional ownership as applied to real estate is a structure whereby a number of co-owners own and can occupy a particular residence or residence type, such as a 2- or 3- bedroom. Each co-owner receives a deed conveying the right to occupy the residence for a specified amount of time annually and specifies how that time is allocated. It may also convey a pro rata share of common areas and amenities. The fractional deed functions the same way as a whole ownership deed to a primary home. The property can be resold through local real estate agents, or by the owners themselves or by the developer, such as KPIG. KPIG’s special consultant, David M. Disick, JD, developed the first Private Residence Club in Telluride, Colorado in the mid-1990. Since then, Private Residence Clubs have been developed in a many countries throughout Europe, Asia, the Middle East, South America and of course, North America. The industry segment has grown to over 322 separate projects. ADVANTAGES OF THE LUXURY FRACTIONAL OWNERSHIP SEGMENT The segment has grown because of the following advantages it offers versus whole ownership. For buyers, fractional home ownership offers better value. People use their vacation homes for just a fraction of the year and consequently it makes good financial sense for them to pay just a fraction of the cost of acquisition and ownership. For vacation home developers and sellers, fractional vacation home sales generate more profit than whole ownership sales. This is based on industry experience that a whole ownership property sold fractionally generates significantly greater revenue. Sometimes almost 100% more. This is what we call the pizza principle – a pizza sold in slices sells for more than the same pizza sold whole. People pay a premium to buy just what they want – and in the case of vacation homes – to have the vacation experience of the luxury fractional. A practical minded customer would prefer to pay only for the use that he will make of the vacation home. Actually, a practical minded customer would prefer to pay only for the use that he will make of the vacation home. As a result, the fractional revenues will exceed the whole ownership cost of the unit. This differential as referred to what is called the fractional multiplier. In addition, application of Fractional Concept increases the occupancy rate of resort, F&B sales and boosts other revenues. For the local community, fractionals have much higher year-round occupancy rate, thus providing greater stability for local employment and greater spending from visitors year round.
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