Ragatz report indicates light at the end of the tunnel
US consultant Dick Ragatz has released his annual state of the industry report, taking the pulse of the fractional ownership sector in the US, Canada, Caribbean and Mexico. And while the numbers reported at the 2012 Ragatz conference in Scottsdale, Arizona, aren't going to result in the popping of champagne corks across the industry, there are definitely signs of those elusive green shoots of recovery.
Across the countries involved, there were a total of 98 active developments, down from 104 in 2010. These are broken down in to 32 private residence clubs, and 66 fractional interest projects. For the sake of the report, Ragatz defines a PRC as anything that sells for US$1,000 per square foot upwards. There were also six active destination clubs, one more than the previous year.
Ragatz estimates that 1,925 fractions were sold in 2011, a four per cent increase from 2010's 1,850. Total sales volume was $552 million, a four per cent increase on the 2010 figure of $530 million. Significantly this is the first increase in overall volume since the peak year of 2007, when sales totalled $2.3 billion.
The average price for a fractional interest was up to $131,000 from 2010's $120,000 but the avergae price for a PRC interest fell from $271,000 to $254,000.
When potential purchasers were quizzed about their reasons for not buying a fractional interest, a whopping 81 per cent cited economic uncertainty, followed by 20 per cent who blamed a lack of consumer financing. Interestingly, just four per cent said they would rather own a whole ownership property.
The survey certainly hints at significant pent-up demand for fractional products, with buyers still adopting a wait-and-see attitude to the economy. More than 70 per cent of respondents (and 90 per cent of PRCs) said more consumer finance would improve their sales, while owner referrals and in-house renters were cited as the most productive sources of new leads.
Key industry trends are smaller shares, smaller unit sizes, more mixed-use resorts, and more owner privileges, especially rentals and exchange programmes.