Date: June 17th 2010 - Publication:"City Insider" -  Title: "Is Fractional Ownership the new Timeshare?"  Author:David Stevenson

Soaring accommodation prices could be good news for 'destination club' models - and that could spell an opportunity for travel firms

Your humble columnist and Panmure Gordon's top travel analyst Gert Zonneveld have at least one thing in common.

I can't boast a Dutch background or the same level of knowledge about the travel industry's business structure but both of us have young families and both of us find the cost of leisure accommodation absolutely prohibitive.

Many moons ago after interviewing Gert about Ryanair's business model (and its plans to hand money back to its shareholders) we joked that if nothing else the Irish operator was largely true to its brand in providing cheap air travel (most of the time) to its less than adoring fan base.

Cheap is not a word I'd use to describe the other main cost element of most family holidays - the accommodation. Air travel costs have collapsed but accommodation  costs appear to be rocketing.

Of course mass market hotel chain operators such as Travelodge and Premier Inn lull us into the idea that £19.99 bargains abound, but in my experience these prices have very little relevance except for business travellers in the middle of the week in motorway locations.

Book at a family orientated hotel in the UK or Europe and the costs shoot past £200 per room per night, sometimes per person, for anything half decent.

In my experience well-serviced family accommodation now comprises well over 80% of the total cost of a decent family summer holiday.

We all know where this cost inflation is coming from, yet no-one seems to be offering an alternative, outside of the big travel groups and their bulk buy deals. 

One traditional alternative is suffering a slow and very painful death. The second home abroad was, for many middle class families, the only sensible way out. You didn't "waste" countless thousands every year on an expensive hotel over which you have no control - instead you ploughed that money back into paying for a nice little French farmhouse.

That was the theory I certainly signed up to, but I can say now, without the slightest hesitation, that it doesn't work. The kids get bored of going to the same place every year - "Daddy, Samantha's friends have been to Spain last year and Florida this year - why can't we!" - and the real costs in terms of time and bother are huge. 

House maintenance is, trust me, a veritable pain in the ass. We've just sold our house - at a small profit thank god - and I know of many others desperate to do the same thing.

Which leaves us in a pickle - go shopping in the online accommodation market, or trust in the mass market packagers? 

Another alternative might start taking shape over the next few years, one which both tour operators and agents might want to think about engaging with.

Last week in this column on I mentioned Geoffrey Kent of Abercrombie and Kent's successful Residence Club model. In passing I mentioned that business was brisk but I probably understated its importance - for Mr Kent this is a big part of his future.

According to the Abercrombie and Kent founder, as people come out of this recession they are "analysing seriously their second homes" and opting for a pooled or fractional ownership model a la his destination Club.

It is by far his "hottest and biggest" product, and apparently uptake of the $300,000-plus service in the first few months of 2010 has already exceeded the total for 2009.

This buzz is echoed by one of Mr Kent's former business partners, David Rogers at a company called Rocksure.

The travel industry veteran is now pioneering a fascinating model which involves wealthy types such as accountants, lawyers and CFOs investing between £50,000 and £200,000 in a range of property syndicates that then buy into a pool of luxury, serviced villas around the world.

This equity based model is similar to The Hideaways Club but marketed at a slightly more humble crowd, and with a clearer syndicate ownership structure. 

Middle class consumers want some choice in the range of properties they can access, as well as proper service when they get there, plus some sense that this is an investment in an expensive product which isn't entirely being flushed down the drain.

The fractional ownership sector is certainly limbering up to supply this demand, in part because the fears surrounding the old timeshare model are fast fading away but also because the real estate industry now has a glut of properties it is looking to shift using innovative new financial models.

The pitch is also increasingly simple - give us between £20,000 and £50,000 and we'll give you access to a range of serviced, well maintained properties in which you also have some investment potential.

The actual model might be a hotel club or the Rocksure full equity ownership model - both have a place but the missing ingredient is the channel. Who's going to sell this product?

Step forward the existing travel industry chains and operators. Many were undoubtedly burnt by the time-share disasters of old but a huge opportunity awaits for those with the right brand, and the right product set.

Provide me with a model where my accommodation money is not seen as a wasted expenditure but a potential investment for the future, and give me excellent service and I'd suggest there are hundreds of thousands of potential customers out there, many flushed with cash from having sold their second homes.

Anyone up for the challenge?

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Date: May 10th 2010 - Publication:"Country Life International." -  Title: "Fractional Ownership - A Fraction of the Cost"  Author: Holly Kirkwood

NICK VAN GRUISEN, managing director of the Ultimate Travel Company, knows an awful lot about holidays, and swore blind he wouldn’t buy overseas. ‘I always said I’d never buy a property abroad. You constantly feel you have to go there - it’s less about the financial strain and more about the mental strain. You’re emotionally tied to it - I’d always rented and walked away afterwards.’

However, hearing about a new fractional-ownership scheme turned his head. Rocksure has fixed-term plans where members invest in a portfolio of properties all over the world - in this case, six houses, in the Rocky Mountains, Brazil, Thailand, Morocco, the Algarve and Croatia - with the advantage that the investment is spread across many different currencies, a form of spread betting, if you like. The scheme lasts seven years, during which each member has an average of four weeks’ holiday in the properties of their choice, and, at the end of a fixed term, the capital appreciation of the portfolio is shared out. ‘I didn’t want a time share and I didn’t want to get stuck in a property club I wasn’t sure I could get out of easily,’ explains Mr. Van Gruisen. ‘A lot of these clubs are one-in, one-out.’

What Rocksure was offering had a fixed term of seven years, after which we sell the properties and split the profits between us. We used our weeks, as well as donating them to charity auctions and giving them away - whatever suited us at the time. You also don’t have the responsibility of looking after your own house - properties are managed and staffed all year round and fees are low - currently less than £2,000 per annum.

Members of such clubs enjoy the minimal outlay for the maximum enjoyment of their holidays, plus what they hope will be a capital gain at the end. With others doing the work, it’s a stress-free - if short-term - way to be a property owner abroad.

Fractional ownership
Pros
• Minimum financial risk spread across several different currencies as you save money on holidays
• You can spend time in diverse locations living in glamorous properties that are worth considerably more than your own investment
• Fixed term arrangements mean you can plan your investments accordingly

Cons
• You only have a certain amount of time in each property every year
• You have to plan holidays well in advance
• You can’t choose where you buy - the club picks the properties

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Date: February 12th 2010 - Publication:"City a.m." -  Title: "Get into the foreign property game at a fraction of the cost."  Author:Tomothy Barber

Get into the foreign property game at a fraction of the cost.

By Timothy Barber

Published: Friday February 12th 2010

FOR many people, owning a foreign property would be the ultimate luxury. However, dealing with local authorities, maintaining the place, or renting it out can turn a luxury into a time-consuming, costly hassle. And that assumes you can really afford the place of your dreams, rather than a flat in a high-rise overlooking a crowded beach.

That is where the growing market for fractional – or shared ownership – properties has come in. Originally an idea popular in America, fractional buying allows you to purchase a portion of a property (usually between a quarter and an eighth) in a luxury resort, for which you can stay for a set period per year – between three and six weeks is normal. Allocations for owners will be spread across the year with, say, each allowed two weeks in high season, two in mid season and two in low season.

Fractional buying is often compared to timeshare ownership, but differs in that you buy a freehold share of the property, rather than units of time. As the property value rises, so does your share. Tax and legal fees will usually be included in the price, with everything handled by the fractional company – but it’s worth checking to avoid being surprised by extra costs.

It’s a nifty way of enjoying a luxurious foreign pad without having to stump up millions, and there are other perks. Resorts offering fractional properties will also manage them, meaning you just have to turn up on your agreed dates.

Some companies, like Rocksure Property, have taken the model further. They offer investment in funds that buy up luxury homes around the world, which shareholders can arrange to stay in. Having launched two funds for ultra-high-end villas in places such as Thailand, Colorado, Morocco and Brazil, Rocksure has just launched a Capital Fund for deluxe properties in major European cities (see above), appealing to those who prefer cultural trips and weekend breaks to lounging on white sands.

Following the devastation of the holiday homes market in the recession, the fledgling fractional market is now particularly affordable. While fractional ownership won’t guarantee huge returns, it nevertheless has the potential for capital appreciation with minimal risk. Buyers do have to pay local tax on capital gains made, though unless you get very lucky, this won’t be a very substantial sum.

“The recession has created an opportunity for the fractional market,” says Paul Owen, chief executive of the Association of International Property Professionals. “It’s in its infancy for British buyers, but in five years time it might be seen to have been introduced at the right time.”

ROCKSURE PROPERTY
Bravo fund from £189,000, Capital Fund from £100,000
Rocksure Property’s Bravo Fund owns six properties around the globe that shareholders can stay in for four weeks each year. Destinations include Thailand, Morocco, Portugal (pictured), Croatia, Colorado and Brazil, with four and five bedroom homes averaging over £1m in value each. The life of the fund is seven years, at which point the properties are sold on and investors paid. Rocksure’s newly-launched Capital Fund is offering 14 nights a year in townhouses in European cities such as Paris, Cannes, Venice, Florence, Vienna and Barcelona. The life of this fund is 10 years.
For more information visit www.rocksureproperty.com

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