Words: Ashley Rigg
Published: 23rd September 2009
Bad business models keep fractional sales low
OPP report today that a lack of consumer awareness and problematic business models are hindering sales of fractionized property developments.
Article highlights
- Savills have so far failed to achieve significant sales despite taking on five projects
- Agents are not being given enough commission to incentivize them to sell. Prices should rise by at least 25% so allow room for generous commissions and 10% should to allocated to marketing
- Only fractions with low entry prices in hotspot destinations are achieving high sales volumes
- However, smaller fractions are not necessarily the answer as they increase relative costs
Low consumer awareness of the benefits of fractional is certianly as issue but a bigger problem is arguably developers with sub-standard products assuming that fractionalizing them in itself will help lift sales. There are too many mediocre developments on the market and the international buyers that remain are more discerning than ever.
A great location, excellent amenities and build quality, good transport links, a strong finance package and ideally an exchange programme (at the high-end) and exit strategy will all help sell through rates. Only a minority of developments tick these boxes.
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User Comments
An insightful article that explains many of the obvious problems with Fractional. You have several “weak links” with Fractional Resorts.
The Bad Developer/Business Models keep fractional sales low because they can't produce Team C+ #'s in a volatile economy.
Key Reason: most Deveopers are one-dimensional. They refuse to create a true "Win/Win" with the buyers + sales agents.
PLUS, they do not have the "resolve + skill" to lead, manage, sell or train in a bad market....
Kevin Cox,
Omega Consulting
Excellent article. Developers - where do we go from here?
patricia creevy,
Charles Oliver
Good article. Something we've been saying for months!
http://www.fractionallife.com/articles_fractional_real_estate_commissions.asp
Piers Brown,
Fractional Life