What is Timeshare?

Timeshare is a form of holiday ownership in which a customer purchases a ‘right to use’ – the right to spend a week or more - at a holiday property for a minimum of three years. It can be bought either at a fixed time of year at a certain resort, or in the form of floating weeks which enables the week’s holiday to be taken at any time of year and in any resort, in accordance with the owned week’s trading power. The trading power of a week is defined by several criteria including size, location and seasonality of resort and week, and, importantly, early deposit of the week into the exchange pool.

RCI members can also buy RCI Points that can be traded in to take breaks at a variety of destinations, including hotels and cruises, as well as for travel services such as flights and car hire.

Timeshare, which originated in the 1960s, offers a cost-effective and hassle-free alternative to second home ownership. Resorts are run year-round by professional management companies, so there are no worries about break-ins, flooding or other possible property damage, or deterioration due to lack of occupancy.

In addition, buyers don’t have to return to the same resort every year, as weeks or RCI points can be swapped through an exchange company – such as RCI – for similar accommodation elsewhere in the world. The guarantee of quality of accommodation, destination choices and the range of facilities are quoted by the 87% of satisfied timeshare owners as reasons for buying timeshare, and the majority say they would recommend timeshare to others. Nine out of ten say timeshare is better than other self-catering holidays. (Source: 2009 Resort Development Organisation Timeshare Owners’ Survey.) Check percentage and report name.

The value and benefits of the timeshare product is reflected in the fact that there are now some 6.7 million timeshare owners worldwide, of which over 1.5 million reside in Europe. The industry currently generates revenues of more than $9.4bn per annum.

It is important to differentiate between timeshare and ‘holiday clubs’ or ‘discount travel clubs’. These clubs – which do not come with a ‘right of use’ – merely offer discounts from future holidays and generally do not own or control the holidays or accommodation they offer.

The Resort Development Organisation (RDO) is the industry trade body, and its members – which include resort developers, exchange companies, trustees and resale companies – all sign up to a code of conduct that protects purchasers’ rights. These are in addition to the safeguards already provided under the laws governing timeshare. A new EU Timeshare Directive giving stronger consumer protection and legislative structure to the industry is currently being implemented across Europe and comes into force in 2011. For more information on all aspects of the timeshare product visit www.rdo.org and www.gotimeshare.org

What is Fractional Ownership?

Fractional ownership enables people to own an interest in a luxury property (often in an exclusive holiday resort or glamorous city centre location) that they might otherwise be unable to afford.

As an asset-linked, deeded purchase, the fractional property is equally attractive to those who can afford to purchase property outright but do not have the time to use or maintain it all year round.

Fractionals are usually sold in anything from one-quarter to one-twelfth shares, with periods of the year being allocated on either a rotational basis or a mixture of fixed and floating periods within a season. As well as having all the benefits of a management company to take care of the property, fractional owners usually have a direct interest in the value of the asset and are likely to benefit from any appreciation in the property value, although this return on investment cannot be guaranteed and the purchase should be viewed as an investment in lifestyle.

Extremely successful in the US, the concept is rising in popularity in Europe - the number of residences having increased from 60 to 90 in 2008/9. Further substantial market growth is anticipated during the next five years when the fractional home will become an accepted alternative to wholly-owned second home ownership.

The fractional purchase is not confined to real estate. Luxury yachts, prestige cars and private jets are just some of the other luxury products that are available under fractional ownership schemes.

When it comes to luxury real estate, there are three main types of non-whole ownership model:

Fractionals/Private Residence Clubs (PRCs)

These generally involve deeded ownership in a luxury residence in a unique or sought-after location. Purchases usually amount to 4-12 weeks of the year in a two to three-bedroom unit and often incorporate an exchange element. PRCs represent the ultimate in luxurious fractional residences with a high level of service and amenities.

Destination Clubs

Joining this type a club (such as The Registry Collection) can be an equity or non-equity driven purchase, either deeded to a percentage of the entire real estate portfolio or a non-deeded, right-to-use membership. Joining such an exclusive ‘club’ means potentially unlimited use of properties (typically of two to four-bedrooms) and access to multiple residences in prized destinations via a closed exchange network.

Condo Hotels

The whole-ownership purchase of a hotel suite for a set amount of time during which the project operates. The room can be used when required or rented out when not, with the hotel handling rentals and taking between 40-60 per cent of the revenue. Hotels are generally operated by prestigious and upscale hospitality brands and sold as a fractional lifestyle and investment purchase, with some offering a guaranteed yield over a pre-determined period of ownership. Rooms are usually studios or one-bedroom in size, and at the end of the specified period the hotel is sold with all parties sharing in any resulting capital appreciation. In the interim, purchasers can sell their own interest on the open market.