Fractional property ownership, considered the more respectable cousin of time-share, is making headway in difficult economic times with two resort developers using the approach to woo buyers.

The fractional ownership specialist Leisure Solutions is now marketing two properties: Infinity Samui on the resort island in the Gulf of Thailand, and the Falls in Hua Hin.

It is also holding talks with other developers, both in Thailand and Vietnam, who are interested in offering fractional ownership of some units at traditional condominium or resort condominium projects, according to business development manager Brendan McClean.

The company is also offering a hospitality component for both fractional and residential resort-style properties by linking up with LaTour Signature Group and ResortCom International. While ResortCom predominantly handles three- to four-star properties, ResortCom Elite operates at the five-star level. LaTour only operates in the five- to six-star categories.

"Leisure Solutions certainly believes that there is still a fantastic opportunity in the marketplace for fractional ownership in light of the current economic conditions," Mr McClean said.

"[This is] essentially because to a lot of people risk is associated with the cost of ownership and obviously with fractional you are paying significantly less and to a certain extent sharing the risk with multiple owners."

Time-sharing itself has grown rapidly over the past 20 years in North America and Europe despite image problems. Under a time-share contract, owners buy the rights to a fixed number of days per year at a property on a long-term contract, typically 20 to 30 years. However, the industry's image has been sullied by operators who sign up far more customers than their properties could ever accommodate.

Fractional ownership differs fundamentally from time-sharing in that the purchaser owns part of the title (as opposed to units of time). Therefore, if the property appreciates in value, so do the shares.

The European Parliament last October strengthened the rights of millions of consumers who buy time-share holidays in an effort to crack down on rogue operators.

Earlier EU rules passed in 1994 needed updating to take into account new products such as cruise boats and shorter contracts. "The resale or exchange of time-share schemes was also not covered."

However, the time-share business lately has been hammered by the global credit crisis, with consumers finding it much harder to get credit to purchase time-share contacts, while the securitisation market for hotel companies selling bonds backed by time-share deals has mostly closed.

Mr McClean pointed out that fractional ownership offers deeded interest in an underlying asset. "To a certain extent it's the same as buying a whole ownership, so for example if Thai people were to buy the product there is no reason why they can't all be registered on the title."

Sales to foreigners are typically through an offshore share structure, and Leisure Solutions has an association with a third-party custodian that represents $2.5 billion worth of such structures globally.

As the Falls in Hua Hin is seen as appealing to expats in nearby Bangkok, Leisure Solutions is marketing a quarter-share product that would entitle the owner to spend one weekend in four there. This is also essentially the profile of how people use their second homes.

A quarter ownership of a 68-square-metre, one-bedroom unit at the Falls costs 1.39 million baht, while a 409-square-metre luxury villa costs 6.8 million baht.

The company has also developed a one-twelfth ownership product at the Falls for overseas visitors who would basically get four weeks a year, including two weeks guaranteed in the high season. Aside from prominent regional markets Hong Kong and Singapore, the product would also be sold in the UK and Scandinavia. Prices are expected to start at approximately 700,000 baht.

Because Infinity Samui is not a "drive-to" destination, it is being marketed mainly to overseas residents.

A one-twelfth fractional ownership of a 208-square-metre, two-bedroom unit starts at 3 million baht. Again buyers will get two weeks each in high and low seasons.

Mr McClean said he was in negotiations with developers in Phuket and was also looking at a project in Krabi.

"The challenge with Krabi is that fractional is really positioned in the second-home market so it needs to be a destination where people visit frequently and have second homes."

Even so, Krabi does show promise with developments such as Amantapura, Pavilion Queen's Bay and Centara Grand Beach Resort and Villas.

Similar to time-share, there are exchange programmes in place for fractional owners, but it is essential that the developer become affiliated with such a programme. Otherwise, individual owners would find it difficult to exchange their time use at a particular resort for others in the same country or overseas.

There is a nominal fee, usually $150 to $250, when the owner makes an exchange.

Aside from Leisure Solutions, another prominent vacation ownership marketer in Thailand is the Absolute Sales Corporation, which has operations in Phuket and other resorts and is part of the Absolute group doing business in Asia.

Mr McClean said that in the time-share market, Laguna Holiday Club and Marriott's Phuket Beach Club, which is integrated with JW Marriott Resorts and Spas, have the best brand recognition. There are also independent operators of both time-share and fractional products active in China and India but they usually do not have broad international links. Vietnam shows promise because there is a propensity for expatriate Vietnamese to go back there every year.

"They have got used to Western standards and they understand time-share because time-share is highly regulated and endorsed in the US."

source : www.bangkokpost.com