Further Trend Implications from The Ragatz Fractional Interest Conference
Written by Susan Kime Wednesday, 11 March 2009 17:15
The deflation and recession of the current economy has rippled into all sectors of the shared residence industry, according to the statistics presented by Richard Ragatz, PH.D, at the ninth annual Ragatz Fractional Interest Conference that ended today.
According to Dr. Ragatz' survey results, active fractional interest (FI*) projects diminished in number from 84 in 2007 to 77 in 2008, Private Residence Club projects shrank from 69 in 2007 to 61 in 2008, and Destination Clubs 21 in 2007 to 12 clubs in 2008. Dr. Ragatz also said that his sense in 2009, there would even fewer Destination Clubs than there are now.
Even more diminished returns were noted in total sales performance from 2007 to 2008. These dimensions include closed sales, re-sales and pre-sales. In 2007, the figure presented was $2,297,000. In 2008, the number shrank to $1,525,000 The overall percentage decline across all fractional industries - fractionals, destination clubs and private residence clubs - was 34%.
Breaking the categories down even further, for fractional interest products, sales were down 46%, PRC sales were down 24%, and Destination Club sales were down 43% from 2007. It is widely believed that these numbers may be just a harbinger of things to come, as they were derived in 2008. As remembered, the first 2/3 of the year was stable, but the last 1/3 began the downward spiral that continues today.
In a further discussion on the state of the economy, Dr. Ragatz said that it may recalibrate itself by 2010, and any club that has an equity deed component, whether they are fractionals, private residence clubs, or equity-based destination clubs may fare better in the long run. These industry segments have already fared better than the wholly-owned real estate industry, he concluded.
* FI: According to Rgatz Associates, Fractional Interest projects differ from Private Residence Club projects in dollar per square foot amount. FI = <$1000/sq'
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