Claus Soerensen became a fractional owner of a second home before the term was even coined. Years ago, Mr. Soerensen inherited a share of a vacation house that had once belonged to his great-grandfather. When other heirs sold their shares, he essentially owned the house in common with strangers.
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Courtesy of 47 Park Street
The entrance to 47 Park Street.
Courtesy of 47 Park Street
The members lounge at 47 Park Street.
So Mr. Soerensen, who lives in the Jutland region of Denmark, was comfortable with the idea of fractional ownership in 2005, when he and his wife, Karen Margrethe, went looking for another second home in southern France or Italy. They found French Property Shares, based in the United States, and bought a share of a Languedoc farmhouse.
“If you are very rich and you want to be on your own, you can buy all the properties you want,” Mr. Soerensen said. “But if you only intend to use the property a few times a year, it feels sound to share the possibilities and the costs.”
So far, relatively few Europeans see it that way. The Organization for Timeshare in Europe estimates that the continent has fewer than 25 fractional developments, compared with nearly 200 in the United States.
Some industry observers attribute the difference to the relative lack of big-name players in the European market, as well as to legal issues and general perceptions of the product. But some of those factors may be about to change as more major North American hospitality companies move across the Atlantic.
“We are aware that some of the brands have been looking at this very keenly,” said Darren Ettridge, vice president for resort sales in Europe at Interval International. Interval has contracts with resorts that allow their timeshare buyers to use their stays in other locations.
Timeshares involve a guaranteed period of time at a resort and usually involve an initial payment, followed by annual maintenance or management fees. Fractional ownerships, in contrast, involve actual equity in a property.
“In terms of growth percentages, it’s pretty clear to us that this is a rapidly developing product that has got some value, that has some potential, particularly in certain areas, such as Portugal and Spain, where the product is sort of linked to second-home markets,” Mr. Ettridge said.
Similarly, Scott Berman, director of PriceWaterhouseCoopers’s U.S. hospitality and leisure division, said, “We’re getting more and more calls, particularly from the brand sponsors, who are very interested in penetrating Europe, both with traditional timeshares and, in select destinations, fractionals.”
Marriott is eyeing vacation-home markets as it plans to expand its traditional timeshare and fractional offerings in Europe, according to Bill Phillips, Marriott’s director of worldwide development. The company’s only European fractional property is 47 Park Street in London, which opened in 2003 and has 49 units.
But before the company acts, Mr. Phillips said, it wants to see tighter timeshare regulations, which also cover fractionals. The European Commission regulates fractionals and timeshares, and is considering new rules that are widely expected to be passed next year.
“The reason Europe lags behind the U.S. in terms of development in general and branded development in particular is the lack of effective regulations and enforcement of those regulations, and we think that’s beginning to change,” Mr. Phillips said.
It was not until individual state governments began regulating the timeshare industry in the late 1980s that the American market took off, he noted. “That ended the unsavory development and sales and marketing practices and allowed the industry to grow at double-digit rates.”
A 2005 PriceWaterhouseCoopers report on the European timeshare industry laments the damage done to the industry’s reputation by so-called holiday clubs, which fall outside current timeshare regulations but are nonetheless viewed as timeshares by many consumers. Operators of holiday clubs sometimes engage in high-pressure and misleading sales tactics, according to the British-based Timeshare Consumers Association, and the report says the clubs often sell vacations that are “not supported by inventory.”
A fractional is “perceived by most consumers for what it is, which is a timeshare, and the word ‘timeshare’ now is a killer,” said Sandy Grey, chairman of the consumers association. “Most of the trade bodies don’t use it because they know just mentioning timeshare, whoever they’re trying to sell it to will just walk out the door.”
But many observers predict that the entry of well-respected hotel brands will give the European fractional market a huge image boost.
Steve Navaro, a Colorado-based lawyer who develops fractionals in Paris, encourages his buyers to think of the apartments as their second homes, noting they are free to leave some belongings, like compact discs or books, in the apartments.
Similarly, Ginny Blackwell, the New York-based entrepreneur behind French Property Shares, said: “You never have a timeshare person walk into the place where they’re staying and say, ‘Look at my gorgeous house,’ do you? It doesn’t belong to them. They only own the time there.”
If the home-away-from-home allure sets fractionals apart, so, too, does the cost.
In the United States, Mr. Berman said, the average timeshare sells for about $20,000, while prices for fractionals start at around $250,000.
Shares in Marriott’s 47 Park Street begin at 106,000 pounds, or about $216,000. Other European fractional developments include De Vere’s collection of converted stately homes throughout Britain, which start at around 5,000 pounds per week, or about $10,250, and six properties in Portugal by the Vigia Group, with prices starting at 27,000 pounds, or about $38,500.
Mr. Navaro said: “What I’m marketing is true real estate, with the ownership divided up among a limited number of people, and what you pay to get in reflects pretty closely what the true market value is of that property. So if property values go up, your ownership interest will probably follow that trend.”
Ms. Blackwell does not handle all the secondary sales in her developments, but she said she knows of several shares that have come up for resale. “I’ve never heard of them selling for less than somebody paid,” she said, adding that she typically has three or four requests per property from people who have asked to be notified if shares become available.
Still, fractional developments in Europe are too new and too few to have a resale track record.
Mr. Grey, of the consumers group, said the question of secondary sales hangs over the market’s development. A timeshare, he said, “depreciates instantly by about 70 percent overnight and then goes slowly downward thereafter. With fractionals, we’ve no idea. I doubt if it will appreciate because the market won’t allow it to do so. The market will always keep ahead of it in producing new products and accommodations, which should keep the secondhand prices down.”
