The Ritz-Carlton Club Offers an Opportunity to Buy into Second Home Ownership

May 2006 - America’s continued real estate boom has been going strong for more than a decade. According to a report released by the National Association of Realtors, four out of every 10 purchases are a second home – either being used for an investment or vacation property. This trend is only expected to grow as baby boomers enter their peak earning years. And, with today’s evolving vacation home market, consumers have more options than ever.

Terms like “deeded, fractional ownership residences,” “destination clubs” and “timeshares” are frequently heard because of a surging interest in vacation properties that are beyond the traditional vacation accommodations or second home. However, sorting through exactly what these products are and for whom they’re best-suited can confuse even the most sophisticated consumer. Fortunately there are industry leaders who offer consumers confidence in their choice and provide a consistent quality brand experience—leaders like The Ritz-Carlton Hotel Company, LLC. This premier hotel brand has diversified its hospitality portfolio to include not only hotels and resorts, but also private residences and The Ritz-Carlton Club, luxury fractional real estate.

“With all of the choices available today it is important to understand what each offers in order to pick the vacation home option that is best suited for you and your family,” said Robert Phillips, senior vice president of business development for The Ritz-Carlton Club. “For example, even a superior fractional ownership option like The Ritz-Carlton Club may not suit everyone’s lifestyle. There are several key factors one should consider when investigating vacation home options.”

Robert Phillips suggests answering the following questions as the vacation home quest begins:

1. How much time will we be using the vacation home?

2. Is the destination choice difficult to purchase in or seem over-valued due to location popularity?

3. Am I looking at this second home as an investment and/or family legacy, or perhaps primarily as an annual ‘go to’ vacation spot?

4. How much time and money am I willing to invest in home maintenance or décor?

5. Is it important to be in the same vacation home every time I visit the area, or do I prefer a little variety?

6. What level of luxury am I seeking and am I realistically able to achieve it in a second home?

The answers to these questions provide a starting point in determining the best vacation home choice based on individual needs and financial commitments. Next, it is important to make sense of the many second home vacation options to determine what will be the best personal choice. The below breaks out the marketplace into easy to understand categories: Traditional Second Home Ownership, Fractional Ownership, Destination Clubs, Condo Hotel, and Timeshare. While each category offers the buyer a “vacation home,” they are all quite different, and designed to meet a consumer’s individual needs.

Traditional Second Home Ownership

Overview: Viewed as a lucrative financial investment, traditional second home ownership appeals to those seeking a vacation setting to share with family and friends and/or use for business whenever they choose. Owners have full responsibility of maintaining the property, or the owner must hire a management company. Homes purchased in popular tourist regions can generate revenue for the owner because of the willingness of tourists to pay high rental rates.

Pricing: Prices follow local real estate market trends.

Fractional Ownership / Private Residence Clubs

Overview: Fractional ownership buyers typically have a recorded deed and title. Fractional ownership has the benefits of second home ownership, but for a fraction of the cost and without the maintenance responsibilities. Considering the average vacation home buyer uses the property just three to four weeks a year, fractional ownership tends to be commensurate with actual use of a vacation home. Additionally, fractional properties are generally affiliated with high-end hotel companies, where owners have the benefits of personalized services and amenities.

Pricing: According to 2005 research by Ragatz Associates, fractional pricing ranges from $58,000 to $550,000 per interest based on floor plan, location and size of fraction. In addition to the purchase price, there are annual maintenance fees, which in 2004 averaged $5,760.

Destination Clubs

Overview: Members of a destination club are not buying a specific property/real estate, but rather the right to use any of a portfolio of second homes owned by the management company. They offer a non-equity based membership emphasizing a broad selection in vacation home experiences. Also, destination clubs offer members concierge services.

Pricing: Ragatz Associates research states the average length of stay at destination clubs ranges from four to eight weeks and costs include a one-time fee of $250,000 to $400,000, which is typically between 80 and 100 percent refundable should they choose to exit the program. Annual dues range from $6,600 to $25,000. The club may also charge a nightly fee while guests are in residence.

Condo Hotels

Overview: Condo hotels offer a portion of their hotel room inventory for sale to the public. Generally viewed as an investment opportunity, the owner may use for vacation or corporate housing needs, or place in a rental program typically managed by the hotel. Owners then receive proceeds from the rentals. Buyers enjoy the benefits of owning real estate in a desirable location coupled with hotel amenities and services. Annual dues also apply.

Pricing: Condo hotel pricing varies by real estate market trends.

Timeshare / Vacation Ownership

Overview: Vacation ownership may be purchased through deeded property ownership, right-to-use or a points based program. Owners purchase a vacation villa for one or more weeks within a fixed or “floating time” system, which allows scheduling each year's vacation during the most convenient week within a specified season. With timeshare, consumers have the opportunity to purchase time at quality resorts offering a wide range of amenities at different destinations. While many vacation ownership villas have two- bedrooms and two-baths, floor plans range from studios to three or more bedrooms.

Pricing: With vacation ownership, consumers buy in increments of one week. It is a one-time purchase, and owners also pay an annual maintenance fee, depending on the unit size, location and amenities of the resort. Timeshare is not intended to be an investment opportunity, rather an alternative to traditional vacation accommodations and seen as hedging on “vacation inflation.”

About The Ritz-Carlton Club

The Ritz-Carlton Club is a fractional ownership real estate offering combining the benefits of second home ownership with personalized Ritz-Carlton services and amenities. Designed as a private club, Members have the opportunity to access either their home Club or other Ritz-Carlton Clubs through reciprocal usage privileges. Members also have the opportunity to utilize additional time as available.

A Member’s dedicated concierge assists them with their every need prior to and throughout their stay. Whether it is twice daily housekeeping, pre-arrival provisioning of their residence or personalized arrangements from scheduling golf tee times at the Jack Nicklaus Signature Golf Course in Jupiter to coordinating lift tickets and lessons for their day on the slopes in the Aspen Highlands ski area, The Ritz-Carlton Club provides Members a relaxing experience in the comforts of home.

For information, please call 800.278.0121 or visit www.ritzcarltonlife.com.

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