Articles
Vacation Ownership
Published in the Bozeman Chronicle, October, 2006.
If you are like most people, looking forward to a well-earned vacation is an exciting prospect. Accommodation arrangements can seem to vary almost as much as the choice of destinations. Emerging trends that have spread quickly over the last couple of years are the idea of condotels and fractional ownership in the condo market, as well as vacation ownership and vacation clubs.
All throughout the United States , hotels in prime locations are being transformed to include homes that can either be purchased like a normal condominium or on a fractional basis. Although some are situated in resort markets, many are in historic, large cities featuring strong condominium markets, high hotel occupancy rates, and cultural amenities that lure baby boomers who have an interest in a second home. The condotels are selling a lifestyle which markets luxury and location. The added beauty of condotels is that instead of sitting vacant for a good portion of the year, there is the option of placing the unit in a rental pool which is facilitated by a management company. Two local examples would include the Summit Hotel and Shoshone Condominiums located in Big Sky.
Fractional ownership is considered a middle ground solution to second home ownership. It lies between whole ownership with the qualities of sole responsibility and fully exclusive use and time share where normally what is purchased is vacation time at a given resort facility versus the real estate itself. That fact brings to light an advantage of this form of ownership which is that an owner has possession of real property that can be depreciated, resold, or passed along to heirs. Like condotels, fractional ownership gives the benefits of dividing the costs of ownership among several owners and also making good use of the property versus it remaining unoccupied. This fact can help make the second home truly a vacation home since the homeowner can simply show up and know that everything is in order due to the work of the management company.
Industry experts have stated that it is still too early to tell whether this type of investment will truly pay off. There have not been many resales due to the fact the concept is still quite new. Developers, however, are confident that the fractional share properties will appreciate in value so long as the properties set themselves apart with amenities and high-end destinations.
For those who do not want to truly own a second home, but still want to plan luxury vacations which suit their lifestyle, there is of course the more well-known, but still popular, segment known as vacation ownership which began in the late 1960's. It has remained a fast growing trend in the United States with an increase of nearly 16 percent each year since 1993. More than five million households own vacation intervals throughout 11 countries at almost 5,000 individual resorts. Timeshare resorts are found across the globe, but North America remains the leader with nearly ½ of the resorts and over two million owners.
One major benefit of vacation ownership is the ability to lock in on the price of accommodations to assure future vacations at today's prices. By utilizing vacation exchange programs, timeshare owners can also travel to popular destinations besides their own. Finally, resort developers are increasingly including many of the world's leading hoteliers which has led to the increase of adventure resorts, gaming resorts, and urban resorts.
Vacation clubs are one additional option gaining an enthusiastic following. They entail a one-time membership fee along with annual dues which generally results in the cost per day being far less than comparable ownership options. Clubs combine the privacy of grand vacation homes with the service and amenities of five-star resorts.
Finally, the traditional condo market is also still holding its own due to affordability and the fact that it meets the needs of both Baby Boomers and Gen X buyers quite well. The key features of low maintenance and convenient locations appeal to empty-nesters and retirees who are seeking a reprieve from the upkeep of a single-family home. There are even many buyers who are replacing the large family home with two or more smaller residences.
Robyn Erlenbush is owner of ERA Landmark Real Estate (with offices in Bozeman, Big Sky, Livingston and Clyde Park) and Intermountain Property Management. She can be reached at robyn@eralandmark.com.