Fractional Consulting - Design, Sales and Marketing
Written by Administrator
Friday, 06 June 2008 15:43
FRACTIONAL BENEFITS
As we begin to see signs of economic recovery, most experts believe that the fractional ownership industry will be a strong contributer and eventual leader in the future growth of the vacation home real estate market. Now more than ever discerning buyers are focusing their efforts on practical vacation options. Fractional ownership delivers by providing effortless vacations with first-class accommodations and the deeded ownership that most still desire.
As it is to the buyer, this unique real estate niche can be extremely advantageous to the developer as well. Sales revenues can be enjoyed at a better pace than whole ownership and profit margins can far exceed those of whole ownership. However, expertise, experience and innovation are required to avoid those costly mistakes that developers are commonly faced with.
FORESIGHT COSTS LESS THAN HINDSIGHTSM
Pierce Group, LLC is a full-service fractional consulting firm with a focus on the design, sales and marketing of fractional ownership developments in any market. All of our efforts are concentrated on increasing sales velocities, resulting in lower expenses and carrying costs and higher profits for our clients. Our suite of services cover all stages of the project lifespan: pre-development feasibility studies and project analyses, project management services during development and launch, and sales and marketing services until ultimate project sell out. We have recently provided consulting services for multiple projects in the following locations:
Cabo San Lucas, MX
Cape May, NJ*
Chicago, IL
Destin, FL*
Flagstaff, AZ
Israel, Middle East
Ketchum, ID
Key Largo, FL*
Key West, FL
Lake Lure, NC
Lake Keowee, SC
Miami Beach, FL
Marathon, FL*
Vero Beach, FL*
*While with DCP International
At Pierce Group, we believe success is based on a simple equation:
Developers, institutional lenders, private equity firms, real estate marketing firms, and real estate consultants can contact us for more information.
It’s pretty safe to say that the reduction of costly expenses and the realization of stronger profits is the ultimate goal of any real estate developer.So what is the number one killer of the ultimate goal?Mistakes.Based on this logic, the top priority for real estate developers should be the elimination of as many mistakes as possible.
Of course, not all mistakes are preventable.Some things just happen that no one can predict; take credit swaps and sub-prime lending for example.Those mistakes were made by others and were completely out of our control.
That being said many mistakes are of our own doing and can be prevented with up front planning, i.e. foresight.In the fractional real estate business, foresight is a bit more complex, as most land owners and developers simply are not familiar with what it takes to properly structure, market and sell a Private Residence Club (PRC).While their goals of minimizing mistakes are the same, the importance of mistake-minimizing tools is much greater.
Here I will provide a more detailed review of a crucial mistake-minimizing tool: the fractional feasibility study.I will review the logistics involved and list some of the important elements included in the study.
In short a feasibility study is an extensive and detailed review of all aspects related to the development and financial feasibility of a fractional project.All facets of the project are weighed, analyzed and provided in an easy to understand format for developers, owners, lenders or private equity investors.A typical Pierce Group feasibility study is approximately 30 to 40 pages and is delivered to the client in electronic (PDF) format.Copies of the report can also be printed with express delivery upon request.
A representative from Pierce Group will typically fly to the project destination on day one and spend two full days on-site and in the surrounding community performing the needed due diligence to complete the study.Departure will be either in the evening of day three or the morning of day four.The two day on-site due diligence will include the following:
Strategic meetings with the developer/land owner or representative(s)
Tour of the project site and proposed amenities
Tour of the surrounding community
Tour of likely competing projects
Meetings with top real estate brokers in the community
Meeting with other local organizations – Chamber of Commerce, Property Management and rental companies for example
This schedule is important to help formulate a market analysis, learn the target market, understand tourism travel patterns, learn the real estate market and leave with a complete understanding of the project parameters.
Here is a list of some of the important elements of the final deliverable and why they are important.
IMarket Analysis
This section is where we formulate our opinion on whether or not the project is viable fractionally.If not, we will make recommendations as to what other types of vacation ownership would be a better fit.
AResort Lodging Market & Economic Implications
To determine project viability, it is important to understand the lodging options that visitors to the area are presented with and how the current economic situation impacts those options.
BSeasonality & Demand
In addition to determining project viability, seasonality and demand are factors that are used in designing the club reservation system
CCompetitive Implications
Understanding likely competitors helps us formulate our recommendations with regards to pricing, reservation system design and marketing strategy among other things.
IIRecommendations
The recommendations section is where we reveal our strategy as it relates to how the project should be structured and marketed in order to provide for the best possible sales results and ROI for investors.
If fractional is not recommended we will provide our thoughts on what the highest and best use of the property is.
BResidence Design (if applicable)
There are elements of the floor plan, FF&E and décor that are better suited for the fractional ownership lifestyle and some that are not.We will provide some insight on the current plans and provide recommendations as to how they can be improved for optimum fractional usage.
CProposed Club Amenities
Amenities are a crucial element in the fractional package and we will provide our thoughts on the planned amenities and provide recommendations on additional amenities if needed.
DProposed Club Services
Services to club owners are another important piece of the fractional puzzle and we will provide our recommendations as to the service offerings.
EOwnership Size, Structure and Design
Based on our market analysis we will provide the optimal formula for owner to property ratio, reservation system type and reservation system design. This is an area where many common mistakes are made in building the ownership model.
FPricing Schedule
There are several factors that are at play with the formulation of the pro-forma price and pricing schedule.Mistakes in this area can be costly and even detrimental to the project.
GMarketing Strategy
The most appropriate marketing plan will be recommended based on the results of our market research and competitive analysis.A review of the most appropriate advertising avenues will be provided and we will recommend a marketing budget to the developer/owner that will provide the best results for lead generation.
HSales Strategy
Once marketing efforts have generated leads, what is the most efficient way to move leads through the sales process to the closing table?
IIIProject Financial Model
AProjected Sales Absorption
Based on current economic and market conditions, seasonality and demand, projected closing and pricing schedules are combined to provide the owner with a clear vision of projected revenues.
**BProjected Revenues, Expenses & IRR
Additional revenues are reflected along with every expense associated with the project.This in depth financial analysis will provide a projected IRR for developer(s), investors and/or lenders.
**CRecommended Capital Structure (if applicable)
Based on the financial needs of the project we will provide the recommended avenues to best secure funding and provide assistance in securing that funding as well.
**These items are provided at the request of the developer for an additional fee.
IVProject Time Line
The project timeline is a helpful tool that helps developers understand the process more clearly and the projected time to reach the first sales closing.It also more clearly represents the effects of the project start up phase as it relates to the cash outlay that will be needed prior to the realization of revenues.
Private Residence Clubs Defined & FAQs
General information is provided here on the fractional category, how Private Residence Clubs work and the benefits to buyers.
Customized Reservation System by Pierce Group
An overview of how the project’s customized reservation system works.
Pierce Group Sales & Marketing Services
In addition to project feasibility studies, Pierce Group provides ongoing sales and marketing management services.Please see www.PierceGroupLLC.com for more information and to contact us directly.
Pricing varies based on the size and scope of the project and study.However, Pierce Group feasibility studies typically do not exceed $20,000 even for the larger projects.Furthermore, we have reduced our prices across the board due to the current economic situation.We are fully aware of the struggles that most developers are facing now and believe it is only fair to adjust our business practices to better accommodate our clients.
Regardless of the outcome of a Feasibility Study, (i.e. a recommendation to move forward or to abort the fractional concept and refocus on another format), a developer’s up front investment in the study will pay for itself many times over by reducing unnecessary future expenses.
The dissemination of information at the early stages of the sales process has long been debated and there are believers in both sides – holding back information and throwing it all out there.Let it be heard (read) here, times have changed and the process in which we provide information to interested prospects is a crucial element of the sales process.Fractional sellers need to provide a wealth of information so buyers can educate themselves.
The typical perception is that the information might be too complex and too confusing, or the reader might directly relate the project to timeshare and thus lose interest before completely understanding it. So marketers will throw a little bit of information out there with the hope that enough interest is created resulting in more inquiries. Therefore, the sales process is often extended into months rather than weeks. We all know that this industry is nothing like timeshare and these fears must be conquered. The prospect must be provided the information needed to make an educated and informed decision in a reasonable amount of time, a 90 day forecast to contract is nonsense.
The debate is this: if we present too much information too fast then the vomit effect comes into play and the sale is lost. Most sales people who have been subjected to any type of basic sales training course have likely been introduced to something similar to what I like to call the “Vomit Crevice”. It’s not pretty, but “Vomit Crack” was even worse.
The premise is that sales people stand on the edge of an empty crevice which lies between them and their prospective buyer. This crevice represents the buyer’s lack of understanding of the product or service they are considering. The only way to facilitate a connection between the buyer and seller is to fill up that void with valuable and relevant information that is important to the buyer. Each valuable and relevant question answered represents a large boulder that is tossed into the crevice. The result is a crevice that has been filled with a solid foundation of boulders (information) thus giving the prospect the means to walk across and shake hands – a closed sale.
However, many young sales people are hell bent on spewing as much information as humanly possible regardless of whether or not the buyer actually cares about any of it. This is a classic rookie move. The default for freshly-trained sales people is to vomit every bit of detail about their product or service that they have just learned in their product training classes. (This is where it gets really gross.) A crevice full of vomit is nothing but a disgusting pool that the prospect will sink into when attempting to walk across and therefore results in a lost sale for the sales person. Needless to say, no buyer is going to shake the hand of someone who just led them into a pool of vomit.
How does all of this apply to fractional ownership sales? Easy; fractional sales people have a more challenging task than a typical real estate agent. Fractional folks don’t play in a world of just granite countertops, cherry wood floors and 5,000 square feet. That stuff is easy. In the fractional world the prospective buyer must completely understand everything from why it is a logical real estate purchase, to the unmatched experience provided in residence, to the fair and flexible reservation system and why it’s not a timeshare. You can see why it becomes very easy for a fractional sales person to become completely immersed in all of this information and commence vomiting all over the place. Information starts flowing about the Residence Club’s logarithmic tie-break system when the prospect simply wanted to know if they could go skiing next year.
So, you’re thinking the clear lesson here is to make sure that your sales people do not spew all of their information up front and take it one step at a time, easing the prospect into those nitty-gritty details. Not so fast. There is another factor at play here; closing the deal while the iron is hot. This is a major rebuttal to the vomit crevice. After all, in similar fashion to the “first 48” that cops have to catch their criminal, sales people have a limited window to reel in their interested buyer as interest can fade almost immediately.
This is basically a catch 22. It seems as though the answer is to proceed with information overload to try and bring in the sale while the prospect is hot. Actually, this is correct. The way to do it is with coordinated messaging between your sales team and your sales materials. When I refer to sales materials I mean marketing brochures, FAQ’s and the website. A second document entitled Advanced FAQ’s should also be considered for those hot leads in the final stages of the sales process.
Too many times I look through web sites of Private Residence Clubs that have literally no information except the beautiful mountain surroundings and granite countertops. This is the “tease strategy” and the idea is to get the buyer interested enough to make the phone call so the sales person can take over. The result… vomit. The poor prospect has now been completely overwhelmed with (deep breath) planned vacations, space available vacations, the flexible tie-breaker system, pricing, supply and demand, HOA dues, consumer financing, the daily tidy vs. the mid-week clean, the reservation deposit, no pets but your brother can use it but only on planned vacations, and I almost forgot - the upcoming price increase.
Next will surely come those famous words: “I’m not interested in a timeshare”.
Don’t go this route. Give the prospect more information before they call. An informed prospect is a valuable prospect. Put the price on your website! Yes, I’ll say it again. Put the price on your website! If the price is surrounded by valuable information regarding how the club works along with the unmatched experience that is provided then the price will look great and the phone will ring. What you don’t want to do is vomit all over your website, there is a happy-medium here. Simply put, there is stuff that can go on the site and there is stuff that can’t. For example, explaining how the “rotating priority tie-breaker to be fair to everybody” policy works should NEVER be explained in any detail on the web site.
The sales team should work in concert with the marketing team on the dissemination of information to the buyer. The sales person should hang up with an excited buyer, not confused. They should be anxious to read more detail on the website or in the e-brochure that has just been sent to their inbox.
In summary, we must vomit to a point; a point that creates excitement and moves the sales process forward in an efficient manner. However, the spewing should be done by the marketing materials and the web site in addition to valuable information from the sales team. As the sales process moves along the questions and answers will become more advanced and cover more detail. It’s much easier to explain the “rotating priority tie-breaker to be fair to everybody” policy when the buyer is already excited for their first trip.
Now start spewing.
Eric Pierce is President of Pierce Group, LLC a full service fractional ownership consulting firm.Pierce Group specializes in the design, sales and marketing of upscale Private Residence Clubs.Our clients are developers, land owners, senior lenders, and private equity firms involved in the development of fractional real estate projects.We have consulted and managed properties from Florida to Flagstaff, Chicago to Cabo and Idaho to Israel.
New Network of Fractional Real Estate Professionals Provides Vacation
Home Buyers and Sellers With Appealing Options
Wallingford, CT (March 17, 2009) – Fractional Homes International (FHI) announced today that it now has Certified Fractional Real Estate Professionals in 11 states and 2 countries who are focusing on the fast-growing trend of fractional ownership of single family vacation homes.
Launched by leading fractional real estate consultant Sherman Potvin, FHI's network of highly trained professionals specialize in the art of converting whole-ownership vacation homes into prime fractional vacation properties. FHI is dedicated to the belief that fractional ownership is the smartest way to own a vacation home, allowing several owners (usually 4-8) to share the cost and use of a home.
Selling a home in fractions has several benefits for the seller, especially in a slow economy: the lower cost per share creates a much larger pool of potential buyers; the total gross sales can be up to 1.5 times the Fair Market Value of the home; and owners can keep a share of the home they love if they so choose. Fractional ownership also has many benefits for buyers: they are only paying for the amount of time they would actually use the vacation property; they can afford a share of a nicer vacation home than they could if buying a whole home; and by sharing expenses, the owners can afford to hire a property manager to handle upkeep and maintenance, making their vacations truly hassle-free.
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