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Feature: The Fractional Market

William Kissel

January 1, 2004

With rare exception, most hotel properties are luxury condominiums built adjacent to the hotel, and members have the option of spending all of their time at one location or, more commonly, moving about within the chain on a space-available basis. Some extend privileges to affiliate country clubs around the world. “For most of our members, it’s not about money but about time,” says Angela Gyetvan, director of marketing for Four Seasons Residence Clubs. “We call it the brain drain. With second and third properties, if you’re not there all the time, you have to worry about maintaining them. So there is a tremendous advantage to letting us handle that.”

The second option, which is offered by private operators such as Exclusive Resorts, Private Retreats, Mirabella Estates and, coming this spring, Odyssey Club, is equivalent to membership in a private country club. The formula has members making a six-figure investment (anywhere from $150,000 to $475,000), which is 80 to 100 percent refundable upon cancellation, and paying annual dues of $8,750 to $17,500 to gain access to a wide variety of multimillion-dollar homes. While there are no tax or equity benefits, members get to stay in lavish homes, villas and penthouses in exotic locations that would otherwise be out of reach to all but the supremely wealthy. All of these homes come fully staffed, most with a full-time personal concierge, housekeeper and private chef. And some clubs have partnered with private jet companies, yacht charters, limousine services and safari tour operators to provide those perks as part of the membership.

“It’s really the next generation of second-home replacement,” explains Brent Handler, cofounder and president of Exclusive Resorts, a year-old operation and the newest player in the residence club game. “It’s very different than a traditional time-share or fractional format. One of the main differences with Exclusive Resorts is that it is a nonequity club—with their deposit and dues, our clients get usage rights. There is no concept of exchange or trading for time. Instead, it’s set up like a country club, and you can go anytime you like, with a 90-day advance reservation, and a maximum stay of 14 days at one time. And because we are not tied to a particular developer, our portfolio of properties encompasses the best of the breed in every market.” Aside from its chalets and villas, Exclusive Resorts also owns several Four Seasons–affiliated properties, allowing members to use the hotel chain’s amenities and services while in residence.