The Ragatz Report
May 18, 2010An executive summary of the latest Ragatz Associates survey of the shared-ownership resort real estate industry in North America along with exclusive comments and interpretation by Dick Ragatz
The latest Ragatz survey is out, and it’s perhaps more valuable to developers than ever given the events of the past two years. This is the 10th annual edition of the project, which is considered to be the most thorough and comprehensive survey conducted of the industry. Here we present the summary of the findings together with observations from Ragatz Associates Founder and President Richard L. “Dick” Ragatz, Ph.D.
So what’s the biggest news out of this year’s study? “The major one that pops out immediately is the decline in sales volume by about 43% due primarily to lack of consumer financing and the general economic conditions,” says Ragatz. “That’s obviously the negative, but there was one positive coming out of the sales performance: the fact that prices on a per-square-foot basis, per-week basis and per-share basis did not seem to drop nearly as much as other types of residential real estate, especially whole ownership resort real estate.”
These results aren’t what Ragatz had expected. “We actually thought it was going to be more of a drop off; we thought it was going to be over 50%,” he says. “One surprise was that all three components (moderately priced fractionals, the high-end PRCs and the destination clubs) dropped off almost exactly the same amount – they all dropped off 43-44%. We had anticipated that the fractionals were going to drop off a lot more than the PRCs.”
Ragatz says the drop off was most severe in the Caribbean and Mexico, the least severe in Canada, and somewhere in between in the U.S. “So the 43% was for North America as a whole; in the U.S., that was only about 35%,” he says.
One of the other interesting findings was that in order to decrease prices on a per-share basis without decreasing prices on a per-square-foot basis, there is a tendency to have smaller shares, fewer bedrooms and less square footage in the new-construction units. Following are further details of the summary results. For purposes of definition, fractional interest projects and private residence clubs are similar, in that both typically sell deeded ownership in shares of vacation homes, ranging from a 1/15 share with three weeks of annual use to a 1/4 share with three months of annual use. However, the two components vary in terms of price, quality of product and degree of services and amenities. Ragatz Associates simply assumes that product selling for less than $1,000 per square foot falls into the fractional interest category, and product selling for more than $1,000 per square foot falls into the private residence club category. A destination club typically sells 30-year memberships on a non-equity basis into a wide network of vacation homes in multiple locations. Some clubs are equity-based, however.
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