Fractional Ownership Market in South Africa is Growing Again

Restructuring resorts and steady consumer growth set the stage for an optimistic future.

A Q & A with Dirk Wilson, founder of FractionalOwnership.co.za

Perspective Magazine:
Which areas of South Africa do you see as emerging regions for the fractional ownership product?
Dirk Wilson:
There is a short supply of quality fractional ownership opportunities within the immediate Cape Town City, although there are some fantastic products outside of the city. I believe that the urban areas of the City are where opportunity lies. Cape Town is one of the leading global travel destinations, as well as a major tourism hub for South Africans and more global quality fractional products will create more options for inbound travelers.

Perspective Magazine:
Is there new development taking place?

Dirk Wilson:
Yes, indeed. We are seeing a number of leading hotels and resorts around Southern Africa currently in the process of restructuring to accommodate for various vacation ownership products in the near future. A new wave of more branded hospitality fractional products if you like.

Perspective Magazine:
What are consumers looking for in a fractional development?

Dirk Wilson:
A truly hassle free experience, with transparency from the developer. Obtainable and flexible Domestic and Global exchange options are enticing consumers to seriously consider vacation ownership over renting or whole ownership.



Perspective Magazine:
What seem to be the most popular ownership structures and size of shares and why?

Dirk Wilson:
Many of the early fractional property structures offered 13 fractional shares in a specified residence, with each owners entitled to a 4 x fixed week rotating right to use per annum. Over time these structures have become too rigid, and consumers prefer shared ownership, however with more flexible usage plans. We are now seeing smaller use time modules with some offering 7,14 and 21 bed night use plans entering the market, with some offering ‘split week’ options which provides owners real flexibility to book last minute and use their residence / resort at any time over the course of the year – subject to priority and availability.

Perspective Magazine:
What are the regulatory hurdles to developing or selling fractional products in South Africa, if any?
Dirk Wilson:
With the recent stringent financial services, estate agency and consumer protection acts coming into play, The government, working together with the various real estate, finance and vacation ownership regulatory bodies (VOASA) in South Africa are becoming increasingly focused on assisting current and new developers with correct structuring of fractional products going forward. I see this as a fantastic thing and believe that these bodies will assist developers with creating ethical and long term sustainable products that offer real deliverable values for consumers into the future. The Consumer Protection Act will help shape our industry going forward. [member]

Perspective Magazine:
How has the economic downturn affected the fractional market?
Dirk Wilson:
Hugely, yet simply put; Active consumers dwindled due to cash flow constraints and cost cutting at home. The majority of developers found it extremely challenging to sustain sales and marketing, and this created a domino effect that ultimately lead to low sales volumes. And this was no different to most economic sectors over the doldrums of the recession. Over the past 6 months the market has definitely shown significant improvement, with more appetite from developers complimented with active consumers. Although we are not as we all were in 2007, we are now experiencing steady growth in the market here.

Perspective Magazine:
Is the trend towards new development or conversions?
Dirk Wilson:
We are seeing a significant trend towards branded resorts, and hotels restructuring in order to offer in-house vacation ownership options. If you look back at how many of the fractional property ownership products were structured over 2005 to 2009, you will notice that many of them were independent real estate developers acquiring land or property on leisure estates, then creating and offering fractional interests, sometimes without the full blessing of the estate homeowners associations etc… these models were fraught with post sales issues including owner access to resort facilities, rentals, as well as general guest support and ongoing maintenance. Fundamentally, the resorts and hotels that create and support their own products can control the model and guest experiences that much more.

Perspective Magazine:
What is the current state of the industry in SA?

Dirk Wilson:
I would say it’s in research and re-structuring mode, with some unique and flexible vacation ownership products in the pipeline for release over 2011, and these products will cater for a new breed of consumer.

Perspective Magazine:
How do you see the next 12 months and what products / regions do you think will emerge strongest?

Dirk Wilson:
I think that we will see more exclusive branded resorts releasing their own products into the market over the next 12 months, and the areas where we will see these products are in the Western Cape, game park regions as well as an increase in activity from our tropical neighbors in Mozambique, and Mauritius.

Perspective Magazine:
What is unique about the SA market?

Dirk Wilson:
Our unrivaled and diverse culture and landscape, entrepreneurial spirit and world famous hospitality. This is why they say, once you have experienced Africa, it’s in your blood and you will always want to return.

Perspective Magazine:
How have the finance regulations in SA influenced how fractional companies in SA have weathered
the global economic crisis?

Dirk Wilson:
The fact that leading banks in the country don’t offer finance options for fractional interests has impacted sales volumes throughout. This has forced the developers to release products into the market with part finance (in-house) or products with a price point that appeals to a broader segment of consumers. Fractional developers however, need to ask themselves if they are in the lending business, or service and hospitality business?

Perspective Magazine:
Do you see many major European or American companies entering the market in the near future, or is it more of a regional developer market?

Dirk Wilson:
South Africa has attracted some of the leading global players to pursue interests in this market, this is to cater for the rising global demand for inbound vacations into quality destinations and world class resorts that Southern Africa is currently offering.

Perspective Magazine:
What do you think the future holds for fractional Ownership in SA?

Dirk Wilson:
Tighter regulations, which will ultimately create long term sustainable products in the local market place that will stimulate substantial interest from global players to enter this market and offer Africa as a truly unique global vacation ownership experience. [/member]

Karma Resorts