At A Fraction Of The Cost

Amongst the proposals for the new tourism law due to be enacted next year is one to allow for fractional ownership of hotel accommodation. The concept is one that, at first glance, might raise alarm bells - oh, oh, timeshare. The alarms would, however, be rung falsely. Fractional does not mean timeshare as it involves actually owning part of the bricks and mortar as opposed to a block of time, though time is, nevertheless, a factor.

Fractional ownership has become well-established, especially in the US. The concept was initially used, as far as the property market was concerned, in Colorado's ski resorts. It is something normally for a high-net-worth upper market, rather than the great unwashed of the mass tourism market. But it doesn't have to be and can range from three to five-star style accommodation.

The diffusion of fractional ownership into the European property market has been relatively slow, but it has been gathering pace. What it offers is an opportunity to acquire a holiday home in the knowledge that shares in the property can be sold on.

Of fractional-ownership opportunities currently available in Europe, two give an example of the sort of money that they can command. A residence in a Tuscan hamlet will set you back a minimum of 63,000 pounds; a golf resort on the Algarve comes in at no less than 79,500 pounds (or only 79,500 pounds if you prefer). It depends how much use you want to make of the property, but typically four weeks per year are about what you would get for your money.

Where fractional ownership has been applied to hotels, it has generally been in the form of private residence clubs, i.e. exclusive five-star complexes with all the trimmings you could pretty much hope for. They certainly aren't cheap. If this model of exclusivity were to be followed, their sheer expense draws into question just how much impact they might have in Mallorca.

The tourism ministry would have us believe that within three years some form of revolution will have occurred in Mallorca's tourism, based on hotel conversions into fractionals or condos. As far as the condo is concerned, it is bought outright and used as and when the owner wishes (though this can be limited if the hotel closes), making it more flexible than a fractional. Whereas fractional properties tend to imply something grand, such as a suite with three or four bedrooms, a condo can be as small as a studio apartment.

Condos can be sold as private residences within existing hotel-apartment buildings, which is what Meliá Hotels International appear to be planning for one of the hotels in their projected Magalluf megacomplex (the Royal Beach in all likelihood). Such a mix of regular tourism accommodation and private ownership could also apply to fractionals, though at the more exclusive end of the market (the private residence club), the anticipation would probably be to have fractional owners only.

In wider terms, both fractionals and condos hint at benefits. They are not, for example, all-inclusives. Might they also help to break the cycle of seasonality? The suggestion is that they would be available in winter, especially at Christmas and New Year times. But would they be? It is unclear whether a hotel would actually stay open out of season (which it would have to, as it would be managing the property).

What is also unclear is how much demand there would actually be. The high-end fractional is said to attract considerable interest, partly because it offers a good investment opportunity and partly because of its exclusivity. But what of other levels of the market?

The impact of fractionals and condos will depend on a number of things: the costs, the constraints, the locations and the accommodation itself. To what extent either will amount to the sort of transformation the tourism ministry envisages, time will tell, and it will take longer than three years. In the meantime, though, everywhere else is gearing up for fractionals and condos. Where, for example, is there already a fabulous fractional complex? Egypt.

There is one other issue. Though the fractional is not the same as a timeshare, it is near enough to bear similarities. Which brings us to how fractionals might be sold. Timeshare has a dirty name in Mallorca, because of the past tactics of certain operators in certain resorts. If fractionals are to be part of the way forward for Mallorca's tourism, then their sale needs to be strictly controlled and regulated. If not: "Here, have a scratch card; oh look, you've won a prize, all you need to do is to come along to our office ... ."


Any comments to andrew@thealcudiaguide.com please.