Mr. LaTour

Condo Hotels

The New Paradigm: Fractional Resorts - A Luxury Lifestyle, Not a Hotel Room

By Tom LaTour, Principal, LaTour Signature Group

Vacation home ownership is not a new concept in the hotel development world. For decades, time-shares and second residences built in desirable resort communities and quickly absorbed by wealthy buyers have resoundingly demonstrated that people want more than just a hotel room when they vacation in these primo destinations.

Few experts in the hospitality industry would have predicted it earlier this year, but after a brief lull the market for luxury fractional resorts is starting to heat up again.

This is not to say that consumer demand or development volume has come roaring back to the levels once projected for the product, but rather that the investor community has focused on this segment as being one of the most promising opportunities for the decade ahead.

Many reasons have been offered by various industry leaders as to why fractional resorts are garnering so much attention, but chief among these is the fact that few new for-sale luxury resort products are being initiated, while demand among affluent consumers for an innovative vacation real estate model has been steadily increasing.

In the past five years, the fractional ownership buzz has been amplified within the luxury space -- and throughout popular culture as well (nee Hard Rock "condotels"). The result of this attention? Resort owners and developers around the world are tapping into the fractional ownership trend.

By all indications, there's a paradigm shift occurring away from hotel rooms and more toward luxury vacation lifestyle experiences. Consequently, these new ultra-luxe fractional resorts are catching the eye of developers and investors alike who want to be well positioned when the economy regains its strong footing and luxury consumers start flexing their buying power again.

The question remains, however, when will the interest in fractionals reach the level that financing sources and equity investors feel that it is time to put new dollars into new product and start breaking ground?

If history is an indicator, that time may not be a far away as many industry sources believe. Perhaps not with the same scope and magnitude as the 1990s boom, but some version of the same zealousness to invest in and ultimately start building luxury fractional properties seems almost inevitable in the very near future.

The New Luxury Consumer

A mass of wealthy people have emerged the world over, giving rise to a large section of consumers who are moving into the once exclusive luxury category.

The phrase "new luxury" has been tossed around a lot in recent years, often synonymous with mass prestige as it applies to affordable next generation luxury brands like Starbucks, Victoria's Secret and Panera Bread.

As James B. Twichell states in his book, "Living It Up: Americas Love Affair With Luxury," the modern concept of luxury has been "democratized" and marketed to a wide swath of the consumer population. From clothing to cosmetics, watches to wine, vehicles to vacation travel, luxurious indulgences are no longer reserved solely for the likes of the Rockefellers.

This concept of mass-marketed luxury doesn't go far enough to explain the paradigm shift that is taking place in the luxury market today. The real shift is in the dramatic change in the ways consumers define luxury.

Old luxury is defined by the attributes, qualities and features of the product -- usually referring to heritage brands that charge a premium such as Mercedes, Christina Dior and Cartier.

But new luxury is about the experience. Offering the best of the best quality now has to go that extra step to deliver not just a great thing, but also one that is unique, memorable and desirable.

Today, aura is more important than exclusivity. Luxury is an indulgence that consumers are willing to pay for because it makes them feel good. Therefore, they have a more emotional approach to a high-ticket purchase.

Price has long been the easiest differentiator in the luxury market. But this tactic is quickly becoming less influential. Exclusivity is evolving from price-driven to scarcity driven.

It's about social currency. People like to say the have the item or do the thing other people can't get.

American retailers who forget this marketing maxim in their pursuit to expand their brand image to the nouveau riche masses have been feeling snubbed by the very luxury consumer they've long courted.

Tiffany & Co., for instance, embarked on a strategy in the early 2000s of spreading into suburban shopping malls and offering a selection of sub-$100 items as an enticement for the upwardly mobile middle-class shoppers. The strategy worked for a while, until Tiffany executives realized that the cheapest baubles were accounting for the bulk of sales, and the company's core wealthy shoppers had started to avoid the packed counters.

Now, the company is again representing itself as an ulta-luxe purveyor, shunning the masses it once courted. Burberry, Cadillac and even Vlasic pickles have also experienced the downside of expanding what is perceived as a premium brand in the quest for more sales.

Creating a feeling of "insiderness" is essential in convincing consumers to choose one product over another.

Any luxury goods marketer needs to start with the knowledge that no one really needs your stuff, anyway. You have to transform your quality good into an experience to make a difference to the true luxury consumer.

Indulging Lifestyle Experiences

Relaxation and stress relief are the primary experiences desired by luxury travelers according to a recent survey by the Luxury Institute, followed by just wanting to have fun.

Fractionals are all about delivering a lifetime of memorable "feel good" vacation experiences to the market's most discerning guests. This requires an innovative approach to delivering luxury travel and hospitality - one that focuses on privileged access to the world's most exclusive vacation properties offering a full complement of five-star amenities delivered with superior customer service.

When it comes to pursuing luxury lifestyles, there are two overriding attributes to characterize our affluent owner-guests. First and foremost, they demand exceptional quality - usually from leading trusted brands.

These fractional resorts may define their luxuriousness differently - say, with a Tahitian Noni beachside massage instead of a helicopter ski drop in deep powder or freshly grown organic food and vegan meals as opposed to celebrity chef prepared five-course dinners, but in many ways they still offer the same ultimate vacation experience.

At the same time, they expect a level of personalized service that is universally unparalleled.

This level of first-class service is where high-end fractional resorts stand apart from the rest of the resort hotel crowd and make other competitors nearly obsolete.

At Olamar Resort in Cabo San Lucas, Mexico there's a suite of concierge services from arranging a private chef for dinner party and a captain for day aboard a yacht to a surf instructor to help guests catch those gnarly waves.

And it's not just the services and amenities provided. It is an attitude and manner of doing business that must be diligently acquired, continuously practiced and meticulously perfected by the hospitality industry's top talent. These consummate professionals are highly trained and motivated to deliver against the promise (or brand values) - which for LaTour Signature Group fractional resorts includes five key pillars: Culinary, Wine, Wellness, Entertainment and Concierge.

The highly personalized exchanges and often time life-changing connections should be among the top goals for purveyors of luxury vacation experiences.

Meeting and exceeding that perceived promise of superior service is what gives fractional resorts that exclusive edge and delivers on the pledge of an unforgettable luxury vacation experience.

Tom LaTour is one of the founding partners of LaTour Signature Group, a joint-venture business with ResortCom Elite that provides superior management services to small, luxury fractional ownership properties throughout North America. As the former Chairman and Chief Executive Officer of the Kimpton Hotel and Restaurant Group, he is applying his more than 40 years of experience in the travel and hospitality industry to this booming new vacation real estate market. Mr. LaTour can be contacted at 415-568-2210 or Extended Bio... retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by

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