Ragatz Report

COMMENTS ON A POSSIBLE
FRACTIONAL INTEREST PROJECT IN

MANZANILLO, COLIMA, MEXICO
Prepared for
SIMON ROFFE
February 2007
767 Willamette Street ● Suite 307 ● Eugene, OR 97401 ● Tel: (541) 686-9335 ● Fax: (541) 686-8142
TABLE OF CONTENTS
Page
I. INTRODUCTION .......................................................................................................... 1
Purpose.................................................................................................................... 1
Manzanillo .............................................................................................................. 2
II. AN OVERVIEW OF THE FRACTIONAL INTEREST INDUSTRY ........................ 7
A. OVERVIEW COMMENTS.................................................................................... 7
Introduction............................................................................................................. 7
Definitions............................................................................................................... 7
B. SUPPLY SIDE CHARACTERISTICS................................................................... 9
Introduction............................................................................................................. 9
Industry Performance: 2005................................................................................... 9
Number of Projects ............................................................................................... 12
Number of Units ................................................................................................... 19
Developer Type..................................................................................................... 21
Destination Type................................................................................................... 21
Fraction Size ......................................................................................................... 22
On-Site Amenities................................................................................................. 22
Services Included With Purchase.......................................................................... 23
Use Plan ................................................................................................................ 24
Prices..................................................................................................................... 25
Maintenance Fees.................................................................................................. 26
Some Summary Averages..................................................................................... 28
Destination Clubs.................................................................................................. 28
C. DEMAND SIDE CHARACTERISTICS: EXISTING OWNERS ...................... 30
Introduction........................................................................................................... 30
Demographic Characteristics ................................................................................ 30
Marketing or Lead Generation Channel ............................................................... 32
Motivations for Purchasing................................................................................... 33
Hesitations About Purchasing............................................................................... 34
Current and Future Use of HFI/PRC .................................................................... 35
Satisfaction With Purchase ................................................................................... 36
Would Purchase Again in Hindsight..................................................................... 37
Would Recommend HFI/PRC Ownership............................................................ 38
Satisfaction With Most Recent Stay ..................................................................... 39
Interest in Purchasing More .................................................................................. 40
Changes in Maintenance Fees and Service Level................................................. 40
D. DEMAND SIDE CHARACTERISTICS: POTENTIAL BUYERS.................... 41
Introduction........................................................................................................... 41
Ragatz Associates i Roffe; Manzanillo: 02/07/sw

TABLE OF CONTENTS (continued)
Demographics ....................................................................................................... 41
Awareness of FI/PRC Concept ............................................................................. 43
Opinion of FI/PRC Concept.................................................................................. 45
Important Amenities ............................................................................................. 46
Preferred Location Types...................................................................................... 47
Preferred Unit Size................................................................................................ 48
Preferred Share Size.............................................................................................. 49
Preference for Rental and Resale Services ........................................................... 50
Financing of Purchase........................................................................................... 51
Deeded Versus Non-equity Membership.............................................................. 52
Impact of Major Hotel Brand................................................................................ 52
Access to Resort Home......................................................................................... 53
Multi-site Clubs .................................................................................................... 54
Exchange Service.................................................................................................. 54
Purchase Motivations............................................................................................ 55
Purchase Hesitations ............................................................................................. 56
Interest in Purchasing............................................................................................ 57
Company Interest in Purchasing ........................................................................... 58
Looking Glass Cohorts® ...................................................................................... 59
E. POTENTIAL MARKET DEPTH ......................................................................... 61
III. THE FRACTIONAL INTEREST INDUSTRY IN MEXICO .................................. 65
Introduction........................................................................................................... 65
IV. CONCLUSIONS AND RECOMMENDATIONS .................................................... 79
General Conclusions ............................................................................................. 79
The Product........................................................................................................... 81
Size of Shares........................................................................................................ 83
Use Plan ................................................................................................................ 86
Pricing ................................................................................................................... 88
Sales Pace.............................................................................................................. 95
Miscellaneous Recommendations......................................................................... 96
Anticipated Financial Performance....................................................................... 97
Ragatz Associates ii Roffe; Manzanillo: 02/07/sw

LIST OF TABLES
Page
TABLE II-1 U.S. Income-Eligible Households for a HFI/PRC Purchase, By

Region ................................................................................................. 62
TABLE II-2 Estimated Number of Existing Owner Households of HFI/PRCs in
the U.S., By Region ............................................................................ 63
TABLE II-3 Remaining Market Potential For HFI/PRCs in the U.S, By Region... 63
TABLE III-1 Fractional Interest Projects in Los Cabos ........................................... 71
TABLE III-2 Size and Bedroom Configuration........................................................ 71
TABLE III-3 Average Square Footage ..................................................................... 72
TABLE III-4 On-Site Amenities............................................................................... 73
TABLE III-5 Member Privileges .............................................................................. 73
TABLE III-6 Pricing Characteristics, By Number of Bedrooms.............................. 74
TABLE III-7 Average Weekly Maintenance Fees, By Number of Bedrooms ......... 76
TABLE III-8 Average Weekly Prices, By Number of Bedrooms ............................ 76
TABLE III-9 Average Price Per Square Foot, By Number of Bedrooms ................ 77
Ragatz Associates iii Roffe; Manzanillo: 02/07/sw

I. INTRODUCTION
Ragatz Associates Roffe; Manzanillo: 02/07/sw

COMMENTS ON A POSSIBLE
FRACTIONAL INTEREST PROJECT IN
MANZANILLO, COLIMA, MEXICO
I. INTRODUCTION
Purpose
The purpose of this document is to provide preliminary comments concerning a
possible fractional interest project in Manzanillo, Colima, Mexico. The project is
currently planned for a total of 78 units, including 30 whole-ownership units and 48
fractional interest units. Emphasis in this document is entirely on the fractional interest
component.
The subject property is a very prime site on a point of land with spectacular views
of Manzanillo Bay and the environs. It is next to Las Hadas, the renowned development
that heretofore has been the most upscale in Manzanillo. Besides the 78 residential units,
the overall development will contain an extensive set of amenities and services, as well as
unique and attractive architecture and site planning. Emphasis will be on a “green-
construction, sustainable energy design.” Upon completion, it is fully anticipated that the
project will be the most attractive resort development in Manzanillo.
It is emphasized that this document is not a thorough feasibility analysis, but
rather a series of preliminary conclusions and recommendations. Comments are based
on:
1. a tour of the site and the environs

2. a review of the tourism industry in Manzanillo
3. a review of the current fractional interest industry in the U.S. and Mexico
Ragatz Associates 1 Roffe; Manzanillo: 02/07/sw

4. the consultant’s previous experience in the fractional interest industry, with such
experience involving the conduct of several hundred feasibility analyses on the
topic, including 12 in Mexico
This document contains three additional chapters. Chapter II describes the

fractional interest industry in general in North America, while Chapter III concentrates on
the industry in Mexico. Chapter IV is the most important as it includes the preliminary
conclusions and recommendations.
Manzanillo
The subject property is located in the tourist-oriented community of Manzanillo in
the State of Colima, Mexico. It is on the west coast of the country. The second largest
city in Mexico, Guadalajara, is located about 200 miles to the northeast. Puerto Vallarta
is about 235 miles to the northwest. An article describing the many attributes of this
unique community is found at the end of this chapter.
Some statistics describing the tourism industry in Manzanillo are briefly listed
below.
1. In 2005 there were 723,538 tourists to Manzanillo. This represents a good

increase of 32,998 from 2004, or 4.8 percent. Just five years earlier in 2000, the
number was only 537,095. So, over the five-year period, the number of tourists
increased by 186,443, or 34.7 percent.
2. In 2005, 82.5 percent of the tourists came from outside of Mexico with the other
17.5 percent coming from within the country.
3. The average length-of-stay was 2.3 nights, and the average visitor party size was
2.5 people. In regard to a fractional interest offering these statistics suggest a
flexible use plan and smaller units, as will be returned to in the final chapter.

4. The year-round occupancy rate in the 3,600 hotel rooms was 52.1 percent.
However, it was a much higher 66.2 percent in 5-star hotels, which is a good sign
for a fractional interest project.
5. There were 2,343 commercial flights into Manzanillo in 2005, up 8.6 percent
from 2004.

- TicketTo Paradise
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MANZANILLO.
1'1,
Karel Schaler
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As a child, I grew up hearingstoriesofMexico's magicalplacesfrom my adv€nturesome gBndparents.

TheyslarledexploringMexico morethan 30 yearsagowhenlheylook a road lrip south1oescapethe
soggywinlersoflhe Nonhw€st Thcy headedright over the U.S. borderand boLrght a winler homern
the small adisls' communilyofAlanos. Everywinter afterlhal, theywould seekout new places.So I'd
heardlalesaboutlhe seaportofManzanillo yearsbeforeI wasablelo visit.
l'lying in alongthe Pacificcoast,I spottedManzanillofor th€ first lime and immedialelyh€ld rny
breath.The gold beachandtbe turquoisewalerbelow sccmcdsuncal.
As we madeour final approach,I got a closerlook at the details.Manzanillowas magnificenlly
blanketedin Iushverdur€ coconutpal,nsand lim€ andmangotrces.Likc my grandparents before
me, I knew I rvasseejnga rare.unspoiledpieceofparadis€.Locatedon the coastbelweenPueno
Vallana andAcapulco.Manzanillois situaledon two beautifulbays,separal€d by the Santiago
PeninsulaOftentouledas lhe real" Mexico,Manzanillopridesitselfon beingnothinglike Cancun,r(s
splashysisreron (helhe othersideoflhe country.
Quainrandc lturallyaulhcnlic.Manzanillos rich historydatesto 1522,whenexplorerHemiin
Con€swasoneofth€ first non-nalivesto discovertbis stretchofbeach.Conts was sailingthc coaslof
N,{exico searchingfor a safeharboranda shipbuildingsitc whenManzanillocaughlhis eye.Overth€
nextseveralc€nluri€slhis areawasalsoa favorilespo(for unscrupulous piraleswho laid in tvait for
passingcargoships.
ln l825,lhe porl ofManzanillo opened.(Th€ lown's nameis takenffom the nativ€manzanillotrees
usedin previouscenturiesfo.shipbuilding.)Thepondidn t olficially becomca city until 1873 Forthe
nextcentury,Manzanillokept a low profile until it was featuredas a vacationdestinationin the mo!ie
/0, filmed at the Las HadasResortand at La AudienciaBeach
As I walkedthe beach.I washappyto find thattbis legendaryrcson$ill lives up to its superstar
slalus Wilh nearly250 rooms(14 ofwhich havelheir own swimmingpool), Las Hadasrese'nbles an
exoticMoorishvillage.The resonalsoboastson€ofthe finest18-holechampionshjpgolfcoursesin all
Dinneral lhe resort'spremi€radulis-onlyrestaurantLegazpiwasa goumet lreat,from menuto

view 1oservice.My r€commendalion for an appelizer,lhelobsterbisque:for an entr6e,slewedshrimp
with grapesin a Corgonzolasaucewith Marsala.
Lookingfo. a place1oget pampered,I h€adcdnextdoor to oneofManzanillo s newestluxury
resons.the family-friendlyBarc€16KarminaPalace.I head€dto a no-frillsboutiquespasel up n€xt to
l of 3 2/22/20014:27 PM
- TicketTo Paradise
USAirwaysMagazine http://www.usairwaysmag.com-/archives/2006_l
l/feature0l.asp
oneofKarmina's eighl swimmingpools.I chosethe 8o-minulehotrockmassageandwas soonfeeling

€veryhint oflension leavemy body.
Asidefrom its all-inclusivestatus walersports,nigblly enterlainment,andm€alsanddrinksar€
partofthe package- Karminaoffersoneofthe mostbeautifulreslauranlsettingsin Manzanillo.
Cario€ais p€rch€don a clifToverlookingthe water As you djne on a remarkableselectionof fresh
seafood,wavescrashagainstthe rocksbelow.
After havingenjoy€dsomeexcellentmealsat th€ resortrestaurants, it was time for somethingwilh

moreofa local flavor. Headingaway from the resorts,lvenlureddowntownto Manzanillo'scity center.
After steppingout ofthe taxi, I was in sensoryoverload.A hostofsighrs,smells.and sounds
bombardedme from everydhectionas I ambleddown the crowded,winding narrowslr€€ts.Following
my nose,it didn't lake long to find a small open-ahrestaurantthal dishedup succulenttacosand
enchiladas.
To walk offmy meal,I head€dout ofthe dow own centerto the walerfront,wherethe esplanade
hasr€cenllyund€rgon€a massiverenovationandis now gracedby a sculptureof a giantblue sailfish.
No whimsyhere:Manzanillois known as th€ "SailfishCapitalofthe World." Ask any local,andthey'll
lell you how more sailfishhavebeencaughtoffthe watersofManzanillo thanany otherplacein the
world. In mosl deep-sea-fisbing adventur€s, you often lravelabouttwo hoursto find your bestcatch.but
not here.The localssaythatjusi 15 minutesoffshoreyou can reel in sailfish.dorado,marlin,and luna.
(In FebruaryandNovember,Manzanillohoststhe lntemalionalDorseyToumamenl,on€of the largesl
sailfishcomDetitions in the worid.)
Ifyou'd ralherwiggleyour toesin the sand.Manzanillohassomeofdrc mostbeautifulbeacbesrn
Mexico.B€tweenth€ slrandsalongthe twin baysofsantiago Bay and ManzanilloBay, your options
appearalmostendless.In SanliagoBay,tbe bestbeach€sincludeLa Audiencia,Santiago,OlasAltas,
Miramar,and La Boquita.Hereyou'll find g€ntl€waves perfectfor swimming,snorkeling,and
diving.Along ManzanilloBay,th€ beachesof Las Hadas,Las Brisas.PlayaAzul. Salagua,Escondida,
andSanPed lo are magnificent.Salaguais a popularplaceto fish for red snapper,and Las Hadasis a
delighlfulbeachhrddenaway In a sheheredcove
After exploringManzanillo,I grew curiousaboutthe sunoundingarea.I l€t a localcompany,
Heclours,be my guide.One oflhe mosi eyeopening trips is the allday Colima-ComalaTour, which
venturesinland1othe hea( ofColima to explorethe colonial-stylecapitalcity andthe nearby
cobbleston€d town of Comala.
Ifsboppingis your pl€asure,lake Hectours'three-hourCity Tour and Shoppingexcursion,where
you g€t to experience th€ storesin downtownManzanillo,as well as s€veralsmall outdoormarkets.At
the markets. you can bargain for great prices on everlthing from real vanilla exlract 1olocal arls and
Anotherfascinalingforay is the six-hourCuyutlanE€o-Paradise Tour, in which you leam how s€a

salt is minedand observefirst-handthe effons to protectseaturtl€s,iguanas,andcrocodiles.
Takea ride on the wild sideand checkout the threehourATV AdventureTour. You'll drive your
own vebicleand follow a guideon a lour throughruggedmountaintrailsand downthe beachofPena
Blanca.(B€ sureto wear long pantsandtennissho€s.and bring a driv€r's license.)
During my explorations,I foundthat onceyou'vev€nluredoutsidethe r€sorts,you rarelysee
anotherlourist.Away from town, you havetbe rareopponunityto seethe Mexicancoasllinein its
naluralslale slill, for the most part,undeveloped. But timesare changing.New construclioncan be
seenalongthe coaslline,and thereare plansto build more luxury condosand resons.Th€ city's port is
alsoexpandingto allow for more cruiseships.Someofthe localsfearthatas tourismgrows,
Manzanillowill losesomeof its uniquecharm,and whil€ they'reproudandeagerto shar€this sliceof
paradisewith the restofthe world. there'sno desircto grow so fast andso largelhat the €ssenceof
Manzanillois lost.
As my planeclimbsskyward,I seeManzanillodisappearinto the horizon.I know that"progress"is
a forceofd€stiny.And ifl wait loo long 1orelum. the Manzanillomy grandparents remember- and
what I'vejusi experienced will foreverbe changed.
KAREtt SCHALERresidesin Scottsdale,Arizona.She is an Emmy-winnin9reporter who work as

a r y - n e w s a n c h o ra n d p r i n t j o u r n a l i s t .
HOW TO GET THERE
USAirways
fliesdirectlyto Manzanillo.
CONTACTS
Bcfnrc lravelino visil th. Wch manTanillnrnm mx
2(lf t 2/22/20074:27 PM
II. AN OVERVIEW OF THE FRACTIONAL INTEREST
INDUSTRY

II. AN OVERVIEW OF THE FRACTIONAL INTEREST INDUSTRY
A. OVERVIEW COMMENTS
Introduction
As noted in Chapter I, the product being considered for the subject property is
fractional interests (aka a private residence club). Since the product is relatively new in
the resort real estate industry, it is valuable to provide some background information on
its current status.
Material in this chapter is taken from previous work conducted by Ragatz
Associates, and not specifically for this report at-hand. It is intended for readers who
may not be fully acquainted with this cutting-edge product.
Following some definitions, the remainder of the chapter is divided into three
sections. The first one describes results of our most recent (May 2006) survey of the
supply side of the industry. The second describes results of the only survey ever
conducted of fractional interest owners (February 2005). The third describes results of
the only survey ever conducted of the public-at-large, concerning their interest in
purchasing the product (March 2005).
Unfortunately, the vast majority of the information in all three sections pertains to
the fractional interest industry in the United States instead of Mexico since research
heretofore has not been conducted in the latter country. However, Chapter III does
describe the current fractional interest industry in Mexico.
Definitions
As defined by Ragatz Associates, the overall fractional industry contains four
types of products. The first three are fairly similar, with the categories being defined by
the rather subjective criteria of price per square foot and degree of services.

For the most part, these three categories involve selling deeded real estate in a
particular resort home or development. Internal exchange may be provided into other
projects operated by the same development entity, and external exchange may be
provided through affiliation with one of the outside exchange companies. The fourth
category typically involves selling an equity or non-equity membership in a network of
resort homes in a variety of locations.
The four categories include:
Traditional fractional interests: product selling for less than $500 per square
foot. These are usually resort homes of average quality, in regional resort
areas, with typical resort amenities and services. Often characterized as at the
“three star” level of quality. Hereafter in this report they are referred to as
TFIs.
High-end fractional interests: product selling for $500 to $999 per square foot.
This product represents a step up from the preceding category, typically due to
some combination of more desirable location, lower density, larger unit size,
higher construction and furnishings quality, or additional amenities or
services. Often characterized as “four star” quality. This product has attained
the trappings of a true industry within the past five to 10 years. Hereafter in
this report, they are referred to as HFIs. This is probably the most appropriate
category for the subject property in Manzanillo.
Private residence clubs: product selling for $1,000 or more per square foot.
These represent the pinnacle of quality -- not just among fractional interest
projects but in comparison with virtually any resort accommodations available
-- due to a combination of locations in the top tier of resort destinations on
prime sites, extraordinary architecture and design, and the highest levels of
services and amenities. “Five star” quality in every way. As HFIs, this
product has attained the trappings of a true industry within the past five to 10
years. Hereafter in this report, they are referred to as PRCs.

Destination clubs: Another product related to the preceding two is a “destination
club.” Here, “ownership” is typically conveyed not by a traditional deed in-
perpetuity in a specific project, but rather by a “non-equity membership” in a
network of vacation homes. As such, the concept is akin to a multi-location
non-equity country club membership, but with upscale overnight
accommodations also included. Typically, between 80 and 100 percent of the
initiation deposit is refundable. Members also pay annual dues and, in some
cases, nightly occupancy fees. A few destination clubs offer an equity
membership instead of a non-equity membership.
B. SUPPLY SIDE CHARACTERISTICS
Introduction
Information in this section is taken from the most recent survey of the supply side
of the fractional interest industry, including market trends and product characteristics. 1 It
was completed by Ragatz Associates in May 2006. The survey was conducted by
telephone and included over 90 percent of all fractional interest projects known to exist in
North America.
Industry Performance: 2005

It is estimated that total sales volume in the overall fractional interest industry in
North America in 2005 was about $2 billion. This represents an increase of 27 percent
from 2004 and 283 percent from 2003.
As shown below, the almost $2 billion includes $1.5 billion of new closed sales,
$388 million of presales and $48 million of resales. Included in the $1.5 billion of new
closed sales are $366 million from traditional fractional interest (TFIs) and high-end
fractional interest (HFIs) projects combined, $440 million from private residence clubs
(PRCs), and $726 million from destination clubs (DCs)
1
The Fractional Interest Industry: 2006 Edition is the property of NorthCourse Advisory Services. Full
copies of the survey may be obtained by contacting NorthCourse at www.northcourse.com.

new closed sales millions
fractional interests $366.4
private residence clubs $440.0
destination clubs $725.5
total $1,531.9
resales (FI/PRC) $47.9
presales (FI/PRC) $388.0
total $1,967.8
In relative terms, new closed sales represented 78 percent of the total, presales
represented 20 percent, and resales represented two percent. New closed sales from TFI
and HFI projects combined represented 19 percent of the total. PRCs represented 22
percent and DCs represented 37 percent. The three fractional tiers represented 63 percent
of the total (including new sales, presales and resales) and DCs represented 37 percent.
These relative figures are summarized in the table below.
new closed sales

fractional interests 23.9%
private residence clubs 28.7%
destination clubs 47.4%
total 100.0% 77.8%
resales (FI/PRC) 2.4%

presales (FI/PRC) 19.8%
total 100.0%
total sales
FI/PRC 63.1%
DC 36.9%
total 100.0%
As noted, the total sales volume for all four products increased by 28 percent in
2005 over 2004. As summarized in the table below, most significant increases in
absolute terms were for DCs (+$276 million) and TFIs/HFIs (+$149 million). DCs
increased by $33 million, and resales by $16 million. In relative terms, TFIs/HFIs
increased by 68 percent, resales by 52 percent and DCs by 43 percent. PRCs increased
by eight percent. As an indicator of the maturation of the industry, the amount of
presales actually decreased by $49 million, or -11 percent.

change: 2004 to 2005 % of total
2004 2005 $ % 2004 2005
new closed sales
fractional interests $217.8 $366.4 $148.6 68.2% 14.1% 23.9%
private residence clubs $406.9 $440.0 $33.1 8.1% 26.4% 28.7%
destination clubs $450.0 $725.5 $275.5 42.5% 29.2% 47.4%
total $1,074.7 $1,531.9 $457.2 42.5% 69.7% 77.8%
resales (FI/PRC) $31.5 $47.9 $16.4 52.1% 2.0% 2.4%

presales (FI/PRC) $436.7 $388.0 -$48.7 -11.2% 28.3% 19.8%
total $1,542.9 $1,967.8 $424.9 27.5% 100.0% 100.0%
The graph below concentrates only on new closed sales in 2005. This amount
was about $1.5 billion, up from $1.1 billion in 2004 (+43 percent), and from $515 million
in 2003 (+199 percent). The graph also shows the tremendous growth in the overall
industry since Ragatz Associates first started tracking it in 1999.
Across all fractional projects selling in 2005, new closed sales volume averaged
$16.7 million. This average is up significantly from the past four years when it was
$12.8 million (2004), $10.8 million (2003), $10.3 million (2002) and $10.7 million
(2001). Averages were $4.2 million for TFIs,
Estimated Closed Sales Volume, 1999-
$15.8 million for HFIs, and $24.4 million for $1,800 2005* $1,532.0
PRCs. $1,500
Among independently developed projects, $1,200

$900 $1,075.0
the average was highest among hotel company
$600
projects at $24 million. Projects developed by
millions
$300 $160.7 $513.3

$373.0
independent companies averaged $11 million and $328.5 $350.4
$0
other public companies averaged $14 million. 1999 2000 2001 2002 2003 2004 2005
*TFIs not included prior to 2003.
Projects in urban ($11 million), golf ($16 million)
and beach ($16 million) destinations had higher average sales volumes than ski ($14
million) and wine ($7 million) destinations.
While average sales volume is a good indicator of industry growth, sales pace
adds another dimension. Traditional timeshare resorts sell an average of 80 intervals per
month. In comparison, fractional interest projects see many fewer sales leads, leading to
an average monthly sales pace in 2005 of seven shares.

Because there were not an exceptionally large number of fractional interest
projects in sales during 2005, average monthly sales pace was influenced a great deal by
a few extreme cases. To hone in on the factors that influence sales pace, segmenting the
projects into various groups is helpful. Segments with the most rapid sales paces in terms
of shares sold per month are:
• HFIs and PRCs at seven, compared to TFIs at three

• hotel companies at eight, compared to other public companies and
independent developers at six
• ski locations at seven, compared to between five and six for all other types of
locations
Number of Projects
Number of Existing HFI and PRC Projects
As of March 2006 some 188 fractional 100
89
90 81
interest projects that had begun sales prior to
80
66
December 31, 2005 were identified in North 70
59
60
America. They are listed on the following 50 42
47
40
pages. Of these, 99 were TFIs, 42 were HFIs, 31
30 20
and 47 were PRCs. Of the 188 total, locations 20 13
4 6
10
include: 156 in the United States, 17 in 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Canada, six in the Caribbean, five in Mexico,
and four elsewhere.
Fractional Interest Projects, March 2006
Fractional interest projects are now
found in 29 states. Four states contain 37 Location Number of Projects
United States 156
percent of the 188, including Colorado (18 Canada 17
Caribbean 6
percent), California (eight percent), Oregon Mexico 5
Other 4
(six percent) and South Carolina (five
percent). It also is noted that Colorado (28
percent) and California (17 percent) contain 45 percent of the HFIs and PRCs. The state-
by-state distribution is shown in the first table on the following page.

As previously mentioned, during 2005, 79 of the 188 projects were identified as
being in active sales; i.e., closing sales, taking pre-construction reservations with a
refundable deposit, or taking non-refundable deposits on contracts that will close at the
time a certificate of occupancy is issued. Of these projects, 19 were TFIs, 26 were HFIs
and 34 were PRCs.
Existing Fractional Interest Projects
Project Community Type
ARIZONA
Rocks at Pinnacle Point Scottsdale, AZ HFI
Scottsdale Club Villas Scottsdale, AZ HFI
Rancho Manana Private Residence Club & Spa Cave Creek, AZ HFI
Four Seasons Residence Club Scottsdale at Troon North Scottsdale, AZ PRC
Quality Hill Resort Villas Pinetop, AZ TFI
CALIFORNIA
Club at Big Bear Village Big Bear Lake, CA HFI
Villas of Gold Mountain Graegle, CA HFI
Mountain Club Kirkwood, CA HFI
Northstar Club Northstar, CA HFI
Sentinals Private Ownership Club Kirkwood, CA HFI
Sierra Shores South Lake Tahoe, CA HFI
Residence Club at PGA West La Quinta, CA HFI
Tallus Private Residence Club Mammoth Lakes, CA HFI
80│50 Mammoth Lakes, CA PRC
Four Seasons Residence Club at Aviara Carlsbad, CA PRC
Marriott Grand Residence Club South Lake Tahoe, CA PRC
Storied Places at Tonopalo Tahoe Vista, CA PRC
Villas at Rancho Valencia La Jolla, CA PRC
Old Greenwood Truckee, CA PRC
Calistoga Ranch Calistoga, CA PRC
4 Seasons at Desert Breezes Palm Desert, CA TFI
COLORADO
Christie Club Steamboat Springs, CO HFI
Franz Klammer Lodge Telluride, CO HFI
Fox Acres Residence Club Red Feather Lakes, CA HFI
Cirque at Copper Mountain Copper Mountain, CO HFI
Inn at Lost Creek Telluride, CO HFI
Pine Meadows Telluride, CO HFI
Hyatt Main Street Station Breckenridge, CO PRC
Ritz-Carlton Club at Aspen Highlands Aspen, CO PRC
Ritz-Carlton Club at Bachelor Gulch Beaver Creek, CO PRC
Roaring Fork Club Basalt, CO PRC
Sanctuary at Snowmass Club Snowmass Village, CO PRC
Snowmass Club Snowmass, CO PRC
Valdoro Mountain Lodge Breckenridge, CO PRC

Club Residences at Vail Mountain Lodge & Spa Vail, CO PRC

One Willow Bridge Road Vail Village, CO PRC
Vail Plaza Club & Hotel Vail, CO PRC
River Club Telluride, CO PRC
Villas at Tristant Telluride, CO PRC
Hyatt Grand Aspen Lodge Aspen, CO PRC
Porches at More's Corner Steamboat Springs, CO PRC
Residences at Little Nell Aspen, CO PRC
St. Regis Residence Club Aspen Aspen, CO PRC
Timbers Club Snowmass Village, CO PRC
Austria Haus Vail, CO PRC
Hyatt Mountain Lodge Beaver Creek, CO PRC
Grand Summit Resort Hotel - Steamboat Springs Steamboat Springs, CO TFI
Greens at Copper Creek Copper Mountain, CO TFI
Shadow Mountain Lodge at Aspen Aspen, CO TFI
Park Plaza at Beaver Creek Beaver Creek, CO TFI
Prospector of Aspen Aspen, CO TFI
Rams Horn Village Estes Park, CO TFI
Rockies Condominiums Steamboat Springs, CO TFI
DELAWARE
Surf Club Dewey Beach, DE TFI
FLORIDA
Emerald Grande at HarborWalk Village Destin, FL HFI
Inspiration Sandestin, FL HFI
WaterColor Private Residence Club Seagrove Beach, FL HFI
Ritz-Carlton Club at Jupiter Jupiter, FL PRC
Sandrift Resort Naples, FL TFI
HAWAII
Maui Sunset Kihei, HI TFI
Kona Bullfisher Kailua-Kona, HI TFI
IDAHO
Hemingways Sun Valley, ID HFI
Les Saisons Sun Valley, ID PRC
Hearthstone at Spring Mountain McCall, ID TFI
INDIANA
Pointe Golf and Tennis Resort Bloomington, IN TFI
MAINE
Grand Summit Resort Hotel – Sugarloaf Carrabassett Valley, ME TFI
Grand Summit Resort Hotel - Sunday River Bethel, ME TFI
MARYLAND
Quarters Ocean City, MD TFI
Quarters at Marlin Cove Ocean City, MD TFI
Marlin Cove II - Blue Marlin Ocean City, MD TFI
MASSACHUSETTS
Sea Quarters of New Seabury New Seabury, MA TFI
Horizon Beach/Terrace Dunes Resort North Truro, MA TFI
MICHIGAN
Cottages at Waters Edge Thompsonville, MI TFI

Kinlochen Lodge at Crystal Mountain Resort Thompsonville, MI TFI

Boyne Mountain Grand Lodge Boyne Falls, MI TFI
Masterpiece Residence Club at Treetops Resort Treetops Village, MI TFI
Homestead Glen Arbor, MI TFI
Vacation Club II Bellaire, MI TFI
Shanty Creek Bellaire, MI TFI
Wintergreen Quarters Stanwood, MI TFI
MINNESOTA
Larsmont Cottages on Lake Superior Duluth, MN TFI
Superior Shores Two Harbors, MN TFI
MISSOURI
Private Quarters Club Lake Ozark, MO TFI
Four Seasons Racquet and Country Club Lake Ozark, MO TFI
La Jolla Club at 4 Seasons Racquet Club Lake Ozark, MO TFI
Lakeview Resort Vacation Club Lake Ozark, MO TFI
MONTANA
Edelweiss Whitefish, MT TFI
Ptarmigan Village at Whitefish Whitefish, MT TFI
Meadow Lake Golf and Ski Resort Columbia Falls, MT TFI
NEVADA
Residence Club at Southshore Zephyr Cove, NV HFI
Tropicana Estates Las Vegas, NV TFI
NEW HAMPSHIRE
Grand Summit Resort Hotel – Attitash Bartlett, NH TFI
B. Mae's Resort Gilford, NH TFI
Mountain Sun Condominium Quarters Waterville Valley, NH TFI
Bretton Woods Bretton Woods, NH TFI
Deer Park North Woodstock, NH TFI
NEW YORK
Whiteface Lodge Lake Placid, NY HFI
Phillips Club at Lincoln Square New York, NY PRC
Kaatskill Mountain Club Hunter, NY TFI
Quarters at Four Seasons Inn Lake George, NY TFI
Quarters at Lake George Lake George, NY TFI
NORTH CAROLINA
Hammocks on Bald Head Mountain Southport, NC HFI
Cottages at National Golf Club Village of Pinehurst, NC TFI
Mountain Club at Cashiers Cashiers, NC TFI
Ships Watch Outer Banks, NC TFI
OREGON
Residence Club at Pronghorn Bend, OR HFI
Residence Club at Seaside Seaside, OR HFI
Eagle Springs Redmond, OR TFI
Eagle's Landing at Running Y Klamath Falls, OR TFI
Resort at Whale Pointe Depoe Bay, OR TFI
Inn at Seventh Mountain Bend, OR TFI
Mount Bachelor Village Resort Bend, OR TFI
Ridge at Sunriver Sunriver, OR TFI
Shorepine Village Pacific City, OR TFI

Stoneridge Townhomes Sunriver, OR TFI

Thundering Shores Executive Estate Condos Depoe Bay, OR TFI
PENNSYLVANIA
North Slope & Valley View at Shawnee Shawnee-On-Delaware, PA TFI
RHODE ISLAND
Neptune Vacation Club Block Island, RI TFI
SOUTH CAROLINA
Ocean Front Residence Club at Daufuskie Island Hilton Head, SC HFI
Owners Club at Hilton Head, The Hilton Head, SC HFI
Brigantine Quarters Hilton Head, SC TFI
Cottages at Shipyard Hilton Head, SC TFI
Harbour Town Yacht Club Hilton Head, SC TFI
Harbourside III Hilton Head, SC TFI
Main Street Inn Hilton Head, SC TFI
Ocean Palms at Port Royal Resort Hilton Head, SC TFI
Southwind Hilton Head, SC TFI
Planters Quarters at Port Royal Resort Hilton Head, SC TFI
TEXAS
Owners Club at Barton Creek, The Austin, TX HFI
Pirates Cove Townhomes Galveston, TX TFI
San Luis Condominiums Galveston, TX TFI
Victorian Galveston, TX TFI
UTAH
Deer Valley Club Park City, UT HFI
Residences at The Chateaux Deer Valley, UT PRC
Sky Lodge ResortClub Park City, UT PRC
Grand Summit Resort Hotel – The Canyons Park City, UT TFI
VERMONT
Lodge at Lincoln Peak Warren, VT HFI
Villas at Trapp Family Lodge Stowe, VT HFI
Front Four at Stowe Mountain Stowe, VT PRC
Jackson Gore Inn at Okemo Ludlow, VT TFI
Grand Summit Resort Hotel - Mt. Snow West Dover, VT TFI
Killington Grand Hotel & Crown Club Killington, VT TFI
Trail Creek Condominiums Killington, VT TFI
VIRGINIA
Owners Club at The Homestead, The Hot Springs, VA HFI
WASHINGTON
Weatherly Condominium Resort Ocean Shores, WA TFI
Kala Point Village Port Townsend, WA TFI
Snowater Glacier, WA TFI
Blue Heron Union, WA TFI
WYOMING
Teton Club Jackson Hole, WY HFI
Residence Club at Teton Pines Jackson Hole, WY HFI
Four Seasons Residence Club at Jackson Hole Jackson Hole, WY PRC
CANADA
Parkside Victoria Resort & Spa Parksville, BC HFI

Poet's Cove Seaside Resort Vancouver, BC PRC

Storied Places At Natures Door Whistler, BC PRC
Canadian Mountain Cabins Kimberley, BC TFI
Horstman House Whistler, BC TFI
Le Sommet des Nieges Tremblant, Quebec TFI
Miraloma on the Cove Sidney, BC TFI
Spirit Ridge Vineyard Resort & Spa Osoyoos, BC TFI
Cottages at Port Stanton Severn Bridge, ON TFI
Currents at Otter Bay Vancouver, BC TFI
Landscapes at Lake of Bays Baysville, ON TFI
Legends Vancouver, BC TFI
Montebello II Whistler, BC TFI
Muskokan Resort Club Muskoka, ON TFI
Taboo Resort Gravenhurst, ON TFI
Tory’s Landing Cottage Community Messionaugh, ON TFI
Vacation Residence Club at Fox Harb'r Wallace, Nova Scotia TFI
CARIBBEAN
Cinnamon Hill Club Jamaica, West Indies HFI
Isle de France Club St. Barth, USVI PRC
Pond Bay Club St. John, USVI PRC
Ritz-Carlton Club at St. Thomas St. Thomas, USVI PRC
Residence Club at Tucker's Point Tucker's Town, Bermuda PRC
Virgin Grand Villas St. John, USVI TFI
MEXICO
Owners Club at Puerto Vallarta, The Puerto Vallarta, Mexico HFI
Grand Regina Los Cabos Cabo San Lucas, Mexico HFI
Auberge Residence Club at Esperanza Cabo San Lucas, Mexico PRC
Fairmont Heritage Place Acapulco Diamante Acapulco, Mexico PRC
Villa La Estancia Cabo San Lucas, Mexico TFI
The growth rate among HFIs and PRCs has been steady since these product types
were introduced in the mid-1990s, increasing from just four in 1995 to 89 by the end of
2005. The growth rate in this segment of the industry rose by 10 percent in 2005.
Because the TFI market was not studied between 1989 and 2003, growth trends in this
segment are not available.
In addition to the 188 fractional interest projects, at least 22 destination clubs
were active in sales during 2005. They are listed in the second table on the following
page.

Location of Fractional Interest Projects
HFIs/ HFIs/
State TFIs PRCs Total State TFIs PRCs Total
Arizona 1 4 5 Nevada 1 1 2
California 1 15 16 New Hampshire 5 0 5
Colorado 7 25 32 New York 3 2 5
Delaware 1 0 1 North Carolina 3 1 4
Florida 1 4 5 Oregon 9 2 11
Hawaii 2 0 2 Pennsylvania 1 0 1
Idaho 1 2 3 Rhode Island 1 0 1
Indiana 1 0 1 South Carolina 8 2 10
Maine 2 0 2 Texas 3 1 4
Maryland 3 0 3 Utah 1 3 4
Massachusetts 2 0 2 Vermont 4 3 7
Michigan 8 0 8 Virginia 0 1 1
Minnesota 2 0 2 Washington 4 0 4
Missouri 4 0 4 Wyoming 0 3 3
Montana 3 0 3 Multiple locations 0 4 4
Other North America 17 16 33
Total 89 99 188
Destination Clubs
Club/Company Based in: Started Sales in:

Tanner & Haley Steamboat Springs, CO 1999
Portofino Club Englewood, CO 2002
Exclusive Resorts Denver, CO 2003
Private Escapes Fort Collins, CO 2003
Private Escapes Platinum Fort Collins, CO 2003
Belle Havens Salt Lake City, UT 2004
Quintess Boulder, CO 2004
Setai Club Miami, FL 2004
Solstice Sausalito, CA 2004
Choice Escapes Morgantown, WV 2005
Crescendo Roseville, CA 2005
Dream Catcher Greenwood Village, CO 2005
Fly Fishing Destinations Sandy, UT 2005
Gentry Retreats Celebration, FL 2005
Havens New York, NY 2005
Leading Residences of the World Dallas, TX 2005
Marker’s Golfers’ Residence Club St. George, UT 2005
Parallel unknown 2005
Signature Destinations Kirkland, WA 2005
Ultimate Resort Steamboat Springs, CO 2005
Vantages West unknown 2005
Vintner’s Club Denver, CO 2005

Number of Units
There are an estimated 4,700 Unit Configuration
fractional interest units in North America in 50%
46%
45% TFI
38%
the 188 total projects. Of these, 40% HFI
34%
33%
35% PRC
approximately 2,000 are in TFI projects and
27%
26%
30%
23%
approximately 2,700 are in HFI and PRC 25%
17%
16%
20%
13%
projects. Among the 4,700, approximately
11%
15%
10%
6%
5%
4,100 are in the United States.
5%
5%
0%
As previously emphasized, this
Studio 1-BR 2-BR 3-BR 4-BR
survey examined only projects active in
sales. The estimated number of built units at fractional interest projects selling during
2005 was 3,555. Of these, 1,195 were at TFI projects, 1,170 were at HFI projects and
1,190 were at PRC projects.
The average size of TFI projects in active sales was 65 built units. If all under-
construction and planned units are built, the average TFI project will contain 99 units.
The average size of an HFI project was 45 built units. If all under-construction and
planned units are completed, the average HFI project will contain 68 units. The average
size of a PRC project was 35 built units. If all under-construction and planned units are
completed, the average PRC project will contain 52 units. The overall fractional interest
project contains 45 built units, which will increase to 69 units if all under-construction
and planned units are completed.
The preceding information on project size for the three tiers is summarized in the
following table.
status of units TFI HFI PRC all
built 651 45 35 45
under-construction 15 11 8 11
planned 18 13 10 13
total at build-out 99 68 52 69

Two-bedroom units were the most Unit Square Footage
common configuration among both PRCs 4,000
3,365
TFI
3,225
(46 percent) and TFIs (34 percent). Units HFI
3,000 PRC
2,424
containing three or more bedrooms were
2,141
1,940
1,532
1,459
more typical at HFI (33 percent) and PRC 2,000
1,288
(26 percent) projects than at TFI projects (23
823
863
760
1,000
461
425
416
percent) Of all 3,555 built units in active
0
projects, seven percent are studios, 22
Studio 1-BR 2-BR 3-BR 4-BR
percent are one-bedrooms, 37 percent are
two-bedrooms, 28 percent are three-
bedrooms, and six percent are four-bedrooms.
Not only do TFI units typically offer fewer bedrooms, they also have smaller unit
areas, on average. The overall average unit size at TFI projects was 1,220 square feet.
Among HFIs, the overall average unit size was 1,830 square feet. The average among
PRCs was 1,600 square feet. Many PRCs have smaller units than TFIs and HFIs due to
locations featuring exceptionally high land values.
unit size TFI HFI PRC all
studio 425 460 5415 430

1-bed 825 760 865 820
2-bed 1,290 1,460 1,530 1,450
3-bed 1,940 2,425 2,140 2,185
4+-bed N.A. 3,550 3,225 3,365
average 1,220 1,830 1,600 1,585
Unit areas also vary significantly by destination type. Among units at projects in
active sales during 2005, the largest units on average were found in wine (2,482 square
feet) and golf (2,292 square feet) destinations. In contrast, ski and beach destinations
offer units containing an average of 1,789 and 1,644 square feet, respectively. Due to the
expense and scarcity of developable land in urban areas, units are smallest at these
projects – 759 square feet, on average.

Among all active fractional interest projects, average unit sizes are 430 square
feet for a studio, 820 square feet for a one-bedroom, 1,450 square feet for a two-bedroom,
2,185 square feet for a three-bedroom, and 3,365 square feet for a four-bedroom. The
overall average for all units is 1,585 square feet.
Developer Type
There are essentially three types of
Developer Type
fractional interest development companies:
95%
100%
88%
hotel companies, other public companies, 90% TFI
80% HFI
and independent companies. Like in the 70% PRC
53%
early years of the timeshare industry, 60%
50%
38%
independent developers currently have a 40%
30%
clear majority in number of fractional 20%
9%
8%
5%
4%
10%
interest projects. Of fractional interest
0%
projects selling during 2005, 74 percent were Hotel Independent Other Public
developed by private developers. Only 18

percent were developed by hotel companies and eight percent by other public companies.
Hotel companies have entered the fractional interest arena in two segments, PRCs
and HFIs. Over one third of PRC projects (38 percent) were developed by hotel
companies. Only four percent of HFIs were developed by hotel companies.
Destination Type
Fractional interest resorts exist in Destination Type
five primary types of destinations – ski (51
70%
62%
percent), beach (27 percent), golf (13 TFI

60%
53%
HFI
percent), urban (four percent), and wine 50% PRC
37%
(four percent). Ski destinations are most

35%
40%
31%
common among all three tiers of product. 30%

23%
18%
TFIs are located primarily in ski (53 20%

9%
8%
6%
10%
5%
6%
5%
percent) and beach (37 percent)

4%
0%
destinations. HFIs are located in four of
Ski Beach Golf Multiple Urban Wine

the five destinations, and primarily in ski (35 percent), beach (31 percent), and golf (23
percent) destinations. PRCs are offered in all five types of destinations, but are primarily
in ski (62 percent) and beach (18 percent) destinations.
Fraction Size
TFI
Fraction Size
Fractional interest share sizes
60% HFI
53%
range from a 1/25 (two weeks of PRC
50%
ownership) to a 1/4 (13 weeks of
37%
ownership). Among TFIs in active 40%
27%
sales during 2005, over half (53
27%
percent) offered 1/4 shares, leading to
20%
18%
17%
20%
11%
an average fraction size of 1/5 (nine or
11%
10%
10%
10%
10 weeks of ownership) among these
0%
projects. HFI and PRC projects 1/21 - 1/17 1/13 - 1/11 1/10 - 1/8 1/7 - 1/6 1/5 - 1/4
tended to offer smaller share sizes.
Among HFI projects, the average size was a 1/7 (seven weeks of ownership). The
average size among PRCs was a 1/9 share (five or six weeks of ownership).
On-Site Amenities
Due to the variety of destination types that were selling fractional interests during
2005, on-site amenities vary greatly. The most typical amenities included were exercise
facilities (81 percent), swimming pool (79 percent), and whirlpool (75 percent). Slightly
less common were year-round storage (64 percent), spa facilities (59 percent), and
restaurant (56 percent). The least common amenities were beach (25 percent), ski-in/ski-
out access (26 percent), golf (34 percent), and tennis (36 percent).
Among projects located in golf destinations, 70 percent offered on-site golf
courses. Among projects located in ski destinations, 54 percent offered ski-in/ski-out
access. Among projects located in beach destinations, 57 percent were located directly
on the beach.

On-site Amenities
Some amenities are common at each tier
of property, swimming pools and exercise 78%
Pool 88%
76%
facilities, for example. Spa facilities and year-
83%
Exercise 81%
round storage are much more common at HFIs 85%
78%
and PRCs than at TFIs. Whirlpool 88%
68%
50%
Storage 65%
74%
Services Included With Purchase
39%
Spa 46%
The most significant difference between 82%
56%
TFIs, HFIs and PRCs, besides price, is the level of Restaurant 58%
59%
services provided. HFIs and PRCs offer far more 44%
Golf 46%
21%
services and membership perks than TFIs.
56%
Tennis 38%
Concierge service was standard at HFI and 26%
22%
PRC projects. Pre-arrival concierge services, Ski-in/Ski-out 12%
41%
such as stocking groceries in the unit prior to TFI HFI PRC
39%
Beach 31%
arrival, were also common among these two tiers. 15%
0% 25% 50% 75% 100%

Concierge service was not uncommon (72
percent) at TFIs projects, but pre-arrival services
Services Included With Purchase
were less common (61 percent).
72%
Valet and bell service, being a five star Concierge 100%
100%
hotel requirement, were found at over half of Pre-arriv al
61%
92%
PRCs. This type of service was less common concierge 97%
17%
among projects in the other two tiers, especially Valet/bell
50%
serv ice 59%
TFIs (17 percent).
Priority tee 33%
Golf perks were relatively common as 50%
times 32%
well. Interestingly, discounted green fees and Discounted 44%
58%
golf
priority tee times were more common among TFIs 21%
22%
and HFIs than among PRCs. This is probably Transportation 73%
50%
because negotiating these agreements with local
28%
Discounted ski 4% TFI HFI PRC
golf courses is more difficult in the exclusive 24%
resort areas where most PRCs are located.

0% 25% 50% 75% 100%
Transportation was provided at 73 percent

of HFIs and 50 percent of PRCs, while at only 22 percent of TFIs. Most often
transportation provided was a shuttle service, but in several cases it involved the use of a
vehicle while in residence.
Discounted ski lift tickets were much more common among TFI projects (28
percent) and PRCs (24 percent) than at HFIs (four percent).
Use Plan
Fractional interest projects employ
Use Plan
several use plans, or access arrangements,
for determining when owners and guests 53%
Rotating
may occupy their units. The most calendar
22%
28%
common arrangements are rotating
calendar, rotating priority, and set 33%
calendar. Some projects use multiple use Rotating priority 56%
50%
plans.
A rotating calendar system 13% TFI
HFI
provides owners every nth week. For Fixed weeks 9% PRC
25%
example, a 1/4 share owner might have
every fourth week. With this plan, over a 0% 25% 50% 75%
four-year period, each owner will
eventually have access to every week of the year. The majority of TFI projects selling
during 2005 use this plan (53 percent).
With a rotating priority system, owners use a priority or lottery system for making
reservations. For example, a 1/10 share owner might have first choice for reservations
during one reservation period, but drop to second choice the following reservation period
and so on. This is the most common use plan for HFI (56 percent) and PRC projects (50
percent).
A set calendar system is not often used because it does not provide a great deal of
flexibility. Under this system, owners have the same fixed weeks every year. This plan
was not used by many fractional interest projects selling during 2005. It is often used in
conjunction with rotating priority, with some fixed weeks during peak season.

Regardless of the type of use plan, space available usage is also offered at 62
percent of fractional projects selling during 2005. Space available requests typically can
be made after all owners have made reservations for their “guaranteed” weeks. This
allows owners to benefit from
other owners not using all of their
Average Price, By Size of Unit
allotted time. This type of usage is
$60,750
more common among PRCs (72 Studio $102,333
$106,300 TFI
percent) and HFIs (53 percent) $76,742 HFI
1-BR $124,367 PRC
than TFIs (33 percent). $153,531
$134,463
2-BR $165,170
$259,540
Prices $163,985
3-BR $218,985
$406,615
Because fractional interests
4-BR $303,333 $649,564
are purchased in shares ranging in
size from 1/25 to 1/4 (two to 13
$0
0
0
0
0
,00
,00
,00
,00
,00
,00
,00
weeks of use), as well as in varying
00
00
00
00
00
00
00
$1
$2
$7
$3
$4
$6
$5
unit sizes and quality tiers, there is
a great deal of price variation. Three methods are used to examine retail prices of
fractional interest real estate: price per fraction, price per square foot, and price per week
of ownership.
On a price-per-fraction basis by unit
size, TFIs selling in 2005 averaged from
Average Price Per Square Foot, By Size of Unit
$60,750 for a studio unit to $163,985 for a
$572
three-bedroom unit, or $115,650 overall. Studio $888
$1,980
HFIs averaged from $102,333 for a studio $374
1-BR $883
$1,970
unit to $303,333 for a four-bedroom unit, or
$422
$187,500 overall. PRCs averaged from 2-BR $721
$1,774
$430 TFI
$106,300 for a studio unit to $649,564 for a 3-BR $735
$1,663 HFI
four-bedroom unit, or $290,000 overall. PRC
4-BR $695
The overall average price for all three tiers $1,677
was $215,000. $0 $500 $1,000 $1,500 $2,000

Price per square foot is calculated by multiplying the retail fraction price by the
number of fractions sold, and then dividing by the square footage of the unit. In other
words, it is the aggregate sales price per square foot of the unit. Examining price in this
manner allows for more rational comparison across the various fraction sizes. As usual
with real estate in general, price per square foot generally declines with larger unit size.
The average price per square
foot was $385 at TFI projects. It was
Average Weekly Price, By Size of Unit
$765 at HFIs and $1,785 at PRCs. $5,063
Studio $9,500 TFI
The overall average price per square $18,303
HFI
$6,045
foot among all projects closing sales 1-BR $12,002
PRC
$35,294
during 2005 was $1,110.
$11,471
The final price analysis 2-BR $26,048
$56,386
involves price per week of $17,579
3-BR $37,284
$77,437
ownership. This takes into account
fraction size and various unit 4-BR $54,745
$123,331
configurations. The pattern one
$0 $50,000 $100,000 $150,000
would expect appears – PRCs had the
highest price per week, followed by HFIs, then by TFIs. The average price per week
among TFIs was $10,500. It was $29,425 at HFI projects and $59,335 at PRC projects.
Among all fractional interest projects the average price per week was $37,750.
In concluding this section, it is interesting to see what the preceding prices permit
in terms of operating and product costs. Among all projects reporting the information,
average marketing and sales costs (as a percent of gross sales volume) were 16 percent,
general and administrative costs were four percent, and product costs were 47 percent - -
generating a before-tax profit of 33 percent.
Maintenance Fees
The average maintenance fee among all fractional interest projects selling during
2005 was $5,575. This figure includes fees for all fraction and unit sizes.
The average annual maintenance fee at TFI projects ranged from $312 in a studio
unit to $4,200 in a three-bedroom unit. The average maintenance fee by unit type for

HFIs is influenced by an outlier, causing Average Maintenance Fee, By Size of Unit*
the average among studio units to be
$312
$2,021 TFI
higher than that for PRCs. HFI Studio
$1,867 HFI
$2,771
maintenance fees ranged, on average, from 1-BR $2,413
PRC
$3,664
$2,021 in a studio unit to $9,478 in a four- $4,552
2-BR $4,576
bedroom unit. Among PRCs, with the $6,988
$4,200
many services and memberships perks 3-BR $6,865
$8,913
offered, the average maintenance fee
4-BR $9,478
ranged from $1,867 in a studio unit to $12,169
$12,169 in a four-bedroom unit. $0 $5,000 $10,000 $15,000
Across all price tiers, the average

maintenance fees by unit type, are listed below.
• studio: $1,545
• one-bedroom: $3,035
• two-bedroom: $5,608
• three-bedroom: $7,100
• four-bedroom: $11,000
Again, because of the various sizes of fractions available, it makes sense to

discuss maintenance fees per week of
ownership. On a per-week-of-usage basis Average Weekly Maintenance Fee, By Size of
the average in 2005 for all three tiers was Unit
$75
TFI
$975. Studio $188
$384 HFI
$257
TFI projects have maintenance fees 1-BR $221
PRC
$876
somewhat below those of comparable
$426
2-BR $590
timeshare projects, averaging from $75 per $1,602
$454
week in a studio unit to $454 per week in a 3-BR $1,118
$1,768
three-bedroom unit. This is probably due
4-BR $1,447
to the greater opportunity for rental $2,233
$0 $500 $1,000 $1,500 $2,000 $2,500

revenue in these units. The overall weekly average was $350.
HFIs had average maintenance fees per week of use ranging from $188 in a studio
unit to $1,447 in a four-bedroom unit. The overall weekly average was $775. PRCs had
significantly higher annual maintenance fees, averaging from $384 for studio units to
$2,233 for four-bedroom units. The overall weekly average was $1,480.
Across all price tiers, average maintenance fees per week of use by unit type are
listed below.
• studio: $195
• one-bedroom: $510
• two-bedroom: $985
• three-bedroom: $1,238
• four-bedroom: $1,890
Some Summary Averages

The following table summarizes averages for some of the most important
variables in regard to the three tiers within the overall fractional interest industry. All
included averages were previously detailed in appropriate sections of this document.
average TFI HFI PC all
square feet 1,220 1,830 1,600 1,585

fraction price $115,650 $187,500 $290,000 $215,000
price per square foot $385 $765 $1,785 $1,110
price per week $10,500 $29,425 $59,335 $37,750
maintenance fee per week $350 $775 $1,480 $975
Destination Clubs
Due to the limited number of active DCs it is not possible to provide much
information about this segment without revealing specifics about each one. Due to the
proprietary nature of the survey and the need to protect the individual data collected on
each club, only ranges of data are shown in this section.

Among active destination clubs in 2005, the following general information can be
provided:
• Membership prices range from $20,000 to $1,500,000, with an average price

of $255,000.
• Annual dues range from $1,500 to $30,000, with an average of $14,850.
• Amount of annual usage ranges from one to nine weeks.
• Fees for space available usage (after the guaranteed usage) range from $0 to
$215 per night.
• The term of membership for each club is 30 years (except the equity clubs).
• The refundable amount should a member wish to leave the club is 88 percent.
• The refund policy typically involves a 2.25 to 1 ratio.
• The number of members ranges from five to 1,800.
• The average member-to-property ratio is eight-to-one.
• There are approximately 4,300 members among the 22 destination clubs.
• There are approximately 815 residences among the 22 destination clubs.
• The value of a single residence ranges in price from $500,000 to $8.0 million,
with an overall average of $2.4 million.
• A single residence ranges in size from 1,600 to 13,000 square feet, with an
overall average of 3,450 square feet.
• The average monthly sales pace is eight.

C. DEMAND SIDE CHARACTERISTICS: EXISTING OWNERS
Introduction
Information in this section is Demographic Characteristics
based on a survey of existing fractional Private
Residence
interest owners. It was conducted by All High End Club
Characteristic Responses Owners Owners
Ragatz Associates in February 2005.
Some 3,572 questionnaires were Household
Single female 3.7% 4.8% 3.0%
distributed to owners at 15 different HFI Single male 2.4% 2.1% 2.6%
Couple 93.9% 92.1% 94.4%
and PRC resorts. Some 501 were
Total 100.0% 100.0% 100.0%
returned.
Children Under 18 in Home
No 74.1% 57.9% 84.1%
Yes 25.9% 42.1% 15.9%
Demographic Characteristics Total 100.0% 100.0% 100.0%
Respondents were asked several
Age
questions about themselves, including Under 40 10.6% 6.3% 13.2%
40 to 44 12.0% 10.5% 12.9%
household type, age, income, and net 45 to 49 15.6% 13.7% 16.8%
50 to 54 16.6% 18.9% 15.2%
worth. It is noted that owners of TFIs 55 to 59 19.5% 24.7% 16.2%
60 to 64 12.4% 14.2% 11.2%
were not included in the survey. 65 or older 13.3% 11.5% 14.6%
Total 100.0% 100.0% 100.0%

Mean 52 54 52
• Household: Virtually all HFI and
Household Income
PRC owners are couples (93.9%). Under $200,000 18.1% 26.0% 13.1%
$200,000 to $299,999 14.1% 17.3% 12.0%
• Children in home: One out of $300,000 to $499,999 22.4% 22.5% 22.3%
$500,000 to $749,999 18.8% 15.6% 20.8%
every four HFI/PRC owners $750,000 or more 26.6% 18.5% 31.8%
report having at least one child Total 100.0% 100.0% 100.0%

Approximate median $460,000 $360,000 $530,000
under the age of 18 in their home.
Approximate Net Worth
As the table shows, HFI owners Under $1 mil. 9.3% 13.0% 6.8%
$1 mil. to $2.49 mil. 27.6% 33.7% 23.8%
are more likely to have children $2.5 mil. to $4.9 mil. 23.5%23.7% 23.4%
$5 mil. to $9.9 mil. 19.6% 18.3% 20.4%
in their home than PRC owners. $10 mil. or more 20.0% 11.2% 25.7%
Total 100.0% 100.0% 100.0%

Approximate median $3.9 $2.8 $4.6

• Age: The average age of HFI/PRC owners is 52 years. Fully, half of all owners
are between the ages of 45 and 59.
• Household income: HFI and PRC owners report very high household incomes.
The approximate median annual income for HFI owners is $360,000 and for PRC
owners is $530,000. By way of comparison, the median household income in the
United States in 2004 was estimated at $46,000. 2 Thus, HFI/PRC owners
represent a very affluent segment of the population.
• Net worth: More than nine out of every 10 HFI/PRC owners report a net worth of
$1 million or more (90.7%). Among PRC owners, more than one-quarter report a
net worth of $10 million or more (25.7%). These findings further reinforce the
affluence of HFI/PRC owners.
• Country club membership: More than half of all HFI/PRC owners report holding
a country club membership Demographic Characteristics
(55.0%).
Private
• Other types of recreational Residence
All High End Club
property owned: Many Characteristic Responses Owners Owners
respondents report owning other Country Club Membership

Yes 55.0% 51.1% 57.4%
forms of recreational property, No 45.0% 48.9% 42.6%
including single-family second Total 100.0% 100.0% 100.0%
homes (25.1%) and resort Other Recreational Property

Single family home
25.1% 23.2% 26.2%
condominiums (9.8%). About one Resort condominium 9.8% 6.8% 11.7%
Hotel condominium 1.6% 1.6% 1.6%
out of every seven report owning Resort timeshare 15.4% 16.3% 14.9%
resort timeshare (15.4%).
2
Source: SRC: www.demographicsnow.com.

Marketing or Lead Generation Channel
When asked which of a list of options “best describes how you first heard about
the sales presentation for your fractional
interest or private residence club?,” the most Marketing or Lead Generation Channel
frequently cited options were:
Noticed resort while in area 31.1%
• Noticed resort while in area: Nearly
one-third of all owners report first Referral 17.1%
learning about their HFI/PRC by Invited while vacationing at resort 16.6%
simply noticing the resort while Print advertisement 16.2%
visiting the area. These results

Invitation through mail 5.7%
support the notion that location and
OPC 4.4%
visibility are very important to
Real estate agent 2.6%
marketing these products.
• Referral: Approximately one in five Other 6.3%
HFI/PRC owners reported attending 0% 10% 20% 30% 40%
the sales presentation after hearing

about the offer via word of mouth from another owner, a friend, relative, or
coworker. This may have been in ordinary conversation, or as part of a formal
referral program. This high percentage is a very positive finding for the industry.
• Invited while at resort: A full 16.6% were invited to the sales presentation while
staying at the resort. These may have been renters, guests of owners, or exchange
guests.
• Print advertisement: Advertisements in newspapers or magazines generated
approximately one in six sales leads.
• Direct Mail: Direct mail to the home or business generated 5.7% of sales leads.
• OPC: About one in 20 owners indicate they were invited to attend the sales
presentation by an off-premises contact while vacationing elsewhere in the resort
area.
• Other: Most commonly, respondents in this category learned about their
HFI/PRC either on the Internet, or had already researched the fractional interest
concept and actively sought a particular property.

Motivations for Purchasing
The top motivations for purchasing are related to the location and quality of the
resort. The vast majority of HFI/PRC owners cite location (96.8%), quality of the resort
home (89.5%) and the extent of
Motivations for Purchasing
activities/amenities (83.1%) as “very
("Very Important" Responses)
important” in their decision to purchase.
Of least concern is the influence of the Location of resort 96.8%
salesperson (9.9%) and saving money on

Quality of finishes, furnishings 89.5%
future vacation costs (18.7%).
• Product type: Overall response Extent of on-site amenities, activities 83.1%
patterns do not differ between HFI

Extent of personalized service 76.7%
and PRC owners. Both types of
owners indicate location, quality of Credibility of management company 72.1%
the resort home, and on-site

Credibility of development company 67.5%
amenities/activities are most
important. Size of resort home 61.6%
• Household income: As might be

Opportunity to own at affordable price 55.2%
expected, those with lower incomes
Makes more sense than whole
are more likely to say the ownership
50.3%
opportunity to own at an affordable

Potential to resell at profit 37.9%
price is “very important.” By
contrast, owners with higher Exchange opportunity 34.0%
incomes are more likely to say the

Save money on future vacation costs 18.7%
extent of personalized service and
credibility of the development Influence of salesperson 9.9%
company are “very important.” 0% 20% 40% 60% 80% 100%
• Age: Younger owners (under the

age of 50) are much more concerned with the ability to exchange, saving money
on future vacation costs and the potential to resell at a profit than are older
owners. By contrast, owners over the age of 50 are much more likely to say that
shared ownership simply makes more sense than whole ownership.

Hesitations About Purchasing
By far the most common concern owners had about purchasing was being able to
access their preferred resort home at their preferred time. These results indicate how
critical it is for developers to arrive at a fair, equitable and yet appealing access
arrangement for owners.
Financial issues, including the ability to resell and the cost of annual dues and
maintenance fees round out the top three concerns. Fewer than one out of every 10
owners say that already owning resort property was a “very important” hesitation at the
time of purchase. Recall from previous findings that 43.4% of HFI/PRC owners report
owning some other form of resort real estate in addition to their fractional interest.
• Product type: Results do not vary
Hesitations About Purchasing
much between HFI and PRC ("Very Important" Responses)
owners. However, PRC owners are
May not always receive
45.7%
slightly more concerned with the preferred time, home
ability to resell, while HFI owners Concerned about ability

30.7%
to resell
are more concerned with being able
Annual dues and
to make enough use of their maintenance fees
27.3%
purchase. Not sure would make

24.4%
enough use of it
• Household income: Not
surprisingly, as income decreases Prefer flexibility of renting 18.7%
concern over financial issues such as Sounded too much like

17.8%
resort timeshare
maintenance fees and the ability to
resell increases. Among owners Did not seem like good
value for money
12.6%
with household incomes below

Prefer purchasing whole
9.6%
ownership
$300,000, the most important
purchase hesitation is the annual Already own resort
property
9.2%
dues and maintenance fees. 0% 10% 20% 30% 40% 50%
• Age: Younger respondents are more

concerned with their ability to make enough use of their ownership. For example,
nearly three out of every 10 owners under the age of 60 say not being able to
make enough use of their purchase was a “very important” hesitation at the time

of purchase. By contrast, only 15.2% of those age 60 and older indicate the same.
This is likely because older HFI/PRC owners can be more flexible in their
vacation planning as they are: (1) less likely to have children; and (2) are more
likely to be retired.
Current and Future Use of HFI/PRC

Overall, respondents report using their Number of Times Use HFI/PRC Per Year
HFI/PRC resort home an average of 3.2 times

All 3.2
per year. As shown in the upper graph, PRC
PRODUCT TYPE
owners report using their purchase more often
HFI 2.8
than HFI owners. This is likely because PRC
PRC 3.4
owners, on average, own slightly more time
than HFI owners (4.9 weeks of annual use ANNUAL WEEKS OF USE
versus 4.4 weeks of annual use, respectively). 2 to 3 weeks 2.8
Not surprisingly, those who own more weeks of 4 to 5 weeks 3.0
annual use report visiting their HFI/PRC more 6 or more weeks 3.9
often.
0 1 2 3 4 5
When asked how they expect to use their
HFI/PRC in the future, owners say they will allocate two-thirds of their time for personal
use. Owners plan to exchange 11% of their time, either internally through a developer
network or externally through an exchange company. Another 10% is slated to be given
away to friends, relatives and acquaintances free of charge. Owners say that very little of
their time will go unused (2% of time). While fractional resorts often times have very
high occupancy rates, undoubtedly more than 2% of time will go unused.
For the most part, planned future use does not vary much by analyzed subgroups.
However, some points of interest include:
• Share size: As the number of weeks owned increases, the amount of time
reserved for personal use decreases while the amount of time that will be given
away free and rented increases.

• Household income: Owners with
Future Use of HFI/PRC
lower incomes (under $300,000)
indicate that they will rent their Let go
unused
Rent
HFI/PRC twice as much as owners 9%
2%
with incomes of $300,000 or more. Give away

10%
• Ownership of other recreational
property: Interestingly, owning other
resort property does not appear to Exchange
11%
influence use. That is, those who own
other resort property report using their
Personal use
HFI/PRC as often as those without 67%
other ownership. In addition, the

expected future use patterns of those
who own other resort property is virtually identical to those who do not own other
resort property.
Satisfaction With Purchase

Fully 92.7% of HFI/PRC owners report
Satisfaction With Purchase
being satisfied with their purchase. This
includes 71.2% that are “very satisfied” and Dissatisfied
Neutral 3.2%
21.5% that are “somewhat satisfied.” Some 4.1% Very satisfied
71.2%
4.1% express neutral feelings about their
Somewhat
purchase. Only 3.2% report any level of satisfied
21.5%
dissatisfaction. This includes 2.0% that are
“somewhat dissatisfied” and 1.2% that are “very
dissatisfied.”
Satisfaction does not vary much by
product type, length of ownership, demographic
variables, or other analyzed subgroups.

Would Purchase Again in Hindsight
When asked whether they would
purchase their HFI/PRC again, fully 77.1% say Would Purchase Again in Hindsight
“yes.” Another 16.3% say “maybe,” while only
6.5% would not purchase again. No
6.5%
Yes
Results are fairly consistent across 77.1%
Maybe
analyzed subgroups; however the lower graph 16.3%
displays some differences:

• Product type: PRC owners are
somewhat more likely to say they would
purchase again. This is likely related to
the below point on price paid per week of
annual use, as the majority of PRC
owners paid $40,000 or more per week of
ownership while the majority of HFI Would Purchase Again in Hindsight
Percent indicating "yes"
owners paid less than $40,000 per week
PRODUCT TYPE
of ownership.
HFI 73.7%
• Price per week of annual use:
PRC 79.3%
Approximately seven out of every 10
PRICE PAID PER WEEK
owners that paid less than $35,000 per
Under $35,000 70.1%
week of annual use would purchase their
$35,000 to $54,999 80.2%
HFI/PRC again. That number jumps to
$55,000 or more 80.7%
eight in 10 among those who paid
AGE
$35,000 or more per week of annual use.
Under 50 70.4%
• Age: Younger owners are less likely to
50 to 59 78.0%
say they would purchase again. For
60 or older 85.6%
example, 70.4% of those under 50 years
0% 20% 40% 60% 80% 100%
of age would purchase again while 85.6%
of those age 60 and older would purchase
again.

Would Recommend HFI/PRC Ownership
When asked about their willingness to recommend HFI/PRC ownership, the
majority of those surveyed say they already have recommended ownership to a friend,
relative or acquaintance (81.5%). Most of those who have not yet recommended
ownership are willing to do so (10.3%). About
Would Recommend HFI/PRC Ownership
one in 20 are not sure (5.9%) and only 2.2%
would not recommend ownership. These results Don't Know
No
2.2%
5.9% Already
are not unexpected with the high satisfaction
Have Not, Have
levels reported previously. Recall from previous But Willing 81.5%
10.3%
findings that referrals are the second largest
channel for generating new HFI/PRC sales.
Results are fairly consistent across
analyzed subgroups, and do not vary much by
product type, annual weeks of use or
demographic variables. Some differences,
however, are apparent with:
• Year of purchase: Newer owners who purchased in the last year are less likely to
have already recommended ownership, but are more likely to say they are willing
to do so. That is, newer owners are not any
less willing, but simply have not had as Willingness To Recommend
by Overall Satisfaction
much chance to recommend as those with a
Satisfaction With
longer ownership tenure. Ownership
Neutral or
• Overall satisfaction: Owners who are Characteristic Satisfied Dissatisfied
satisfied are much more likely to Already have

85.3% 36.1%
recommend HFI/PRC ownership to a Have not, but willing 10.1% 13.9%
Don't know 4.2% 25.0%
friend, relative or acquaintance. As the No 0.4% 25.0%
table shows, 95.4% of satisfied owners Total 100.0% 100.0%
either already have recommended

ownership to another, or are willing to do so. By contrast, only half of those who
hold neutral or dissatisfied feelings toward their ownership indicate the same.

These results reinforce the importance of owner satisfaction, especially at
properties that rely heavily on referral sales.
Satisfaction With Most Recent Stay

Owners were asked to indicate their Satisfaction With Most Recent Stay
Percent indicating "very satisfied"
level of satisfaction on several items relating
Cleanliness of resort home upon
to their most recent stay at the HFI/PRC check-in
93.6%
where they own. In total, satisfaction was

Friendliness, helpfulness of staff 91.9%
measured on eight items, which appear in the
graph at the right. Overall, responses are
Extent of onsite services 90.0%
very positive and indicate that owners are
very much enjoying the use of their Check-in procedure 89.2%
purchase. These findings are not surprising,

Extent of onsite amenities, activities 87.8%
given the high rates of overall satisfaction
and the willingness of owners to recommend General maintenance, upkeep of
87.0%
resort
HFI/PRC ownership to others.
As with the other measures of Quality of furnishings 86.1%
satisfaction previously discussed, results are

Reservation process 69.9%
fairly consistent among subgroups. One
main exception to this, however, is the 0% 20% 40% 60% 80% 100%
difference in satisfaction with the reservation

process between HFI and PRC owners. Fully, 83.2% of HFI owners are “very satisfied”
with their reservation process while only 61.5% of PRC owners are “very satisfied” with
this aspect of ownership. This finding may be specific to the resorts surveyed and not an
industry-wide finding.

Interest in Purchasing More
Owners were asked to indicate their level of
Interest in Purchasing More
interest in purchasing more HFI/PRC time at: (1)
Characteristic Percent
the resort where they currently own; and (2) at
another resort in a different location. Overall, more
At Present FI/PRC
than one-third of HFI/PRC owners show at least
Yes 5.6%
some interest in purchasing more time at their Maybe 29.3%
current resort (34.9%) and a full 42.5% show at No 65.1%
least some interest in purchasing more time at Total 100.0%

another resort in a different location. At Another Resort in
These results speak volumes about owner Different Location
Yes 7.9%
satisfaction, as interest in purchasing more time at Maybe 34.6%
No 57.5%
HFI/PRC resorts is perhaps the ultimate
endorsement of the product.
Changes in Maintenance Fees and Service Level

Maintenance fees are typically a large concern among owners of fractional
interests and private residence clubs. Recall from previous discussion that annual dues
and fees rank as the third most important concern when buying a HFI/PRC. As such, the
current survey investigated if owners would prefer to pay more for higher service levels,
pay less for lower service levels, or simply maintain their current fees and service levels.
As the table below shows, for all seven items the vast majority of HFI/PRC
owners would prefer to simply maintain their current fees and service levels. However,
one out of every 10 owners would prefer to reduce fees for less frequent maid service.

PRC owners are somewhat more willing to increase fees for improvements in the
reservation system than are HFI owners. Recall from previous discussion that PRC
owners are less satisfied with their current reservation system than HFI owners. Other
than improvements in the reservation system, results do not vary much by product type or
other analyzed subgroups.
Changes in Maintenance Fees and Service Levels
Quality of
Service, Quality, Building Number, Quality of On-
Response Level, Frequency of Maintenance, Landscaping, Quality of site
Time for Frequency of Interior Resort Maintenance Amenities at Management
Characteristic Reservations Maid Service Replacements Improvements at Resort Resort Staff
Adjustment Willing To
Make
Pay more for improvements 6.0% 1.4% 5.6% 2.9% 0.8% 6.4% 3.5%
About right 86.3% 84.8% 84.3% 92.2% 91.5% 87.0% 90.1%
Pay less for reductions 4.1% 10.5% 2.7% 2.1% 2.7% 4.6% 4.1%
No opinion 3.5% 3.3% 7.5% 2.9% 5.0% 2.1% 2.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
D. DEMAND SIDE CHARACTERISTICS: POTENTIAL BUYERS
Introduction
Information in this section is based on a survey conducted of the public-at-large,
with the intent being to understand the potential depth of demand for fractional interests,
as well as most preferred characteristics. It was conducted by Ragatz Associates in May
2005. The survey was sent to 16,000 households with incomes over $150,000. Some
189 completed questionnaires were returned.
Demographics
The following table displays the demographic characteristics of respondents and

compares them to current HFI/PRC owners. As noted in the methodology section, the
target of the survey was households in the United States with incomes of $150,000 or
more. The table to the right displays the demographic characteristics of respondents and
compares them to current HFI/PRC owners.

• Household: Few respondents are single (12.3%). In this respect, survey
respondents approximate current HFI and PRC owners.
• Children in home: Less than half of all respondents have a child(ren) under the
age of 18 in their household. Demographic Characteristics
Among HFI/PRC owners only High-Income HFI/PRC
Characteristic Households Owners
one-quarter have one or more
children under the age of 18 in Household
Single female 6.4% 3.7%
their home. Single male 5.9% 2.4%
Couple 84.7% 93.9%
• Age: The average age of Total 100.0% 100.0%
respondents is 53 years, with a full Children Under 18 in Home

No
58.2% 74.1%
95.1% over the age of 40. In this Yes 41.8% 25.9%
respect, respondents are quite Total 100.0% 100.0%
similar to current HFI/PRC Age
Under 40 4.9% 10.6%
owners. 40 to 44 19.1% 12.04
45 to 49 15.3% 15.6%
• Household income: More than 50 to 54 18.6% 16.6%
55 to 59 12.6% 19.5%
half of all respondents report an 60 to 64 13.7% 12.4%
65 or older 15.9% 13.3%
income between $200,000 and
Total 100.0% 100.0%
$499,999 (56.2%). The Mean 53 52
approximate median income of Household Income

Under $200,000 19.6% 18.1%
respondents is $297,000. $200,000 to $299,999 31.4% 14.1%
$300,000 to $499,999 24.8% 22.4%
Although this is somewhat lower $500,000 to $749,999 14.4% 18.8%
$750,000 or more 9.8% 26.6%
than current HFI/PRC owners,
Total 100.0% 100.0%
individuals with such high incomes Approximate median $297,000 $460,000
are likely qualified to buy at most Approximate New Worth

Under $1 mil. 14.6% 9.3%
fractional interest developments. $1 mil. to $2.49 mil. 42.4% 27.6%
$2.5 mil. to $4.9 mil. 25.0% 23.5%
By way of comparison, the median $5 mil. to $9.9 mil. 10.4% 19.6%
$10 mil. or more 7.6% 20.0%
household income in the United
Total 100.0% 100.0%
Approximate median (mil.) $2.3 $3.9

States in 2004 was estimated at $46,000. 1
• Net worth: The majority of respondents report an approximate net worth between
$1 million and $4.9 million. This is somewhat lower than current HFI/PRC
owners.
• Country club membership: Just Demographic Characteristics

under half of all respondents report High-Income HFI/PRC
Characteristic Households Owners
currently belonging to a country
Country Club Membership
club. This is similar to current Yes 48.1% 55.0%
No 51.9% 45.0%
HFI/PRC owners.
Total 100.0% 100.0%
• Recreational property ownership:
Other Recreational Property
Some 46.6% of respondents report Single family home
28.6% 25.1%
Resort condominium 10.6% 9.8%
owning one or more types of Hotel condominium 0.5% 1.6%
Resort timeshare 16.0% 15.4%
recreational property, including
single-family homes, resort condominiums, condo-hotels and resort timeshare.
As shown in the table, respondents approximate current HFI/PRC owners in this
regard. However, obviously HFI/PRC owners own the listed recreational
property in addition to their fractional interest.
Awareness of FI/PRC Concept

After being given the following description of fractional interests/private
residence clubs, respondents were asked if they were familiar with the concept as applied
to resort real estate.
A new product recently has been introduced in the resort real estate industry.
Usually referred to as “fractional interests” or a “private residence club,” the concept
sometimes is called “shared vacation home ownership” or “co-ownership.” Hereafter in
this survey, it will simply be referred to as FI/PRC. There are currently about 200 such
developments in North America, although many more are being planned. FI/PRC
developments usually are located in upscale resort destinations where whole ownership
prices are extremely high and such properties are scarce.
1
Source: SRC: www.demographicsnow.com.

The FI/PRC concept is considered an alternative to owning a year-round
second home. It allows purchasers to tailor their ownership to accommodate
their family’s anticipated usage without the investment and ongoing expense and
maintenance hassles of whole ownership.
The concept should not be confused with resort timesharing, since: (1) it
is more exclusive; (2) the resort homes are larger and more luxuriously furnished;
(3) more services, privileges and amenities are included; (4) prices are much
higher; (5) owners receive more usage every year; and (6) purchasers have much
higher incomes.
Typically, FI/PRC ownership offers various sizes of “shares” or

“interests,” ranging from a 1/12 interest (giving owners four weeks of use every
year) to a 1/4 interest (giving owners 12 weeks of use every year). As with
traditional real estate ownership, you can
rent it, let friends, family or business
Heard of FI/PRC Concept as Applied to
associates use it, and/or resell it on the Resort Real Estate
open market.
Yes
No
49.7%
50.3%
As shown in the chart, half of all
respondents have heard of the fractional
interest concept as applied to resort real estate
(49.7%).
• Income and net worth: Awareness

varies somewhat by income and net
worth, with higher income and net
worth households more likely to be
familiar with the concept.
• Recreational property ownership: Respondents that already own some other form
of recreational property are more likely to be familiar with the fractional interest
concept than those who do not currently own recreational property.

Opinion of FI/PRC Concept
Respondents were next asked to indicate whether they felt the FI/PRC concept seems
like a good idea. As shown in the graph, more than three-quarters of all respondents say
“yes,” the concept as applied to resort real estate does seem like a good idea. Perhaps
more importantly, only 5.9% feel it is not a good concept.
• Awareness of concept: Approval of the
concept is greater among those who were Does FI/PRC Concept Seem Like a Good
Idea?
previously aware. Fully, 82.6% of those
who had already been introduced to the No opinion Yes
17.3% 76.8%
concept think it is a good idea. By
contrast, among those being introduced to No
5.9%
the concept via this survey, only 71.0%
feel it is a good idea. These respondents
who were not previously aware do not
necessarily dissaprove of the concept, but
rather are more likely to state no opinion.
• Recreational property ownership:
Approval of the concept is greater among those who already own some form of
recreational property.
• Demographics: Responses do not vary much by variables such as gender, having
children in the home or household income.

Important Amenities
Respondents were given a list of 11 common amenities at FI/PRC resorts and were
asked to rate the importance of each to their family. As the graph shows, having fully-
equiped exercise facilities, fine dining and daily maid service are “very important” to
more than half of all respondents. Pre-
stocking of the resort home with groceries, Importance of Amenities
Percent indicating "very important"
beverages, etc., appears to be least important
to offer.
Fully equiped exercise center 65.4%
Results are consistent across analyzed
subgroups, however some notable findings Fine dining restaurant and lounge 54.1%
are:
Daily maid service 50.8%
• Gender: An exercise/fitness center is

Shuttle service to airport, local
46.8%
the most important amenity to both attractions
males and females. However, some Full-service health spa 44.3%

79.0% of females say this amenity is
Golf membership included in
“very important” while only 58.2% of annual dues
36.6%
males indicate the same. Also, health

Room service 31.7%
spas are much more important to
female respondents. While 65.1% of Private storage when not in
26.2%
residence
females rate having a full-service
Ski passes included in annual
23.7%
health spa as “very important,” this is dues
true of only 33.6% of males. Personal concierge 23.1%
• Household income: Households with

Prestocking prior to arrival 18.7%
incomes of $300,000 or higher are
more likely to rate each of the 11 0% 20% 40% 60% 80%
amenities as “very important” than

households with incomes below $300,000. The largest differences are in daily
maid service, shuttle service and fine dining – all of which are much more
important to households with $300,000 or higher incomes.

• Age: As age increases, so does interest in having golf membership included in
annual dues. Younger respondents show more interest in pre-stocking of the
resort home with groceries and beverages than do older respondents.
• Children in home: Not surprisingly, respondents with children place more

emphasis on having family ski passes included in annual dues.
Preferred Location Types
Respondents were given a list of five different types of resort destinations and were
asked to rate the attractiveness of each. Overall, beach locations are the most preferred,
with 76.1% rating them “very attractive.” Ski and golf locations are “very attractive” to
four out of every 10 respondents. While urban destinations receive the least amount of
“very attractive” ratings, still some 17.4% are excited about city locations.
• Gender: Males are more interested in

golf and ski, while females are more Preferred Location Types
Percent indicating "very attractive"
interested in spa locations. Since the
vast majority of FI/PRC owners are Beach 76.1%
married, it may be important for resorts Ski 40.1%
to include components desired by males

Golf 39.1%
and females.
Spa 24.6%
• Children in home: Respondents with
City 17.4%
children are more interested in ski
locations than childless respondents. 0% 20% 40% 60% 80%
• Age: Older respondents are more likely

to find golf locations attractive, while younger respondents indicate that ski
locations are more attractive.
If respondents were to purchase with a developer who has a network of resorts, would
they prefer only traditional resort-type locations, only urban locations, or a mixture of
both? Overwhelmingly, respondents prefer a mixture of both traditional resort locations

and urban locations. However, if just one type
Preferred Mixture for Network of Resorts
of location is offered, it appears that the more
traditional resort-type locations (ski, golf, Only resort
locations
beach, etc.) are most important to offer. Mixture 29.4%
67.9%
For the most part, responses do not
differ by things such as household income,
children in home and gender. One exception to
this is that older respondents show more interest
in urban locations. For example, among
Only urban
respondents over the age of 50, 5.0% prefer locations
2.7%
exclusively urban areas and 70.0% prefer a
mixture. By contrast, among respondents age
50 and younger, those proportions drop to 0% and 63.4%, respectively. Indeed, many
salespersons at urban locations have related that older buyers often times purchase to be
near their children and grandchildren who live and work in the area.
Preferred Unit Size
If respondents were to purchase in a FI/PRC development, would they most prefer a

two-bedroom unit (1,500 square feet), a three-
bedroom lock-off unit (2,000 square feet – at Preferred Unit Size
Four-
25% higher cost than the two-bedroom) or a bedroom Two-
11.8%
four-bedroom lock-off unit (2,500 square feet – bedroom
45.5%
at 50% higher cost than the two-bedroom)?
Results suggest that respondents are evenly split
between two- and three-bedroom units. Only
about one in 10 respondents would prefer a unit
as large as four bedrooms (11.8%).
Three-
These preferences are fairly universal, with bedroom
42.8%
results varying only by children status.
Respondents that have at least one child in their
home under the age of 18 tend to desire larger unit sizes than those without children. For

example, 54.1% of childless respondents most prefer a two-bedroom unit. By contrast,
50.0% of respondents with children prefer a three-bedroom unit. Respondents with
children are also twice as likely to prefer a large, four-bedroom unit than childless
respondents (16.7% and 8.3%, respectively).
Preferred Share Size
Respondents were asked to choose which option they most prefer from a list of four
different share sizes: (1) a 1/12 share; (2) a 1/6 share, at 90% higher cost than the 1/12
share; (3) a 1/4 share, at 150% higher cost than the 1/12 share; or (4) whole ownership, at
the same price as the 1/4 share, but unfurnished and with no services. Overall, two-thirds
of respondents most prefer the smaller, 1/12 share, which provides four weeks of annual
use. Most of the remaining respondents prefer either whole ownership (16.7%) or a 1/6
share (14.0%).
As with size of unit, these
Preferred Share Size
preferences are fairly universal. Younger
respondents, and those with children are Characteristic Percent
somewhat more likely to prefer the Most Preferred Share Size

1/12 share (4 weeks) 64.7%
smaller 1/12 share size than respondents
1/6 share (8 weeks), for 90% more than 1/12
who are older or do not have children. share 14.0%
1/4 share (3 months) for 150% more than
Likely, those who are younger or have 1/12 share 4.7%
children find time to vacation less Whole ownership, same price as 1/4 share,
but unfurnished and no services 16.7%
frequently because of school and work
Total 100.0%
schedules.

Preference for Rental and Resale Services
When asked how the presence of rental

Impact of Rental Program on Purchase
and resale programs would affect their interest in Decision
purchasing at a FI/PRC development, most
Prefer no
respondents say having such programs would rentals Increase
No impact 3.7% greatly
increase their purchase interest. 10.7% 47.1%
In regards to a rental program, 85.6% of
respondents say such a service would increase
their interest in purchasing. Fewer than one in
20 would prefer not to have a rental service
(3.7%). Interest in a rental program is greater Increase
somewhat
among respondents that are under the age of 50 38.5%
and those that have at least one child in their

household under the age of 18.
Impact of Resale Program on Purchase
In regards to a resale program, a full 88.7% of
Decision
respondents say such a service would increase
their interest in purchasing. Not surprisingly, as No impact
11.4% Increase
income and/or net worth increases, less emphasis
greatly
is placed on resale assistance. For example, 47.6%
9.9% of those with a net worth under $2.5

million say a resale service would have no
impact on their decision to purchase. By
contrast, among those with a net worth of $2.5 Increase
somewhat
million or more, that proportion nearly doubles, 41.1%
to 18.0%.

Financing of Purchase
If respondents were to purchase in a FI/PRC development, how would they prefer

to pay for their share? Respondents were given the choices of: (1) pay cash; (2) finance
through the developer, with 20% down and a 10-year term with an interest rate under
10%; or (3) obtain financing elsewhere. Fully, two-thirds of all respondents would obtain
financing elsewhere (66.1%). About one in five would finance through the developer
(18.6%) and the remaining would pay cash (15.3%).
These findings are likely the result of: (1)
the purchase being too large for most buyers to Financing of Purchase
pay cash; and (2) with current mortgage rates
well under 10%, the developer financing option
Pay cash
Obtain own
is not the most attractive. financing
15.3%
66.1%
Some observed differences are:
Finance
• Household income: As might be through
developer
expected, those with higher incomes are 18.6%
less likely to finance their purchase.

Among those with incomes under
$300,000 only 9.3% would pay cash. By
contrast, among respondents with
incomes of $300,000 or more, a full
24.6% would pay cash.
• Age: While the proportion that would finance their purchase remains constant
across age groups, the method of financing differs. For example, among those
age 50 and younger the vast majority of financers would obtain their loan from a
source other than the developer. By contrast, those over the age of 50 are much
more likely to finance through the developer. This may be because those over the
age of 50 are more likely to cash out within a short amount of time and are not as
concerned with the higher interest rate offered by the developer. Indeed,
compared to younger respondents, those over the age of 50 have higher incomes
and net worth and are less likely to have children in the home, all of which may
indicate more discretionary income.

Deeded Versus Non-equity Membership
Respondents were given the following Preference for Deed or Non-equity
description of deeded and non-equity Membership
membership conveyance types and were asked

Deed
which they would most prefer. Non-equity
membership 76.0%
Typically, ownership in a FI/PRC 24.0%
resort is conveyed via a traditional deed in-

perpetuity. Another option also exists,
however, and is referred to as a ‘”non-equity”
membership. This option is similar to such
membership in a country club. If you decide
to sell your memberhsip, roughly 80 percent of
the original purchase price is returned.
Overall, three-quarters of respondents prefer a more traditional, deeded product.
However, the non-equity membership route is attractive to nearly one-quarter of
respondents.
Respondents that are over the age of 50 and those who do not have children in
their household are more tolerant towards non-equity memberships than their
counterparts. Otherwise, there are no major
differences among demographic groups.
Impact of Major Hotel Brand on Decision
To Purchase
Impact of Major Hotel Brand
Negative
Respondents were informed that some 1.6% Very positive
Neutral 35.7%
FI/PRC resorts are developed and/or managed 24.9%
by a major hotel company, such as Ritz

Carlton, Four Seasons, Fairmont, Starwood,
etc. Using a five-point scale of “very positive”
to “very negative,” respondents were asked to
rate how the presence of a major hotel Somewhat
positive
company would impact their decision to 37.8%
purchase.

Overall, 73.5% say the presence of a major hotel company would positively
influence their decision to purchase. This includes some 35.7% who said their
decision to purchase would be impacted in a “very” positive manner.
Another 24.9% feel neutral about the presence of a major hotel company,
while very few (1.6%) would be negatively impacted by the presence of a major
hotel company. Results are consistent across all analyzed subgroups.
Access to Resort Home

Next, respondents were asked to indicate the importance of: (1) having
predictable weeks available far in advance; (2) being able to use the resort home for more
than one week at a time; and (3) having the abiltiy to use the resort home on short notice.
This was done using a three-point scale ranging from “very important” to “not
important.”
As shown in the graph, two-thirds of Access to Resort Home
respondents feel that having predictable weeks Percent indicating "very important"
available far in advance is “very important.” Predictable

weeks far in 66.7%
However, at the same time, more than half say advance
that the ability to use their resort home on

Ability to use on
55.1%
short notice is also “very important.” short notice
Dilemmas such as this have spurred many Ability to use

more than one 50.8%
FI/PRC developers to become creative in their week at a time
access plans and not offer rigid fixed or first-
0% 20% 40% 60% 80%
come first-serve plans. For example, many
resorts use a combination of fixed and floating
time. Also, many resorts offer space-available time, whereby owners can reserve unused
periods of time, often on relatively short notice.
• Children in home: Respondents with children in their home place more emphasis
on having predictable weeks far in advance. This is not surprising, as these
families must plan their vacations around school schedules.
• Household income: Respondents with lower household income and net worth
place less importance on the ability to use their resort home for more than one

week at a time. This may be because these individuals are somewhat younger
than other respondents and thus may have more demanding family and work
schedules that keep them from such a long vacation.
Multi-site Clubs Preference for Single Location Versus

Multi-location Club
Overwhelmingly, respondents would
Ex clusiv e
prefer to have access to a network of resorts Access to use of one
netw ork of resort
operated by the same developer rather than
resorts 12.4%
simply access to a single resort. Fully 87.6% 87.6%
like the idea of having access to multiple

resorts, even if it means sharing the resort at
which they purchased with other owners.
This preference for multi-site clubs is
consistent across all analyzed subgroups.
Exchange Service
Respondents next were told that they
could have the ability to exchange some or all
Preference for External Exchange Service
of their purchased time with owners at
comparable quality resorts via an external
Don't know Opportunity
exchange service. Overall, nearly seven out of to trade
26.2%
68.4%
every 10 respondents would like the opportunity
to exchange time with owners at other resorts
(68.4%). Some 26.2% are unsure about an
exchange service while only one in 20 do not
No trading
like the idea (5.3%). 5.3%
Preference for an external exchange

service is fairly universal. Respondents with
higher income and/or net worth are somewhat
less likely to want an external exchange service. However, even the majority of these
respondents are in favor of an external exchange service.

Purchase Motivations
Respondents were presented with a list of nine potential benefits of FI/PRC
ownership and were asked to rate the importance of each as a purchase motivation. As
shown in the graph, financial benefits such as
the advantage of owning a second home Purchase Motivations
without the high costs, equity appreciation, Percent indicating "very important"
and a good value for the money top the list. Advantage of second home
67.6%
without high cost
Other important purchase motivators
include the exchange opportunity and the Investment, equity appreciation 59.9%
ability to purchase a useable and affordable

Seems like good value for the
58.2%
amount of time. Personal concierge services money
are by far the least cited item, with only 22.7% Trading opportunity with
56.2%
comparable resorts
saying they are “very important” in
Able to purchase amount of time
influencing their purchase decision. 53.7%
would use
• Household income: Respondents with Able to purchase amount of time

44.0%
could afford
higher incomes place less emphasis on
equity appreciation and more emphasis Rental opportunity 39.0%
on personal concierge services than

Discounts made available to
38.4%
owners (golf, ski, etc.)
households with lower incomes.
• Gender: Compared to men, women Personal concierge services 22.7%
place more emphasis on all nine items.

0% 20% 40% 60% 80%
The difference is most notable on
personal concierge services, where
36.5% of women indicate “very important,” but only 15.7% of men indicate the
same. Women also place much more emphasis on being able to purchase an
affordable amount of time.

Purchase Hesitations
Respondents were presented with a list of nine possible reasons that could cause
hesitation to purchase and were asked to rate the importance of each. As shown in the
graph, two potential hesitations stand out: (1)
the possibility of not getting their preferred
Purchase Hesitations
time/home at the FI/PRC development; and Percent indicating "very important"
(2) concern about the ability to resell their

May not always receive preferred
60.2%
purchase. time, home
Already owning resort property and

Concerned about ability to resell 56.5%
the preference for whole ownership generate
Not sure would make enough use
the least amount of concern among of it
46.4%
respondents. As discussed in the chapter on

Prefer flexibility of renting 44.3%
current HFI/PRC owners, these two items
were of least concern to them as well. That is, 42.8%
Annual dues, maintenance fees
many current HFI/PRC owners hold other
Does not seem like good value for
resort property in addition to their fractional money
39.3%
interest, and the vast majority do not

Sounds too much like timeshare 35.5%
necessarily prefer whole ownership.
• Household income: Not surprisingly, Prefer purchasing whole
20.9%
ownership
households with higher incomes
and/or higher net worth are less Already own resort property 18.5%
concerned with financial aspects such 0% 20% 40% 60% 80%

as annual dues and the ability to resell.
• Age: Respondents age 50 and younger are more concerned about making enough
use of their FI/PRC resort home than are those older than 50. By contrast, those
over age 50 may be slightly more concerned with value for the money and already
owning resort property.
• Children in home: Respondents with children are more concerned about making
enough use of their FI/PRC resort home than are those without children. Also,
those with children are more concerned about the annual dues and maintenance
fees.

Interest in Purchasing
Respondents were asked to indicate their
Interest in Purchasing
degree of interest in purchasing a 1/12 share, 1/6
Characteristic Percent
share and a 1/4 share. As shown in the table, a
1/12 Share (4 Weeks)
fairly high proportion of respondents express at 100% interested 9.9%
Better than 50-50 29.7%
least some interest in each of the three share About 50-50 27.5%
Less than 50-50 22.5%
sizes. Not surprisingly, interest decreases as Zero, no interest 10.4%
share size, and consequently price increases. Total 100.0%
This pattern of results is consistent across 1/6 Share (8 Weeks), for 90% More Than
1/12 Share
variables such as income, age, gender and 100% interested 4.1%
whether or not children are in the household. About 50-50 20.6%
Less than 50-50 30.0%
Some small differences, however, include: Zero, no interest 33.5%
• Household income: Interest in the 1/12 Total 100.0%
and 1/6 shares increase with income. 1/4 Share (3 Months) for 150% More Than
1/12 Share
However, interest in the larger 1/4 share 100% interested 2.3%
is relatively stable across income groups. About 50-50 11.7%
Less than 50-50 21.1%
• Age: Respondents over the age of 50 are Zero, no interest 56.1%
more enthusiastic about the 1/12 share Total 100.0%
than are younger respondents. For

example, a full 13.1% of those over age 50 say they are “100% interested.” By
comparison, only 5.1% of those age 50 and younger indicate the same high level
of interest.
These results indicate that there may be a fairly high demand for fractional
interests among the population of $150,000+ income households in the United States.

Company Interest in Purchasing
As a follow-up question regarding
Company Interest in Purchasing
interest in purchasing, respondents were asked
to indicate if their firm or company might be Yes
9.5%
interested in buying at a FI/PRC development, Don't know
34.9%
for use by top officers, salespersons, executive
retreats, etc.
Overall, some 9.5% think their employer
might be interested. Interest is greater among
younger respondents (age 50 and younger) and No
55.6%
those with higher incomes and/or net worth.

Looking Glass Cohorts®
To provide a more complete picture of HFI/PRC and traditional fractional interest
buyers, respondents were segmented into Looking Glass Cohorts® based on their
responses to the demographic questions. Cohorts® is a proprietary household-based
market segmentation system that categorizes consumers into cohesive groups, or
Cohorts®, based on lifestyle, demographic and consumer behavior characteristics. The
combination of lifestyle, demographic and behavioral groupings gives each Cohort® a
distinctive “personality,” and thus provides product designers and marketers with a basis
for tailoring products and messages appropriately. What is more, Cohorts® is based on
individual household characteristics, not neighborhood characteristics, which means the
Cohorts® Segmentation Of Fractional Interest And Private Residence Club Owners

Compared To All U.S. Households
HFI/PRC Trad All US

Owners Owners Households
Married Households
Alex & Judith, Affluent Empty Nesters, Median Age 62, Median Income $149,869 41.0% 24.8% 3.0%
Jeffrey & Ellen, Affluent Couples With Kids, Median Age 42, Median Income $144,764 36.1% 18.9% 3.5%
Stan & Carole, Upscale Middle-Aged Couples, Median Age 49, Median Income $73,499 6.0% 6.4% 4.8%
Burt & Marilyn, Mature Couples, Median Age 66, Median Income $54,922 4.8% 19.3% 8.9%
Barry & Kathleen, Affluent Professional Couples, Median Age 46, Median Income $137,435 4.8% 8.6% 2.6%
Danny & Vickie, Teen-Dominated Families, Median Age 42, Median Income $56,210 0.0% 2.8% 5.1%
Todd & Wendy, Back-To-School Families, Median Age 38, Median Income $53,277 0.0% 1.6% 4.5%
Elwood & Willamae, Modest-Income Grandparents, Median Age 71, Median Income $18,979 0.0% 1.4% 5.7%
Chad & Tammie, Young Families, Median Age 32, Median Income $51,523 0.0% 1.1% 3.1%
Ronnie & Debbie, Working-Class Couples, Median Age 47, Median Income $38,499 0.0% 0.8% 2.5%
Brett & Tracey, Hyperactive Newlyweds, Median Age 31, Median Income $63,042 0.0% 0.6% 3.0%
Frank & Shirley, Older Couples Raising Kids, Median Age 59, Median Income $47,985 0.0% 0.6% 1.2%
Eric & Rachel, Young Married Starters, Median Age 28, Median Income $19,900 0.0% 0.0% 0.7%
Sub-total 92.7% 86.9% 48.6%
Singles
Andrea, Single Moms With Careers, Median Age 39, Median Income $48,916 2.4% 1.4% 2.2%
Sean, Affluent Guys, Median Age 41, Median Income $93,377 1.2% 1.7% 1.7%
Randy, Single Dads, Median Age 37, Median Income $39,965 1.2% 1.2% 1.9%
Elizabeth, Savvy Career Women, Median Age 41, Median Income $166,425 1.2% 0.5% 0.3%
Jonathan, Elite Single Men, Median Age 41, Median Income $165,331 1.2% 0.3% 0.5%
Virginia, Upscale Mature Women, Median Age 60, Median Income $69,605 0.0% 3.0% 2.0%
Allison, Educated Working Women, Median Age 33, Median Income $49,789 0.0% 2.3% 4.5%
Harry, Well-To-Do Gentlemen, Median Age 57, Median Income $48,976 0.0% 1.2% 1.8%
Bernice, Active Grandmothers, Median Age 61, Median Income $35,431 0.0% 0.9% 3.6%
Ryan, Energetic Young Guys, Median Age 33, Median Income $47,207 0.0% 0.3% 3.4%
Jason, Male Students & Grads, Median Age 26, Median Income $17,276 0.0% 0.2% 1.8%
Elmer, Sedentary Men, Median Age 73, Median Income $16,800 0.0% 0.0% 1.3%
Jerry, Working-Class Guys, Median Age 45, Median Income $19,400 0.0% 0.0% 2.1%
Megan, Fit & Stylish Students, Median Age 26, Median Income $16,900 0.0% 0.0% 2.6%
Penny, Working-Class Women, Median Age 42, Median Income $17,900 0.0% 0.0% 2.0%
Minnie, Fixed Income Grandmothers, Median Age 73, Median Income <$15,000 0.1% 0.0% 5.8%
Denise, Single Moms On A Budget, Median Age 37, Median Income $17,400 0.0% 0.0% 3.5%
Sub-total 7.3% 13.0% 41.0%
Total 100.0% 100.0% 100%*

*Households that do not fit a Cohort are called “Omegas” and are included in the 100% figure for all U.S. households.

system is more accurate than old-style, geographically based segmentation schemes.
The Cohorts® that buy HFI/PRC interests constitute a very narrow segment of the
U.S. population. Fully Alex & Judith
• Dual-income, older couples who use their high
Affluent Empty-Nesters discretionary incomes to enjoy all aspects of the good life.
77.1% of HFI/PRC market is
• Almost 14 times more heavily represented among private
drawn from just two residence club owner than among all U.S. households.
segments, although those two • Over eight times more heavily represented among
fractional interest owners than among all U.S.
segments represent only households.
Median Age: 62 years
6.5% of U.S. households. Median Income: $149,900
Five segments represent • Urban families who, despite children at home, have
Jeffrey & Ellen
sufficient financial resources to own the latest high-tech
Affluent Couples with Kids products and to lead very active recreational and cultural
92.7% of the HFI/PRC
lifestyles.
market. Only 10 of the 30 • Middle-aged and affluent.
• More than 10 times more heavily represented among
segments that exist in the private residence club owners than among all U.S.
households.
U.S. population are even
Median Age: 42 years • Almost six times more heavily represented among
represented among HFI/PRC Median Income: $144,800 fractional interest owners than among all U.S.
households.
owners. Stan & Carole
• Unburdened by children, credit-worthy, dual-income
Upscale Middle-Aged Couples couples who divide their time between the great outdoors
Traditional fractional
and domestic hobbies.
interest owners are slightly • Can afford to vacation, but seek value for their money.
• About 25% more heavily represented among private
more diverse, with 23 residence club owners than among all U.S. households.
segments represented, but the • About 33% more heavily represented among fractional
Median Age: 49 years interest owners than among all U.S. households.
same five segments represent Median Income: $73,500
Burt & Marilyn
78.0% of the market. • Comfortable, close-to-retirement homeowners with no
Mature Couples children at home to support; active investors; engage in
Thumbnail profiles of charitable activities, travel, politics and their
grandchildren.
the five segments of greatest • Only about 54% as heavily represented among private
residence club owners as their share of all U.S.
importance to these two households, due to modest incomes.
• More than twice as heavily represented among fractional
markets are provided. The Median Age: 66 years
interest owners as among all U.S. households.
Median Income $54,900
concentration in these few Barry & Kathleen
• Educated, dual-income, childless couples who have
Affluent Professional Couples connoisseur tastes and are focused on their careers,
Cohorts® segments creates staying fit, and investing.
significant opportunities for • About 85% more heavily represented among fractional
interest owners than among all U.S. households.
targeted marketing not • Over three times as heavily represented among fractional
interest owners as among all U.S. households.
available in many industries.
Median Age: 46 years
Median Income: $137,400

E. POTENTIAL MARKET DEPTH
Based on market research conducted by Ragatz Associates and current purchasing

patterns in the industry, it appears that income-eligibility for a typical HFI purchase starts
at around $250,000 and for a PRC purchase at around $500,000. These assumptions are
obviously very rough, and do not account for hidden wealth, high net worth of older
households, lower priced fractions, etc. The figures of $250,000 and $500,000 are simply
“in the ballpark” estimates. The $500,000 estimate for private residence club income
eligibility may be too high, but is used here so some estimates can be made.
ESRI Business Information Solutions estimates there are currently 105.8 million
households in the U.S. Some 2,092,440 households have annual incomes over $250,000,
or 2.0 percent of all households. Some 451,237 households have annual incomes over
$500,000, or 0.4 percent of all households.
The breakdown of these households by the region in which they reside is shown
in Table II-1. The seven regions shown are those defined by Sales & Marketing
Management’s Survey of Buying Power. The states included in each region are as
follows:
1. Pacific: Alaska, California, Hawaii, Oregon, and Washington

2. Mountain: Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah,
and Wyoming
3. South Central: Alabama, Arkansas, Kentucky, Louisiana, Mississippi,
Oklahoma, Tennessee, and Texas
4. South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland,
North Carolina, South Carolina, Virginia, and West Virginia
5. North Central: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin
6. Middle Atlantic: New Jersey, New York, and Pennsylvania
7. New England: Connecticut, Maine, Massachusetts, Rhode Island, and
Vermont

TABLE II-1
U.S. Income-Eligible Households for a HFI/PRC Purchase, By Region
Total Households with incomes Households with incomes

Number of over $250,000 over $500,000
Households Number Percentage Number Percentage
Pacific 15,732,831 428,296 2.7% 94,761 0.6%

Mountain 6,711,902 111,200 1.7% 20,834 0.3%
South Central 18,041,462 256,891 1.4% 50,879 0.3%
South Atlantic 19,973,752 386,902 1.9% 83,663 0.4%
North Central 24,734,532 367,903 1.5% 67,939 0.3%
Middle Atlantic 15,126,240 390,904 2.6% 98,255 0.6%
New England 5,510,698 150,344 2.7% 34,906 0.6%
Total 105,831,417 2,092,440 2.0% 451,237 0.4%
Source: ESRI Business Information Solutions (www.esribis.com)
The Pacific, Middle Atlantic and South Atlantic states contain the greatest number
of households with incomes over $250,000. Together these regions account for 58
percent of U.S. households that are income-eligible for a HFI purchase. The same three
regions also contain the greatest number of households with incomes over $500,000.
Currently, approximately 20,000 households own a HFI/PRC. The consultant

estimates the current number of HFI owners to be about 3,420 and the current number of
PRC owners to be about 16,580. The number of U.S. owners by region of residence is
shown in Table II-2. It is not surprising that the Mountain and Pacific regions contain the
majority of the owner households, as the majority of HFI/PRC projects are also located in
these regions.
Table II-3 shows the remaining market demand for HFI/PRCs. The numbers
shown are found simply by subtracting the number of existing owners from the number
of income-eligible households in each region. Currently only 0.16 percent of the income-
eligible market for HFIs and 3.67 percent of the market for PRCs have been absorbed.

TABLE II-2
Estimated Number of Existing Owner Households of HFI/PRCs in the U.S., By
Region
Estimated Number of Owner Households

HFI PRC Total
Pacific 1,516 7,346 8,862

Mountain 1,052 5,099 6,151
South Central 159 769 928
South Atlantic 119 575 693
North Central 85 414 499
Middle Atlantic 294 1,427 1,721
New England 196 949 1,145
Total 3,420 16,580 20,000
Source: Ragatz Associates, October 2003.
TABLE II-3
Remaining Market Potential For HFI/PRCs in the U.S, By Region
Number of Households Percentage of Households

HFI PRC HFI PRC
Pacific 426,780 87,415 99.65% 92.25%

Mountain 110,148 15,735 99.05% 75.53%
South Central 256,732 50,110 99.94% 98.49%
South Atlantic 386,783 83,088 99.97% 99.31%
North Central 367,818 67,525 99.98% 99.39%
Middle Atlantic 390,610 96,828 99.92% 98.55%
New England 150,148 33,957 99.87% 97.28%
Total 2,089,020 434,657 99.84% 96.33%
Source: Ragatz Associates and ESRI Business Information Solutions (www.esribis.com)

None of the regions have absorbed more than one percent of the HFI income-
eligible market. Only two regions have absorbed more than three percent of the PRC
income-eligible market – the Mountain (24.5 percent) and Pacific (7.8 percent) regions.
So what proportion of these households will purchase? For comparative

purposes, about 12 percent of all U.S. households (regardless of income) currently own
resort real estate of any type, including single family detached vacation homes, wholly
owned resort condos, RV campsites, vacant homesites in resort-oriented communities,
and various forms of shared ownership. Included in the 12 percent are about three
percent who own resort timeshare. We also know that propensity to own resort real
estate increases significantly with income. Most likely, this proportion is over 20 percent
among households with incomes over $250,000.
Assuming the HFI/PRC market becomes stabilized, no major and publicized

failures occur, and proper product continues to be developed, it is suspected that upwards
of 10 percent of income-eligible households could purchase the product within the next
five to 10 years. In order to estimate the effected market demand for HFI/PRCs, three
scenarios are used to create “best case,” “likely” and “worst case” scenarios. The “best
case” scenario assumes a 10 percent penetration rate and an average sales price of
$250,000. The “likely” scenario assumes a five percent penetration rate and an average
sales price of $200,000. Finally, the “worst case” scenario assumes a 2.5 percent
penetration rate and an average sales price of $150,000.
The three scenarios result in an estimation between 52,225 to 208,902 purchasers

of HFI/PRCs over the next 10 years. At an average price ranging from $150,000 per
share to $250,000, total sales volume over the 10 years could range from $8.0 to $51.4
billion. Obviously, such ranges are excessively wide.
If we take the mid-points, a penetration rate of 5.0 percent would result in

104,451 purchases. An average price of $200,000 would generate a 10-year sales volume
of $21.0 billion, or about $2.1 billion annually. By comparison, it is noted that traditional
resort timeshare sales in the U.S. in 2003 were about $5.5 billion.

III. THE FRACTIONAL INTEREST INDUSTRY IN MEXICO

III. THE FRACTIONAL INTEREST INDUSTRY IN MEXICO
Introduction
The purpose of this chapter is to describe the fractional interest industry in
Mexico, as it currently is known to exist. It appears there are few active projects
currently in sales in the country, although it is known that many are being planned.
Ragatz Associates has recently worked on such projects in Merida, Los Cabos, Huatulco,
Puerto Vallarta, Cancun and Puerto Peñasco. Most likely, other projects are being
planned without the involvement of our firm.
The resort timeshare industry has long thrived in the country with sales in 2006
perhaps approaching $1 billion. While this product and the prices are oriented toward a
different consumer and use pattern than fractional interests, it does provide some
indication that at least one form of shared ownership has succeeded very well in the
country. As the fractional interest concept becomes more understood and accepted in the
United States, it is fully suspected that it will also expand into Mexico, just as did the
resort timeshare industry many years ago.
Thus far the fractional interest industry in Mexico has been concentrated almost
entirely in Los Cabos. Here, seven projects are in active sales with several more being
discussed. Most of the remainder of this chapter, therefore, concentrates on the situation
in this community, since it represents a good comparison as to what perhaps could
happen in Manzanillo over time. Before describing the market in Los Cabos, however, a
run down is provided of what is known about the industry in other tourist communities in
Mexico.

Acapulco
Only one known to exist – Fairmont Heritage Place. This very attractive project
started sales in 2003, and already has sold over $65 million of inventory to over 300
owners. Upon completion this beachfront property will contain 45 units, of which 25
already have been completed. All units are sold as 1/10 shares, giving owners four weeks
of fixed time and one week that floats throughout the year. Prices started at $145,000
three years ago, and now are at $217,500, or plus 50 percent more. Some 90 percent of
sales have been made to wealthy families in Mexico City, and over 60 percent of the
sales have been made through referrals.
Cancun
None in active sales known to exist, except for a couple of very small 1/4 share
projects of less than 10 units. It appears that both were created simply as a way to lower
the prices of whole-ownership condominiums, as there is no mark-up ratio used in setting
prices.
We recently completed a feasibility analysis for Fairmont Hotels and Resorts for a
50-unit private residence club next to their new hotel in the Mayakoba master-planned
resort community south of Cancun. Here, 1/10 shares are being planned at prices of
about $200,000. The average residence would contain about 3,000 square feet for a per
square foot price of about $665. Sales have been projected to begin for the past two
years, but internal partnership issues have slowed the process.
Huatulco
There is one existing very moderately priced fractional interest project in
Huatulco that has been in and out of sales for several years. Here, 1/8 shares were sold in
small two-bedroom units for about $80,000, or about $400 per square foot. It appears the
product represented more of a “drop-in-price” concept for whole-ownership
condominiums rather than a true product unto itself.
We recently completed a study for several large high-end single family residences
next to the Quinta Real Hotel. Sales stopped after a few months, apparently due to some

internal financial problems with the hotel company at that time. The community also is
fairly remote, and seemingly not a good location for a viable fractional interest project.
Mazatlan
None known to exist at this time. However, we are conducting a feasibility
analysis for a 78-unit project on a beautiful site next to Las Hadas. A 1/4 share offering
is being discussed with prices of about $125,000 in a one-bedroom unit, $175,000 in a
two-bedroom unit, and $225,000 in a three-bedroom unit. The average per square foot
price would be about $400. Implementation is probably 24 months away.
Merida
None known to exist at this time. However, we recently completed a feasibility
analysis for a 100-unit project as part of a large master-planned golf course community.
There would be 50 two-bedroom units and 50 three-bedroom units. The most frequent
share would be a 1/10. Starting prices would be $70,000 and $90,000, respectively. The
average price per square foot is estimated at $400.
Puerto Peñasco
Two projects have an organized program for fractional interests, including
Laguna Shores and Oasis. However, there are only 10 units at Laguna Shores and two at
Oasis. Prices are shown below.
fraction price average price per week average price

project size two-bed three-bed two-bed three-bed per sq. ft.
Laguna Shores 1/6 $75,000 $90,000 $9,375 $11,250 $240

Oasis 1/6 $68,235 $110,900 $8,530 $13,850 $250
average 1/6 $71,615 $100,450 $8,950 $12,555 $245
Both projects sell a 1/6 share. Prices are very low in accord with comparables
anywhere in North America. The average price when combining two- and three-bedroom
units is only $86,000, or $10,750 per week and $245 per square foot. The consultant has
never seen such low prices in the industry. The average mark-up over whole-ownership

prices is only 1.1, which is far lower than the industry rule-of-thumb of between 1.5 and
2.0.
It is noted that a couple of other projects also are selling “fractionals.” Here, they
will literally break up the whole unit into any number of weeks requested by the
consumer. This also occurs at Laguna Shores. Such a practice strongly indicates that the
market for whole-ownership condominiums is suffering, and that developers are trying to
create lower price points to broaden the market.
Puerto Vallarta
None known to be in active sales at this time, but at least five are being discussed.
Punta Mita
Three high-end private residence clubs have been discussed in Punta Mita, but it
appears that none are now in active sales. The three include ones by Four Seasons, St.
Regis and Rosewood. All have discussed selling 1/12 shares in the range of $250,000 to
$300,000, and around $1,500 per square foot. All three apparently are on hold for a
variety of reasons. Most likely, at least two will be started this year.
Zihuatanejo
There is only one fractional interest project in Ixtapa-Zihuatanejo, with a second
one under-construction and a third being planned. The three projects are described in the
following paragraphs.
1. The Villas at Club Intrawest

Club Intrawest is located on prime oceanfront property along the Playa La Ropa
Beach in Zihuatanejo. The mixed-use resort contains hotel rooms, timeshare units
and fractional interest units. At this time, the fractional portion of the project features
only five units, including two two-bedroom units (1,600 interior square feet) and
three three-bedroom units (1,985 interior square feet). The total number of planned
units will range from 22 to 28 units, depending on market demand.

Resort amenities are extensive and include two swimming pools, two restaurants,
bar and palapa lounge, exercise facility, massage cabana and 24-hour receptionist and
concierge.
Fractions are sold as 1/9 shares. Owners are guaranteed five weeks of planned
time per year. Space available time is also offered on a first-come, first-served basis,
providing owners access to additional time each year. Space available stays may be
from one to seven nights.
Prices are $139,900 for a two-bedroom unit, or $785 per square foot, and
$174,900 for a three-bedroom unit, or $788 per square foot. Some 31 shares have
been sold in the last 10 months, or about three shares per month. However, no sales
operations have occurred during the last three months of low season. Thus, the sales
pace during the other seven months has been about 4-1/2. Sales will start again this
month.
2. The Inn at Manzanillo Bay

The Inn at Manzanillo Bay is located on Trocones Beach, approximately 30
minutes north of downtown Ixtapa. The project currently contains eight casitas that
are under-renovation. Prior to renovation, the nightly rental rates were approximately
$100. Project officials report that the nightly rates will increase to $150 to $200 after
renovation has been completed.
In addition to the renovation, construction is underway on eight additional casitas
that will be sold as fractional units. All units will be two-bedrooms, providing
approximately 1,000 square feet of living space. Fractions will reportedly be sold as
1/4 shares for $250,000. Annual maintenance fees have not been defined. Plans and
permits for the units have been approved and presales are expected to commence in
November 2006. First occupancy for the fractional units is slated for early 2007. The
Inn will provide a rental program for the owners.
On-site amenities include a swimming pool, tropical garden, restaurant, massage
service and beach access. An on-site activities center includes a staff that provides
guided surfing, fishing and kayaking lessons and tours. The units will not have
kitchens.

3. Sotavento Beach Resort
The Sotavento Beach Resort has reportedly been purchased by an undisclosed
Canadian company. The new developer has plans to tear down the existing structure
and rebuild it as a fractional interest project. The resort is located in Zihuatanejo, and
currently contains 70 hotel suites and 30 guest rooms. The project is located next to
Intrawest Resort and has views of La Ropa Beach and the Pacific Ocean. No other
details were provided.
Los Cabos
As previously noted, by far the most popular resort destination where fractional
interest projects already are quite prevalent in Mexico is the Los Cabos area of Baja
California. Some seven projects were identified in the area, including five that are
occupied and two that are under-construction. All seven have some type of on-site sales
office. The under-construction projects are selling inventory on a “reservation-with-
deposit” basis, without final closings.
Two of the seven projects are located in San Jose del Cabo and five in Cabo San
Lucas. All seven are summarized in Tables III-1 through Table III-8.
As shown in Table III-2, a total of 321 fractional interest units currently exist or
are under-construction in Los Cabos. All seven projects offer three-bedrooms, and they
account for 49.5 percent of all inventory. Five projects offer two-bedrooms, and they
account for 32.1 percent of all inventory. Only two projects (Capella and Esperanza)
offer four-bedrooms and only one (Cabo Villas) offers one-bedrooms.
The largest project is Mision La Serena (75 units), followed by Cabo Villas (60
units) and Esperanza (60 units). The smallest projects are La Estancia (30 units) and
Capella (31 units). The average number of built and under-construction units for all
projects is 46.
Average unit sizes are 800 square feet for a one-bedroom, 2,125 for a two-
bedroom, 2,805 for a three-bedroom and 3,487 for a four-bedroom. The largest two-
bedrooms (2,400 square feet) are at Esperanza, and the largest three-bedrooms (3,075
square feet) are at Capella. The smallest two-bedrooms (1,860 square feet) and three-
bedrooms (2,340 square feet) are at Grand Regina. (See Table III-3.)

TABLE III-1
Fractional Interest Projects in Los Cabos
Project Community Status
1. Cabo Villas Beach Resort Cabo San Lucas under-construction/built

2. Capella Resort & Spa Cabo San Lucas under-construction
3. Esperanza Resort & Spa Cabo San Lucas built
4. Grand Regina Los Cabos San Jose del Cabo built
5. Mision La Serena San Jose del Cabo under-construction
6. Montecristo Estates Pueblo Bonito Cabo San Lucas built
7. Villa La Estancia Cabo San Lucas built
Source: Fieldwork conducted by Ragatz Associates.
TABLE III-2
Size and Bedroom Configuration
Project 1-Bed 2-Bed 3-Bed 4-Bed Total
1. Cabo Villas Beach Resort 20 5 35 0 60

2. Capella Resort & Spa 0 0 14 17 31
3. Esperanza Resort & Spa 0 18 20 22 60
4. Grand Regina Los Cabos 0 20 12 0 32
5. Mision La Serena 0 35 40 0 75
6. Montecristo Estates Pueblo Bonito 0 0 33 0 33
7. Villa La Estancia 0 25 5 0 30
Total 20 103 159 39 321
Average 3 15 23 6 46
Percent 6.2% 32.1% 49.5% 12.1%

TABLE III-3
Average Square Footage
Project 1-Bed 2-Bed 3-Bed 4-Bed Average
1. Cabo Villas Beach Resort 800 2,000 2,800 n/a 1,266

2. Capella Resort & Spa n/a n/a 3,075 3,473 3,274
3. Esperanza Resort & Spa n/a 2,400 3,000 3,500 2,967
4. Grand Regina Los Cabos n/a 1,860 2,340 n/a 2,100
5. Mision La Serena n/a 2,200 2,800 n/a 2,500
6. Montecristo Estates Pueblo Bonito n/a n/a 2,850 n/a 2,850
7. Villa La Estancia n/a 2,163 2,769 n/a 2,466
Average 800 2,125 2,805 3,487 2,489
All projects have swimming pools, as shown in Table III-4. Montecristo is the
only property that does not offer exercise facilities and is not located on the beach. Three
projects will have on-site golf courses and four properties will offer a restaurant.
Esperanza has the highest number of on-site amenities and Montecristo has the least.
As shown in Table III-5, concierge service is standard at all projects. Pre-arrival
concierge services, such as stocking groceries in the unit prior to arrival is offered at five
projects. Valet and bell service is offered at five projects and shuttle service is found at
four. Two of the three projects (Capella and Esperanza) that have on-site golf courses
offer golf valets. Three of the four projects that do not have on-site golf courses offer
discounted green fees to local courses.
As shown in Table III-6, fractional interest projects in Los Cabos range from a
1/17 share (three weeks of ownership) to a 1/4 share (12 weeks of ownership). Five
projects offer a 1/8 share and three offer a 1/4 share. Grand Regina is the only project
that offers a 1/10 share (five weeks of ownership) and Esperanza is the only project that
offers a 1/6 share (eight weeks of ownership). Mision La Serena offers a 1/12 (four
weeks of ownership) and a 1/17 (three weeks of ownership) share in addition to a 1/4 and
1/8 share, and Montecristo offers a 1/13 share in addition to a 1/8 share. Prices range
from $160,833 for a 1/13 share at Montecristo to $660,000 for a 1/6 share at Esperanza.
More detailed pricing information is provided in Tables III-7 through III-8.

TABLE III-4
On-Site Amenities
Whirl- Day Exercise Boats/ Ocean

Restaurant Store Pool pool Spa Storage Facilities Fishing Golf Beach
1. Cabo Villas Beach Resort -- -- X X -- -- X -- -- X

2. Capella Resort & Spa X -- X -- X X X X -- X
3. Esperanza Resort & Spa X X X X X X X -- X X
4. Grand Regina Los Cabos X -- X X X X X -- X X
5. Mision La Serena X -- X X X -- X X X X
6. Montecristo Estates Pueblo Bonito -- -- X -- -- X -- -- -- --
7. Villa La Estancia -- X X X X -- X -- -- X
Total 4 2 7 5 5 4 6 2 3 6
TABLE III-5
Member Privileges
Pre- Valet
Arrival Parking Golf Discounted Shuttle
Concierge Concierge Bell Svc. Valet Golf Service
1. Cabo Villas Beach Resort X -- -- -- -- --

2. Capella Resort & Spa X X X X -- X
3. Esperanza Resort & Spa X X X X -- --
4. Grand Regina Los Cabos X X X -- X X
5. Mision La Serena X X X -- -- X
6. Montecristo Estates Pueblo Bonito X -- -- -- X X
7. Villa La Estancia X X X -- X --
Total 7 5 5 2 3 4

TABLE III-6
Pricing Characteristics, By Number of Bedrooms
Weighted
1. Cabo Villas Beach Resort

1/4 share $165,000 $462,000 $725,000 n/a $516,417
Avg. price per week $13,750 $38,500 $60,417 n/a $43,035
Avg. price per sq. ft. $825 $924 $1,036 n/a $956
Avg. weekly maintenance fees unk. unk. unk. n/a
2. Capella Residences
1/8 share n/a n/a $420,000 $490,000 $458,387
Avg. price per week n/a n/a $70,000 $81,667 $76,398
Avg. price per sq. ft. n/a n/a $1,093 $1,129 $1,113
Avg. weekly maintenance fees n/a n/a $1,833 $1,833 $1,833
3. Esperanza Resort & Spa

1/6 share n/a n/a n/a $660,000 $660,000
Avg. price per week n/a n/a n/a $82,500 $82,500
Avg. price per sq. ft. n/a n/a n/a $1,131 $1,131
Avg. weekly maintenance fees n/a n/a n/a $1,600 $1,600
1/8 share n/a n/a $385,000 n/a $385,000

Avg. price per week n/a n/a $64,167 n/a $64,167
Avg. price per sq. ft. n/a n/a $1,027 n/a $1,027
Avg. weekly maintenance fees n/a n/a $1,285 n/a $1,285
4. Grand Regina Los Cabos

1/10 share n/a $325,000 $375,000 n/a $343,750
Avg. price per week n/a $65,000 $75,000 n/a $68,750
Avg. price per sq. ft. n/a $1,747 $1,603 n/a $1,693
Avg. weekly maintenance fees n/a $1,100 $1,350 n/a $1,194
5. Mision La Serena
1/4 share n/a $478,995 $556,995 n/a $520,595
Avg. price per sq. ft. n/a $871 $796 n/a $831
1/8 share n/a $283,995 $331,995 n/a $309,595

Avg. price per sq. ft. n/a $1,033 $949 n/a $988
1/12 share n/a $194,328 $227,735 n/a $212,145

Avg. price per sq. ft. n/a $1,060 $976 n/a $1,015

1/17 share n/a $149,245 $176,870 n/a $163,978

Avg. price per sq. ft. n/a $1,153 $1,074 n/a $1,111
6. Montecristo Estates
1/8 share n/a n/a $245,883 n/a $245,883
Avg. price per sq. ft. n/a n/a $690 n/a $690
1/13 share n/a n/a $160,833 n/a $160,833

Avg. price per sq. ft. n/a n/a $734 n/a $734
7. Villa La Estancia
1/4 share n/a $326,869 $625,563 n/a $376,651
Avg. price per sq. ft. n/a $604 $903 n/a $654
Avg. weekly maintenance fees n/a $617 $826 n/a $652
1/8 share n/a $180,000 n/a n/a $180,000

Avg. price per week n/a $30,000 n/a n/a $30,000
Avg. price per sq. ft. n/a $666 n/a n/a $666
Avg. weekly maintenance fees n/a $1,233 n/a n/a $1,233
Average weekly maintenance fees according to size of unit are shown in Table
III-7. The overall average weekly maintenance fee is $1,436. Averages by unit size are
as follows: two-bedrooms ($1,125), three-bedrooms ($1,421), and four-bedrooms
($1,717). Only La Estancia reports an average weekly fee of less than $1,000. On the
upper-end are Montecristo ($1,881) and Capella ($1,833).
Approximate weekly sales prices are shown in Table III-8. Averages range from
$13,750 for a one-bedroom, to $44,629 for a two-bedroom, to $59,476 for a three-
bedroom, to $82,684 for a four-bedroom. The overall average is about $55,385, ranging
from $37,555 at Cabo Villas to $75,823 at Capella.

TABLE III-7
Average Weekly Maintenance Fees, By Number of Bedrooms
Project 1-Bed 2-Bed 3-Bed 4-Bed
1. Cabo Villas Beach Resort unk. unk. unk. unk.

2. Capella Resort & Spa n/a n/a $1,833 $1,833
3. Esperanze Resort & Spa n/a n/a $1,285 $1,600
4. Grand Regina Los Cabos n/a $1,100 $1,350 n/a
5. Mision La Serena n/a $1,350 $1,350 n/a
6. Montecristo Estates Pueblo Bonito n/a n/a $1,881 n/a
7. Villa La Estancia n/a $925 $826 n/a
Average unk. $1,125 $1,421 $1,717
TABLE III-8
Average Weekly Prices, By Number of Bedrooms
1. Cabo Villas Beach Resort $13,750 $38,500 $60,417 n/a $37,555

2. Capella Resort & Spa n/a n/a $70,000 $81,667 $75,833
3. Esperanza Resort & Spa n/a n/a $64,167 $82,500 $73,333
4. Grand Regina Los Cabos n/a $65,000 $75,000 n/a $70,000
5. Mision La Serena n/a $46,394 $54,410 n/a $50,400
6. Montecristo Estates Pueblo Bonito n/a n/a $40,208 n/a $40,208
7. Villa La Estancia n/a $28,620 $52,130 n/a $40,375
Average $13,750 $44,629 $59,476 $82,084 $49,985
Weighted average $13,750 $45,080 $56,867 $82,137 $55,385
La Estancia is the only project with two-bedrooms ($28,620) being sold for less
than $30,000. Grand Regina has the highest priced two-bedrooms ($65,000) and three-
bedrooms ($75,000) and Esperanza has the highest priced four-bedrooms ($82,500).
The overall weighted average price per square foot is $1,037. Average prices per
square foot for all projects according to size are shown in Table III-9. Averages by unit
size are as follows: one-bedrooms ($825), two-bedrooms ($1,084), three-bedrooms
($1,046) and four-bedrooms ($1,130).

TABLE III-9
Average Price Per Square Foot, By Number of Bedrooms
1. Cabo Villas Beach Resort $825 $924 $1,036 n/a $928

2. Capella Resort & Spa n/a n/a $1,093 $1,129 $1,111
3. Esperanza Resort & Spa n/a n/a $1,027 $1,131 $1,079
4. Grand Regina Los Cabos n/a $1,747 $1,603 n/a $1,675
5. Mision La Serena n/a $1,029 $949 n/a $989
6. Montecristo Estates Pueblo Bonito n/a n/a $712 n/a $712
7. Villa La Estancia n/a $635 $903 n/a $769
Average $825 $1,084 $1,046 $1,130 $1,039
Grand Regina has the highest average per square foot price ($1,693), followed by
Capella ($1,113) and Esperanza ($1,081). La Estancia ($680) and Montecristo ($712)
average the least per square foot.

IV. CONCLUSIONS AND RECOMMENDATIONS

IV. CONCLUSIONS AND RECOMMENDATIONS
General Conclusions
Based on contents of the three preceding chapters, and most importantly, on the
consultant’s 30 years of experience in the resort industry, it is recommended that
development proceed with a fractional interest offering on the subject property in
Manzanillo. Sell-out should be fairly rapid and the resulting profit significant.
The consultant endorses the client’s concept of a mixed-use project, including 30
whole-ownership condominiums and 48 fractional interest units. However, variations
from the client’s preliminary business plan include:
1. smaller units
2. a greater proportion of two-bedroom units and a smaller proportion of one- and
three-bedroom units
3. 1/12 shares in addition to 1/4 shares, with emphasis on the former
4. a different use plan and reservation system
5. higher construction costs, but also higher prices, resulting in a greater profit
6. a different building configuration
It is recommended that the 48 units include 12 one-bedroom units with 900 square
feet of interior space, 24 two-bedroom units with 1,350 square feet, and 12 three-
bedroom units with 1,800 square feet. A 1/12 share should be sold in 32 units, resulting
in 384 shares/sales. A 1/4 share should be sold in 16 units, resulting in 64 shares/sales.
There would be 448 total shares/sales.
Recommended starting prices for the 1/12 shares are $52,500 for a one-bedroom,
$78,750 for a two-bedroom, and $105,000 for a three-bedroom. For a 1/4 share, they are
$135,000, $202,500 and $270,000, respectively. These prices result in an estimated gross

sales volume of $48.3 million, and a before-tax profit of $20.2 million. Sell-out is
anticipated in about 3 1/2 years.
The preceding summary comments are expanded on in the remainder of this
chapter. There are sections on product characteristics, size of shares, use plan, pricing,
sales pace, miscellaneous recommendations, and anticipated financial performance.
Before proceeding, it may be useful to the reader to once again list reasons for
moving forward with a fractional interest offering on the subject property. Some of these
reasons separate the concept from resort timeshare and whole-ownership, while some
accrue to the owner and some to the developer. The most important reasons are
summarized in the following list.
advantages of fractional interests for the consumer
versus resort timeshare versus whole-ownership
• more of the price goes into the real estate • higher quality resort home for less cost
itself rather than to marketing and sales • more services
costs – about 50 percent versus 25 percent • better management and hassle-free
• more probable appreciation since is more • able to purchase the proper amount of time
akin to a real estate purchase than a that have vacations to use and discretionary
vacation purchase income to spend on, and not having the
• more time vacation home sit idle the vast majority of
• more services the year
• higher quality product • more flexibility of use and experiences due
• better image and more exclusivity to exchange
• higher documented satisfaction rates
advantages of fractional interests for the developer
versus resort timeshare versus whole-ownership
• better image • broadening of the market due to lower

• fewer sales to make income-eligibility
• much lower marketing and sales costs – • much higher profit margin
about 20 percent compared to 50 percent or • more ancillary income due to much higher
more year-round occupancy rates
• able to use more traditional and less • easier sale if properly positioned
disruptive marketing and sales approaches • current darling of the public media with
• less need for a joint venture partner since wide and positive attention
positioned more as traditional real estate
• higher profit margin

The fractional interest concept also brings some disadvantages to the consumer
and developer:
• for the consumer versus resort timeshare

• higher price
• for the consumer versus whole-ownership
• not always being able to use when want to
• for the developer versus resort timeshare
• narrower market due to higher income-eligibility
• no interest-income from consumer receivables
• for the developer versus whole-ownership
• more sales to make
• possible confusion with resort timeshare if not properly positioned
The Product
As currently planned prior to the preparation of this position paper, the subject
property was to contain 78 units, including 30 whole-ownership units to be sold in the
first phase of development and 48 fractional interest units to be sold in the second phase.
As noted in Chapter I, emphasis in this position paper is entirely on the fractional interest
units.
The 48 fractional interest units were to be built in six distinct buildings. Three
buildings were to contain six three-bedroom units each. Three other buildings were to
contain one one-bedroom and five two-bedroom units each. This arrangement would
result in 15 one-bedroom units, 15 two-bedroom units and 18 three-bedroom units. Floor
areas were 1,200 square feet for a one-bedroom, 1,800 square feet for a two-bedroom,
and 3,000 square feet for a three-bedroom.
In accord with trends in the fractional interest industry in the United States (where
the vast majority of buyers of a project in Manzanillo are expected to reside), it is felt
that: (1) the 48 units should include a greater proportion of two-bedroom units and a
smaller proportion of one- and three-bedroom units; and (2) the current floor areas are
unnecessarily large.

In regard to the latter item, it is realized that building costs in Mexico are less than
in the U.S., thus allowing for larger units at comparable costs. But at the same time, it is
critical to keep price points low in order for consumers to see value in the product, i.e.,
not provide excessive amounts of space that are not appreciated in the purchase decision.
Let us look at some current industry averages. As noted in Chapter II, the average
high-end fractional interest project in the U.S. contains 45 units (or about the same as at
the subject property). If all under-construction and planned units are built, the average
will increase to 68 units. In many cases, the number of units is limited more by site size
and/or public regulations than by consumer demand.
In regard to bedroom configuration, the average high-end fractional interest
project contains 27 percent studios or one-bedroom units, 27 percent two-bedroom units,
33 percent three-bedroom units, and 13 percent four-bedroom units. In regard to floor
areas of units, averages include 460 square feet for a studio, 760 square feet for a one-
bedroom unit, 1,460 square feet for a two-bedroom unit, 2,425 square feet for a three-
bedroom unit, and 3,550 square feet for a four-bedroom unit.
In Los Cabos (the destination in Mexico where the majority of fractional interest
projects are located at this time), the average project contains 46 units. Floor areas
admittedly are larger than in the U.S., and there is a greater proportion of three-bedroom
units. However, the tourist profile in Los Cabos is much higher-income than in
Manzanillo – suggesting that project and prices be more modest in the latter community.
So, given the preceding bits and pieces of information, let us look at an alternative
configuration for the 48 fractional interest units at the subject property. It is suggested
that a building block approach be taken. Each block would contain 450 square feet.
A one-bedroom unit would comprise two blocks with 900 square feet. One block
would contain the kitchen, dining room and living room space. The second block would
contain a bedroom and bathroom. A two-bedroom unit would comprise three blocks with
1,350 square feet. One block would contain the kitchen, dining space and living room
space. The other two blocks would each contain a bedroom and bathroom. A three-
bedroom unit would comprise four blocks with 1,800 square feet. One block would
contain the kitchen, dining space and living room space. The other three blocks would
each contain a bedroom and bathroom.

In an effort to generate more two-bedroom units, it is suggested that each building
contain two one-bedroom units, four two-bedroom units and two three-bedroom units.
And, each building would contain four floors. Two floors would each contain one one-
bedroom unit and one three-bedroom unit. Two floors would each contain two two-
bedroom units. Thus, all four floors would each contain six building blocks of 450
square feet each, or 2,700 square feet. Each building would contain 10,800 square feet.
In summary, the recommendations are for:
• six buildings of four floors each

• six building blocks per floor, or 2,700 square feet (net interior space) per floor
and 10,800 square feet per building
• 64,800 total square feet in the six buildings
• each building to contain two one-bedroom units, four two-bedroom units and
two three-bedroom units
• a total of 48 units, including 12 one-bedroom units, 24 two-bedroom units and
12 three-bedroom units
The preceding configuration could very well change over time in accord with
effected market demand. However, this arrangement allows much greater flexibility in
meeting variations in demand than having each building only contain one bedroom type.
Size of Shares
There are at least eight sizes of shares being offered in the fractional interest
industry. They range from a 1/20 to a 1/4. Final profitability should not vary
significantly regardless of the size of share chosen. Larger shares typically require lower
marketing and sales costs, although generating lower prices per square foot. Smaller
shares typically require higher marketing and sales costs, although generating higher per
square foot prices.
A trend in the industry is toward smaller shares, especially in the 1/12 to 1/8
range. This size of share is appealing to the consumer because it more closely matches

the amount of vacation time taken away from home in a typical year, i.e., four to six
weeks versus two to three months.
At the same time it also is advisable to have more than one size of share in order
to expand the market due to different price points, demographics, and use plans. This is
especially true in fractional interest projects with a relatively large number of units in a
heretofore untested market with a limited number of tourists, e.g., the 48 suggested
fractional interest units at the subject property in Manzanillo which has at this time no
existing fractional interest projects and only about 725,000 annual tourists.
In many resort destinations where fractional interest projects are located, there is
significant variation in seasonality of demand, e.g., winter for skiing in the Rockies. In
these places the size of the shares offered needs to be large enough to ensure adequate use
of the high-demand seasons.
The seasonality of demand issue does not seem applicable to Manzanillo as the
area is attractive as a year-round resort destination. As in most coastal tourist
destinations in Mexico, there appears to be a five-month high season from December
through March and July, followed fairly closely by two shoulder seasons of April through
June and November. The only low season seems to be the two months of September and
October. Thus, the primary factor in determining the size(s) of fraction at the subject
property is a broadening of the price points, and hence the market. Again, this factor is
especially important in projects with a relatively large number of units located in untested
markets with a limited number of tourists.
Based on the aforementioned trends in the fractional interest industry and the
desire to have a broad market, it is recommended that a 1/12 share be the primary product
sold at the subject property – in 32 of the 48 suggested fractional interest units. It is
tempting to suggest an even smaller 1/26 share, but there seems to be an inherent issue
with this small size of share being too closely associated with resort timeshare.
A 1/12 share would provide owners with four weeks of guaranteed annual use that
are equitably distributed throughout the year. It also offers consumers additional time on
a space-available basis. For instance, the four weeks of guaranteed time result in 336
annual guaranteed nights for the 12 owners (12 owners times four weeks times seven

nights equals 336). The remaining 29 nights are placed in a space-available pool that all
owners have access to in order to maximize flexibility of use.
When multiplying the 32 suggested units times 29 extra nights per unit, it means a
pool of 928 additional nights that the 384 owners would have access to besides their four
“guaranteed” weeks. The additional space-available time has proved popular in the
industry. It is less possible if selling a smaller share.
It also is recommended that another 16 fractional interest units be sold as 1/4
shares, providing owners with three months/13 weeks of annual use. Price points should
be in higher, and the product should be more positioned as traditional real estate. This
product will be a nice compromise for some buyers between a 1/12 share and whole
ownership. It also has the advantage over smaller shares in that fewer sales are required
per unit. At the same time, however, the 1/4 share has not yet proven itself to be as
popular as the smaller shares, thus the recommendation to have only 16 1/4 share units
and 32 1/12 share units. It is emphasized that the final mix between the 1/12s and the 1/4s
may vary over time and that the true determinant will be effected market demand.
At this point, it candidly is not known whether demand will be greater for the 1/12
shares or the 1/4 shares. But most likely, it will be for the 1/12 shares due to the
significantly lower price points. Let us simply assume that two-thirds of the units (32)
will be sold as 1/12s and one-third of the units (16) will be sold as 1/4s. Let us also
assume that the same proportion of the one-, two- and three-bedroom units will be sold in
each of the two sizes of shares. These assumptions result in the following configurations.
size of units total shares total

share one-bed two-bed three-bed units one-bed two-bed three-bed shares
1/12 8 16 8 32 96 192 96 384

1/4 4 8 4 16 16 32 16 64
total 12 24 12 48 112 224 112 448
The 48 fractional interest units would generate 448 shares/sales. Included would
be 384 1/12 shares in 32 units and 64 1/4 shares in 16 units. Some 112 shares would be
in one-bedroom units, 224 in two-bedroom units, and 112 in three-bedroom units.

In concluding this section, it is emphasized that the preceding recommendations
and resulting configurations regarding the potential mix between share sizes and bedroom
sizes will probably change over time in accord with effected market demand. The
preceding figures should simply be used as a starting point at this time.
Use Plan
Here again, we are faced with an issue of importance – how purchasers of a 1/12
share/four week/30 night product or of a 1/4 share/13 week/91 night product can use their
amount of time on an annual basis.
The challenge becomes creating a use plan that will balance: (1) certainty of
access with flexibility; and (2) high season use with low season use. Both balancing acts
will be necessary if the consumer is to perceive value and attractiveness with the product.
Some options that have been applied in other fractional interest projects include:
1. a fixed-rotating use plan. Here, for example, in Year 1, owners of a 1/12

share would have access to the first week of each quarter (plus space available
time). In Year 2, their use-calendar would rotate forward one-week, and
continue to do so until all owners had access to all 52 weeks. It would then
start over. This would insure use of one week in each of the four seasons.
Owners of a 1/4 share would have use of the first week of every month or the
first two weeks of every other month in Year 1, the second week of every
month or the second two weeks of every other month in Year 2, and so forth.
2. a fixed time use plan. This would be the most restrictive option. It would
offer 100 percent certainty, but no flexibility. Owners would have access to
the same weeks or month every year, e.g., always having the first week of
each quarter (1/12 shares), the entire month of January, April, July or October,
etc. With the latter option, prices would vary in accord with desirability of the
month.
3. a float within season use plan. Here, owners would have the right to choose
their weeks within specifically defined seasons, e.g., one week in every 12 or

every four, etc. The choosing would occur the year prior to choice, and would
be done on a priority space-available basis. This would ensure that the same
owner did not always receive Christmas week, for example.
Other issues relating to the chosen use plan (some of which are alluded to in the
preceding paragraphs) are:
1. should split week usage be allowed? And if so, should there be a surcharge?
2. should an internal exchange system be created to allow for lengths-of-stay of
more than one week?
3. should prices vary by season, or remain the same for all 1/12 and 1/4 shares?
4. should bonus time be allowed, whereby owners could use more than 30 or 91
nights per year, on a space available basis, for a nominal cleaning/reservation fee?
5. should owners be allowed to rent out their unused time? If so, should such rentals
be managed/controlled by the client, and at what fee?
6. should the offering be affiliated with an external exchange entity?
7. should owners of the smaller units be allowed to upgrade to the larger units at a
nominal surcharge if space is available when they want to stay?
Based upon our previous research findings and the success of other fractional
interest projects, it appears the most appropriate use plan would be a fixed-rotating
system. As described in the preceding page, this would ratchet use forward about one
week each quarter (1/12) or every month (1/4). Arrangements for internal trading also
should be allowed in order to allow for incremental stays of more or less than one week
at a time. And, additional space would be available for the 1/12 share owners due to
space available.
It is also recommended that a “floating unit” use plan be employed. This means
owners will be conveyed deeded ownership in a specific unit for legal/security purposes.
But, they would not always be using the same specific unit. This is common in the
shared-ownership industry, and is done in order to ensure maximum flexibility of access
throughout the year. And, as explained in a following section, the floating unit concept
simplifies the pricing schedule and hence, the sales process. There would be only six

prices, including one each for the one-, two- and three-bedroom 1/12 shares, and one
each for the one-, two- and three-bedroom 1/4 shares.
Other refinement-type recommendations include:
1. Allow split time use, with a nominal surcharge for cleaning/reservation costs.
2. Offer a rental opportunity, but only through resort management (with perhaps
a 50-50 split of rental income).
3. Offer bonus time, on a space-available basis.
4. Offer discounts to owners’ friends in space available time in unused inventory
when owners are occupying their unit.
5. Do affiliate with an external exchange company. The most appropriate
options are Elite Exchange, Resort-to-Resort and Interval International.
6. In a tangentially related recommendation, establish a viable resale program at
the outset, with perhaps every nth sale being a resale if the amount of resale
inventory warrants it.
7. Do not allow owners of the smaller units to upgrade to the larger units even if
space is available and a surcharge is imposed, as this would diminish the
motivation to purchase a larger, more expensive unit.
Pricing
Setting proper prices for the two suggested fractional interest products is another
important challenge. This task is especially difficult due to the uniqueness of the subject
property and the lack of any comparables in Manzanillo.
Several different approaches can be used in setting prices, as follows:
1. Rack rates
One approach is to look at possible rack rates in the fractional interest units if
used as rentals. Such prices have not been established, but some rough estimates can
be made.
Let us simply assume that the year-round average rack rates might be $200
for a one-bedroom unit, $250 for a two-bedroom unit, and $300 for a three-bedroom
unit.

The $250 night rate for a two-bedroom unit translates into a $1,750 weekly
rate. If using the old rule-of-thumb that says the price of a resort timeshare interval
should be 10 times the weekly rate, it means this product would be priced at $17,500.
If we multiply this times four to equate with a 1/12 share, the price would be $70,000.
For one-bedroom units, the $200 rack rate estimate translates into a $1,400 weekly
rate, a $14,000 timeshare price, and a $64,000 1/12 share price. For a three-bedroom
unit, the $300 rack rate estimate translates into a $2,100 weekly rate, a $21,000
timeshare price, and an $84,000 1/12 share price. Prices for 1/4 shares would be
$168,000 for a one-bedroom, $210,000 for a two-bedroom, and $252,000 for a three-
bedroom.
This approach is overly aggressive for the 1/4 share prices because it does not
allow for multiple-week discounts. For the 1/12 share products, however, the
approach does not incorporate the advantages of owning versus renting or the many
ancillary advantages of fractional interests, thus perhaps under-estimating prices.
2. Comparables
As frequently noted, a fractional interest offering at the subject property will
pretty much be breaking new ground. We found in Chapters II and III that relatively
few such projects are in active sales in North America although many are being
planned/discussed. None exist at this time in Manzanillo. We also know, however,
that the concept is at the cutting edge of the resort real estate industry. Most existing
projects are in resort communities where prices for whole-ownership resort real estate
are high, and where the availability of such inventory is scarce. For the most part,
these two characteristics are not found in Manzanillo, and certainly not to the degree
as in Aspen, Vail, Telluride, etc.
As previously noted, we have somewhat arbitrarily divided the existing
industry into three pricing categories, including “traditional fractionals,” “high-end
fractionals” and “private residence clubs.” Due to the intended overall quality of the
proposed development, the views, the adjacent beach, the amenities, etc., it is
expected that “high-end fractional” prices are most appropriate. “Private residence
club” prices are not appropriate because of the lower real estate prices in the local

area than in Aspen, Vail, etc., and not wanting to “over-build” the market.
“Traditional fractional” prices are too low due to underestimating the attractiveness of
the property.
Prices on a weekly basis in the current high-end fractional interest industry are
$12,000 for a one-bedroom unit, $26,048 for a two-bedroom unit and $37,284 for a
three-bedroom unit. If multiplying these weekly averages times four in accord with a
1/12 share product, prices would be $48,000 in a one-bedroom unit, $104,200 in a
two-bedroom unit and $149,200 in a three-bedroom unit. These prices are perhaps
too high because most traditional fractional projects are in locations where whole
ownership real estate prices are higher than in Manzanillo.
When looking at national average per square foot prices, we find they are
$883 in a one-bedroom unit, $721 in a two-bedroom unit and $735 in a three-
bedroom unit. We can apply the preceding price per square foot averages to the
suggested size of the units at the subject property. The suggested one-bedroom unit
with 900 square feet would be priced at $66,225 ($883 times 900 divided by 12). The
price for a two-bedroom unit with 1,350 square feet would be $81,110. The price for
a three-bedroom unit with 1,800 square feet would be $110,250. These prices are
perhaps too high because of the large sizes of the units suggested at the subject
property relative to industry averages.
For comparative purposes, we found the following per square foot prices for
both fractional interest projects and private residence clubs in Mexico.
• Punta Mita (anticipated): $1,500

• Los Cabos: $1,039
• Zihuatanejo: $785
• Acapulco: $725
• Cancun: $665
• Huatulco: $400
• Mazatlan: $400
• Merida: $400
• Puerto Peñasco: $245

It is noted that such prices are quite low in several of the communities,
including Huatulco, Mazatlan, Merida and Puerto Peñasco. For the most part, there
are not many existing projects in any of these areas, and all such projects are on sites
significantly inferior to the subject property. Whole-ownership real estate prices in
the communities also are quite low.
3. Mark-up of whole-ownership prices

A third approach is to mark-up prices that would be attained if the units were
sold in whole ownership. We know that considerable mark-up of prices (both total
and per square foot) occurs when selling fractional interests as opposed to whole-
ownership. This mark-up compensation is for higher marketing, sales and
administrative costs, for the greater risk involved, and for the desired additional
amount of profit. Thus far, such mark-up seems to be ranging between a factor of 1.5
to 2.0.
Rational use of this approach is most appropriate in communities where
several new whole-ownership condominium projects are in active sales.
Unfortunately, this criterion does not characterize Manzanillo as no such projects
reportedly currently exist.
Conversations with current real estate agents suggest that the average per
square foot price of whole-ownership condominiums on the resale market is roughly
$200. This price is too conservative for the subject property due to: (1) the
outstanding water views from throughout the site; (2) the intended on-site amenities
and services; (3) the intended access to the beach at adjacent Las Hadas; (4) the units
will contain upscale finishings and furnishings; and (5) the units will be new.
In consideration of these facts, it is felt that a per square foot price of $400
could be attained for whole-ownership condominiums at the subject property. This
figure is high relative to the present market in Manzanillo, but we are talking about a
totally different quality of product than currently exists in the community.
Let us apply the “mark-up-over-whole-ownership” approach with a per square
foot price of $400 and the 1.5 to 2.0 range. Resulting prices are shown below by
number of bedrooms.

square 1/12 share price at:* 1/4 share price at:*
bedrooms feet 1.5 2.0 1.5 2.0
1 900 $45,000 $60,000 $135,000 $180,000

2 1,350 $67,500 $90,000 $202,500 $270,000
3 1,800 $90,000 $120,000 $270,000 $360,000
* Assumed whole-ownership price at $400 per square foot.
Prices for a 1/12 share in a one-bedroom unit would range from $45,000 with
a 1.5 mark-up to $60,000 with a 2.0 mark-up. For a two-bedroom, they would range
from $67,500 to $90,000. For a three-bedroom, they would range from $90,000 to
$120,000.
The 1/4 share prices would range from $135,000 to $180,000 in a one-
bedroom, from $202,500 to $270,000 in a two-bedroom, and from $270,000 to
$360,000 in a three-bedroom. These 1/4 share prices are perhaps too high due to the
large sizes of the shares and the fact that the mark-up is typically less for larger
shares.
4. Suggested starting prices

In reviewing results of the different approaches, it is obvious that resulting
prices vary greatly. So, which, if any, of these approaches is most applicable? Or
should it be “whatever the market will bear, once the offering is brought forth?”
Factors suggesting higher prices at the subject property include the obvious
ones, e.g., being a self-contained destination, intended quality of the units, the
recommended amenity package and services for the owners, the adjacent beach, the
unique design, the wonderful views, etc.
Factors suggesting more modest prices include the lack of a proven market for
fractional interests in Manzanillo, the fact that truly high real estate prices have not
come to the local area, perhaps greater perceived value in simply renting and/or
purchasing whole ownership, and possible future terror attacks and economic
downturns, etc.
Shown below are the suggested starting prices.

• 1/12 shares
• $52,500 for a one-bedroom unit
• $78,750 for a two-bedroom unit
• $105,000 for a three-bedroom unit
• 1/4 shares
The prices result in the following.
price per price per mark-up

size of share/bedrooms price sq. ft. week over $400
1/12
• one $52,500 $700 $13,125 1.75
• two $78,750 $700 $19,685 1.75
• three $105,000 $700 $26,250 1.75
1/4
• one $135,000 $600 $11,250 1.50
• two $202,500 $600 $16,875 1.50
• three $270,000 $600 $22,500 1.50
Per week prices for the 1/12 shares would be $13,125 for a one-bedroom,
$19,685 for a two-bedroom, and $26,250 for a three-bedroom. For the 1/4 shares, the
per week prices would be $11,250, $16,875 and $22,500, respectively. The per
square foot price for the 1/12 shares would be $700, representing a 1.75 mark-up over
the presumed $400 for whole-ownership. The per square foot price for the 1/4 shares
would be $600, representing a 1.50 mark-up.
5. Implications for the consumer

Now let us see what the recommended prices suggest in terms of possible
perceived value in the purchase by the consumer, i.e., the rationality of such a
purchase versus simply renting overnight accommodations. It is recognized that most
such consumers at the subject property will be sufficiently wealthy to not have to
belabor over the decision to allocate discretionary dollars to the purchase of real

estate in a prime location. However, at some time even for the wealthiest, rationality
and value probably enter the decision-making process.
Shown below are what the recommended 1/12 share prices would translate
into on a nightly rental basis for the first 20 years of ownership. Prices are given for
two scenarios, including if the consumer: (1) financed their purchase at 20 percent
down, 7.5 percent interest, and a 20 year term; or (2) paid cash. On average in the
current shared-ownership industry, only about 40 percent of consumers finance their
purchase, while about 60 percent pay cash. But, it is still interesting to consider the
implications of nightly costs if financing.
The following examples also assume annual dues of $2,500 for a one-
bedroom unit, $3,000 for a two-bedroom unit, and $5,500 for a three-bedroom unit,
and 600 nights of use over a 20-year period, at the full 30 nights per year. The
examples are obviously overly simplified in that they do not account for loss on
investment, escalation in annual dues, paying off the loan sooner, etc. But, some
interesting results do appear.
one-bedroom two-bedrooms three-bedrooms
purchase price $52,500 $78,750 $105,000
down payment at 20 percent $10,500 $15,750 $21,000

monthly payments $81,900 $122,500 $163,000
annual dues $50,000 $60,000 $70,000
total paid $142,400 $198,250 $254,000
nightly rate, if finance (600 nights) $235 $330 $425

nightly rate, if pay cash (600 nights) $170 $230 $290
nightly rate after 20 years (30 nights) $85 $100 $115
As shown above: (1) if a purchaser paid $78,750 for a 1/12 share in a two-
bedroom unit; (2) used the purchase the fully available 600 nights over a 20-year
period; and (3) financed the purchase at 20 percent down and 7.5 percent interest, and
did not pay off the loan early, the nightly charge for the 600 nights would be $330.
Such nightly rates for 20 years might raise the eyebrows of potential consumers
despite the quality of the units, the services provided, and the location.

On the other hand, if a consumer paid cash at the outset, the average nightly
rate over a 20 year period would be reduced dramatically to only $230. After the first
20 years (i.e., after the 20-year note was paid off and only annual dues had to be paid
thereafter) the average nightly rate would be only $100, assuming no escalation in
annual dues. For a one-bedroom unit, these figures would be $235, $170 and $85,
respectively. For a three-bedroom unit, they would be $425, $290 and $115.
In summary, the recommended prices for a 1/12 share may suggest
questionable value to some consumers who finance their purchase. However, such
value is significant for consumers who pay cash. And of course, the real estate is still
owned at the end of the 20 years for resale, if desired.
Shown below are comparable figures for the 1/4 shares.
one-bedroom two-bedrooms three-bedrooms
purchase price $135,000 $202,500 $270,000
down payment at 20 percent $27,000 $40,500 $54,000

monthly payments $210,000 $315,000 $420,000
annual dues $100,000 $120,000 $140,000
total paid $337,000 $475,500 $614,000
nightly rate, if finance (1,820 nights) $185 $260 $335

nightly rate, if pay cash (1,820 nights) $130 $175 $225
nightly rate after 20 years (91 nights) $55 $65 $75
Sales Pace
Anticipating a sales pace for any one-of-a-kind product or service is obviously
difficult. We found in Chapter II that the average number of monthly sales for fractional
interest projects disclosing such information in our most recent survey was about eight
interests. Only three projects reported a monthly pace of more than 20. Some 17 projects
reported an average monthly sales pace of five interests or less; 10 reported it to be
between six and 10; five reported it to be between 11 and 20; and two reported it to be
between 21 and 24.
So, what to expect at the subject property? If 32 units are sold as 1/12 shares, 384
shares would be generated. The 16 1/4 share units would generate another 64 shares, for

a total of 448. If the industry average of eight sales per month were attained, sell-out
would be in about 4 1/2 years. Due to an untapped market in Manzanillo and the many
unique characteristics of the subject property, the sell-out could be more rapid. But at
this time, let us simply assume the national average in Year 1 of sales, increasing to 10
per month in Year 2, and to 12 per month in Year 3. As shown below, this results in a 3
1/2 year sell-out.
average sales annual cumulative

year per month sales sales
1 8 96 96
2 10 120 216
3 12 144 360
4 12 88 448
Miscellaneous Recommendations
Following are a series of miscellaneous recommendations that should enhance the
potential success of the proposed fractional interest offering at the subject property in
Manzanillo.
1. amenities, services and benefits

a. the amenity package as currently planned with indoor/outdoor swimming
pool/deck area, fitness center, and clubhouse with business facilities,
meeting room, changing rooms, restrooms, whirlpool spa, the stairway to
the adjacent beach at Las Hadas, etc.
b. a strong ambience of privacy, exclusivity, security, serenity, nature,
environment, family, away from crowds, beauty and value
c. an outdoor hot tub on the deck of each unit, if possible
d. pre-stocking of units prior to arrival with food and beverages
e. weekly owners’ parties and other social events
f. private storage lockers/spaces
g. a resale program
h. a rental program
i. an external exchange program
j. 24-hour security, and well defined and advertised

k. discounts at one or more of the local fishing trip operations as well as a
golf course
l. a concierge service to make arrangements for dinners and tours, advise on
local activities, set tee times, etc.
m. a shuttle service to the airport, downtown, golf and other attractions
2. the units
a. two fairly similar master bedrooms in the two- and three-bedroom units
b. stacked washer/dryer in all units
c. extra 1/2 guest bathroom in all units
d. upscale finishings and furnishings
e. internet hookups
f. plasma TVs, complete entertainment centers, surround sound system, etc.
g. more emphasis on a great-room concept and bathrooms over bedrooms
and kitchen
h. upscale bathrooms with dual sinks, granite countertops, nice hardware,
floor heat, instant hot water, etc.
i. compact, but attractive kitchens with higher quality appliances, cabinets
and hardware, small wine cooler space, etc.
j. large outdoor decks and balconies
k. maximize views from all units
Anticipated Financial Performance

Preparation of the anticipated financial performance component of a feasibility
analysis for any type of resort real estate product involves many variables and
assumptions, as described in the preceding sections of this final chapter as well as in this
final section itself. The need for using unproven assumptions is especially exacerbated
for the subject property due to its unique characteristics and lack of any direct
comparables in Manzanillo.
The remainder of this chapter is divided into three sections. The first one
describes assumptions used in determining “product costs,” i.e., all costs required in

creating the physical product. The second section describes assumptions used in
determining “operating costs,” i.e., marketing, sales and administration. The final section
summarizes results in terms of the anticipated financial performance of two possible
products, including the 1/12 shares and 1/4 shares.
A. Product Costs
1. Number and type of units, as per previous discussion:
• 1/12 shares
• eight one-bedroom units with 900 square feet
• 16 two-bedroom units with 1,350 square feet
• eight three-bedroom units with 1,800 square feet
• 32 total units with 43,200 square feet, for an average size of
1,350 square feet
• 1/4 shares
• four one-bedroom units with 900 square feet
• eight two-bedroom units with 1,350 square feet
• four three-bedroom units with 1,800 square feet
• 16 total units with 21,600 square feet, for an average size of
1,350 square feet
• 48 total units, including 12 one-bedroom units, 24 two-bedroom units
and 12 three-bedroom units, for an average size of 1,350 square feet.
The total interior, saleable space would be 64,800 net square feet. If
we assume that only 75 percent of gross building space is used for net
building space, it means that the 64,800 square feet of net square feet
would require 86,400 square feet of gross space. The difference of
21,600 square feet would be used for corridors, walls, stairways,
elevator shafts, etc. Neither the 64,800 nor the 86,400 figure include
exterior patios or balconies.

2. Number of shares/sales:
• 1/12 shares: 384 (32 units times 12 shares per unit)
• 1/4 shares: 64 (16 units times four shares per unit)
• 448 total shares/sales
3. Land costs: assumed at $1,846,150. This represents 61.5 percent of the total
land cost of $3.0 million (as per information from the client). The 61.5
percent is the proportion of total units planned in the overall development (78)
that are designated for the fractional interest units (48). The $1,846,150
represents only 3.8 percent of the estimated gross sales volume. The industry
average is about six percent.
4. Infrastructure costs: assumed at $10,000 per unit, for a total of $480,000.

Such costs include demolition of the existing structures, other land
preparation, utilities, circulation, etc.
5. Construction costs: assumed at $125 per net square foot. This is higher than
the client’s estimate of $80 to $100, but more in line with the high quality of
construction expected by today’s consumers as well as commensurate with the
suggested price.
Initial construction costs would be $112,500 for a one-bedroom unit with
900 square feet, $168,750 for a two-bedroom unit with 1,350 square feet, and
$225,000 for a three-bedroom unit with 1,800 square feet. Total construction
costs for the 48 units would be $8.1 million.
6. FF and E costs: assumed at $35 per net square foot. This is higher than the
client’s estimate of $18, for the same reasons as the higher construction costs.
Initial such costs would be $31,500 for a one-bedroom unit, $47,250 for a
two-bedroom unit, and $63,000 for a three-bedroom unit. Total FF and E
costs for the 48 units would be $2,268,000.

7. Amenities, landscaping and parking: assumed at $1.0 million. It also is
assumed that total costs for this item will be higher when including the
additional 30 whole-ownership units – perhaps $1.5 million, or more.
8. Sales office: assumed at $250,000. This cost may not be necessary if sales
are conducted off-site and/or if one of the units or some of the common space
is used during the sell-out period. At any rate, the space should be very nicely
furnished and large enough to allow for privacy during the decision-making
process.
9. Soft costs: assumed at 5.0 percent of appropriate hard costs, for a total of
$604,900. Such costs should include design, legal, permits, etc.
10. Contingency: assumed at 7.5 percent of appropriate hard costs, for a total of
$907,350
11. Finance costs: assumed at $2.5 million
The many preceding assumptions result in the following product costs for the
48 fractional interest units. It is emphasized that most such costs simply represent
best guess estimates by the consultant at this time.
source amount
land $1,846,150
infrastructure $480,000
amenities, landscaping, garage $1,000,000
construction $8,100,000
FF and E $2,268,000
sales office $250,000
soft costs $604,900
contingency $907,350
financing $2,500,000
total $17,956,400
cost per unit $374,090
% of gross sales 37.2%

The total product costs for the 48 fractional interest units are roughly
estimated at $17,956,400, or $374,090 per unit and 37.2 percent of the estimated
gross sales volume. This latter figure is significantly below the current industry
average of about 50 percent.
B. Operating Costs
1. Initial prices, as previously suggested, and assumed that all prices increase 7.5
percent annually:
• 1/12 shares
• 1/4 shares
• The overall weighted average price per share during the first year of
sales would be $96,425.
2. Sell-out period: 3 1/2 years, as previously discussed, and re-shown below.
average sales annual cumulative

year per month sales sales
1 8 96 96
2 10 120 216
3 12 144 360
4 12 88 448
3. Total gross sales volume: estimated at $48,282,840, with this amount being
calculated as follows.

shares average price sales
year sold per share (@+7.5%) volume
1 96 $96,425 $9,256,800
2 120 $103,655 $12,438,600
3 144 $111,430 $16,045,920
4 88 $119,790 $10,541,520
total 448 $107,775 $48,282,840
4. Marketing costs: assumed at 8.0 percent of the estimated gross sales volume
as per current industry averages, for a total of $3,862,625
3. Sales costs: assumed at 8.0 percent of the estimated gross sales volume as per
current industry averages, for a total of $3,862,625
4. General and administrative costs: assumed at 3.5 percent of the estimated

gross sales volume as per current industry averages, for a total of $1,689,900
5. Start-up costs: assumed at $500,000, as per current industry averages
6. HOA short-fall costs: assumed at $250,000, as per current industry averages
The preceding assumptions result in the following operating costs.
source amount
marketing $3,862,625
sales $3,862,625
G and A $1,689,900
start-up $500,000
HOA short-fall $250,000
total $10,165,150
Total operating costs are estimated at $10,165,150, representing 21.1 percent

of the estimated gross sales volume. This latter figure is slightly above the
current industry average of about 20 percent.

C. Before-Tax Profit
As calculated, the estimated total gross sales volume from complete sell-out of
the 48 fractional interest units with 448 shares/sales is $48,282,840. When
subtracting estimated product costs of $17,956,400 and operating costs of
$10,165,150, the remaining before-tax profit would be $20,161,290. These
figures are summarized below.
gross sales volume $48,282,840

product costs ($17,956,400)
operating costs ($10,165,150)
remainder $20,161,290

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COMMENTS ON A POSSIBLE

FRACTIONAL INTEREST PROJECT IN

Ragatz Associates i Roffe; Manzanillo: 02/07/sw

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TABLE II-1 U.S. Income-Eligible Households for a HFI/PRC Purchase, By

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1. a tour of the site and the environs

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This document contains three additional chapters. Chapter II describes the

1. In 2005 there were 723,538 tourists to Manzanillo. This represents a good

Ragatz Associates 2 Roffe; Manzanillo: 02/07/sw

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TI!:KET AC] PAriADISE

As a child, I grew up hearingstoriesofMexico's magicalplacesfrom my adv€nturesome gBndparents.

Dinneral lhe resort'spremi€radulis-onlyrestaurantLegazpiwasa goumet lreat,from menuto

oneofKarmina's eighl swimmingpools.I chosethe 8o-minulehotrockmassageandwas soonfeeling

After havingenjoy€dsomeexcellentmealsat th€ resortrestaurants, it was time for somethingwilh

Anotherfascinalingforay is the six-hourCuyutlanE€o-Paradise Tour, in which you leam how s€a

KAREtt SCHALERresidesin Scottsdale,Arizona.She is an Emmy-winnin9reporter who work as

HOW TO GET THERE

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B. SUPPLY SIDE CHARACTERISTICS

Industry Performance: 2005

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resales (FI/PRC) $47.9

presales (FI/PRC) $388.0

new closed sales

resales (FI/PRC) 2.4%

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resales (FI/PRC) $31.5 $47.9 $16.4 52.1% 2.0% 2.4%

Among independently developed projects, $1,200

$300 $160.7 $513.3

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• HFIs and PRCs at seven, compared to TFIs at three

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Existing Fractional Interest Projects

Project Community Type

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Club Residences at Vail Mountain Lodge & Spa Vail, CO PRC

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Kinlochen Lodge at Crystal Mountain Resort Thompsonville, MI TFI

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Stoneridge Townhomes Sunriver, OR TFI

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Poet's Cove Seaside Resort Vancouver, BC PRC

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Club/Company Based in: Started Sales in:

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status of units TFI HFI PRC all

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unit size TFI HFI PRC all

studio 425 460 5415 430

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developed by private developers. Only 18

percent), beach (27 percent), golf (13 TFI

(four percent). Ski destinations are most

common among all three tiers of product. 30%

TFIs are located primarily in ski (53 20%

percent) and beach (37 percent)

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