Brand Your Assets: Consumer Trends That Will Impact Luxury Fractional Ownership In 2008

What do private jets, mega yachts, classic cars, helicopters, racehorses, fine art, a vineyard, a whiskey distillery, and an ostrich purse all have in common? If your first thought was “Gee, that’s a luxury I wish I could own,” (except for maybe the purse) you are actually quite close. For many affluent consumers, these luxuries can’t be wholly owned but they sure can be fractionally owned.

If you are reading this, you are probably already familiar with the rapidly evolving trend of asset–sharing or luxury fractional ownership. While it’s a consumer trend unto itself, there are several macro consumer trends that will have challenging and rewarding implications for the shared luxury ownership industry in the coming year.

With the help of trendwatching.com - an independent trend firm that scans the globe for promising consumer trends, insights, and related business ideas, we see some are old, some are new, some are borrowed, and some are green.

1. Eco Friendly and Green
   Green construction has been used for years by primary home builders. Learning the rules of green marketing and committing to environmental sensitivity is paramount. Developers will put it into product design as well as every day everyday operations. Expect to see more green buildings, solar power, water conservation, landscaping (or lack of), energy efficiency, hybrid car services, etc. as Green will become more prevalent in the development of second homes and leisure real estate. Eco embedded services and regulations will be implemented as eco goodness can be accomplished without too much effort. Consumers will be more enticed by green efforts as it impacts their environmental and leisure consciousness. BelleHavens, an equity destination club, began a GreenHome initiative in 2007 deploying energy conservation practices throughout each home. Look for resorts, residence clubs, and destination club homes to build green into aspects of their project including carbon-offset programs as well as demonstrate sensitivity to preserving the natural character of their developments.



2. Authenticity
   What is really real? Some would argue there exists a gap between the real world (consumers) and the business world. Consumers now have unlimited resources and techniques to uncover and expose that which is fake, untrue, phony, and scripted. Unauthentic companies can no longer get away with their fakeness. Consumers value authentic products with natural materials and authentic experiences such as adventure and eco travel, arts and culture, food and wine, spas and wellness, vacation stays in homes and apartments (like theirs.) Expect to see resorts and residences differentiate their product with authenticity. The Whiteface Lodge in Lake Placid, New York is a revival of an Adirondack Great Camp that celebrates its natural setting with timbers harvested from the property used in every room. The industry will further have to embrace accuracy and integrity in their marketing and sales messages. Consumers won’t buy into claims that emphasize “investment” potential for fractional real estate, or resorts that feature a relaxing Spa if all there is a gym with a massage table.



3. Unreal World
   And yet there is, not surprisingly, a counter trend where artificial experiences still thrive among consumers. Who can argue with the popularity of Las Vegas, Dubai, or even Disney World? The difference is that they are all mega sized and demonstrate that the fake and the make believe, when executed brilliantly, will still excite masses of consumers. Differentiation for shared luxury properties is still through authenticity available on a smaller scale. These places are designed for a narrower audience who has an affinity to a destination. They seek genuine experiences worth repeating rather than denying. What happens on their vacation doesn’t stay there.



4. Status Symbols
   With an unprecedented rise of high net worth individuals globally especially in the BRIC nations, owning luxury item such as a residence club or destination club will become somewhat of a status quo. Those who aspire to have a collection of “second homes” that are used only a week or two per year can now do just that. We expect to see fractional ownership marketed to the affluent more as part of their lifestyle. While residence and destination clubs are often being marketed in a manner consistent with attracting high-end buyers, the sales process tends to focus on features and benefits. We see the focus will be more on the relationship sales process and the ability to tap into the emotions of an affluent buyer. Having status in the world of the wealthy means getting consistent superior quality and feeling special throughout every experience.



5. Self Fractionalization
   Who would ever think that so many consumers would turn into mini-entrepreneurs? It’s the further evolution of the person to person marketplace. In the current real estate market, individuals with second homes are now looking to fractionalize their very own vacation home. The luxuryfractionalguide.com promotes a book on how consumers can actually fractionalize their home. An apartment owner in Paris has fractionalized three prime and pricey urban properties to create the Paris Pied–a-Terre Residence Club. Expect to see more hybrid fractional real estate alternatives that are consumer friendly and consumer driven. Education is critical as fractional ownership can be operationally and legally complex.



6. Unfixed Theme
   There is a continual shift in value perception among many consumers as they prefer experiences over physical goods. As they want to “collect’ many experiences and stories that go along with them, they find that “using” (sharing) is better than completely owning. Consumers have short satisfaction spans and will only want to own for a short (shared) periods of time, thereby collecting experiences and stories. “The fractional interest industry, fueled by the growing desire for luxury access, has grown four fold in the past three years. Luxury-goods purchases dropped 21 percent for each affluent consumer, while spending on buying and renting experiences gained 11 percent in the third quarter of 2007 according to research firm, Unity Marketing. These data display the undeniable interest in luxury access without luxury ownership,” comments Susan Kime, President of KIMEDIA, LLC, and expert in the fractional luxury field.



7. Story Ingredients
   Storytelling is perhaps one of the oldest forms of communication. Consumers today want products and services to contain story elements that will enable them to tell their own story, and, in many cases, for the purpose of impressing others. Brand stories are everywhere. (Look on the back of your water bottle.) Expect to see more honest (albeit poetically enhanced) stories about amenities, destinations, properties, local history, and authentic experiences. A shared luxury property will carry a story about what it is and why it’s there to intrigue a buyer even more. “The Whiteface Lodge is handcrafted in the style of the Adirondack Great Camps with architectural elements designed by local artisans. Ironwork fixtures hand-forged by local blacksmiths stand as testament to generations of Adirondack craftsmanship.”
   
   Great salespeople are considered great storytellers because they use real life experiences relayed to them by current owners. These stories help a potential buyer to see themselves owning the product or being ‘part of the club’. When a prospect begins to see themselves owning something, they’ve arrived at the point where they’re ready to buy. When it comes to creating a vivid and memorable picture in a prospect’s mind, there’s nothing more powerful than a story.



8. Time as the new currency
   Time is a big desirable in 2008. No surprise here as time has become a scarce resource and the new status symbol. Consumers crave quality time for themselves and to spend with friends and family. Consumers will embrace the thought of dedicated weeks every year to reconnect and experience new places with others close to them. Time and space will not only create happiness from the experiences, but also the memories derived from those experiences. The message from shared residences will emphasize how their product offers multi seasonal sanctuary and retreat as well as a variety of emotional interactions that create a lifetime of experiences and memories.



9. Brand Assets
   Brand extensions are proliferating. Consumers now can have footwear from Harley-Davidson, a baby stroller from Jeep and a kitchen sink from Jacuzzi. According to PricewaterhouseCoopers, there were a total of 34 new hotel brand launches in the U.S. in the last three years led by the luxury hotels segment. The reasons include above-average supply growth, record average daily rates, demographic changes, consumer preferences, and availability of financing. Medallia, Inc. reports that while hotel performance scores are increasing, well-known hotel brands are losing "mindshare" among customers, and a growing number of hotel brands are struggling with a phenomenon that occurs when a guest's positive impression of a brand is tarnished by an actual stay experience. As branded hospitality companies continue to overwhelm guests with brand choices, private residence clubs and destination clubs will need to better build their own brand identity for their relatively niche affluent audiences. Affluent consumers will quite often differentiate a brand through design and innovation that resonates with them and extraordinary service levels that exceed their expectations.

In the business of luxury shared ownership and all its hybrids of co-ownership, those who can capitalize on these trends and brand their assets will take luxury shared ownership to a level where the sum of the fractions becomes greater than the whole. The opportunity is to turn these trend insights into products, innovations, and experiences that will stimulate consumers in the coming year and beyond.

Lawrence Hefler is principal of BrandShares International – a sophisticated marketing and branding consultancy that helps hospitality, leisure real estate, and shared ownership companies find, keep, and grow customers. His brand heritage includes Hilton Hotels, Walt Disney, BellSouth, American Express, and Sol Meliá. He can be reached at [email protected].