Fun with Fractionals

In the gilded bubble otherwise known as Aspen, Colo., the local pecking order isn't kind to outsiders. At the top are the natives, then the Johnny-come-latelies, followed by the tourists--who are vermin in most resort towns. But in Aspen, the bottom slot goes to guys like David Massarano, a prosperous real estate attorney from Houston who recently dropped $470,000 for three slices of a one-bedroom condo in the six-week-old Hyatt Grand Aspen, 157 steps from the gondola at the base of Aspen Mountain.

Doesn't seem hospitable to label a Texan of some standing a sucker in a small western town--a small western town with an airport, at least one $46 million ranch and visits from Cher--where his ski-happy family has been oiling the local economy since he was a kid. But Massarano doesn't mind. "I've been called worse things, being from Texas," chuckles the 50-year-old, who searched Pitkin County for years before finding the deal of his downhill dreams in the sprawling Hyatt, where the ghosts from bacchanals at the torn-down Continental Inn still dance.

Massarano is not the only flatlander engaged in a high-stakes land rush for fractionals--the new-millennium term for time shares in lavish condominium projects in Aspen and other beautiful-people playgrounds sprouting around the world. Shelling out an average $221,600 for a deeded share, these Range Rover-in', Fendi-friendly folks who live to ski, golf and power shop are buying a couple of weeks of prime time in first-class venues stretching from the West Coast through the Rockies to the Gulf of Mexico. More often than not, though, the tab ranges from $300,000 to $750,000 and up in the higher elevations of Lake Tahoe, Calif., Jackson, Wyo., and, of course, Aspen, where the Hyatt Grand has sold nearly half its 1,000 shares, selling for $80,000 to $1 million apiece. Nor is it that much cheaper at sea level at Ritz-Carlton residences in St. Thomas, U.S. Virgin Islands, and Jupiter, Fla.

Little wonder that the market in 2004 generated $1.5 billion in sales, triple 2003's, according to Ragatz Associates, a consulting and market-research firm in Eugene, Ore. That kind of volume is beginning to pay off for the hospitality industry's big guns--Ritz-Carlton, Four Seasons, Starwood, Hilton, Marriott and Hyatt, among others--which have bottle-fed the fractionals concept for more than a decade. The motivation? Financing expensive hotel projects is easier and far more lucrative this way. "The time-share business has been a very good business for these companies because it tends to have high margins," says Bill Crow, an analyst with Raymond James & Associates in St. Petersburg, Fla. "Three to five to six years after you've opened, you've made your money back--compared to the 10 years or more it usually takes [with a hotel-only project]."

Wielding the algorithmic model refined by NetJets and other fractionals businesses (if I have X customers, how many jets, boats, rooms, etc. will I need to meet demand at any given time period Y?), developers have zeroed in on a core market: older, well-heeled baby boomers, high-level executives and flush empty-nesters who want to play among themselves or with their families.