The potential of fractional ownership in the luxury lodge sector
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With many lodge developments located in some of the finest holiday destinations in the UK and many offering a wide range of leisure facilities, selling on a fractional basis makes perfect sense for park operators looking to take advantage of the benefits of fractional ownership.
The last few years have seen a surge in popularity in lodge ownership. Many developments now offer high specification lodges with bespoke features allowing buyers to customise their design.
Fractional ownership has the potential to work well in the sector. And with many potential second home buyers reassessing their financial and lifestyle priorities in 2020, there has never been a better time for lodge park developers to add fractional to their sales mix.
Some of the key considerations that are relevant to any fractional project apply equally when setting up the ownership framework for a lodge - pricing, usage rights, a transparent structure etc.
But there are some additional considerations which are unique to the luxury lodge sector:-
Pricing - whilst there are a number of ways of developing a pricing strategy for fractions of lodges, an added consideration is that they are likely to have a limited lifespan - anywhere between 15 and 50 years, and this must be reflected in the pricing.
Ownership structure - this is likely to be different to traditional 'bricks and mortar' structures. Depending on where the lodge is located, fractional owners may not own the ground on which the lodge is located but may just have the benefit of a licence.
VAT - rules relating to supply of lodges are complex and whilst it may be possible to develop a legal ownership framework that takes a sale outside the scope of VAT, specific advice will be required on each project, particularly as to whether HMRC will treat the sale of a fractional interest in a lodge as subject to VAT.
As the fractional sector matures, we are seeing more innovative luxury lodge schemes - some offering highly flexible usage rights with rental options, whilst others are targeted at investors with annual returns, a guaranteed exit route but no or very limited personal use.
We have worked with a number of luxury lodge park operators in the UK as well as smaller developers - helping them to set up a successful operation offering an alternative, affordable ownership option. We are also assisting operators in mainland Europe looking to sell on a fractional basis.
Please contact us for an initial discussion about the options you may have.