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Changes in Vacation Homes

Of course, it's hard not to wonder who has that much free time. Think athletes. Former Denver Broncos wide receiver Ed McCaffrey was hired to pitch Exclusive Resorts to celebrity sports pals. To make the deal sweeter, Exclusive Resorts has an alliance with the fractional private plane company NetJets, plus an on-site concierge team. The company's main draw is its collection of 145 houses in 30 destinations, including Hawaii, Paris, Telluride, and Scottsdale. (Don't forget that the opportunity to trade places was what originally made time-sharing so attractive.)

"Choice is a powerful component of our success," Brent points out. "How many homes can people own? How often can they actually return to one resort and be happy with the product?" And now that Steve Case has signed on as chairman, the company is stepping up its acquisitions. Exclusive Resorts and its competitors, such as Abercrombie & Kent Destination Clubs, are elegant solutions for anyone who isn't shopping for another beachfront villa on St. Bart's. However, there's always a traveler who just wants bragging rights at five-star hotels; that's why Leading Hotels has launched a deeded interest vacation-club alliance designed for people who want to live large at Gleneagles or Hôtel de Crillon. Of course, extended residence in hotels is not novel. Oscar Wilde did it. Ditto for Howard Hughes. Pierre Bergé recently put his apartment in the Pierre on the market. And soon Eloise may be able to buy hers in the Plaza: condo developer Elad Properties recently purchased the venerable Fifth Avenue hotel.

From a developer's point of view, the economics of mixed-use seem clear. For one thing, the revenue stream is stable. In the months after September 11, hotel occupancy rates plummeted in some markets, while time-share occupancy remained relatively steady. "It's a pre-paid vacation," says Howard Nusbaum, president of the American Resort Development Association. "People own that week and they're going no matter what." It turns out that resorts paired with any type of fractional real estate, condominiums, or single-family vacation homes are proving more lucrative for investors. "With this business model," says Nusbaum, "there's no imbalance of occupancy because residential always fills the golf courses, tennis courts, restaurants." By planting a five-star hotel next to an equally glossy vacation home enclave, developers also ensure a steady influx of qualified customers who might buy into the lifestyle. According to Auberge Resorts' Harmon, "Building a stand-alone hotel is often a long-term commitment; combined with another investment vehicle to increase the return, this makes it easier to get capital up front."

With all the mixed-use projects suddenly vying for your vacation dollars, it's worth pausing to consider whether this trend is the postmillennial equivalent of peddling Florida swampland. Not exactly. However, before you sign on the dotted line, you should know the difference between investing in real estate and sinking a large chunk of cash into a prepaid nonequity club, even one in which membership is transferable and personal knickknacks can be warehoused until your next visit. Getting in before the ground floor is poured usually helps, but how do you pick a property that's likely to appreciate in value? Sometimes gut instinct helps. The Setai sold out thanks to hotelier Adrian Zecha's track record. When looking at a hole in the ground or a scale model, you need either a fertile imagination or familiarity with the quality and level of service before making that leap of faith. It also doesn't hurt if Lenny Kravitz turns out to be your next-door neighbor.

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