This couple reportedly bought part of a Hawaii resort: What is fractional ownership?
Many travelers have likely felt the urge to extend their stay at the end of a vacation, but one couple went even further and decided to buy part of the Hawaii resort where they were staying.
Joan and Ned Woodward signed a fractional ownership deed for a three-bedroom townhouse on the water at Timbers Kaua’i in October 2022, CNBC Make It reported. Their one-sixth stake reportedly cost $1.125 million and got them six weeks of planned vacations each year (they could also take a last-minute trip if another fractional owner cancels).
“We have a deed and a physical asset that we can sell,” Joan told the outlet. “We can give it to our kids when we retire, which is very different from a timeshare.”
So, what is fractional ownership and how does it work? Here’s what travelers should know.
What is fractional ownership?
Fractional ownership allows consumers a way to buy a percentage of an asset, such as real estate or artwork.
In the case of hotels, travelers can purchase a room they share with other owners and each gets to use it for a certain amount of time every year, according to Dan Jin, an assistant professor of retail, hospitality and tourism management at the University of Tennessee, Knoxville.
“So instead of using all your money on buying a whole hotel room, you just buy a fraction of it,” she told Paste BN. “So, it's like timeshares, but with a twist.”
Typically, owners get between two and 12 weeks to use annually – though that can vary – and work out preferences as a group, Jin said. The hotel generally manages the room and handles upkeep, though owners may have to pay additional fees.
Is fractional ownership a good investment?
Because buyers own a piece of the property in fractional ownership, their investment goes up and down with the market, Jin said. During times when owners aren’t using the unit, it can be rented out, and they get a slice of the rental income.
However, travelers may have to navigate sometimes complex dynamics between co-owners to make decisions about the unit, such as on decor, for instance, Jin said. “Making decisions with a group can be a real challenge,” she noted.
And given their unique setup, shares of a unit as compared with an entire property can be difficult to sell if owners decide they want out.
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Is fractional ownership different from timeshares?
Yes.
However, when compared with timeshares, in which owners own units of time rather than a part of the title, Jin said fractional ownership makes sense, as the former often lose value and are “almost impossible” to sell.
“Fractional ownership can be a smart investment choice compared to a timeshare,” she said.
Nathan Diller is a consumer travel reporter for Paste BN based in Nashville. You can reach him at ndiller@usatoday.com.