The first fractional began back in the 90s in Deer Valley Resort in Park City. Now, fractionals are a real estate trend. The main consumers of this type of real estate are Baby Boomers whose idea of retirement involves luxury, full service, and prime location.

Many people get confused about the difference between a fractional property and a timeshare. A fractional includes the luxury fractional and the Private Residence Club (PRC). It can also be difficult to distinguish the difference between these two, very similar properties. Here are the main characteristics of these three different properties.

Actual, deeded ownership. A fractional property is something in which multiple owners have a deeded portion to a specific unit. Owners will own anywhere from three to thirteen weeks per year in this specific unit. Common ownerships are ¼, 1/7, 1/8, 1/10, and 1/12.

A timeshare does not usually have a deed, but uses a "right to use" or points system instead. Since timeshares are allocated one week per user, there may be as many as 52 users per unit.

Real Estate Value. Fractional properties have actual real estate value, which can fluctuate with the market, and may even appreciate.

Timeshares typically lose their value. If you try to sell your timeshare in the first few years, you will likely recoup about 50% to 80%.

Operators and Services. Private Residence Clubs are run by 5 to 6 star hotels, which are always on prime real estate (golf course, ski-in/ski-out, beachfront) and provide guests with the full service and amenities of the hotel. This includes luxurious interior design, the best construction materials, heated pools, Jacuzzis, 5-star dining, room service, laundry and maid services, free high speed Internet and 24-hour concierge. The Ritz Carlton, Four Seasons and St. Regis are among the best Private Residence Clubs in the world.

Luxury fractionals don’t have quite the level of service and amenities of the PRC. They are also not necessarily affiliated with a hotel, or located in the same prime real estate.

Timeshares are run by 2, 3, or 4 star hotels. Their location is not as ideal as those of the PRC. A high end timeshare will provide use of the hotel with which it is affiliated, but since it is no higher than 4 stars, will not be the same experience as a fractional.

Size. Fractional units are typically one to four bedrooms, and can range from 1,500 to 2,500 square feet. They have Master Suites, baths, gourmet kitchens, dining rooms, spacious living rooms, private pools, fireplaces, and balconies.

Timeshares are much smaller and have lower quality furniture and construction materials. The mid-level timeshare is usually one to two bedrooms, with a full or partial kitchen, and a hot tub.

Cost. A fractional can cost anywhere from $100,000 to $3M, and the average is $260,000. Owners are required to pay dues every year. Luxury fractionals typically run an average of $1,200 per week, or $7,000 per year. The dues for a Private Residence Club are a bit more expensive, at $12,000 – 16,000 per year.

To purchase time in a timeshare, it runs about $10,000 to $35,000, and averages at $16,000. An annual fee of $500 to $1,000 is required.

Use and Exchange. Owners of fractionals have a few different management systems. There is a fixed week system, where the management company will assign owners specific weeks each year. The second method is floating weeks, where owners attempt to make a reservation for desired weeks, which the managers will prioritize and then allocate. The hybrid method is a combination of fixed and floating.

At the Ritz Carlton Residence Club in Jackson Hole, you can see the implementation of the floating method. Each owner is guaranteed four weeks, and they submit their reservations to management in June. The priority is determined by owner seniority – the first owner gets his pick the current year, the second owner is put first on the list the following year, and so on until it’s gone full circle. At the Ritz Carlton Residence Club in Bachelor Gulch, they use the fixed system, and everyone is given their schedule.

Owners can trade weeks amongst themselves, and can rent unused weeks to outside owners at a market value rate. There are companies that provide this service, such as Travel En Vogue.

Timeshares also use the fixed and floating methods, and an additional points trading system. They are also able to swap time with other users.

Fractional properties, especially Private Residence Clubs, are more luxurious, more expensive, and make more fiscal sense than a timeshare. Timeshares are ideal for people who wish to purchase a yearly vacation at a lower-end resort.