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Timeshare Net Sales Top $4.7 Billion Stateside In 2003
Hotel chains grab a share of profits; new options make timeshares more flexible
By JOANISABEL GONZALEZ-VELAZQUEZ
November 4, 2004
ORLANDO, Fla.With 2003 net sales topping $4.7 billion on the U.S. mainland alone, according to a Pricewaterhouse-Coopers survey, the timeshares industry has gone from being an emerging vacation product to a solid industry that promises to keep growing.
The survey, commissioned by the American Resort & Development Association, showed that in 2003, timesharing grew 11% compared with 2002. In timesharing, a customer buys a hotel room or villa to be used for a specific period of time each year.
The survey analyzed the responses of 43 timeshare companies considered to have the largest share of industry sales. An active timeshare resort generates on average $16.8 million per year and sells more than 2,500 unit/weeks.
Hotels have taken the cue and have started to offer timeshares more aggressively, which, in turn, has contributed to the timeshare industrys growth. Major hotel brands have increased their revenue considerably by offering the product, said David Clifton, managing director for Europe, the Middle East, Africa and Asia for Interval International, which is the leading exchange vacation company in the world. "Hotel brands have helped a lot in strengthening the credibility of timeshares," he said.
Clifton made his statements during the Timeshare & Resort Development Conference, held in central Florida from Oct. 25 to 27. He said timeshares have evolved enormously since the product was first launched in the early 1980s.
Hotel chains grab a big chunk of the timeshare market
Marriott International, considered to be the leader in the timeshare industry, generated $1.22 billion in revenues in 2003. The hotel chains timeshare program, Vacation Club International, has registered an average 20% annual growth rate since it was launched in 1996 and has 256,000 owners. Marriotts timeshare products include the Ritz- Carlton Club, Marriott Grand Residence Club, and Horizons.
Meanwhile, Starwood Vacation Ownership, a subsidiary of Starwood Hotels, which operates six brands, including the Westin, Sheraton, and Four Points by Sheraton in Puerto Rico, registered a 30.7% increase in timeshare sales in 2003.
Clifton explained that timeshares are profitable for developers and hoteliers because the risk is spread among the buyers. They also provide numerous sources of revenue, such as selling and reselling, financing, and operation and maintenance fees.
For hoteliers, there is another advantage. When owners choose not to use their timeshare units, hotels can let the rooms to regular guests. However, only a limited number of timeshare units can be included in a hotels inventory.
Another reason timeshares are an attractive business is because timeshare owners start paying upon signing their deeds, meaning developers obtain a considerable amount of money in advance to continue developing the property. Plus, since most timeshare owners cant afford to pay all at once (timeshares cost on average $14,652 each), they opt to finance the property. Interest becomes an additional source of income for developers. According to industry sources, a full 70% of timeshares are financed.
Clifton added that timeshares are becoming increasingly flexible, giving a boost to the industry. For example, the "floating week with a floating unit" option allows owners to travel during a certain period and stay in someone elses unit.
Timeshare property Disney Vacation Club, which already has more than 85,000 members, has implemented a point system to make their timeshares more flexible. Owners purchase points that go toward their stays; the number of points they pay depends on the time of year they travel and the units they choose. Disney Vacation Clubs accommodations range from studios to two-story, three-bedroom villas.
Timeshare owners can also travel the globe by swapping units with other Interval International hotel members. Considered the leading exchange vacation company with more than 2,000 resorts in 75 countries, its member hotels include Disney Co., Marriott International, and Starwood Resorts.
Running a timeshare
In 2003, timeshare developers invested about 26.9% of net sales in construction and land acquisition and 9.4% in general and administrative costs. Most of the net sales money goes into sales and marketing (47.6%).
Timeshare developers and hoteliers invest considerable sums of money in promotions; for example, potential buyers can stay at the properties before deciding to purchase a unit. Companies such as Marriott and Disney Co. have invested in new sale centers complete with audiovisual presentations, computers, and large-scale interactive maps to inform potential buyers of the products and offerings.
In June, CARIBBEAN BUSINESS reported the timeshare industry generated $67 billion for the U.S. economy and over 500,000 direct and indirect jobs on the mainland during 2002.
This Caribbean Business article appears courtesy of Casiano Communications.