The Hotel Industry – Timeshare

TACKLES TIMESHARING With lower occupancy rates, a sagging economy, and the changing demographics of travelers, hotel industry officials are constantly searching for ways to fill rooms. One hot topic is timesharing. Long considered the bad boy of the hospitality business, timesharing is coming of age in both size and stature. The entrance of companies like Disney, Marriott, and Hilton has served notice that timesharing is a viable occupancy option for the hotel industry. THE BASICS Timesharing’s image of past decades is quickly changing. Many vacationers now view it as a viable and economical option for future vacations. The timeshare market is exploding. In the past two years, almost 500,000 households have purchased a total of more than 700,000 timeshare intervals. That means there are more than 3 million owners at more than 3,000 resorts worldwide. Contrary to popular belief, a recent survey showed that most of these owners are happy with their purchase. «It is clear that timesharing is gaining in popularity, not only here in the United States, but also across Europe, Mexico, and in South America,» says Tom Franks, president of the American Resort and Residential Development Association, the timeshare industry body. «We expect the industry to double in the next 10 years and the hotel industry will definitely be involved in a big way.» Timesharing is the most prevalent form of vacation ownership. Consumers typically buy one or more weeks at a specific resort and can return to that resort every year or exchange it for a week at another resort. Prices currently average around $9,000, with annual maintenance fees of around $300. Vacation timesharing generally takes one of two forms: «Fee» timesharing gives the purchaser permanent rights–in the form of a deed–to the property.

About 85% of timeshare resorts sell under fee-ownership agreements. «Right-to-use» timesharing grants the purchaser the rights to the use of the property for an established period of time, such as 30 years. Under this type of timesharing, the purchaser does not receive a deed. Rather than return to their home resort every year, many owners opt to exchange to one of thousands of other timeshare properties worldwide. For a small fee, companies like Resorts Condominiums International or Interval International perform these exchange services for member resorts and owners. Many owners say this exchange privilege was a key reason for buying. Many hotel chains in the timeshare industry form their own internal exchange system to complement the exchange company services. Hotel companies have found that the basics of timesharing are an ideal fit for filling rooms. They have accomplished this by using existing facilities and services, as well as developing new properties and support structures. Their success stories tell the tale of why and how the hotel industry is tackling timesharing. THE MARRIOTT STORY While timesharing has been in the United States for just twenty years, Marriott has been around for more than six decades. In 1984, however, it entered the timesharing business and has turned the move into a very successful venture. «We looked into it and in theory it was a sound idea,» says Bill Marriott. «But, timesharing in practice was often not up to our standards. If we weren’t able to effect rigid controls on the quality of timesharing that Marriott offered, we weren’t interested in doing it.» That opportunity came in 1984, when American Resorts–which had recently opened a top-of-the-line timeshare project on Hilton Head Island called Monarch–initiated talks with Marriott. American Resorts’ concept of timesharing matched Marriott’s, but the company’s ability to carry that vision forward required major capital.

Marriott had the capital. Monarch’s success was an encouraging barometer and Marriott looked to new markets. Orlando was a very logical choice, because Marriott was already constructing a 192-acre resort complex: Mariott’s Orlando World Center. Construction of Sabal Palms, the first of two timeshare resorts adjoining Marriott’s Orlando World Center, began in February 1986. The resort offered Marriott’s customarily luxurious surroundings and by the summer of 1987 the resort had sold all available weeks. Construction of Sabal Palms’ sister resort, Royal Palms, began a year later and recently sold out ahead of schedule. Marriott’s fourth timeshare project was at Hilton Head Island’s signature location: Harbour Town. Construction began in 1987 and was completed in less than a year. Marriott’s Heritage Club at Harbour Town is keyed to the island’s exceptional sports facilities. Ownership includes special privileges at three golf courses and the Sea Pines Racquet Club. The 30-villa resort’s 1,500-week inventory sold out in July 1988, just nine months after its initial offering. On the heels of this success, Marriott decided to build its third Hilton Head Island timeshare resort, Harbour Club at Harbour Town.

Marriott’s newest resort on Hilton Head Island is Sunset Pointe at Shelter Cove Harbour, which has already sold out.

The resort features 25 timeshare residences, in addition to 86 existing luxury villas. Marriott is also developing a 25-acre oceanfront site for a new timeshare property, which is currently the Hilton Head Inn. The 288-unit property is called Grande Ocean Resort and started with brisk sales in April. Marriott’s third Orlando timeshare resort, Cypress Harbour, is a 500-villa property near Sea World. It has carried forward Marriott’s successful Orlando timeshare vision and is experiencing brisk sales. Marriott’s first resort in the west was Desert Springs Villas at Palm Desert, Arizona. The 236-villa resort is adjacent to Marriott’s Desert Springs Resort Spa. Streamside at Vail in Colorado features 150 villas within two miles of Vail Village and North America’s largest ski mountain. Its Paradise Island Beach Club in the Bahamas was Marriott’s first venture outside the U.S. The property offers 44 two-bedroom villas with an oceanfront location. Additional villas are planned. Marriott also recently announced that it plans a new timeshare resort on Barbados, next to Marriott’s Sam Lord’s Castle. It is called the Barbados Beach Club and started sales in February. With so many successful timeshare properties, Marriott serves as an ideal example of hoteliers involved in timesharing. Marriott now has over 40,000 owners, with annual sales of more than $100 million.

It offers many travel programs for their owners, including an excellent internal timeshare resort exchange program, exchanges throughout Marriott’s hotel and resort system, exchanges through one of the large exchange companies, one of the largest resale operations in the industry. Marriott also recently announced that it had signed an agreement to manage a timeshare resort where it had no direct capital investment. The company expects this management contract to be the first of many. Other hotel companies already involved in timesharing or considering involvement are expect to follow suit. Bob Miller, MORI’s executive vice president and general manager, feels that Marriott and other hotel companies can bring much to timeshare resort management. The advantages include: volume purchases and preventive maintenance for the property; collection of receivables and servicing of loans; a national rental program; access to the company’s reservations system; owner communications, systems support, and development; strong management; and much more. HILTON TAKES ON TIMESHARING In one of the most exciting timeshare industry developments since Marriott entered the business, Hilton Grand Vacations Company was recently formed. Though Hilton will probably not begin the construction of new timeshare properties until later this year it is already entering into the market aggressively. As part of HGVC’s formation, it has joined as partners with a successful timeshare company in Florida, Mariner, and thus, already has 15 timeshare resorts and more than 22,000 owners. In addition to excellent resort properties, Mariner also runs many rental programs and a resale operation that has one of
the highest volumes of any timeshare company in the United States. As with many hotel companies entering the business, Hilton’s timeshare objectives include: creating a system of high-quality timeshare resorts throughout the world; establishing property management and hospitality services that include reservations, resale, and rental segments; and establishing a club to provide exchange services and access to its frequent guest program and other hotel industry programs.

Another key player in this joint venture is Ed McMullen Sr. of American Resorts. Mr. McMullen has been highly successful in timesharing and he brings much experience to Hilton. Both Mariner and McMullen have had great success with high-quality two-bedroom, two-bath units of about 1,200-square-feet and this policy will continue with Hilton and future construction. Many resorts may be built on or near already-existing Hilton hotels and resorts throughout the world (e.g., the Caribbean, California, Colorado, Hawaii, Hilton Head Island, and Orlando). Owners will be able to enjoy all of the hotel or resort amenities and services. They will also have access to the Hilton HHonors program and other vacation packages offered by Hilton. Hilton’s timeshare ownership program will be based on a points system, which has become very popular in the industry. The firm also plans to interface with Conrad Vacation Ownership, Hilton’s other timeshare program. OTHER BIG NAMES IN TIMESHARING Many other hospitality companies have reviewed the advantages of timesharing and are entering the business. Among many, two perfect examples are Disney and Ramada. Disney Vacation Club (DVC) recently opened its first units at Walt Disney World. As with many companies in the industry, DVC tackled two major consumer concerns: flexibility and «hard-sell» sales techniques. By purchasing a real estate interest in Disney Vacation Club Resort, guests automatically become members of the club and are entitled to a variety of exclusive benefits and privileges. Members also receive an annual allotment of vacation points, which may be used on vacations at the resort or at more than 100 worldwide resorts currently offered through a «Member Getaways» program. «The flexibility of choosing among several different vacation experiences is what sets the Disney Vacation Club apart from many similar plans,» says General Manager Mark Pacala.

«The vacation points system allows members to select the type of vacation best suited to their needs, particularly as those needs change from year to year.» Each year, members choose how to use their vacation points, either for one long vacation or a series of short getaways. For a one-time purchase price and annual dues, guests may purchase a real estate interest in the resort, which expires after 50 years. The minimum purchase price is currently $11,730. According to Mr. Pacala, the Disney timeshare project is substantially ahead of projections. The entrance and success of Disney serves as more proof that timesharing is a viable option for many hotel companies. This past spring, Ramada International also entered into the timeshare business in the Bahamas. Through the purchase of a Divi timeshare resort near Nassau, Ramada is testing the waters to see if timesharing should be a part of a larger program for them. Divi recently emerged from Chapter 11 bankruptcy, with plans to concentrate on its five Caribbean resorts and ten timeshare locations. With 50 units, the Ramada International timesharing project is part of the 295-suite Ramada South Ocean. They offer both floating-time and fixed-week units.

With this kind of company, the timeshare industry is really coming of age.

Hotel officials obviously consider it an excellent way to fill rooms with happy vacationers.