Revenue Management In Timeshare Businesses


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Apply RM tactics in new ways

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  • Revenue management in a time share business needs a multi-faceted approach. After maximising sales on the sale of the timeshare units, there should be a strategy to re-sell the units on a more short-term basis (when expected to remain un-used). Following there is a need to apply cruise ship revenue management i.e. considering the starting point for ancillary sales to be breakeven point. An 'on-board revenue manager' should aim to maximise ancillary sales through a comprehensive upselling program that is thoughtfully rolled out using every touch point i.e. prior/on/post to arrival.
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Revenue Management In Timeshare Businesses

  1. 1. Revenue Management in Timeshare Businesses Yuan Shen Undergraduate Student Oxford Brookes University
  2. 2. The Concept of Timeshare <ul><li>Timeshare as a business emerged in 1960s in Europe and ‘has grown substantially over the past decade in both size and product configuration’ </li></ul><ul><li>Involves the purchase of a business asset to give owners a period of time for usage. The member owns their portion of the holiday unit for the time they plan to use it, and could receive a deed for that portion of the property. </li></ul><ul><li>Timeshare owners are allowed to exchange schemes to other membership resorts or clubs worldwide by paying some extra fees </li></ul><ul><li>Creates jobs, promotes tourism and assists economies to grow </li></ul><ul><li>3 types: </li></ul><ul><ul><li>fixed week timeshare scheme is the same week owned each year which is the most common </li></ul></ul><ul><ul><li>the floating week scheme is the owner could select any week of the year (floating - annual) or </li></ul></ul><ul><ul><li>a particular season (floating - season); the points timeshare schemes are very flexible and for daily or weekend stay </li></ul></ul><ul><li>Strong at sales but relatively weak at operations </li></ul>
  3. 3. Strengths & Weaknesses <ul><li>Consumers perspective </li></ul><ul><li>Strengths </li></ul><ul><ul><li>Save money on vacations; </li></ul></ul><ul><ul><li>Once owned, only pay management fee; </li></ul></ul><ul><ul><li>Exchanges during membership resorts; </li></ul></ul><ul><li>Weaknesses </li></ul><ul><ul><li>Limited usage; </li></ul></ul><ul><ul><li>High price to purchase; </li></ul></ul><ul><ul><li>High maintenance fee; </li></ul></ul><ul><li>Opportunities </li></ul><ul><ul><li>Investment; </li></ul></ul><ul><ul><li>Earn money; </li></ul></ul><ul><li>Threats </li></ul><ul><ul><li>Lack of legal protection; </li></ul></ul><ul><ul><li>Economic crisis; </li></ul></ul><ul><li>Developers perspective </li></ul><ul><li>Strengths: </li></ul><ul><ul><li>Get capital return quickly </li></ul></ul><ul><ul><li>Increase the profitability </li></ul></ul><ul><ul><li>Nice location </li></ul></ul><ul><ul><li>Full occupancy when all other hotels are empty (low season) </li></ul></ul><ul><ul><li>Savings on maintaining a consistent staffing level </li></ul></ul><ul><li>Weaknesses </li></ul><ul><ul><li>High pressure selling required </li></ul></ul><ul><li>Opportunities </li></ul><ul><ul><li>Resale business & Increased sales </li></ul></ul><ul><li>Threats </li></ul><ul><ul><li>Still a low penetration rate </li></ul></ul><ul><ul><li>Economic crisis </li></ul></ul><ul><ul><li>Increasing taxes </li></ul></ul><ul><ul><li>Credit crisis </li></ul></ul>
  4. 4. Not as Successful as Expected <ul><li>Timeshare developments will be scaled back, as Wyndham struggles to find customers with sufficient credit quality </li></ul><ul><li>The timeshare segment, including Marriott, Ritz-Carlton, Renaissance Hotels, the Fairfield Inn and Suites, accounted for just 13% of total sales in the last quarter in 2008, but its operating losses of $681 million wiped out the $160 million in pre-tax gains from lodging; in fact, the timeshare business has been a drain on cash flow for three years running because decreased sales demand and fewer opportunities to sell packaged timeshare receivables </li></ul>
  5. 5. RM in Timeshare Business <ul><li>Should consider following the model where the core product is given away i.e. Printers, mobile phones etc. </li></ul><ul><li>Optimal capacity management is a good option to increase revenue. </li></ul><ul><li>Optimal demand forecast can be implemented to enable classic application of RM tactics </li></ul><ul><li>The overselling/overbooking opportunity should be explored further </li></ul><ul><li>Maximisation of ancillary sales should be the focus due to captive audience </li></ul>