With lower occupancy rates, a sagging economy, and the changing demographics oftravelers, hotel industry officialsare 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 aviable occupancy option for the hotel industry.
Timesharings image of past decades is quickly changing. Manyvacationers now view it as a viable and economicaloption for future vacations.
The timeshare market is exploding. In the past two years, almost 500,000 households have purchased a total ofmore than 700,000 timeshare intervals. That means there are more than 3 million owners at more than 3,000 resorts worldwide. Contrary to popularbelief, 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 acrossEurope, Mexico, and in South America," says Tom Franks, president of the American Resort and ResidentialDevelopment Association, the timeshare industry body. "We expect the industry to double in the next 10 years and thehotel 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 thepurchaser permanent rights--in the form of a deed--to the property. About 85% of timeshare resorts sell under fee-ownership agreements. "Right-to-use" timesharinggrants the purchaser the rights to the use of the property for an established period of time, such as 30 years. Under this type oftimesharing, 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 formember resorts and owners. Many owners say this exchange privilege was a key reason for buying. Many hotel chains in the timeshare industry formtheir own internal exchange system to complement the exchange company services.
Hotel companies have found that thebasics of timesharing are an ideal fit for filling rooms. They have accomplished this by using existing facilities and services, as well as developing newproperties and support structures. Their success stories tell the tale of why and how the hotel industry is tackling timesharing.
While timesharing has been in the United States for just twentyyears, 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 itwas a sound idea," says Bill Marriott. "But, timesharing in practice wasoften not up to our standards. If we werent able to effect rigid controls on the quality of timesharing that Marriott offered, we werent 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 oftimesharing matched Marriotts, but the companys ability to carry that visionforward required major capital. Marriott had the capital.
Monarchs 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 resortcomplex: Mariotts Orlando World Center.
Construction of Sabal Palms, the first of two timeshare resorts adjoining Marriotts Orlando World Center, began in February 1986. The resort offered Marriotts customarily luxurioussurroundings and by the summer of 1987 the resort had sold all available weeks. Construction of Sabal Palms sister resort, Royal Palms, began a year laterand recently sold out ahead of schedule.
Marriotts fourth timeshare project was at Hilton Head Islands signature location: Harbour Town. Constructionbegan in 1987 and was completed in less than a year. Marriotts Heritage Club at Harbour Town is keyed to the islands exceptional sports facilities. Ownership includes special privileges at three golfcourses and the Sea Pines Racquet Club.
The 30-villa resorts 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 Islandtimeshare resort, Harbour Club at Harbour Town.
Marriotts newest resort on Hilton Head Island is Sunset Pointe at Shelter Cove Harbour, which has already sold out. The resort features 25 timeshare residences, inaddition 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-unitproperty is called Grande Ocean Resort and started with brisk sales in April.
Marriotts third Orlando timeshare resort, CypressHarbour, is a 500-villa property near Sea World. It has carried forward Marriotts successfulOrlando timeshare vision and is experiencing brisk sales.
Marriotts first resort in the west was Desert Springs Villas at PalmDesert, Arizona. The 236-villa resort is adjacent to Marriotts DesertSprings Resort & Spa. Streamside at Vail in Colorado features 150 villaswithin two miles of Vail Village and North Americas largest ski mountain.
Its Paradise Island Beach Club in the Bahamas was Marriotts first venture outside the U.S. The property offers 44 two-bedroom villaswith an oceanfront location. Additional villas are planned. Marriott also recently announced that it plans a new timeshare resort on Barbados, next to Marriotts Sam Lords 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 ofhoteliers 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 Marriotts 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 directcapital investment. The company expectsthis 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, MORIs 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 companys reservations system; owner communications, systems support, and development; strong management; and much more.
In one of the most exciting timeshare industry developments since Marriott entered the business, Hilton Grand Vacations Company was recentlyformed. Though Hilton will probably notbegin the construction of new timeshare properties until later this year it is already entering into the market aggressively.
As part of HGVCs formation, it has joined as partners with a successful timeshare company inFlorida, Mariner, and thus, already has 15 timeshare resorts and more than22,000 owners. In addition to excellent resort properties, Mariner also runs many rental programs and a resale operation that has one of the highestvolumes of any timeshare company in the United States.
As with many hotel companies entering the business, Hiltons 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 guestprogram and other hotel industry programs.
Another key player in this joint ventureis 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-bathunits of about 1,200-square-feet and this policy will continue with Hilton and future construction.
Many resorts may be built on or nearalready-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.
Hiltons timeshare ownershipprogram 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, Hiltons other timeshare program.
Many other hospitalitycompanies have reviewed the advantages of timesharingand are entering the business. Among many, two perfect examples are Disney and Ramada.
Disney Vacation Club (DVC)recently opened its first units atWalt 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 automaticallybecome 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 morethan 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 allowsmembers 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 theirvacation points, either for one long vacation or a series of short getaways.
For a one-time purchase price and annual dues, guests maypurchase 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 andsuccess of Disney serves as moreproof that timesharing is a viableoption for many hotel companies.
This past spring, Ramada Internationalalso entered into the timeshare businessin 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 11bankruptcy, with plans to concentrate on its five Caribbean resorts and ten timeshare locations.
With 50 units, the Ramada International timesharingproject 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 obviouslyconsider it an excellent way to fill rooms with happy vacationers.
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