Vacation ownership, often referred to as timeshare, has become an important sector in the hospitality and tourism industry. In this series we examine how vacation ownership is affecting the tourism industry in light of the downturn in the hospitality sector, as reported at the 12th Annual Vacation Ownership Investment Conference recently held at the Peabody Resort, Orlando, Florida.
WITH THE SUCCESS of vacation ownership timeshare, fractionals and private residence clubs (PRCs), a number of hoteliers and resort owners continue to make decisions to convert part of their properties into timeshare components, making them mixed-used properties.
“Converting other real estate into timeshare is becoming very popular. A number of luxury resorts are converting and there is an interest in long term results,”says Craig Nash, chairman, president and chief executive officer of Interval International.
That company operates membership programmes for vacationers, provides value-added services to its developer clients worldwide, and has a network of over 2 500 resorts in over 75 countries. Nash is of the view that the best opportunity for timeshare now was in North America, as “real estate prices are low”.
He noted, however, that it does not “take anything away from international, Mexico and other regions”.
“Wherever the middle classes are going, whether it be India or China, is the right market,” he added.
Statistics reveal that between 2006 and 2007 there was extremely high interest in timeshare and more capital to finance such properties was available, compared to the past two to three years. However, this lack of capital has not decreased the interest in the industry.
“Having a mixed-use component is the talk of the town,” said Allen Ten Broek, president of the Mariner Group, Inc. of the United States.
He too stressed that timeshare was “a great option for hotels that cannot get their hotel rooms sold”. He also pointed out that during a panel discussion on Converting Or Adding An Ownership Component To An Existing Resort at the recently held 12th Annual Vacation Ownership Investment Conference held at the Peabody Resort in Orlando, Florida,
that most hotel brands entering the vacation ownership arena, along with those already selling this type of product, “are selling unprecedented, luxurious, savvy units”.
“This means that those seeking to get into timeshare must adopt the high standards of the industry.”
Broek noted that many conventional hotels were “overbuilt” and the opportunity to convert to timeshare would be greater.
“My advice would be not to convert an entire resort into timeshare but to keep a conventional hotel component.
Consider all options
“All options must be evaluated, in terms of acceptance in the particular market and the available financing.
The legal side of things must also be considered,” he added.
Not to be forgotten, advised John Melicharek Jr, Baker Hostetler LLP partner, was that when converting a hotel to a timeshare component, one must also consider the maintenance obligations. He said owners needed to be creative and know exactly what the potential vacation owner was looking for. One must also know the fundamentals
of entering the vacation ownership arena, such as the registration process and legal obligations, he noted.
While some are considering a mixed-use option, others who have made the decision to convert were already reaping some success. The choice is up to the fearless and bold hotelier.
Broek put it this way: “Adversities breed opportunities. Hotels which are not doing well in the current climate represent significant opportunities for vacation ownership.
“Hoteliers can go to lenders and see what can be done to convert their properties into mixed-used properties – timeshare and the traditional hotel room.”
Next week we continue our series on vacation ownership.
