NEWH - April 2004 - (Page 38)

A Brand New Product Credit for the image makeover belongs in large part to the brand clout of major operators, who could no longer ignore the prospect of a huge customer base, ready to spend their wealth and their golden years on vacation, and a product that helps stabilize a cyclical business. By maintaining and maximizing the brand promise, the operators are able to draw from a large customer base of vacation owners loyal to the brand. Today, the timeshare industry totals $6.6 billion in the United States; $10 billion worldwide, representing more than 5,000 resorts. And they’re just getting started. Established in 1984, Marriott’s timeshare division, Marriott Vacation Club International, is the acknowledged timeshare leader among major operators with 52 resorts worldwide and $1 billion in sales in 2002 alone. However, two others to watch are Starwood Vacation Ownership and Hyatt Vacation Ownership. To jump start its portfolio, Starwood acquired a timeshare company. Starwood’s vacation ownership resorts primarily cater to luxury and upscale markets under the Westin and Sheraton brands with 18 properties serving over 100,000 vacationers. Since establishing its timeshare affiliate in 1994, Hyatt Vacation Ownership has developed 10 resorts in eight locations (including Puerto Rico). No Easy Math At the ALIS Conference in January, we had the opportunity to sit down with John Burlingame, Executive Vice President of Hyatt Vacation Ownership, and Starwood Vacation Ownership CEO Rip Gellein to gain their insight on timeshare development. While both men are clearly optimistic about the industry’s fastest growing segment, their confidence comes with a caveat: The timeshare business is not as easy as it looks. As Hyatt’s Burlingame points out, “There is a tendency to look at the numbers and assume that with a good site and the right unit/price ratios you’re fast on the road to riches. But the success of a project is not derived by a straight-forward formula; timeshare development is a complicated process, he cautions. “Do not be fooled by the easy math.” 38 Photo courtesy of Projects Pacific It seems the timing is finally right for timeshare. Developed some forty years ago in Europe as a strategy to rescue strapped properties, the timeshare has become a legitimate, purpose-built product type, successfully moving away from the 1970’s stigma of pressure sales and dubious quality. With satisfaction rates of US timeshare owners in the 85% range and occupancy rates in the last two years maintaining a respectable average of 80%, compared to 30% for hotels, optimism for the product is understandably high. Calistoga Ranch, Calistoga, CA So what’s behind the numbers? More numbers of course. Based on what we learned from Rip Gellien and John Burlingame, together with what we know from the planning and design perspective, we identified seven factors that are critical to the success of timeshare development. The Model - understand it. Just what, exactly, is a timeshare? With its resort amenities and the opportunity for ownership, it is neither resort nor hotel, condominium or apartment; rather it is some combination of all these products - usually with some retail in the mix to make it all connect, literally and figuratively - that comes in an array of choices, including timeshares, fractionals and residence clubs. For hotel companies accustomed to dealing with defined business models that minimize guesswork, that makes the vacation-ownership product a strange animal. While operators typically hold only sliver equity and a management contract with their hotel properties, timeshares are typically wholly-owned products (by the consumer) that are developed, built, marketed, maintained and managed by the operator. This means that timeshares present a greater risk, because the sale of units is time-critical. At the same time, because they provide early retirement of debt through sales rather than retiring a loan over decades, they are increasingly becoming the driver for hotel projects. Timeshares are often planned as a first phase in a resort development, or, increasingly as several floors in an urban hotel.

Table of Contents for the Digital Edition of NEWH - April 2004

NEWH - April 2004
President’s Letter
Calendar of Events
Contents
From the Editor
Hospitality News
In Memory - Thomas R. Durkan, Sr.
Top Hotel Developers - John Q. Hammons
On the Road Again
HD Expo at a Glance
Surviving HD
Did You Know
Exclusive Lifestyle by Design
If It Were Easy
The Best of Time
Talk About Fast Track
What to Expect From the Vacation Ownership Industry
A Look Back in History
The New Direction for Timeshares in Europe
Confronting the Disabilities Myth
Furnishing Today’s Timeshare
Art - The Final Piece of the Puzzle
Showcase Projects
Design Education Today
Designer Profile: Esther Dunbar-Cullum
Oh Canada, Oh Canada
Top Awards
From Across the Pond
Spotlight On...
Tips on Specs
Window Treatments 101
Hot New Products
We Want Your Projects
Bios

NEWH - April 2004