Timeshares - Global - March 2004

WORLDWIDE TIMESHARE INDUSTRY OVERVIEW
 DEFINITION
 DATA SOURCES AND ACKNOWLEDGEMENTS
 INDUSTRY EVOLUTION AND GROWTH
Figure 1: Locations of timeshare resorts worldwide, 2003
Figure 2: Growth of the timeshare industry worldwide, 1980-2002
Figure 3: Estimated total timeshare projects worldwide by market with corresponding market share 2003
The US – Market leader
Other regions
Figure 4: Numbers of resorts and owners in remaining established markets, 2003
Annual sales volume
Figure 5: Global industry – annual sales, 1990-2004
The top 10 countries
Figure 6: The top 10 countries for timeshare projects, 2003
 TIMESHARE’S ECONOMIC IMPORTANCE
Figure 7: Worldwide timeshare ownership, 1990-2004
 RESORT LOCATION PREFERENCES
Figure 8: Industry recreational property trends
HISTORY AND DEVELOPMENT OF TIMESHARE
 THE ORIGIN OF TIMESHARE
A European concept
Timeshare introduced in the USA
 THE ARRIVAL OF THE EXCHANGE COMPANIES
RCI established
Interval international established
 TRADE ASSOCIATIONS DEVELOP
 RESORT QUALITY RATING SYSTEM
 US INDUSTRY PIONEERS
 INDUSTRY PIONEERS – EUROPE
Hapimag
Holiday property bond
Club La Costa
Resort Properties
 INDUSTRY PIONEERS – SOUTHEAST ASIA
Berjaya Vacation Club Berhad (BVC)
 ENTRY OF THE FIRST MAJOR HOSPITALITY BRAND
 EXCHANGE COMPANIES EXPAND
 PROTECTING CONSUMER INTERESTS
 EUROPEAN LEGISLATION
 EU TIMESHARE DIRECTIVE
 INDUSTRY EVOLUTION: CLEARLY DEFINED PHASES
Phase 1: Birth and infancy
Phase 2: Childhood
Phase 3: Adolescence
Phase 4: Towards early adulthood
 INTEREST OF INVESTORS AND TRAVEL GROUPS
 THE INDUSTRY TODAY – WELL POSITIONED FOR CONTINUED GROWTH
INDUSTRY STRUCTURE
How the industry is structured
Barriers to entry
Increasing consolidation
Impact of leading developers
Figure 9: Worldwide industry concentration, by annual sales volume, 1998, 2002 and 2003
Owners
Figure 10: Worldwide industry concentration, by owner base, 1998 and 2003
Resorts
Figure 11: Worldwide industry concentration, by numbers of resorts, 1998 and 2003
Figure 12: Top ten timeshare resort companies, by annual sales volume, 1994
Figure 13: Top ten timeshare resort companies, by annual sales volume, 1998
Figure 14: Top ten timeshare resort companies, by annual sales volume, 2003
US non-branded developers
Figure 15: US industry’s leading non-branded developers, 2000
Figure 16: US industry’s leading non-branded developers, 2001
Figure 17: US industry’s leading non-branded developers, 2002
Figure 18: US industry’s leading non-branded developers, 2003
US domination
Increasing globalisation
Hospitality chains
International expansion of leading companies
Figure 19: Top ten companies, by number of resorts, end 2003
Owner bases
Figure 20: World’s top ten timeshare companies, by ownership base, end-1998
Figure 21: World’s top 12 timeshare companies, by ownership base, end-2003
Market segmentation
 THE INDUSTRY’S TWO LARGEST NON-BRANDED DEVELOPERS
1. Cendant Timeshare Resort Group
2. Sunterra Corporation
Conclusion: consolidation and segmentation ahead
THE US MARKET
Figure 22: Timeshare resorts within the US, 1975-2004
Figure 23: Spread of timeshare resorts, by key states, 2003
Figure 24: Number of timeshare units within each of top ten states, 2003
Figure 25: Growth of timeshare accommodation units in US, 1975-2005
Figure 26: US timeshare developer sales volume, 1975-2004
 TIMESHARE PURCHASES
Figure 27: Timeshare purchase prices in the US, 2003
Purchase prices
Figure 28: Timeshare price details and trends – US
Financing of purchases
Figure 29: Purchaser financing percentages, US compared as between May 1999-April 2000 and August 2001-July 2002
 CONSUMER BENEFITS
 COMMUNITY BENEFITS
 SIZE OF UNIT PURCHASED
 NUMBER OF WEEKS PER PURCHASE
 TYPE OF USE PLAN
Figure 30: Type of use plan
Figure 31: Average maintenance fees on recent acquisitions
Figure 32: Maintenance fees per week
Figure 33: Average maintenance fee per week of annual use
MARKETS IN EUROPE, MEXICO AND LATIN AMERICA
Figure 34: Growth in number of European timeshare resorts, 1981-2001
Figure 35: Spread of European resorts, by country
Figure 36: Europe’s top ten countries for timeshare resorts
Figure 37: Timeshare resort distribution within the Canary Islands
Figure 38: Timeshare resort distribution within mainland Spain and Balearic Islands
Figure 39: European resort distribution, by location type
Figure 40: Distribution of Spanish resorts, by resort size
Figure 41: Resort ownership, by country of residence
Figure 42: Attraction of European resort location, by type
Figure 43: Type of use plan, by European market region
 HEADLINE FIGURES FOR THE TIMESHARE INDUSTRY IN EUROPE
Timesharing in the United Kingdom
Figure 44: Analysis of resort distribution in the United Kingdom
Figure 45: UK owners, by ownership and location
 LATIN AMERICA
Figure 46: Resort distribution in Mexico and Latin America, by country, 2003
Figure 47: Listing of resort projects by country with units per country and average resort size, by country
Figure 48: Showing owners owning in country and owners residing in country for Mexico and Latin America
Summary of magnitude and distribution
Figure 49: Intervals sold by country in Latin America
Figure 50: Mexico’s largest vacation ownership companies measured by sales volume
THE TIMESHARE PRODUCT
The starting point – Resort location
Feasibility
Development process
Creating the timeshare legal plan
The timeshare use plan
Vacation clubs
 SALES IMPACT OF PURPOSE-BUILT DESIGN
Original use
The physical product – bigger units
Figure 51: RCI Minimum Size Guidelines
Figure 52: Interval International unit size guidelines – excluding Urban Sites
Figure 53: Interval international unit size guidelines – urban sites only
Unit design
Role of the developer
Resort management
Basic product concepts
Property law systems
Multi-ownership
Multi-use
Rental for periods of time
Periodic right-to-use
 PERSONAL RIGHT OR CONTRACT LAW SYSTEMS
Club trustee format
Company share schemes
Comparison of fee-simple deeded ownership and right to use
Forms of deeded product
Advantages of deeded ownership
Disadvantages of deeded ownership
 RIGHT-TO-USE PRODUCTS
Duration of right-to-use product
Advantages of right-to-use
Disadvantages of right-to-use
Variations in use offerings
Fixed period
Floating period
Split weeks
Points based products
Biannuals or biennials
Recent developments in product concepts and legal structures
Vacation clubs
 NEW PRODUCTS
Gaming
Fractional interests
Canal boat timeshare
Catamaran and cruise timeshare
Timesharing a single cruise ship
Cruise based vacation club
Fractional jet ownership
THE ROLE OF EXCHANGE
Two types of exchange
 PROFILES OF THE TWO PRINCIPAL EXCHANGE COMPANIES
RCI – part of Cendant Corporation
Figure 54: Vacation rental group properties
Figure 55: RCI affiliated resort locations
RCI Travel
RCI Holiday Network
RCI Resort Management
Exchange – a key role
Interval International
Competition
Dual affiliation
How exchange works
Advanced technology systems
Ancillary services
Resort categorisation and quality standards
Performance levels – high level of satisfaction
Monitoring customer retention
Industry role of the exchange companies
Exchange trends
Wholesale inventory swaps
Diverse strategies
Technology a major asset
 ENTRY OF INDUSTRY INNOVATORS AND NEW EXCHANGE COMPANIES
International Cruise & Excursions, Inc. (ICE)
Affiliations
Membership
Development and promotion of internet technology
The San Francisco Exchange Company
Dialanexchange
The Abercrombie and Kent Registry
The World’s Finest Resorts
INDUSTRY APPROACHES TO REGULATION AND LEGISLATION
Key principles of fair legislation
Full disclosure sales process
Cooling-off period
Protecting purchasers’ deposits
Assurance of occupancy
1. Exchange companies
2. Trustee companies
3. The trade associations
The American Resort Developers Association (ARDA)
ARDA’s organisational development
Do not call
SPAM
Accounting standards
The Organisation for Timeshare in Europe
AMDETUR
Canadian Resort Development Association (CRDA)
La Federacion LatinoAmericana des Arrolladores Touristicos AC (LADETUR)
Timeshare Industry in South Africa (TISA)
The Thai Vacation Ownership Association (TVOA)
The Malaysian Holiday Timeshare Developers Federation (MHTDF)
The All India Resort Development Association (AIRDA)
The Australian Timeshare & Holiday Ownership Council Limited (ATHOC)
The Global Alliance for Timeshare Excellence (GATE)
 EARLY APPROACHES TO LEGISLATION
THE US Alda/Narello Model Act 1979
The Alda/Narello Model Act 1983
International bar association paper, 1991 – international regulation of the timeshare industry
The current regulatory approach within the US
Timeshare registration
Additional laws and legal issues
Management regulation
Sales and marketing laws
Financing laws
Construction/development laws
Securities laws
Europe
Figure 56: European legislation relating to the timeshare directive EC/47/94, as at January 2004
 POTENTIAL NEW LEGISLATION IMPACTING THE TIMESHARE INDUSTRY IN EUROPE
The Proposed Unfair Commercial Practices (UCP) Directive
Aims of the proposed directive
General prohibition of unfair commercial practises
Misleading and aggressive commercial practises
Continuing issues
Holiday packages
Australia
Legal framework and history
Structures of timeshare – Premanaged Investment Act
Structures under the current legislation
Overall impact of legislation
Legal and tax complexities
THE IMPACT OF THE HOSPITALITY BRANDS
Hospitality industry interest aroused
Profit and growth opportunities
Focus moves from sales via product to customer
Redefining the hospitality industry
Customer equity
The appeal of timeshare’s strong growth
Mixed-use properties
Marketing synergies
Striking a balance
The impact of the hospitality brands
Figure 57: Percentage share of the global timeshare market, measured by sales volume, achieved by the leading participating hospitality brands, 1998-2003
Figure 58: Percentage share of the global timeshare market held by hospitality brands, measured by sales volume, when also including Cendant Timeshare Resort Group
Figure 59: Percentage share, measured by sales volume, of the US market achieved by the major hospitality brands, 1998-2003
 SEGMENTATION
Sub-brands
Rating systems
Main hotel brands involved in timeshare
Figure 60: Hospitality brands and the timeshare industry
Marriott Vacation Club International
Figure 61: Marriott’s brands
Segmentation
The Horizons product
Marriott Grand Residence Club
The Ritz Carlton Club
 THE TRAVEL TRADE AND TIMESHARE
Tour operator challenges
Cannibalisation
Fear of competition
Opportunities in timeshare
 EARLY ENTRANTS FROM THE TOUR OPERATING ENVIRONMENT
Airtours vacation ownership
Thomas Cook
TUI AG
The key to broader market acceptance
THE ECONOMICS OF TIMESHARE
 THE TIMESHARE BUSINESS MODEL
 BASIC INDUSTRY ECONOMICS
 THE TIMESHARE BUSINESS MODEL
Primary operations
 ECONOMIC DRIVERS
Figure 62: Timeshare economics
Figure 63: Timesharing economics – preliminary project pro forma – hypothetical resort
 CONSTRUCTING A PROJECT PRO FORMA
 THE FACTORS WHICH WILL INFLUENCE SUCCESS OR FAILURE
THE MARKETING AND SELLING OF TIMESHARE
Perceptions of the product
Public image
Changing the image of timeshare
How timeshare is sold
Traditional commercial strategy
Core marketing methods
 SALES TECHNIQUES
Resale activity
Affinity marketing
Owner/member referrals
In-house programmes
The sales process
Post-sales – cancellation/rescission
Post-sale consolidation and follow-up work
 NEW DISTRIBUTION CHANNELS
The secondary market
Resale options
Marketing resales
Unwanted timeshares
Supply and demand
The impact of the internet
POINTS AND VACATION CLUBS
Vacation Clubs
Figure 64: Multi-faceted club structure
Points
Figure 65: Inventory bucket concept
Rationale
Figure 66: Comparative advantages and disadvantages of points
 KEY CAPABILITIES
 HOW POINTS SYSTEMS WORK
 OPERATING CHALLENGES
Start-Up Costs
Automation
Figure 67: Points Management
Extra staffing needed
Pricing of points
Points allocation
Inventory management
Practical operating challenges
 HOW POINTS ARE PRESENTED
 HISTORY OF POINTS
The South African experience
Figure 68: Examples of vacation clubs and points systems, 2003
 THE RESPONSE OF THE EXCHANGE ORGANISATIONS
RCI Points system
CRI Points and RCI Points
Interval International’s different approach
Legal Issues associated with Points
Development
Branding and product differentiation
Sales and marketing
Need for controlled sales process
Points systems - further issues
Benefits of points systems for the consumer
 INDUSTRY REGULATION
Industry consolidation and polarisation
FINANCING WITHIN THE TIMESHARE INDUSTRY
Developer financing
End loan financing
Hypothecation and sale/purchase of receivables
Hypothecation
Sale/purchase of receivables
Securitisation
Key participant
Static pool analysis
Loan servicing and collections
THE TIMESHARE CONSUMER
No longer an unsought product
Public image
Figure 69: The public image of resort timeshare
Figure 70: Hesitations before purchasing resort timeshare
Research indicates contented purchasers
Figure 71: Satisfaction of existing resort timeshare owners
Figure 72: Timeshare owner satisfaction levels around the World
Consumer profiles
 US TIMESHARE PURCHASERS
Demographic characteristics of US timeshare owners
Figure 73: Key demographic characteristics of US timeshare owners
Top five timeshare purchase motivations
Figure 74: Top five timeshare purchase motivations
Satisfaction with timeshare ownership
Figure 75: Overall satisfaction with timeshare ownership
Utilisation of timeshares
Figure 76: How US timeshare owners utilised time during prior year
Awareness and opinions of timesharing among public
Figure 77: Awareness and opinions of timesharing US households, never owned timeshare, income $25,000+
 EUROPE
Consumer demographic characteristics
Figure 78: Demographics of European timeshare owners(1)
Figure 79: Demographics of European timeshare owners (2)
Motivations for purchasing
Figure 80: European timeshare purchaser motivations (1)
Figure 81: European timeshare purchaser motivations (2)
Hesitations about purchasing
Figure 82: How European timeshare purchasers utilise time
The consumer benefits of resort timesharing
Figure 83: Satisfaction with timeshare ownership in Europe
 LATIN AMERICA
Consumer demographics
Timeshare owner satisfaction levels
Figure 84: Satisfaction with timeshare amongst Latin American owners
Future timeshare buyers
Customer valuation
Figure 85: Cost of customer acquisition
What are the key elements of customer value?
Figure 86: Lifetime value of client
Added value potential
What is the approach to valuation methods?
Figure 87: The value of customer loyalty
URBAN TIMESHARE
 URBAN TIMESHARE IN EUROPE
Figure 88: Spread of European urban resorts, 2001
Figure 89: Spread of Hapimag’s European urban resorts, 2002
 ESTABLISHED URBAN PROJECTS IN THE US
The Manhattan Club, New York
Examples of other US urban projects
FRACTIONAL INTERESTS AND PRIVATE RESIDENCE CLUBS
 FRACTIONAL INTERESTS MARKET PROFILE 2003
Industry size
Product characteristics
Purchasing process
Satisfaction, use and future plans
Consumer characteristics
The supply side
Figure 90: Geographic spread of fractional projects within North America, 2003
 PRIVATE RESIDENCE CLUBS
Background
Product concept
Product characteristics
Pricing
Marketing and sales
Figure 91: Differentiating characteristics of timeshares, fractional interests and PRC’s
Examples of established luxury fractional and private residence club products
The Ritz-Carlton Club
Ritz-Carlton Club – competitive advantage
Development focus
Ritz-Carlton Club resorts overview
Exclusive resorts – an alternative approach
The demand side
Outlook
KEY ISSUES AND FUTURE PROSPECTS
Legislation
Industry consolidation and polarisation
Pricing
Marketing and sales costs
Human resources
Consistent service delivery
Technology and the Internet
Changing consumer demographics
Access to finance
Ageing physical timeshare product
Inadequate reserve funding
Longer annual vacation entitlements
Figure 92: Vacation days per year by country
The secondary market
Impact of low-cost airlines
New and prospective entrants to the industry
The vacation ownership company of the future
Figure 93: Key components for a successful vacation ownership company
 REMAINING MARKET POTENTIAL IN KEY ESTABLISHED MARKETS
US market potential
Figure 94: US market penetration rate
Europe
Figure 95: Ragatz Associates – 1995 study
Figure 96: Remaining European market potential
Figure 97: OTE European timeshare industry, 2001 study
Latin America – Potential remaining market depth
Figure 98: Latin America – estimated remaining demand for resort timeshares
 FUTURE PROSPECTS
Conclusions
COMPANY PROFILES
 CENDANT TIMESHARE RESORT GROUP
 MARRIOTT
 WESTGATE
 STARWOOD VACATION OWNERSHIP
 BLUEGREEN CORPORATION
 HILTON
 SUNTERRA
 DISNEY VACATION CLUB
 SHELL
Number of countries: 2 (US, Canada).
 CONSOLIDATED RESORTS
 VILLA GROUP
 CLUB LA COSTA
 ORANGE LAKE
 PACIFIC MONARCH
 ANFI SALES SL
 TEMPUS
 HYATT
 ROYAL RESORTS
 ISLAND ONE
 INTRAWEST