WILL STARWOOD/VISTANA'S COMBINED CLOUT RULE IN PHOENIX?

Staff Writer - The Timeshare Beat

September 7, 1999
SCOTTSDALE, AZ -- Phoenix, which fell on hard times a few years ago, is booming again. This time around the luxury timeshare and hotel/resort markets are leading the way for tourism in the city's upscale bedroom communities.

Scottsdale, Tempe, Mesa, etc.-- the valley is getting packed with timeshare sales rooms, and most of the big players in the industry either already have a presence there or are trying to get one. And with so many resorts in active sales, the marketing competition is getting fierce.

Currently marketing the Scottsdale Embassy Resort, Vistana (Nasdaq:VSTN) is already the most successful seller and marketer of vacation ownership in the metro Phoenix/Scottsdale area according to industry insider Steven Rue Bromberg, a longtime hospitality and timeshare industry veteran. The Scottsdale Embassy Resort is next to the Tournament Player's Club's Stadium Course, home of the Phoenix Open, and behind the famous Scottsdale Princess.

Mr. Bromberg stated that with sales volume ranging between $3 million to $5 million a month, Vistana's monthly sales top Sunterra's Scottsdale Villa Mirage (separated from the Vistana property by only a parking lot wall), Shell Vacations Legacy Resort, Epic Resorts Scottsdale Links (just down the street), and Trendwest's off site sales center in Scottsdale combined.

Vistana/Embassy Scottsdale is the only company and developer of timeshare in Arizona that actually owns hotels, and is soon to become a part of a major brand name in the lodging industry. Recently acquired by Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) for $404 million in cash and stock, the transaction is due to be finalized in December of this year. When the final papers are signed, the combination of the two hospitality giants will be a force to be reckoned with.

Starwood/Vistana's plans are to develop timeshare properties at their finest locations and properties, probably beginning with the luxury Phoenician Resort at the base of Camelback Mt. in Scottsdale, which was recently ranked by Travel and Leisure Magazine as the #5 top resort and #3 top health spa resort in the world.

Starwood will tie in its prestigious Preferred Guest Awards benefit program, with superb benefits and awards for travel options around the world.

Designed as the easiest, most flexible and rewarding program of its kind, Starwood Preferred Guest features no blackout dates and no point expiration dates. Starwood/Vistana will combine it with its timeshare ownership to offer a product unmatchable and-- to quote wall street investment analysts-- "formidable", or unapproachable by other timeshare developers in the industry.

Juergen Bartels of Starwood recently said Vistana and Starwood will begin their first resort before the end of 1999. In addition to The Phoenician, they will also be offering timeshare at the Desert Inn in Las Vegas and at the world famous Atlantis Resort and Casino on Paradise Island in the Bahamas in conjunction with Sun International. It was Atlantis' current owner and hotel magnate Sol Kerzner's Sun International Hotels which also developed and owns the famous Palace of the Lost City at Sun City in South Africa, featured by Robin Leach on Lifestyles of the Rich and Famous.

Forced to compete against this powerhouse in Phoenix/Scottsdale, and in other resort destinations, are other timeshare giants with forces of their own. Shell Vacations, for instance, whose founding principals Perry Snyderman and Sheldon Ginsberg were two of the five developers of the Vistana Resort in Lake Buena Vista near Orlando in 1980 (along with current Vistana executives Jeff Adler and Raymond "Rip" Gellein, and Art Zimand, who has moved on to form his own consulting firm).

Shell is teamed in Greater Phoenix with local real estate mogul Rusty Lyon (son of Russ Lyon of Russ Lyon Realty ) a giant in the Arizona general and commercial real estate market. Rusty Lyon's commercial realty development and management division "Westcorp", the largest developer and manager of shopping malls in Arizona, is a joint venture partner of the new South Mountain Ranch, a master planned community in south east Phoenix bordering Tempe, where Shell Vacations' Legacy Golf Resort is situated, and directly across the street from the Raven Golf Course owned and operated by Intrawest Resorts of Vancouver, B.C.-- more of which later. Shell has the exclusive rights for OPC locations at the malls and shopping centers operated by Westcorp.

In addition, Shell Vacations has Finova Corp. (formerly known as Greyhound Financial Corp.), the foremost financier and a major financial lender for timeshare properties and golf resorts in the U.S., as an equity owner and limited percentage partner in the privately held Shell Vacations Corp, according to Mr. Bromberg. This affiliation gives Shell Vacations a distinct edge when it comes to acquiring properties and financing operations.

Finova has financed resorts all over the world, including the Ridge Tahoe, Orange Tree Golf Resort, Polo Towers in Las Vegas, Manhattan Club, and Westgate Resorts of Florida. The company has offices in New York, Chicago and a new one in downtown Phoenix.

Other timeshare giants in the area that will have to contend with the power of a Starwood/Vistana merger are Sunterra, with more timeshare resorts worldwide than any other company; Intrawest, the premiere developer of ski resorts and mountain real estate in Canada and the U.S. and a major player in vacation ownership ski resorts like Whistler/Blackcomb, Mammoth Mountain in California, Squaw Valley at Lake Tahoe, and Copper Mountain, Colorado; Trendwest's WorldMark The Club, with vacation ownership resorts all over the western USA, including the Hawaiian Islands; and Epic Resorts, one of the fastest growing independent vacation ownership companies in the industry.

All of these have power and resources of their own, but with the Starwood properties that are already extant in the valley, and with additional property owned by Vistana that is ready to be developed, it's likely that Starwood/Vistana will be the real powerhouse in the area.

Starwood's brand names include Sheraton Hotels, the Luxury Collection, Westin Hotels and Resorts, Caesars World, St. Regis Hotels (many are former Ritz Carltons), Four Points Hotels by Sheraton, and the new W Hotels. Starwood presently owns approximately 800 hotels and resorts, including 16 world class resorts in the Hawaiian Islands, many of which are featured annually in Islands Publications' "Worlds 100 best hotels and resorts", available for $15 at bookstores and magazine stands everywhere.

Starwood recently agreed to sell its Caesars and other gaming properties to Park Place Entertainment, which was spun off from Hilton earlier this year. Pending regulatory approval, the sale is expected to be closed in November. The sale excluded the Desert Inn in Las Vegas, which was sold independently to Sun International.

In an interesting twist, Vistana purchased the Embassy Scottsdale franchise from Promus Hotels, with which it used to have an exclusive marketing agreement, and Promus is currently in talks with Hilton Hotels about a possible buy-out by Hilton. Promus currently manages the Scottsdale Embassy property.