“Being good in business is the most fascinating kind
of art...
Making money is art and working is art and good business is the best art”.
- Andy Warhol -
Operating a Timeshare or Vacation Ownership Resort is a business and it is big
business for many. Annual operating budgets in excess of five million are commonplace. Many traditional
resorts are operated by Owner Associations as nonprofit corporations which (in theory) means incomes and expenses
are intended to be equal. At most of these resorts the total income is the result of an annual assessment paid
by owner. It works this way: Assume that the budget for a resort is $5 million and there are 7,500 timeshare use
periods or intervals. On average, the owner of an interval would be assessed $666.66 for each of these that he/she
owned. Many of these associations have chosen to avoid the generation of other income because of the possible impact
on their Internal Revenue Code §528 status. If you are not familiar with this code the Novi, Michigan
law firm of Thompson & Thompson, PC; provides a brief but concise explanation at http://www.t-tlaw.com/tx-01.htm
Our example resort was not one of those. They were attuned to the advantages of maximizing other revenue. Let
us assume that those other revenue sources netted $500,000 in profits that could be applied to the resort general
fund. Each of the 7,500 owners would be assessed only $600 and I assure you that they think the reduction in assessment
was good business. The economics of the annual maintenance assessment fee is, and has always been, a major consideration
with respect to timesharing beginning at the closing table and extending with every owner when they open their
new annual assessment.
The quality of vacations that occur at timeshare or vacation ownership resorts is directly related to five things;
the location of the property, usefulness of the product, the quantity of amenities offered, the attitude of the
guests and the standards of service provided. What, if anything, do these five things have to do with the subject,
other income? Let’s take a further look at each of the five and see if we can find some implications.
The location of a property has everything to do with the opportunities to produce significant impacts from other
income. Let’s assume that the first location is on Irlo Bronson Memorial Highway, in Kissimmee, Florida
at about 6000 West. This would place the resort about one block from the original entrance to Walt Disney World
and on a street that has literally hundreds of restaurants, gift shops and mini attractions such as miniature golf,
bumper cars and roller coasters. It is assumed that the overwhelming majority of the guests at this resort would
use its facilities as a base of operations and look off property for all the other needs, and wants thus, the opportunities
for other income are limited. The second property is located at Copper Mountain in Colorado and due to its location
it has the opportunity for other revenues is unlimited. It has the traditional game room and vending machines however,
it also has a ski school, down hill skiing, ski lift, day care center, health club, restaurant, horseback riding,
grocery, and medical center just to name a few.
The usefulness of the product opens the door for revenue generators. Sometimes-in small ways and other times
in big ways, a small way could be as simple as movie rentals to be used in the VCR or DVD players attached to the
TV provided in the residence unit, the sale of noodles for use in the swimming pool or the sale of tennis balls
for the court. Charcoal grills around the property could mean the sale of charcoal, vending machines is strategic
location dispensing that cool soft drink, tea or water, fireplaces could induce the selling of logs and washer-dryers
in the units encourage the sale of detergents and softeners.
The quality of on site amenities play an important role in the chances to produce other income if they are conducive
to expanded activities. The keys to these opportunities are the facilities provided during the development stage
and/or the space to expand upon demand. As an example: at SCR a small Snack Bar without cooking facilities overcame
that obstacle by utilizing a pool side charcoal grill to produce hamburgers and hot-dogs. This revenue source evolved
over time into a full poolside restaurant and bar. The developer had originally provided two indoor racquetball
courts and time proved that one was sufficient to meet playtime demand. The second court was converted into a game
room that was equipped and serviced by a contractor with a 50/50 split of the revenue produced going to the resort.
From the moment of arrival at the resort and at every turn guest should feel that their every want or need has
been anticipated.
The
attitude of guests will always have an impact on other incomes. First Lady Martha Washington once stated: “I
am still determined to be cheerful and happy, in whatever situation I may be; for I have also learned from experience
that the greater part of our happiness or misery depends upon our dispositions, and not upon our circumstances.”
If the guests are relaxed and happy (as they should be on vacation) they are more predisposed to becoming involved
with their surroundings and this involvement leads to a loosening of the purse strings. Lunch at the restaurant,
kids in the game room, happy hour at the bar, that city tour, balloon ride, or dinner theater. It could be a massage,
facial, tennis lessons, souvenir from the gift shop or an hour with a personal fitness trainer or yoga instructor.
All of which are designed to reinforce a positive attitude.
The standard of service provided can if fact enhances each of the previous four things. At most timeshare resorts
the standards of services is or has been established by the Board of Directors in accordance with the desires of
the collective owners. Management has the duty to facilitate those services and of lending support to those who
actually deliver it. In order to succeed those service personnel must: (a) want to be there, (b) look the part,
(c) smile from the inside out, (d) maintain eye contact, (e) speak with assurance, (f) listen with intensity and,
(g) act with authority. What does that all mean? Those service associates must truly like their job, appear
professional, be truly a people person, be attuned to the guest in front of them, communicate with confidence,
hear and see what is being communicated and take ownership of the situation. This level of service makes it inviting
for the guests and their families to partake in everything offered at/by the resort.
If
you have not yet started the development of a stream of other income the place to start is in areas where a service
currently not available, could be provided at or near the cost to provide the service, or a service that could
be provided by an independent contractor. Such a service could be massages where a licensed contractor could be
identified that had all the necessary equipment but was looking for a location that had potential. As an example:
Several years age Jennifer Meza the SCR activities director began going to school part time to learn the art of
therapeutic massage. After she obtained her license we started offering the service and now we have eight different
therapists serving our guest. Each of these masseuses pays the resort a commission for every massage they perform.
A year ago we added aesthetician to the contractors list and now we have two performing several kind of facials
(and paying us commissions).
FINAL
THOUGHT
The
art of producing other income is on the one hand simple and on the other very complex. In order for the art to
flourish you must gather around you the components necessary including a blank canvas. Why a blank canvas? You
don’t want to approach the first rendering with to many preconceived ideas. You want the effort to flow freely
rather than be forced. If it’s a good idea it will simply evolve into something worthy of the effort. Example:
It was determined that we needed a new activity for the kids to become hands on involved in. Jennifer searched
for something that was related to our area that the kids would like so she narrowed the search down to something
Native American. She was able to find a kit that supplied the parts necessary to make a Dream Catcher. Jennifer
was able to obtain these kits for a price, which would allow them to be resold for a net profit. Therein is the
art. A simple idea and a thrilling memory for all of the children who made one of their own. An idea that was affordable
for the parents and profitable for the resort. If you would like to see why children love the dream catcher simply
click on this link - http://www.soultones.com/dream.html
Easter
is coming soon and this holiday is an exciting one for small children who still believe in the Easter Bunny. The
children of families arriving for Easter week have already received a letter from the SCR Bunny inviting them to
the daylong celebration and to encourage their parents to purchase (in advance) the very special Tote that the
Bunny has prepared for each of them. Jennifer and her able assistant’s Sarah and Kari have been hard at work on
these preparations and each year has build on the success of the prior, even Cyndi is looking forward to getting
into her complex Bunny Hop again.
At
SCR we are always looking for a new KISS method thing we can do to produce other income, which can offset some
expense or other and assist in the reduction of our annual assessments. Our method is to Keep Instituting Special
Services that will stimulate spending. It’s a learned art and it's good business...
