Have you ever wondered where we (as an industry) will be when the end of the first decade
of the 21st century comes to a close? Between 1990 and 2000 our industry (in the United States) added about 400
new resorts, which brought the total to around 1400. By the end of 2002, the count was 1590 and just over 80% of
those resorts were the more traditional deeded interest or right-to-use types offering either fixed or floating
time with the majority of them being between 5 and 35 years old, independently developed and sold out.
Over the next 8 years, we could see the total of the United States Timesharing industry grow to just over 2100
resorts. Current trends indicate that while some of those new timeshare or vacation ownership plans will be offered
in the more traditional form of deeded interest, most will offer memberships in an organization or club where the
interest in real estate (if any exists) will be held in trust by that entity. The benefits of holding a membership
in those organizations or clubs goes well beyond the simple family vacation that formed the basis of the traditional
timeshare plan and whatever benefits obtained will be via some type of currency in the form of points or credits.
As an example, the most current statistics indicate that developers were making about 75% of all sales and almost
50% of those sales were of the points or credit variety.
For the purpose of this wondering, let's identify these diverse entities as group 'A -Timesharing' and group
'B- Club Membership'. In my opinion, there are some similarities that these groups share and several major
differences. These differences place them in opposing camps. Both groups are and will probably remain affiliated
in some way with a major exchange firm because the concept of exchange is and will always be vital to the industry.
For group 'A' exchange is vital because those who actually own a vacation understand that the true value comes
from actually taking a vacation and they enjoy the flexibility to take that vacation in existing timeshare resorts
in all the various locations where such resorts exist. For the developers of the clubs that make up group 'B',
the points or credits obtained by members can be used to acquire several types of benefits, not just a vacation,
however the illusion of vacationing is still vital to the ongoing sale of additional memberships in those clubs
or the purchase of more points or credits for use to obtain the benefits available through those clubs.
The resorts of both groups are now and will remain mostly in clusters at or near destinations, which have universal
appeal. Successful timeshare / vacation ownership developments have always been and will always be dependent on
being at places where people are and where people want to be. Statistics indicate that 56% of those will be located
in areas such as Central Florida; the Disney Land/ Anaheim area of southern California; Branson, Missouri; Las
Vegas, Nevada; and the Gatlinburg/Pigeon Forge area of Tennessee where attractions and/or entertainment is located.
Another 46% will be located in ocean beach or other water oriented areas with the remaining hot spots being mountain,
golfing and urban locations.
The true hot spots in the US are those that offer a combination of enticements such as Myrtle Beach and Hilton
Head, SC; Hawaii, Florida, and Southern California; all offering an abundance of both beaches, golfing and entertainment.
Florida (over 350) has always been the leader in the number of resorts followed by California (over 130), South
Carolina (over 120), Hawaii (over 75), Nevada and North Carolina (over 60). Recent trends indicate that the demand
is growing in the West and areas such as Arizona (over 50) are beginning to catch up.
Both group 'A' and 'B' attract the same type of demographics. A median income of over $75,000 defines the over
3 million households who belong to one of these groups or the other. Over 80% of those households are made up of
home-owning married couples with over 40% having children under 18 years of age and the head of household has a
median age of 51 years.
It's hard to believe that with so many things in common that the wants and needs of these households have changed
so radically in recent times. Of all the sales made by developers during the first three decades, well over 95%
of those sales were into group 'A'. During the 1999-2000 time period about 15% of all developer sales were into
group 'B' and by the 2001-2002 time period group 'B' sales were up to about 45%. Clearly the developers are committed
to the Clubs segment and of the 700+ new resorts anticipated being developed in the decade between 2000 and 2010
the overwhelming number of those will be in the group 'B' segment.
Why the dramatic change? Did the consumer, that all statistics indicate were overwhelmingly (85%+), satisfied
with the timeshare product they had purchased, radically changed their wants and needs or did the industry simply
begin to develop a new identity, a more profitable product? Logic would indicate the latter.
Of all the resorts that fit into group 'A', 1,000+ of those resorts and the improvements directly associated with
them have been fully conveyed by the developer to the individual and collective owners. This means that the developer
has no continuing financial interest in the resort including no financial liability and no residual income stream.
Of all of the resorts that fit into group 'B', the developer retains a financial stake in the overwhelming majority.
It would appear that most current developers find that financial stake to be beneficial because most of them have
either abandoned group 'A' for group 'B' or were relative newcomers to the industry and never involved with group
'A' type developments at all. To clarify this situation: It is my opinion that developers see only one way to generate
income from members of group 'A' and a multitude of ways to generate residual income from members of group 'B'.
That one way is to convert members of group 'A' into becoming members of group 'B'. The major exchange firms find
benefit in having memberships from both 'A' and 'B' groups, however they find it in their own best interest to
follow the developers' lead and are placing more emphasis on the benefits of group 'B'. What was it that caused
this transition? Was it simply money? What part (if any) did the trend toward most of the new developers being
publicly held companies rather than privately held independent developers play?
Most people indicate that the entry of the major hotel/entertainment firms into our industry brought instant creditability
to timesharing. In reality, these hotel firms (Marriott, Hyatt, Sheraton, Westin, Hilton, Disney, etc.) and other
major entities (Shell, ILX, Fairfield, Sunterra, Bluegreen, Starwood, Westgate, WorldMart, etc.) brought 'Branding'
to the industry and it was that branding that created the instant creditability. Traditionally, branding has been
the province of the major public corporations and their name recognition provided the initial impulse that got
the ball rolling. Why did most of these new developers lean toward the group 'B' product rather than the proven
success of group 'A'? The answer to this question may remain a mystery, however, please consider the following.
The timeshare/vacation ownership products tend to converge into an equable level, more or less, of prices/costs,
product quality and features, technological sophistication, and service quality. Almost all executives in competing
companies do is pretty much the same all around. More often than not, most of the available options in the market
offer their consumers 'what matters most'. The competitive edge comes from a strategy. So, what really is a strategy?
By definition, a strategy is the way by which a developer is planning to obtain their goal that the consumer will
prefer their product to that of their competition. The intent is to create a strategic differentiation. Why? Because
the consumer chooses between alternatives on the basis of the differences as he or she perceives them. Not on the
alternatives themselves but the perception of the consumer as to something secondary in importance.
What has all this to do with branding, especially branding in timesharing? A brand is the consumer's anticipation
for a unique and defined experience, or for a certain unique benefit obtainable solely through consuming/owning
a specific product/service manufactured/offered by a specific company. When branding came into the timeshare industry
the perception of the consumer changed greatly. The brand's role in the realm of marketing has changed dramatically
during the past decade. In the past, firms used 'to brand' products in order to make them more attractive to consumers.
It was definitely cosmetic branding. Today, developing a brand means devising and implementing a way by which to
deliver a benefit to consumers. It was this new concept of branding, this method of delivering the benefits to
the consumers, that caused the evolution of the timeshare/vacation ownership developers toward type 'B' groups
that allowed the consumer to access the benefits of the Club using the new kind of currency (Points or Credits).
Initially, the group 'B' product and delivery scheme (points or credits) was the exclusive purview of major brands
directly associated with the hospitality industry such as Marriott and Hilton, etc.. As the concept became more
established others such as Fairfield, Sunterra and Bluegreen, etc., began to develop their version of group 'B'
and by 2000 at least one of the major exchange firms had implemented an exchange system that facilitated exchanges
using points. This exchange firm began to affiliate timeshare resorts according to the 'A' group as "Weeks
Resorts" and the 'B' group as 'Points Resorts". This system facilitated and accommodated those resort
development firms that were affiliated with this exchange firm and were developing group 'B' resorts. Shortly thereafter,
many resorts in the 'A' group were invited by this exchange firm to convert from 'Weeks Resorts' and become a 'Points
Resort'. This conversion had some benefits because owners/members of 'Weeks Resorts' could not access the exchange
inventory of 'Points Resorts', however upon this conversion they could access the entire exchange firm's inventory
including 'Weeks Resorts'. This 'Weeks' - 'Points' system of the exchange firm or the conversion from the former
to the latter did not affect the fact that they were part of group 'A' or group 'B'.
FINAL THOUGHTS
First: It is thought by many that change is inevitable. The pure essence of change is to make an essential
difference often amounting to a loss of original identity. The term timesharing has some lingering negative connotations
from the early years of our industry. The term 'vacation ownership' was thought to describe the product that we
were selling thus many thought that by simply changing the name of our product we could change the market perception
to a more positive one. In reality, what our industry has gone through was an evolution during which the product
has been altered. The essence of alter is a difference in some particular respect without suggesting a loss of
identity.
The industry came about in the United States during a downturn in the existing real estate market. There were a
multitude of studio, 1, 2, and 3 bedroom condominiums along the beaches in Florida, California, Hawaii and the
Carolinas which developers were unable to sell as whole units. A slight alteration allowed these units to be marketed
as interval interests of 7 days. In those early days, these intervals were conveyed with a warrantee deed or a
right-to-use leasehold interest for fixed use periods. This fixed week concept had some limitations, thus a minor
alteration was made to facilitate more flexibility in the form of 'floating time'. This alteration allowed owners
to return to their home resorts at different times of the year. Almost simultaneous with this alteration came the
introduction of exchange that added greatly to the flexibility. This alteration allowed owners to visit other similar
resorts all over the world. The next evolution was the diminishing conversions from existing product to timeshare
and the advent of product purposely built for timesharing. For all intent and purposes the evolution began to slow
and the product was altered only slightly with the advent of split-weeks and lock-off units up until the mid 80's
when the first of the major publicly held companies entered the timeshare industry. This occurrence foretold the
end of the timeshare product and its evolution and the beginning of an industry wide developmental change toward
the club concept. While the traditional timeshare product continued to dominate the industry for several more years
the changes being brought about by the hotel/entertainment companies and branding were clearly differentiating
new product from the traditional concepts. These differences were well beyond the simple name altering from timesharing
to vacation ownership. Deeded interest and yes, even ownership, began to give way to membership and predominate
differences began to clearly define what I have identified herein as groups 'A' and 'B'.
Second: With the industry developers, for the most part, totally committed to the development of group 'B'
type product, the exchange firms are being forced to increase their attention, efforts and resources to enhancements
related to group 'B' products affiliations and servicing the demands of their members, and with the American Resort
Development Association (ARDA) remaining developer driven, it may be time for group 'A' to consider if their interests
are being served by an industry that is committed to change that may leave them farther behind and lead to a total
loss of identity.
I will be exploring this issue further in With Regard to 2010 (Part 2) next
week.
