Special To News Americas
News Americas, ST. JOHN’S, Antigua, Fri. Oct. 26, 2012: During the early 2000s, before the world economic meltdown, a lot of resort developers, including many in the Caribbean, seized upon the idea of building villas and condominiums instead of hotel rooms. The idea was instead of waiting for daily rack rate income, the turnaround time on the investment could be shortened by selling the units to individuals who had the option of using the rooms when they wanted and renting them back to the ‘hotel’ when they didn’t.
The initial sales would also serve as income to assist in the further development of the resort’s common areas and amenities.
But these developers did not foresee the economic meltdown of 2008, when the financial crisis and ensuing recession depressed travel all over the world. In the Caribbean, resorts like the Dawn Beach Club (a Westin project) and the Grande Bay Resort and Residence Club in St. John’s were left with a lot of empty villas and condos. The concept of “timeshares,” which had fallen into some disrepute because of overzealous sales tactics and weak management concepts, began popping up in conversations.
During the annual Shared Ownership Investment Conference, (SOIC), held in Orlando recently, these resorts and others in the Dominican Republic, Cancun and other Caribbean resort areas were trotted out as examples of how the timeshare industry is rapidly evolving to meet developers’ and travelers’ current needs.
The concept of timeshares – where travelers purchased the right to “own” a unit at a resort for a given week every year at a set price that guarantees access for far into the future – first started appearing in the 1960s in Europe. By the 1980s, it had evolved into resorts all over the world aggressively trying to rope tourists into purchasing weeks before they really knew what they were buying, and the industry foundered.
Marriott, seeing the disarray in the industry, created Marriott Ownership Resorts in 1984, bringing more stability and a solid reputation to the industry. They were then followed by Hyatt, Wyndham and other major resort chains. They offered “vacation ownership” or “vacation clubs” where people could get quality accommodations that often included kitchens and more space than a typical hotel room, at a price that was locked in for the future.
In another evolutionary move, Marriott, Interval International, (II), and Resort Condominiums Inc., (RCI), developed programs where timeshare owners could ‘exchange’ their weeks at one resort for similar accommodations at a resort in another location. This added an essential aspect of flexibility that helped revitalize the timeshare market.
According to the American Resort Development Association, (ARDA), 8 million US households now own some sort of time share or interval vacation plan, and there are 5,325 timeshare resorts in 106 countries around the globe.
These are well-heeled travelers with average incomes over $75,000 and nearly 90 per cent own their own homes. They are sophisticated, older travelers with an average age of 51; 62 per cent have college degrees.
Timeshare owners, because of the pre-commitment exhibited by purchasing their accommodations in advance, are loyal travelers even during tough economic times. In the second quarter of 2012, timeshares impressively outpaced hotel occupancy, recording 80 per cent occupancy rates in contrast to hotels’ 63 per cent.
According to Neil Kolton, II’s Director of Caribbean and Florida Resort Sales, there are many luxury villa and suite developments that started before the downturn now languishing with empty units. The challenge is to convert these to use by travelers looking to have the pre-sold travel arrangements that timeshares offer.
As one of the major organizations providing travel exchanges for those owning timeshares, II consults with developers to convert some or the entire unsold inventory into timeshares that then can be used by the millions of II members.
“Right now, the Caribbean is the most highly demanded destination by our members,” he explained. “And currently the supply of timeshare industry is not meeting the demand.”
In the case of the Grande Bay Resort in St. John’s, the Residence Club section of the resort offered 1- and 2-bedroom luxury suites with full kitchens for sale as condo units. John Alvarado, director of sales at the resort, estimates that they sold about half of the 47 units before the recession, and then had empty units sitting there.
Suites and villas are the most easy to convert to timeshares, because most timeshare travelers are looking for a home-like atmosphere that includes the convenience of a kitchen, living room and dining area rather than just a room with a bed. Grande Bay’s villas, ranging from 850 to 1,683 square feet, fit those requirements perfectly. So they set aside five units for timeshares, and developed a program of special amenities that still allowed homeowners who had purchased units before the conversion to feel they were being treated appropriately and distinctly when the new timeshare members came in.
According to Alvarado, once the existing homeowners were on board, the conversion went smoothly and in 2011, their first year of sales, they saw almost $4 million in sales. While prospects were also offered the opportunity to purchase the units as condos, he said they chose rather to pay the $20,000-$40,000 per selected week and not be responsible for the unit for the entire year.
More importantly, timeshare sales continue at a good pace. Although the total yearly sales are down to $6.5 billion in 2011 from the industry high of $10.6 billion in 2007, travelers are still buying into the concept. Part of the reason given for this continued growth is the fact that purchased interests can be converted into exchange points or other methods, so the timeshare owner doesn’t always have to return to the same property but has choices for vacations throughout the world.
This record of sales gives troubled or developing resorts solid opportunities to raise capital and keep their properties afloat in these tight lending times. Another example presented during the SOIC session on Conversions was that of the Carrousel Hotel in Cancun, a failing resort that recently was converted to a timeshare property in its entirety.
The owners, Sunset Group, renamed it the Ocean Spa Hotel and repositioned it as a wellness resort with high-end amenities. They purchased the property for $13 million and put $5 million into renovations. In their first year, (2011), they reported $23 million in unit sales, and in 2012 already they have added $24 million more.
These are numbers that any resort developer, and especially those holding excess inventory in the high-demand Caribbean region, cannot afford to ignore.
