Does Timesharing have A Future?

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

What your theory ignores is that seasonal factors are merely one aspect of the only two things that really matter in the exchange process - SUPPLY and DEMAND. Granted that seasonal factors do have an impact on demand, but the thousand pound gorilla on the supply side is the overbuilt areas. They may indeed have lots of demand, but they have even more supply. At the end of the day that leaves them exactly the same place as the off season weeks. That is why one easily trades for the other. It is NOT a trade up. It is a trade that market forces say is even-steven.

Those is overbuilt areas seem to love points because they figure that RCI will never put developers in a situation with a published value that shows the true supply / demand pit those areas are in. So they will overvalue those areas, benefiting those areas over others.

What those from overbuilt areas have always been in denial on is that a blue week trading into their precious area is NOT a trade up.

The place where Crystal deHahn really had genius was in dealing with the last minute distressed inventory through the 45 window for exchangers. Again, as in the rest of the leisure travel industry, last minute inventory is substantially devalued. By opening this, again at what is really an even trade, to virtually anyone in the system, she gave value to the oversupply weeks, whether from low season or from overbuilt areas. This helped keep those weeks in play in the system. The new RCI has deemphasized the 45 day window in the Weeks system. There is no longer even any mention of it, although it still exists after a fashion. The new RCI would rather rent this inventory to the general public or use it to promote Points, where they still heavily push Points access to last minute Weeks inventory. Some Tuggers who are in both systems report that much of the better last minute Weeks inventory these days seems to only be availible to Points members. RCI is pulling an absolute fraud on its Weeks members here. Points members should not even have access to Weeks inventory at all, much less a preference for it. There should be an absolute firewall between the systems.

The problem being the one way street of that process. Sure the highly seasonal weeks get "value" by taking far more desirable time in less seasonal areas, but that still leaves RCI (or whoever) stuck with those true mud weeks and no one willing to take them at any price. Not ANY price. The owners of the less seasonal areas that now lost inventory to those mud week owners have nothing to claim out as it is supposed to be a one in - one out game. It just moves the problem it doesn't actually add value to anything. You scoff at RCI Points for trying to do the same by taking low value weeks and combining them to actually create enough value to rightfully claim a more useful period yet applaud it when you think it somehow benefits weeks.

THE WEEKS SYSTEM NEVER WORKED. It just took awhile before the shortcomings became too obvious to cover up.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

An efficient market can only exist where the mechanism for setting price is open and aboveboard, something points systems never do. Values are set by Chicago-style politics between the developers and RCI and they positively reek of favoritism. Why is it do you think that RCI has picked some resorts and management companies to give a preview of their new ''credits'' system to but have not mentioned it AT ALL to others? I hear from resorts both in the US and in several countries in Europe where RCI has not even said anything that a change is coming while in others they have gone as far as showing them their numbers. This will likely be a good indicator of who is going to get favoritism and who is going to get screwed when the numbers come out.

There is no way that an exchange system can split hairs enough to calculate EXACTLY what any week is worth, which is why an exact number system is so assinine. Further, by using paper and ink to publish the numbers, they lock in numbers for long periods during which values often change substantially. That is one extreme inefficiency of a points system.

Lets take another inefficiency, the special events that make the value of a week soar. There was a major celebration on the OBX for the 100th anniversary of the Wright Brothers first flight, and it happened in December is a very off week for tourism in the normal circumstance. Given that event, the hotels were full and charging their top high season rate. A friend of mine owned a timeshare week for that week, and he had no trouble renting it for more than a prime season timeshare week normally rents for. A points system is way too rigid and inflexible to adjust values for things like this.

Indeed, points is too rigid and inflexible to even adjust for changing values that are known about way ahead of time, like the fact that Thanksgiving, which is usually week 47 some years falls on week 46. In every points system I have ever seen, the often substantial Thanksgiving bump always goes to the week 47 owner, even when week 47 is the week after Thanksgiving, a big time mud week and the week 46 owner is defrauded of the value when his week is Thanksgiving. Points more ''efficient''? Hardly! More fraudulent? Absolutely!

The ''disconnects'' you refer to are obviously the resorts which bulkbank. Yes that does temporarily throw supply and demand out of whack, which can be exploited. But it is only a minority of resorts that engage in this really stupid practice, and that is the resorts' fault not the exchange company's. Of the ten resorts I have owned at, only one bulkbanked and that was only after a new management company came in. If the resort had been close by, I would have organized a campaign among owners to reverse that practice, but as the resort was half way around the world, I just sold my week there instead. That experience also made me allergic to floating weeks, as a sold out resort with fixed weeks cannot do bulkbanking. So an easy way to avoid the bulkbanking problem is to own at sold out fixed week resorts.

You are largely right when you say that the reason that trading ranges are so much tighter now is because RCI is renting weeks. That is because they want to make it harder for members to make trades, so that they can divert the ''excess'' to rentals. I have been saying ever since RCI got into this fraudulent rental to the public business that the real danger was that RCI would tighten requirements for exchanges so as to give themselves more inventory to rent. Well, it has now happened. I hate to say it, but ''I told ya so!''

This is incorrect. Weeks based trading has always been completely disconnected with supply and demand. That is why dramatic trade ups were possible and so easy to get. Those of us on the timeshare boards could easily figure out the disconnects and exploit them. It is getting harder and harder to exploit because the exchange market is getting more efficient. The perfectly efficient market is the one where you can exchange for exactly what your unit is worth. It is happening with rentals.

Part of the reason why trading power ranges are so much tighter now is that RCI has been renting units and now better understands the real supply and demand. They are now adjusting TP formula accordingly.

The biggest transition of exchange companies is more toward a rental model. I have been saying for years that rentals is the best proxy for supply and demand. When RCI starts granting value to an owner at time of deposit, the transformation to a true supply - demand model will be complete.

This is one of the biggest changes and it is definitely for the better.

[BWolf Senior Member Find all posts View Profile Close BWolf]

I'm not going to attempt to get into the current debate about weeks, points, supply, and demand.

But, I would like to point out that the original timeshare concept, as I understand it through reading some of the "histories," involved owners getting a specific unit and a specific week in order to stay in their "place" at their resort each and every year.

The concept of trading these timeshare units came later. The lady who started RCI being the first, IIRC. Specific units owned and visited at a specific time each year is a concept that worked, and works, quite well.

[tennisWalt Super Moderator Find all posts View Profile Close tennisWalt]

I Brought My first Week In The Early 1980's

Our first week was bought in Wisconsin.

At that time, I remember that RCI was a big part of their sales pitch. Without the promise of exchanging, at a reasonable fee, they would not been able to sell to me.

Our family of 6 was into Skiing at that time. It made sense to exchange into a Ski Resort at a weekly rate of less than the going cost of renting at a Ski Resort in Colorado.

Walt

I'm not going to attempt to get into the current debate about weeks, points, supply, and demand.

But, I would like to point out that the original timeshare concept, as I understand it through reading some of the "histories," involved owners getting a specific unit and a specific week in order to stay in their "place" at their resort each and every year.

The concept of trading these timeshare units came later. The lady who started RCI being the first, IIRC. Specific units owned and visited at a specific time each year is a concept that worked, and works, quite well.

[BWolf Senior Member Find all posts View Profile Close BWolf]

Walt: Understood. We heard the II sales pitch. It didn't hurt, but didn't close the deal.

When there was no RCI, or II, or any idea of exchanging, people bought timeshares with the intent to use them each and every year.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

Walt: Understood. We heard the II sales pitch. It didn't hurt, but didn't close the deal.

When there was no RCI, or II, or any idea of exchanging, people bought timeshares with the intent to use them each and every year.

Actually, the very first timeshare developer, Hapimag of Switzerland started as points based and remains that way today. They have far and away the most impressive mini-system in Europe, but have never been part of RCI or II. They trade internally, and very recently have started also trading some of their resorts, but far from all of them, through DAE and DRI.

A rival French timeshare developer soon thereafter came up with the Weeks concept, and that is what the market clearly prefered and it took off. When timeshare crossed the Atlantic, it was the now dominant weeks concept that came over.

Points had a rebirth as a method for developers to churn existing members and sell them something further.

Crystal deHahn was indeed a genuis to invent the original formula of the RCI exchange system, but that has now been seriously bastardized by Cendant, after they bought the company.

What attracted me to timesharing originally was exchanging, but the idea of using at my own resort was something that grew on me, largely after I was elected to the HOA board. At the time I was elected, our resort was having some serious differences between the board majority which very much looked down their nose at exchangers and those of us (the minority) who exchanged. A group of exchangers solicited proxies for an HOA membership meeting, and at the last minute asked me to run as the pro-RCI candidate for the board, which I did. I was very much an RCI ''Happy'' at the time.

My opinion now is that the resorts that have the best chance of survival are those which limit their exposure to exchanging, especially RCI exchanging. A strong own-to-use base equals a strong resort. Some resorts I have traded into in Europe have over 90% own-to-use bases, but few in the US seem that high.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

To my thinking, the current conditions are also driving the mini-systems.

First, the minis keep a significant portion of the exchanges in house. That means revenue that previously went to RCI or II now stays with the developer through the fees that are part of the mini-system.

Second, most systems are set up so that the memberships are not transferable, or transferable only in part. So there is opportunity to resell when someone drops out if the buyer wants the advantages of the mini.

Third, the minis usually allow flexible length stays. Again for most minis the flexible stays generate more income through the collection of additional reservation fees.

Fourth, most minis charge added fees for guest certificates (as do most exchange companies). So that is another revenue stream redirected from RCI or II to the developer.

Fifth, the mini-systems are easier to sell to newcomers. The prospects can see the list of resorts directly available. And it's a lot easier to explain to someone how they can get into another resort by booking directly instead of going through an exchange process.

Sixth, when the mini is set up as a club, most clubs effectively prohibit quasi-commercial renting by members. That means less competition for the developer's rental activities for it's own inventory.

Seventh, the mini is structured to lock the developer in as resort management, thus providing an additional and sustaining revenue stream.

******

I know minis have been around since the beginning of timeshare, with programs such as Hapimag. However, in the last 10 to 20 years they have become much more prominent. Developers are no longer building individual resorts, then moving on the next project. Instead they are more prone to building networks of resorts.

As you can guess I see the presence of the minis as a direct response by developers to take capture for themselves revenue that was going to RCI and II. With the current conditions, I think the future development projects will increasingly tilt toward mini-systems.

Meanwhile the older and independent resorts will continue to operate through the more traditional exchange mechanisms.

[BWolf Senior Member Find all posts View Profile Close BWolf]

Good info, Carolinian. It helps flesh out some of the "histories" of timesharing that certainly are incomplete. I'm going to file it away.


A point of reference for me is Sanibel Beach Club I, where we now own, which claims to be the first "purpose built" timeshare in the US. The developer used the weeks system.


My original post in this thread suggests that a weeks-based resort with strong owner use may be the future, as in back to the future, but I can see where a points system resort with a strong own-to-use base could work.

[tabbyc Senior Member Find all posts View Profile Close tabbyc]

The future is clear...

To specifically address the future of timeshare as a viable business one might examine similar membership industries and consumer behavior.

The physical fitness industry sold lifetime memberships for thousands of dollars with an initiation fee and annual fees. As the industry matured and abuses flourished this business model was subject to regulatory investigations and controls that we now have a low cost business model with no initiation fee and a small monthly payment to participate.

The private membership campground industry flourished all over the country for forty years before the cost of marketing became so expensive that it was cost prohibitive when compared to a public campground business model. There are now very few marketing locations and most in the Sunbelt.

ELS parent Company of Thousand Trails, NACO, Leisure Time, Mid Atlantic, Outdoor World, Encore Public Campgrounds, Resort Parks International, and other real estate holdings are a publicly traded REIT.
They have closed all their sales offices, cut the commissions drastically for their in house upgrade specialists and rely on an outside company to upgrade their existing member base through hotel presentations.
The private locations have now been open to the public.
Currently the ELS approach to memberships is to give them away for annual fees only and then attempt to upgrade existing owners though this has previously been unproductive.

Since the beginning of timeshare, Membership Vacation Clubs having very limited benefits have successfully extracted money from the consumer who attends the high pressure sales presentations to receive a gift.
The lower initial cost of this product when promising the same condo access as timeshare is an effective hook.

Since a majority of income derived by the larger timeshare corporations is by upgrading or reloading timeshare owners you may see an exodus of larger corporations from exchange company participation.

I expect that Wyndham will eventually withdraw from RCI (and possibly sell it) and establish another exchange system.
They would be able to market to all previous RCI exchangers by giving them one last time to visit Wyndham (Fairfield, Worldmark, Pahio, Epic, etc.) properties.
All Wyndham owners will be able to upgrade to all the properties as opposed to just the system they own.

Diamond Resorts penalizes their current points owners who have bought resale by not allowing any exchange company affiliation. This makes it highly unattractive to the buying public and certainly penalizes their owners who paid retail when they try to sell their ownership.

All these sales presentations are specifically and psychologically designed to build a level of confidence to enroll new members using proven sales techniques and all forms of mendacity.

As long as the consumer continues to attend sales presentations the industry will continue because the concept of group volume buying power and owning rather than renting will always be appealing to the public when presented by a compelling salesperson.

Price of the product is an issue and companies having entry level programs or low initial costs with affordable annual fees and financing under $100 a month will attract a larger audience.

The final analysis is as long as consumer confidence and spending continues there will always be uninformed people with limited sales resistance curious and/or wanting to get something for nothing attending sales presentations.

[JWC Super Moderator Find all posts View Profile Close JWC]

Airline Tickets Are Cheaper?

...Another unknown factor in sales is the ever increasing cost of Airline tickets and Car rentals for places like Hawaii and Europe. [/I]

What Direction do you see the the Timeshare Industry going?

Walt

"Consumer Report's" June 2010 edition had an article "8 ways to land a great airfare" which stated that airfare was down in late 2009. Here is an excerpt from the article.

"Last year was a buyer's market for airfares despite all the angst over extra fees for baggage and meals. When we crunched numbers from the Department of Transportation, we found that average ticket prices dropped at 99 of the 100 busiest US commercial airports in late 2009. ( the exception? Savannah, GA., up 2.5 percent."

I don't know about 2010 but our flights from Ontario, CA to Wichita Falls, TX in March and LAX to Hawaii in April were not any higher.

As far as the future of timesharing goes, I don't have a crystal ball but I do NOT think the future looks very bright. Maintenance fees could skyrocket as more and more people walk away from their timeshares. This means fewer owners that have to carry the freight as the cost of maintenance does not drop.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

As long as the resort developers continue to sell more product, Timesharing will be here for the foreseeable future. Even in this very very bad credit environment, timeshare developers are selling a ton of product. Not as much as the peak (down by 50% or so), but a significant amount product nonetheless.

At this point in time, tons of resorts have enough developer demand to soak up defaulting supply. We shall see how long that lasts.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

To specifically address the future of timeshare as a viable business one might examine similar membership industries and consumer behavior.

The physical fitness industry sold lifetime memberships for thousands of dollars with an initiation fee and annual fees. As the industry matured and abuses flourished this business model was subject to regulatory investigations and controls that we now have a low cost business model with no initiation fee and a small monthly payment to participate.

The private membership campground industry flourished all over the country for forty years before the cost of marketing became so expensive that it was cost prohibitive when compared to a public campground business model. There are now very few marketing locations and most in the Sunbelt.

ELS parent Company of Thousand Trails, NACO, Leisure Time, Mid Atlantic, Outdoor World, Encore Public Campgrounds, Resort Parks International, and other real estate holdings are a publicly traded REIT.
They have closed all their sales offices, cut the commissions drastically for their in house upgrade specialists and rely on an outside company to upgrade their existing member base through hotel presentations.
The private locations have now been open to the public.
Currently the ELS approach to memberships is to give them away for annual fees only and then attempt to upgrade existing owners though this has previously been unproductive.

Since the beginning of timeshare, Membership Vacation Clubs having very limited benefits have successfully extracted money from the consumer who attends the high pressure sales presentations to receive a gift.
The lower initial cost of this product when promising the same condo access as timeshare is an effective hook.

Since a majority of income derived by the larger timeshare corporations is by upgrading or reloading timeshare owners you may see an exodus of larger corporations from exchange company participation.

I expect that Wyndham will eventually withdraw from RCI (and possibly sell it) and establish another exchange system.
They would be able to market to all previous RCI exchangers by giving them one last time to visit Wyndham (Fairfield, Worldmark, Pahio, Epic, etc.) properties.
All Wyndham owners will be able to upgrade to all the properties as opposed to just the system they own.

Diamond Resorts penalizes their current points owners who have bought resale by not allowing any exchange company affiliation. This makes it highly unattractive to the buying public and certainly penalizes their owners who paid retail when they try to sell their ownership.

All these sales presentations are specifically and psychologically designed to build a level of confidence to enroll new members using proven sales techniques and all forms of mendacity.

As long as the consumer continues to attend sales presentations the industry will continue because the concept of group volume buying power and owning rather than renting will always be appealing to the public when presented by a compelling salesperson.

Price of the product is an issue and companies having entry level programs or low initial costs with affordable annual fees and financing under $100 a month will attract a larger audience.

The final analysis is as long as consumer confidence and spending continues there will always be uninformed people with limited sales resistance curious and/or wanting to get something for nothing attending sales presentations.

I've never encountered an industry like timesharing. I don't think there are any analogies that form a reasonable proxy for how the industry operates.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

I'm not going to attempt to get into the current debate about weeks, points, supply, and demand.

But, I would like to point out that the original timeshare concept, as I understand it through reading some of the "histories," involved owners getting a specific unit and a specific week in order to stay in their "place" at their resort each and every year.

The concept of trading these timeshare units came later. The lady who started RCI being the first, IIRC. Specific units owned and visited at a specific time each year is a concept that worked, and works, quite well.

Works VERY well. And since that is all you actually buy in a resort - a set amount of time of use in a unit of a certain size - it also is the most secure way to own. If timeshares were purchased and used as intended the satisfaction rate would skyrocket as the majority of so called problems aren't with the resort/use but the insane systems that were tacked on to try to allow dissimilar ownerships to be traded. Since it is never really equal that leads to all the disagreements & hassles we read so much about.

Systems built from the start to handle use at many resorts - most tend to be points based - also lead to satisfied owners as that also amounts to buying to use. Overall not depending on outside trades to create value & ownership satisfaction tends to be a much better answer than any of the exchange models ever devised. Certainly better than any week for week model was ever able to provide on anything but the tiniest scale. Once it ramped up at all there were too many losers.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

Supply & demand does speak. And it says seasonal weeks have no value

What your theory ignores is that seasonal factors are merely one aspect of the only two things that really matter in the exchange process - SUPPLY and DEMAND. Granted that seasonal factors do have an impact on demand, but the thousand pound gorilla on the supply side is the overbuilt areas. They may indeed have lots of demand, but they have even more supply. At the end of the day that leaves them exactly the same place as the off season weeks. That is why one easily trades for the other. It is NOT a trade up. It is a trade that market forces say is even-steven..

What you try to ignore is that it is a trade up as proven by demand. How do we know that? Because in the end the demand for the non or less seasonal unit that the mud week grabs as a trade up is GONE. Used. Demand absorbed it. But the mud week - the one with no value - still hangs around and dies unused. THAT is a worthless week and there is NO demand for it at any price. So supply and demand tells us those weeks are worth zero while the less than top but more valuable non-seasonal weeks are worth more as they are actually desirable enough to be taken & utilized. Demand has spoken and the seasonal weeks lose. It is a trade up even if only a small one.

Proof is easy. In the non-seasonal area year round the utilization is over 80%. No month is less than 74%. While the seasonal area has months of <30% TOTAL occupancy. So at the very least there is over twice the demand for the seasonal area units. When you go from a week that has a 30%- demand and claim a week that has a 74%+ demand that is the very definition of creating value & a trade UP!

[rikkis_playpen Diamond Club Contributor Find all posts View Profile Close rikkis_playpen]

The next few years will be very important to how interval ownership develops in the future. Currently, there are three major issues that have really impacted the industry in the US: the economic recession, the end of the baby boomer demographic tours, and a general dissatisfaction with exchange systems. These factors are being addressed by developers in various ways.

Recession: Most developers have gone to their bread and butter, In house sale and upgrades. Others have resorted to price cuts, or are now focused on condo-hotel rental models to try and weather the storm until the economy improves.

Exchange: Developers are continuing to develop internal exchange models. I expect to see continued consolidation and expansion by acquisition. The big boys will get even bigger, and the small developers will slowly be strangled.

End of the boomer years: This is the big one! Even if the economy improves, there are expected to be at least five or six more years of lean tour numbers. There is a slight bump in population, but it will never get back to the glory days! Most developers have already streamlined and cut costs, plus the vast majority have developed strategies to try and create recurring revenue streams from owner's usage (estoppels fees, high transfer fees, reservation fees, guest certificate fees, increased housekeeping and incidental fees, etc).

The ELS campaign mentioned below is a great example of this. We are currently seeing them focus more on encouraging increased usage rather than focus on new sales or tour generation. Their campground model has a large recurring revenue stream based on usage. Visitors buy overpriced goods at the general store, rent canoes and pay for horseback riding, pay for various services such as the honey truck, etc. etc.. A large portion of the developer revenue is based on members actually using the parks!

If the economy improves- we may simply see things return to the status quo (although on a smaller sale). Salespeople hate change, and most developer executives came from the ranks of sales.. If the economy continues to struggle- I think we'll see continued emphasis on revenue generation from within the owner base.

The scary part for me, is that I can't decide which one is worse!