ARDA President & CEO Howard Nusbaum

Creating lemonade from lemons has never been a problem for Howard Nusbaum, president of the American Resort Development Association, the vacation ownership industry trade group. Despite a year concluding he describes as “humbling,” Nusbaum remains convinced the timeshare industry will recover from its problems—most of which weren’t its fault—as stronger, more robust and more profitable than ever.

“2010 will be better than ’09, but it will still be painful,” he says. “The credit markets seem to be working again; in fact, some people believe timesharing is breaking the ice in the securitization market. Whereas that market had been frozen for most of the year, our industry has done about $1.5 billion in securitization in the past 90 days.”

As a result of the credit crisis that roiled the financial markets in late 2008, timeshare developers were no longer able to sell their consumer loan paper into securitization, cutting off a major avenue of profitability and eventually forcing many developers to slow or halt their sales and marketing efforts. Now, according to Nusbaum, Wall Street once again views timeshare loans as a safe and desirable product.

“In general, timeshare paper performs much better than auto loans, student loans or credit card debt, and Wall Street now understands that,” says Nusbaum. “Part of it is self-selection. People who value vacations so much they’re willing to prepay for them tend to be more protective of this product. And look the profile of a typical timeshare purchaser: 48 years old, college educated, homeowner, couple of kids and an average income of $90,000 a year. These are people who don’t tarnish their credit ratings easily.”

Nusbaum believes his members—vacation ownership developers—have learned some valuable lessons from the turmoil of the past 14 months. The result, he believes, will be a stronger industry that focuses on what made it successful in the first place: developing and selling timeshare products consumers want.

“For more than two decades, no matter what happened—wars, natural disasters, energy crises, 9/11—we were always the little engine that could,” says Nusbaum. “We grew at double-digit percentages through all that, and we began to believe our own hype. The truth is no industry is above its surrounding environment.”

One lesson learned was the importance of creating profits throughout the development process. In recent years, many developers relied on the profitability from financing and property management to fuel their businesses. As a result, believes Nusbaum, inefficiencies crept into the sales and marketing process, making initial sales not as profitable as they could be.

“Fifteen years from now, we’re going to look back at 2009 as the time we grew up as an industry,” he says. “Our members are beginning to understand that at their core they’re resort developers, and while there may be ancillary income to be made from financing arbitrage, property management and repeat sales, they still need to generate robust and profitable first sales in order to be successful.”

Developers are also realizing they need to change their marketing tactics to appeal to more savvy consumers and especially to younger prospects. “The world wants transparency in their purchases, and that’s especially true in the timeshare sales process,” he says. “The old ways of sales and marketing will begin to give way to the product being sold in more of a retail way.”