Time To Rethink Timesharing

I still don't understand why consumers and developers haven't fully embraced timesharing. Vacation ownership is the perfect leisure product for many people in a wide variety of economic and demographic segments. And when done right — that is, with the right product in the right location, in the right market and with good partners — a traditional timeshare resort or a fractional project can be a money-making home run for developers, even developers who may not have any experience in this segment.

Yet the media, particularly the consumer press and the online world, often bashes timesharing at best as a bad deal or at worst as a scam, a notion that hasn't been true since the 1970s, if it was then. A headline on a recent online story I found screamed “Top 5 Reasons Why Timeshares Are Horrible Investments.” Even though the piece was filled with half-truths and a few lies, the author was right in one regard: A timeshare shouldn't be purchased — or sold — as an investment; it's a lifestyle buy for consumers like the 78 million Baby Boomers approaching retirement or young mothers and fathers who grew up traveling and plan to expose their children to its joys and wonders.

From a developer's point of view, timesharing — as well as its variants, fractionals and private residence clubs — is in a sweet spot as a development opportunity. Just as hotel brands like aloft, Cambria Suites, Hyatt Place and other have sprung up to serve up-and-coming Gen X business travelers, timeshare provides its core customers, Baby Boomers, with the flexibility, quality and credibility they demand and can afford.

And for affluent Boomers, fractionals and private residence clubs are apt alternatives to the purchase of a second home. As whole ownership real estate continues to reach unattainable price levels in ultra-desirable locations, and since the condo hotel craze has crested, you'll see more developers with condotel projects on their drawing boards turning their sights instead to fractional projects. At present, more than 250 fractional and PRC resorts are open, and sales for the segment topped $1.5 billion last year. That's pretty amazing for a product a lot of people never even heard of.

Sales of all types of vacation ownership products have been strong for more than two decades and were up a whopping 16 percent last year. And while more than 50 new timeshare projects are in some stage of development in the U.S., there's no threat of overbuilding in the segment In fact, PricewaterhouseCoopers resort guru Scott Berman sees the potential for a product shortage in the timeshare market. By his calculations, there are an equivalent of 360,000 unsold vacation intervals (roughly translating to one week each) in the U.S. And at present sales pace, it will only take at little more than a year to sell out the current inventory.

If you've ever thought of developing a resort property, now may be a perfect time to do so. And in making these plans, consider a mixed-use development that may include whole ownership real estate, timeshare, fractionals and, of course, a hotel as anchor. There's plenty of help available if you're new to the segment. To start, I recommend that you contact the American Resort Development Association (www.arda.org), which represents the vacation ownership business. The group can provide research, guidance and plenty of dos and don'ts advice for novice timeshare developers.

Other resources are the exchange companies Interval International (www.intervalintl.com) and RCI (www.rci.com). While their main business is timeshare exchange, they also help vacation ownership developers and operators.

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