- Email: [email protected]
The evolution of a sleeping giant: resort timesharing
Hospitality Management 21 (2002) 211–225
The evolution of a sleeping giant: resort timesharing Randall S. Upchurcha,*, Kurt Gruberb a
Rosen School of Hospitality Management, University of Central Florida, Orlando, FL 32816-1450, USA b Planning and Development/General Counsel, Island One, Inc., 2345 Sand Lake Road, Orlando, FL 32809, USA
Abstract The timeshare industry has been in existence in the United States for a little of 30 years during which the industry as a whole has experienced considerable trials and tribulations. This manuscript highlights the evolution of the timeshare industry, its rapid gain in consumer acceptance, and the need for empirical research in this field. r 2002 Elsevier Science Ltd. All rights reserved. Keywords: Timeshare; History; Sales volume; Publicly traded; Vacation ownership
1. What is resort timesharing? Resort timesharing is simply the purchase of a luxurious vacation home in increments of a week or more by a number of buyers, each of whom buy only the time which they will use each year. Because the expense of owning and operating a vacation home is then divided among its many users, the cost to each is only a small fraction of what a vacation home would otherwise cost. Resort timesharing is marketed under various names that represent a particular form of the concept: interval ownership, right-to-use, vacation lease, vacation license and club membership. The terms most often used are resort timesharing (shortened to timesharing) and interval resort sharing. Generally speaking, each type is designed to provide a family with accommodations superior to most vacation hotels and motels and with the use of standard or expanded recreation facilities for a specified number of years. The purchase guarantees accommodations for future vacations at today’s prices, or ‘‘freezes’’ the *Corresponding author. Tel.: +1-407-823-2188; fax: +1-407-823-5696. E-mail addresses: [email protected] (R.S. Upchurch), [email protected] (K. Gruber). 0278-4319/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 2 ) 0 0 0 1 8 - X
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cost of lodgings at the one-time price for the duration of the purchase agreement (Trowbridge, 1981). In order to understand the timeshare product, one must define exactly what is meant by timeshare, alias vacation ownership as the industry is currently known. The timeshare product is drastically different from traditional lodging accommodation products due to various complexities that surround the timeshare product from legal, consumer usage, and product perspectives. Legally timeshare is the right-to-use vacation accommodations and facilities for a stated period of time each year over a certain number of years. This right-to-use is either coupled with an interest in the underlying real property or not. Under this legal definition, the common denominator is whether the timeshare unit was deeded or not to the consumer (Gruber, 1999a). From this legal perspective, the act of engaging in a timeshare is the contractual subdivision of a specific unit at a given location into slices of time during which the owner has exclusive occupancy. Basically this means that a developer can sell a single unit 52 times per year, excluding any maintenance time that might be set aside for unit upkeep. From a consumer perspective, a timeshare is an esteemed vacation accommodation product that is commonly sold to a consumer in weekly intervals (i.e., increments). Under this definition, each unit within a given resort is shared for a predetermined amount of time (i.e., weeks) per each unit. This means that each unit is technically ‘‘shared’’ with other owners throughout the year with the caveat being that a unit is occupied by only one purchaser at a time. From product perspective, a timeshare holds a unique spot on the accommodation spectrum as displayed in the following figure. At one end of the spectrum you have a one-night stay at a hotel for a minimum price. As you increase the length of stay, we find a short-term product for a longer stay, maybe over 1 or 2 years, for a little higher price. Continuing on, we have a timeshare stay of a set duration for a much longer period of time, perhaps from 3 years to perpetual, for a much higher price. Then we have cotenant ownership of a condominium unit or a second home, such as a beach condo, split between several people for a perpetual duration and a higher price. Finally, we have fullownership of a second home at a much higher price. In relation to this timeline analogy, timeshare allows for a second home at a lower price with someone else, meaning a property management company, taking care of the day-to-day management. Product timeline Duration of stay Short Nightly loading
Long Timeshare product
Second home
2. Timesharing: roots and reflections The timeshare industry, otherwise known as vacation ownership, first appeared in Europe in the 1960s. One of the early entrants known as ‘‘Superdevoluy’’, a ski
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resort in France, developed the first ownership program in the world. The purpose of the program was to give the owners of Superdevoluy a guaranteed opportunity to come and ski in the French Alps (Baiman and Forbes, 1992). Not very long after the concept had taken hold in Europe the idea was quickly adopted in the United States. The expansion was so pronounced that in less than two decades, the timeshare industry recorded double-digit growth, which has been relatively unparalleled by other service sectors for this same period of time. Not only did the number of timeshare resorts spread rapidly in the United States, but the diversity of products and services offered evolved in a dramatic fashion as well. To date, if you review timeshare company websites for product and service information, you will find offerings that cater to a wide range of leisure and recreational needs for various consumer segments. The observation that the timeshare product has been differentiated in product type is supported by a tiered classification system proposed by McMullen and Welch (1999). Per this system, there are five levels of timeshare products available in the marketplace. These five levels are luxury, up-market, quality, value, and economy level. The ‘‘luxury’’ market provides a product in the $20,000 range per interval that is commonly found in tourist destinations, and provides a wide array of services and amenities. The luxury timeshare product is often a penthouse style of construction with about 1.500 ft2 or more of unit space. The ‘‘up-market’’ priced a little lower at $15,000–25,000 is also a destination resort with approximately 1000 ft2 of space for a one-room unit and 1800 ft2 for a two-bedroom unit. The ‘‘quality’’ level is priced at $9000–17,000, is located in a destination area, with an average square footage of 800 for a one-room unit or 1400 for a two-bedroom unit. The ‘‘value’’ level is often considered a regional resort/facility that is priced in the $7000–10,000 range. The one-bedroom unit in this type of facility has about 800 ft2 of space, while the twobedroom unit has 1000 ft2 feet of unit space. The ‘‘economy’’ level also is found in regional markets, is priced from $5000 to $8000, has 600 ft2 for a studio unit and is approximately 900 ft2 for a one-bedroom unit (McMullen and Welch, 1999).
3. Timesharing: rising to fame Despite the fast growth of the timeshare industry during the 1960s and the 1970s experts in the hospitality industry did not take the idea seriously and many considered it a fad that would soon vanish (Molinell, 1991). To add to that, many misrepresentations and lawsuits gave the timeshare industry a bad image that resulted in poor acceptance by society (Trowbridge, 1981). But thus far, this young industry has proved that it is here to stay. This statement is affirmed by the fact that in 1999 there were over 5 million families vacationing at over 5000 resorts. This growth rate is phenomenal because these numbers equate to a 1000 percent growth rate over the past two decades (ARDA, 1999a) (Fig. 1). There were two main events that helped to perpetuate this extraordinary growth rate and consumer acceptance of the timeshare product. First, the entrance of many reputable hospitality establishments such as Disney, Hilton, Hyatt, and Marriott
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contributed greatly to consumer’s view that the timeshare industry was, and is, a credible and legitimate vacation alternative. Not only did these establishments enhance the industry’s image by means of their involvement, they also brought years of marketing, sales, finance, accounting, legal, and property management experience to a relatively new and growing industry. As you might imagine, the timeshare industry was obsessed with its image during the 1970s and for good reason. In the 1970s some developers in the US adopted the concept of ‘‘sell it and they will come’’. The net result was a hard-sell approach that led to sales practices that were abominable. In fact, the 1970s have been identified as the decade in which fake premiums were used as a ploy to get people to take a tour. For instance, people were drawn into taking a property tour by such gifts as an allterrain vehicle or a grandfather clock. Certainly these gifts sounded very appealing in principle. Unfortunately, the all-terrain vehicle was really a lawn chair on wheels and the grandfather clock turned out to be a 6-in cardboard clock. To exacerbate this problem, once the consumer was drawn into a sales presentation via the promise of false gifts, additional high-pressure tactics were employed. For instance, it was not uncommon to hear a consumer complain about being forced into buying a timeshare as the result of a ‘‘hot box’’ selling technique. A ‘‘hot box’’ selling technique is a term used to describe a sales presentation where the prospective purchaser is not allowed to leave or terminate the tour without agreeing to buy the product or by aggressively complaining. Needless to say, the outcome of such ploys and unscrupulous tactics caused the general public to view the industry with great skepticism. In Florida during the 1970s the conditions were ripe for developers to claim their fame in the timeshare industry. This was a time when developers put a minimum amount down on a contract to purchase a hotel and began selling timeshare. Unfortunately, when the purchaser came back a year later, the developer was gone and the hotel owner did not know anything about the timeshare plan. By the early 1980s the practices of such unscrupulous developers were out of control. The net result was that Florida’s state legislature passed their first timeshare law in 1983 to finally put an end to such unethical practices. This first ‘‘timeshare’’ law imposed strict restrictions on timeshare developers that in principle put the bad developers out of business. This action can be said to have saved the industry from a very early demise. From that point on, the industry’s image improved significantly due to the fallout of these scam artists. The entry of major lodging companies into the timeshare industry during the 1980s and the 1990s is believed to have exerted a strong influence on increased consumer acceptance of the timeshare product. To be exact, in 1984 Marriott entered, as did Disney, and Hilton following suit in 1992. These developers brought considerable brand-name recognition and elevated consumer acceptance levels with them due to their organizational performance standards, organizational views
Fig. 1. 1999 sales performance. Source: American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, Washington, DC.
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toward civic responsibility, and adherence to strong business ethics. By the end of the century, and continuing into the next, other branded lodging companies followed Marriott, Disney and Hilton’s entrance into the realm of vacation ownership. In 1999, Starwood purchased Vistana Resorts and in 2000 Cendant added Fairfield Communities to their long list of hospitality-related companies. Clearly, these facts indicate that timesharing has widespread acceptance into the hospitality arena. Not only were the 1990s a time of continued entrance of other lodging giants, this decade evidenced public trading of timeshare companies on the stock market. As of February 2001, there were 59 companies, either wholly timeshare companies or partially timeshare companies that were publicly traded on the open market. This fact has placed the timeshare industry under the microscope of the New York stock exchange and, therefore, the public as a whole (Fig. 2). It goes without saying that being publicly traded requires that the timeshare developer conduct their operation with the highest level of financial and ethical integrity possible. ‘‘The influence of Wall St. has changed the way the vacation ownership industry operates. Instead of focusing on sales volume, which has historically been the case, the emphasis is shifting toward bottom-line profit’’ (Vacation Ownership World, 2000).
4. The scope and impact of the American Resort Development Association The emphasis on image continues to be at the forefront for the timeshare developers. The American Resort Development Association (ARDA) is a not-forprofit professional trade association representing the vacation ownership and resort development industries. Established in 1969 and based in Washington, DC, ARDA is the only international trade association representing all facets of the vacation ownership resort industry. The association now serves more than 850 member companies from around the world representing more than 4000 resorts. As part of this charge in representing the industry, ARDA has engaged various consultant groups to conduct studies that benchmark the state of the industry. In summation, ARDA reports that there has been double-digit growth over the past 20 years, 6 million owners worldwide, and significant economic impacts. All of these indicators signify that the acceptance of the vacation ownership product is on the rise. The assumption is that all the aforementioned factors have contributed to the stature and acceptance of this industry as a whole (ARDA, 1999a). Clearly, an industry that has sustained a double-digit growth over the past 20 years in combination with an over 90% owner satisfaction rating is very admirable indeed. Another way to signify the popularity of the vacation ownership industry is to reflect upon the growth in the number of resorts and the number of owners. At the end of 1999, there were over 6000 timeshare resorts located throughout the world with an ownership base of 6 million timeshare owners (Fig. 3). These facts attest to the notion that vacation ownership has appeal for quite a few people, even if it is perceived by some as expensive. At the outset this appears to be
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Fig. 2. Stock symbols for publicly held companies with timeshare interests.
the case, but once you factor in the convenience of having set aside time to vacation in a luxurious setting with known standards, the ability to purchase at current prices instead of renting and paying current inflationary costs at traditional resorts, and a personal commitment to ‘‘owning’’ a vacation experience for oneself, spouse, or for one’s family is a significant lifetime goal that many only dream about. Stated in this manner, timeshare unit ownership enables one to enjoy the extravagance of vacationing in luxury while leaving the management and operation of the resort to a professional organization. This in turn enables the owner to enjoy their vacation experience year after year in a worry-free manner (Baiman and Forbes, 1992).
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Fig. 3. 1999 timeshare owner characteristics. Source: American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, Washington, DC.
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5. Sustained industry volume and growth In support of this sustained growth, you should refer to Table 1 reported in an industry publication titled ‘‘Vacation Ownership World’’. As you can see, Table 1 reflects the sustained vibrancy of the vacation ownership industry. A more important fact to note is that timesharing industry reported its first member of the $500 milliona-year club: Marriott Vacation Club International. This company’s sales rose 27% in 1999 to an estimated $540 million and climbed to 700 million in 2000. Using the figures displayed in Table 1, Marriott now represented about 9% of the entire pie in 1999 with a modest increase to 14.65% in 2000. Furthermore, MVCI announced an aggressive international expansion schedule that in combination with Fairfield’s acquisition by Cendant and Vistana’s acquisition by Starwood indicate the very big intend to get bigger (Vacation Ownership World, 2000). The impact of branding, whether by corporate expansion or by acquisition, accounts for rapid consumer acceptance. It is estimated that 60–70% of the general public feels some form of comfort when purchasing products from recognized names (Vacation Ownership World, 2000). Additional advantages of branding are the association of quality with name recognition, exploitation of database lists, branch networks, and reservation systems. In closing, it is clear that the brands are making a major impact in the timeshare industry. In fact, the top 10 companies in vacation ownership, in terms of sales volume, are either associated with brands or rapidly attempting to establish a brand. It is not a foregone conclusion that timesharing will draw the attention of additional ‘‘traditional’’ lodging corporations due to its profitability and attractive client base.
6. Applying Butler’s tourist lifecycle to timesharing Relative to Butler’s product life cycle theory tourism progresses through the stages of exploration, involvement, development, consolidation, stagnation, and then decline (Butler, 1980). The initial stage of exploration is typified by a newly found curiosity in traveling to the area. The following stage is reflective of this newly found interest in traveling to the area in that services begin to be established that serves the needs of this traveling public. The third stage is the most robust in terms of physical development of the area that is typified by rapid product and service development. However, this rapid development becomes an issue to the residents and to policy agents relative to the impacts that tourism is having on the community. Hence, the development phase is where the economic, sociological, cultural, and ecological impacts become an issue. In addition, this phase of development is commonly associated with considerable advertising and promotional efforts aimed at attracting tourists and in maintaining a balance with available resources. The last phase is strongly impacted by positive or negative impacts that have occurred during the development phase. Hence, the final stage of decline is largely contingent on the ability of the tourist destination to cope with the identified tourism impacts. If the issues are insurmountable, then decline follows with a concomitant drop in tourist
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Company
Allegro Resorts American Skiing Co Anfl del Mar Bluegreen Resorts Club La Costa Clube Praia da Oura Costamex Disney Vacation Club Epic Resorts Equivest Finance Fairfield Comm Four Seasons Rst Club Gold Point Lodging & Realty Grandvista LLC Hapimag Hilton Grand Vac Co Hyatt Vac Ownership ILX Resorts IntraWest Rst Own Corp Island One Marriott Vacation Club
Timeshare sales (millions US$) 2000 1999 25 84 150 55 23 91 186 128 100 446 40 28 31 76 150 48 26 n/a 41 650
Fractional sales (millions US$) 2000 1999
16 71 124 90 23 88 158 84 95 371 31 23 25 67 110 45 25 n/a 38 540
82
22
50
0
Total VO sales (millions US$) 2000 1999 25 82 84 150 55 23 91 186 128 100 446 40 28 31 76 150 48 26 85 41 700
16 22 71 124 50 23 88 158 84 95 371 31 23 25 67 110 45 25 n/a 38 540
VO resorts (year-end) 2000 1999 25 8 3 28 59 2 63 6 8 29 34 2 2 5 58 21 5 11 5 5 53
n/a 7 3 27 49 2 60 5 6 28 33 2 2 5 55 21 5 9 n/a 5 43
VO unites (year-end) 2000 1999 8000 n/a 684 1932 978 712 1010 2092 792 225 5022 200 117 306 5150 2120 449 643 n/a 816 4650
n/a n/a 684 1693 902 712 950 1805 720 2025 4560 160 96 210 4822 2120 306 495 n/a 766 3900
Owners/members (year/end) 2000 1999 8000 1076 25,424 79,558 43,000 20,000 50,500 52,000 30,000 100,000 330,000 4000 4800 10,200 130,000 52,000 10,000 20,000 9000 38,000 175,000
n/a n/a 20,950 82,000 39,000 20,000 43,000 44,000 17,000 75,000 260,000 2200 3100 6800 126,500 45,000 8000 185,000 n/a 35,000 145,000
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Table 1 Timeshares world sales leaders in 2000 (Companies with 2000 sales of US$20 million or more in timeshares and/or fractional ownership interests)
Totals
65 95
55 75
102 70 59 20 32 37 85 74 230 258 285 29 81 297 300
70 65 46 20 30 30 65 80 186 213 435 21 65 220 270
4497
3970
44
30
20
13
0
13
196
78
65 95 44 102 90 59 20 32 37 85 74 230 258 285 26 81 297 300
55 75 30 70 78 46 20 30 30 65 80 186 213 435 21 65 233 270
15 1 5 9 8 17 6 4 9 9 14 22 15 89 17 1 37 14
15 1 5 7 5 17 6 4 6 7 14 23 13 90 n/a 1 30 12
481 1454 150 2077 758 1057 550 1027 569 1631 1753 2600 2700 6910 328 243 2657 4500
481 1344 n/a 1350 688 1039 550 1025 392 1329 1542 2205 2500 6600 534 195 1800 4000
27,000 70,000 1100 52,000 30,000 43,051 19,000 25,000 26,000 61,159 70,000 113,000 150,000 293,000 24,000 16,000 112,000 180,000
25,000 63,000 700 40,000 25,000 40,052 17,000 25,000 21,000 56,281 65,000 90,000 130,000 275,000 33,000 8700 87,000 150,000
4775
4008
724
623
67,343
54,500
2,504,868
2,142,783
Source: Vacation Ownership World (2001, p. 8); contact Scott Burlingame at (425)-402-7036 or mailto:[email protected].
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Med Resorts Orange Lake Resorts The Owners Club Pacific Monarch Resorts Raintree Resorts International Ramada Vacation Suites Regency Resorts Group Resort Properties Group RMI Ltd The Royal Resorts Shell Vacations Silverleaf Resorts Starwood Vac Ownership Sunterra Tanco Resorts Tempus Resorts Trendwest Resorts Intl Westgate Resorts
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arrivals to the area. However, if policies are enacted that sustains the balance between precious resources and tourist demands then the probability of decline is averted. Following Butler’s model, it can be ascertained that the vacation ownership industry is still entrenched in the development phase of the tourism product life cycle. This is supported by the prevalence of timeshare resorts in commonly accepted tourist destinations such as Orlando and Las Vegas. According to ARDA, 24% of the timeshare industry is located in Florida, with Orlando being the most concentrated city. The breakdown of the timeshare industry in the United States is in Florida (24%), California (7%), South Carolina (7%), Hawaii (6%), Colorado (6%), North Carolina (4%), and Texas (4%) (ARDA, 1999b). The growth of vacation ownership that resorts within these states and others is very indicative of an industry that is deeply entrenched in the development phase. Therefore, an argument can be made that the industry is in the early stages of Butler’s development phase for two reasons. First, there is evidence of economic, sociological, cultural, and ecological impacts of vacation ownership in the main media stream. Examples such as these provide strong evidence that the communities are concerned with the impacts that a planned va cation ownership community has upon the community as a whole. The second means of documenting that the vacation ownership industry is in the development phase is attributed to the plethora of marketing and sales programs that are devoted to either ‘‘pushing’’ or ‘‘pulling’’ the prospective consumer to purchase the timeshare product. This is a logical finding because the timeshare product is still not a sought-after good. Therefore, the developer expends considerable sales and marketing resources in an effort to place the vacation ownership product before potential timeshare consumers. In fact, the sales and marketing costs account for 40–60% of the initial product cost. Still, the use of various sales and marketing distribution channels allude to the maturation of the vacation ownership industry. Instead of relying on face-to-face personal selling as the sole means of reaching the consumer, the timeshare industry is actively employing advanced strategies to promote their products. For instance, Fairfield Communities entered into an cooperative marketing agreement with Taylor Made golf products to cooperatively advertise their products. This transaction has enabled Fairfield Communities and Taylor Made to reduce their individual marketing costs while increasing their exposure to a wider consuming audience. The reader should be aware that this is not an uncommon practice within the industry as a whole, and in turn these activities are indicative of a maturing industry.
7. Conclusion In closing, this is a marvelous product because of its history, its scope, its flexibility and complexity whose time has come of age (Pryce, 1999). Due to this sustained growth and degree of consumer acceptance there are a lot of career opportunities for any one interested in entering the field. Fig. 4 lists out some of the more common career positions that support the development and operation of a timeshare
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Fig. 4. Positions within a timeshare company.
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operation. You should note that many of these positions, at least by title, appear to be quite similar to those from other hospitality-related businesses. However, it should also be noted that some of the positions listed are indicative of a real estate industry and not that of the traditional lodging sector. This fact truly indicates that the timeshare, alias the vacation ownership industry, is a combination of both industries.
8. Call to action The timeshare and the vacation ownership industry as a whole has a tremendous need for quantitative and qualitative research studies. At this point in time, this 30-year young industry has a tremendous need for quality research in the general fields of consumer behaviorism, human resources, marketing, sales, training and development, legal, accounting and finance, and property management. Of course, this is not an exhaustive summary of the research needed, but the main call to action is for academics to reach out and contact timeshare developers to determine their needs and then to enter into partnership or consulting agreements.
References American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, ARDA, Washington, DC. American Resort Development Association, 1999b. Phenomenal Growth in the US Timeshare Industry. ARDA, Washington, DC. Baiman, G., Forbes, R., 1992. Vacation Timesharing: a Real Estate. Rapport Publishing, Burlington, Ont. Butler, R., 1980. The concept of a tourist area cycle of evolution: implications for management of resources. Canadian Geographer 24, 5–12. McMullen, E., Crawford-Welch, S., 1999. Looking into the crystal ball: vacation ownership 2000. Timeshare and Vacation Interval Ownership Review 2 (1), 82–91. Molinell, H., 1991. Wanted Timeshare Bandits. Timeshare Posse Publishing, Carbondale, IL. Pryce, A., 1999. Timeshare: Coming of Age. Travel and Tourism Intelligence, UK. Trowbridge, K., 1981. Resort Timesharing. Simon and Schuster, New York. Vacation Ownership World, 2000. Source: Bothell, WA, January. Vacation Ownership World, 2001. Source: Bothell, WA, January.
Randall S. Upchurch holds the ARDA Professorship in Timeshare Resort Development in the Rosen School of Hospitality Management at the University of Central Florida, Orlando, FL, USA. Dr. Upchurch has over 21 years of experience in the lodging industry, working 16 years for a variety of hotel companies including Drury Inns, Hilton, Holiday Inns, Ramada Inn, and Red Roof Inns. As part of this industry tenure he was responsible for operations management, training and development, marketing, sales, strategic planning, and quality control.
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In his present position at the University of Central Florida, Dr. Upchurch is actively working with the American Resort Development Association to deliver a resort development concentration. These courses include (a) Principles of Resort Timesharing, (b) Development of Timeshare Resorts, (c) Property Management of Timeshare Resorts, (d) Sales and Marketing Strategies in Timesharing, and (e) Database Mining in the Timeshare Industry. He currently holds the ARDA Professorship in Timeshare Resort Development from the American Resort Development Association.
The evolution of a sleeping giant: resort timesharing Randall S. Upchurcha,*, Kurt Gruberb a
Rosen School of Hospitality Management, University of Central Florida, Orlando, FL 32816-1450, USA b Planning and Development/General Counsel, Island One, Inc., 2345 Sand Lake Road, Orlando, FL 32809, USA
Abstract The timeshare industry has been in existence in the United States for a little of 30 years during which the industry as a whole has experienced considerable trials and tribulations. This manuscript highlights the evolution of the timeshare industry, its rapid gain in consumer acceptance, and the need for empirical research in this field. r 2002 Elsevier Science Ltd. All rights reserved. Keywords: Timeshare; History; Sales volume; Publicly traded; Vacation ownership
1. What is resort timesharing? Resort timesharing is simply the purchase of a luxurious vacation home in increments of a week or more by a number of buyers, each of whom buy only the time which they will use each year. Because the expense of owning and operating a vacation home is then divided among its many users, the cost to each is only a small fraction of what a vacation home would otherwise cost. Resort timesharing is marketed under various names that represent a particular form of the concept: interval ownership, right-to-use, vacation lease, vacation license and club membership. The terms most often used are resort timesharing (shortened to timesharing) and interval resort sharing. Generally speaking, each type is designed to provide a family with accommodations superior to most vacation hotels and motels and with the use of standard or expanded recreation facilities for a specified number of years. The purchase guarantees accommodations for future vacations at today’s prices, or ‘‘freezes’’ the *Corresponding author. Tel.: +1-407-823-2188; fax: +1-407-823-5696. E-mail addresses: [email protected] (R.S. Upchurch), [email protected] (K. Gruber). 0278-4319/02/$ - see front matter r 2002 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 2 ) 0 0 0 1 8 - X
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cost of lodgings at the one-time price for the duration of the purchase agreement (Trowbridge, 1981). In order to understand the timeshare product, one must define exactly what is meant by timeshare, alias vacation ownership as the industry is currently known. The timeshare product is drastically different from traditional lodging accommodation products due to various complexities that surround the timeshare product from legal, consumer usage, and product perspectives. Legally timeshare is the right-to-use vacation accommodations and facilities for a stated period of time each year over a certain number of years. This right-to-use is either coupled with an interest in the underlying real property or not. Under this legal definition, the common denominator is whether the timeshare unit was deeded or not to the consumer (Gruber, 1999a). From this legal perspective, the act of engaging in a timeshare is the contractual subdivision of a specific unit at a given location into slices of time during which the owner has exclusive occupancy. Basically this means that a developer can sell a single unit 52 times per year, excluding any maintenance time that might be set aside for unit upkeep. From a consumer perspective, a timeshare is an esteemed vacation accommodation product that is commonly sold to a consumer in weekly intervals (i.e., increments). Under this definition, each unit within a given resort is shared for a predetermined amount of time (i.e., weeks) per each unit. This means that each unit is technically ‘‘shared’’ with other owners throughout the year with the caveat being that a unit is occupied by only one purchaser at a time. From product perspective, a timeshare holds a unique spot on the accommodation spectrum as displayed in the following figure. At one end of the spectrum you have a one-night stay at a hotel for a minimum price. As you increase the length of stay, we find a short-term product for a longer stay, maybe over 1 or 2 years, for a little higher price. Continuing on, we have a timeshare stay of a set duration for a much longer period of time, perhaps from 3 years to perpetual, for a much higher price. Then we have cotenant ownership of a condominium unit or a second home, such as a beach condo, split between several people for a perpetual duration and a higher price. Finally, we have fullownership of a second home at a much higher price. In relation to this timeline analogy, timeshare allows for a second home at a lower price with someone else, meaning a property management company, taking care of the day-to-day management. Product timeline Duration of stay Short Nightly loading
Long Timeshare product
Second home
2. Timesharing: roots and reflections The timeshare industry, otherwise known as vacation ownership, first appeared in Europe in the 1960s. One of the early entrants known as ‘‘Superdevoluy’’, a ski
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resort in France, developed the first ownership program in the world. The purpose of the program was to give the owners of Superdevoluy a guaranteed opportunity to come and ski in the French Alps (Baiman and Forbes, 1992). Not very long after the concept had taken hold in Europe the idea was quickly adopted in the United States. The expansion was so pronounced that in less than two decades, the timeshare industry recorded double-digit growth, which has been relatively unparalleled by other service sectors for this same period of time. Not only did the number of timeshare resorts spread rapidly in the United States, but the diversity of products and services offered evolved in a dramatic fashion as well. To date, if you review timeshare company websites for product and service information, you will find offerings that cater to a wide range of leisure and recreational needs for various consumer segments. The observation that the timeshare product has been differentiated in product type is supported by a tiered classification system proposed by McMullen and Welch (1999). Per this system, there are five levels of timeshare products available in the marketplace. These five levels are luxury, up-market, quality, value, and economy level. The ‘‘luxury’’ market provides a product in the $20,000 range per interval that is commonly found in tourist destinations, and provides a wide array of services and amenities. The luxury timeshare product is often a penthouse style of construction with about 1.500 ft2 or more of unit space. The ‘‘up-market’’ priced a little lower at $15,000–25,000 is also a destination resort with approximately 1000 ft2 of space for a one-room unit and 1800 ft2 for a two-bedroom unit. The ‘‘quality’’ level is priced at $9000–17,000, is located in a destination area, with an average square footage of 800 for a one-room unit or 1400 for a two-bedroom unit. The ‘‘value’’ level is often considered a regional resort/facility that is priced in the $7000–10,000 range. The one-bedroom unit in this type of facility has about 800 ft2 of space, while the twobedroom unit has 1000 ft2 feet of unit space. The ‘‘economy’’ level also is found in regional markets, is priced from $5000 to $8000, has 600 ft2 for a studio unit and is approximately 900 ft2 for a one-bedroom unit (McMullen and Welch, 1999).
3. Timesharing: rising to fame Despite the fast growth of the timeshare industry during the 1960s and the 1970s experts in the hospitality industry did not take the idea seriously and many considered it a fad that would soon vanish (Molinell, 1991). To add to that, many misrepresentations and lawsuits gave the timeshare industry a bad image that resulted in poor acceptance by society (Trowbridge, 1981). But thus far, this young industry has proved that it is here to stay. This statement is affirmed by the fact that in 1999 there were over 5 million families vacationing at over 5000 resorts. This growth rate is phenomenal because these numbers equate to a 1000 percent growth rate over the past two decades (ARDA, 1999a) (Fig. 1). There were two main events that helped to perpetuate this extraordinary growth rate and consumer acceptance of the timeshare product. First, the entrance of many reputable hospitality establishments such as Disney, Hilton, Hyatt, and Marriott
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contributed greatly to consumer’s view that the timeshare industry was, and is, a credible and legitimate vacation alternative. Not only did these establishments enhance the industry’s image by means of their involvement, they also brought years of marketing, sales, finance, accounting, legal, and property management experience to a relatively new and growing industry. As you might imagine, the timeshare industry was obsessed with its image during the 1970s and for good reason. In the 1970s some developers in the US adopted the concept of ‘‘sell it and they will come’’. The net result was a hard-sell approach that led to sales practices that were abominable. In fact, the 1970s have been identified as the decade in which fake premiums were used as a ploy to get people to take a tour. For instance, people were drawn into taking a property tour by such gifts as an allterrain vehicle or a grandfather clock. Certainly these gifts sounded very appealing in principle. Unfortunately, the all-terrain vehicle was really a lawn chair on wheels and the grandfather clock turned out to be a 6-in cardboard clock. To exacerbate this problem, once the consumer was drawn into a sales presentation via the promise of false gifts, additional high-pressure tactics were employed. For instance, it was not uncommon to hear a consumer complain about being forced into buying a timeshare as the result of a ‘‘hot box’’ selling technique. A ‘‘hot box’’ selling technique is a term used to describe a sales presentation where the prospective purchaser is not allowed to leave or terminate the tour without agreeing to buy the product or by aggressively complaining. Needless to say, the outcome of such ploys and unscrupulous tactics caused the general public to view the industry with great skepticism. In Florida during the 1970s the conditions were ripe for developers to claim their fame in the timeshare industry. This was a time when developers put a minimum amount down on a contract to purchase a hotel and began selling timeshare. Unfortunately, when the purchaser came back a year later, the developer was gone and the hotel owner did not know anything about the timeshare plan. By the early 1980s the practices of such unscrupulous developers were out of control. The net result was that Florida’s state legislature passed their first timeshare law in 1983 to finally put an end to such unethical practices. This first ‘‘timeshare’’ law imposed strict restrictions on timeshare developers that in principle put the bad developers out of business. This action can be said to have saved the industry from a very early demise. From that point on, the industry’s image improved significantly due to the fallout of these scam artists. The entry of major lodging companies into the timeshare industry during the 1980s and the 1990s is believed to have exerted a strong influence on increased consumer acceptance of the timeshare product. To be exact, in 1984 Marriott entered, as did Disney, and Hilton following suit in 1992. These developers brought considerable brand-name recognition and elevated consumer acceptance levels with them due to their organizational performance standards, organizational views
Fig. 1. 1999 sales performance. Source: American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, Washington, DC.
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toward civic responsibility, and adherence to strong business ethics. By the end of the century, and continuing into the next, other branded lodging companies followed Marriott, Disney and Hilton’s entrance into the realm of vacation ownership. In 1999, Starwood purchased Vistana Resorts and in 2000 Cendant added Fairfield Communities to their long list of hospitality-related companies. Clearly, these facts indicate that timesharing has widespread acceptance into the hospitality arena. Not only were the 1990s a time of continued entrance of other lodging giants, this decade evidenced public trading of timeshare companies on the stock market. As of February 2001, there were 59 companies, either wholly timeshare companies or partially timeshare companies that were publicly traded on the open market. This fact has placed the timeshare industry under the microscope of the New York stock exchange and, therefore, the public as a whole (Fig. 2). It goes without saying that being publicly traded requires that the timeshare developer conduct their operation with the highest level of financial and ethical integrity possible. ‘‘The influence of Wall St. has changed the way the vacation ownership industry operates. Instead of focusing on sales volume, which has historically been the case, the emphasis is shifting toward bottom-line profit’’ (Vacation Ownership World, 2000).
4. The scope and impact of the American Resort Development Association The emphasis on image continues to be at the forefront for the timeshare developers. The American Resort Development Association (ARDA) is a not-forprofit professional trade association representing the vacation ownership and resort development industries. Established in 1969 and based in Washington, DC, ARDA is the only international trade association representing all facets of the vacation ownership resort industry. The association now serves more than 850 member companies from around the world representing more than 4000 resorts. As part of this charge in representing the industry, ARDA has engaged various consultant groups to conduct studies that benchmark the state of the industry. In summation, ARDA reports that there has been double-digit growth over the past 20 years, 6 million owners worldwide, and significant economic impacts. All of these indicators signify that the acceptance of the vacation ownership product is on the rise. The assumption is that all the aforementioned factors have contributed to the stature and acceptance of this industry as a whole (ARDA, 1999a). Clearly, an industry that has sustained a double-digit growth over the past 20 years in combination with an over 90% owner satisfaction rating is very admirable indeed. Another way to signify the popularity of the vacation ownership industry is to reflect upon the growth in the number of resorts and the number of owners. At the end of 1999, there were over 6000 timeshare resorts located throughout the world with an ownership base of 6 million timeshare owners (Fig. 3). These facts attest to the notion that vacation ownership has appeal for quite a few people, even if it is perceived by some as expensive. At the outset this appears to be
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Fig. 2. Stock symbols for publicly held companies with timeshare interests.
the case, but once you factor in the convenience of having set aside time to vacation in a luxurious setting with known standards, the ability to purchase at current prices instead of renting and paying current inflationary costs at traditional resorts, and a personal commitment to ‘‘owning’’ a vacation experience for oneself, spouse, or for one’s family is a significant lifetime goal that many only dream about. Stated in this manner, timeshare unit ownership enables one to enjoy the extravagance of vacationing in luxury while leaving the management and operation of the resort to a professional organization. This in turn enables the owner to enjoy their vacation experience year after year in a worry-free manner (Baiman and Forbes, 1992).
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Fig. 3. 1999 timeshare owner characteristics. Source: American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, Washington, DC.
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5. Sustained industry volume and growth In support of this sustained growth, you should refer to Table 1 reported in an industry publication titled ‘‘Vacation Ownership World’’. As you can see, Table 1 reflects the sustained vibrancy of the vacation ownership industry. A more important fact to note is that timesharing industry reported its first member of the $500 milliona-year club: Marriott Vacation Club International. This company’s sales rose 27% in 1999 to an estimated $540 million and climbed to 700 million in 2000. Using the figures displayed in Table 1, Marriott now represented about 9% of the entire pie in 1999 with a modest increase to 14.65% in 2000. Furthermore, MVCI announced an aggressive international expansion schedule that in combination with Fairfield’s acquisition by Cendant and Vistana’s acquisition by Starwood indicate the very big intend to get bigger (Vacation Ownership World, 2000). The impact of branding, whether by corporate expansion or by acquisition, accounts for rapid consumer acceptance. It is estimated that 60–70% of the general public feels some form of comfort when purchasing products from recognized names (Vacation Ownership World, 2000). Additional advantages of branding are the association of quality with name recognition, exploitation of database lists, branch networks, and reservation systems. In closing, it is clear that the brands are making a major impact in the timeshare industry. In fact, the top 10 companies in vacation ownership, in terms of sales volume, are either associated with brands or rapidly attempting to establish a brand. It is not a foregone conclusion that timesharing will draw the attention of additional ‘‘traditional’’ lodging corporations due to its profitability and attractive client base.
6. Applying Butler’s tourist lifecycle to timesharing Relative to Butler’s product life cycle theory tourism progresses through the stages of exploration, involvement, development, consolidation, stagnation, and then decline (Butler, 1980). The initial stage of exploration is typified by a newly found curiosity in traveling to the area. The following stage is reflective of this newly found interest in traveling to the area in that services begin to be established that serves the needs of this traveling public. The third stage is the most robust in terms of physical development of the area that is typified by rapid product and service development. However, this rapid development becomes an issue to the residents and to policy agents relative to the impacts that tourism is having on the community. Hence, the development phase is where the economic, sociological, cultural, and ecological impacts become an issue. In addition, this phase of development is commonly associated with considerable advertising and promotional efforts aimed at attracting tourists and in maintaining a balance with available resources. The last phase is strongly impacted by positive or negative impacts that have occurred during the development phase. Hence, the final stage of decline is largely contingent on the ability of the tourist destination to cope with the identified tourism impacts. If the issues are insurmountable, then decline follows with a concomitant drop in tourist
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Company
Allegro Resorts American Skiing Co Anfl del Mar Bluegreen Resorts Club La Costa Clube Praia da Oura Costamex Disney Vacation Club Epic Resorts Equivest Finance Fairfield Comm Four Seasons Rst Club Gold Point Lodging & Realty Grandvista LLC Hapimag Hilton Grand Vac Co Hyatt Vac Ownership ILX Resorts IntraWest Rst Own Corp Island One Marriott Vacation Club
Timeshare sales (millions US$) 2000 1999 25 84 150 55 23 91 186 128 100 446 40 28 31 76 150 48 26 n/a 41 650
Fractional sales (millions US$) 2000 1999
16 71 124 90 23 88 158 84 95 371 31 23 25 67 110 45 25 n/a 38 540
82
22
50
0
Total VO sales (millions US$) 2000 1999 25 82 84 150 55 23 91 186 128 100 446 40 28 31 76 150 48 26 85 41 700
16 22 71 124 50 23 88 158 84 95 371 31 23 25 67 110 45 25 n/a 38 540
VO resorts (year-end) 2000 1999 25 8 3 28 59 2 63 6 8 29 34 2 2 5 58 21 5 11 5 5 53
n/a 7 3 27 49 2 60 5 6 28 33 2 2 5 55 21 5 9 n/a 5 43
VO unites (year-end) 2000 1999 8000 n/a 684 1932 978 712 1010 2092 792 225 5022 200 117 306 5150 2120 449 643 n/a 816 4650
n/a n/a 684 1693 902 712 950 1805 720 2025 4560 160 96 210 4822 2120 306 495 n/a 766 3900
Owners/members (year/end) 2000 1999 8000 1076 25,424 79,558 43,000 20,000 50,500 52,000 30,000 100,000 330,000 4000 4800 10,200 130,000 52,000 10,000 20,000 9000 38,000 175,000
n/a n/a 20,950 82,000 39,000 20,000 43,000 44,000 17,000 75,000 260,000 2200 3100 6800 126,500 45,000 8000 185,000 n/a 35,000 145,000
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Table 1 Timeshares world sales leaders in 2000 (Companies with 2000 sales of US$20 million or more in timeshares and/or fractional ownership interests)
Totals
65 95
55 75
102 70 59 20 32 37 85 74 230 258 285 29 81 297 300
70 65 46 20 30 30 65 80 186 213 435 21 65 220 270
4497
3970
44
30
20
13
0
13
196
78
65 95 44 102 90 59 20 32 37 85 74 230 258 285 26 81 297 300
55 75 30 70 78 46 20 30 30 65 80 186 213 435 21 65 233 270
15 1 5 9 8 17 6 4 9 9 14 22 15 89 17 1 37 14
15 1 5 7 5 17 6 4 6 7 14 23 13 90 n/a 1 30 12
481 1454 150 2077 758 1057 550 1027 569 1631 1753 2600 2700 6910 328 243 2657 4500
481 1344 n/a 1350 688 1039 550 1025 392 1329 1542 2205 2500 6600 534 195 1800 4000
27,000 70,000 1100 52,000 30,000 43,051 19,000 25,000 26,000 61,159 70,000 113,000 150,000 293,000 24,000 16,000 112,000 180,000
25,000 63,000 700 40,000 25,000 40,052 17,000 25,000 21,000 56,281 65,000 90,000 130,000 275,000 33,000 8700 87,000 150,000
4775
4008
724
623
67,343
54,500
2,504,868
2,142,783
Source: Vacation Ownership World (2001, p. 8); contact Scott Burlingame at (425)-402-7036 or mailto:[email protected].
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Med Resorts Orange Lake Resorts The Owners Club Pacific Monarch Resorts Raintree Resorts International Ramada Vacation Suites Regency Resorts Group Resort Properties Group RMI Ltd The Royal Resorts Shell Vacations Silverleaf Resorts Starwood Vac Ownership Sunterra Tanco Resorts Tempus Resorts Trendwest Resorts Intl Westgate Resorts
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arrivals to the area. However, if policies are enacted that sustains the balance between precious resources and tourist demands then the probability of decline is averted. Following Butler’s model, it can be ascertained that the vacation ownership industry is still entrenched in the development phase of the tourism product life cycle. This is supported by the prevalence of timeshare resorts in commonly accepted tourist destinations such as Orlando and Las Vegas. According to ARDA, 24% of the timeshare industry is located in Florida, with Orlando being the most concentrated city. The breakdown of the timeshare industry in the United States is in Florida (24%), California (7%), South Carolina (7%), Hawaii (6%), Colorado (6%), North Carolina (4%), and Texas (4%) (ARDA, 1999b). The growth of vacation ownership that resorts within these states and others is very indicative of an industry that is deeply entrenched in the development phase. Therefore, an argument can be made that the industry is in the early stages of Butler’s development phase for two reasons. First, there is evidence of economic, sociological, cultural, and ecological impacts of vacation ownership in the main media stream. Examples such as these provide strong evidence that the communities are concerned with the impacts that a planned va cation ownership community has upon the community as a whole. The second means of documenting that the vacation ownership industry is in the development phase is attributed to the plethora of marketing and sales programs that are devoted to either ‘‘pushing’’ or ‘‘pulling’’ the prospective consumer to purchase the timeshare product. This is a logical finding because the timeshare product is still not a sought-after good. Therefore, the developer expends considerable sales and marketing resources in an effort to place the vacation ownership product before potential timeshare consumers. In fact, the sales and marketing costs account for 40–60% of the initial product cost. Still, the use of various sales and marketing distribution channels allude to the maturation of the vacation ownership industry. Instead of relying on face-to-face personal selling as the sole means of reaching the consumer, the timeshare industry is actively employing advanced strategies to promote their products. For instance, Fairfield Communities entered into an cooperative marketing agreement with Taylor Made golf products to cooperatively advertise their products. This transaction has enabled Fairfield Communities and Taylor Made to reduce their individual marketing costs while increasing their exposure to a wider consuming audience. The reader should be aware that this is not an uncommon practice within the industry as a whole, and in turn these activities are indicative of a maturing industry.
7. Conclusion In closing, this is a marvelous product because of its history, its scope, its flexibility and complexity whose time has come of age (Pryce, 1999). Due to this sustained growth and degree of consumer acceptance there are a lot of career opportunities for any one interested in entering the field. Fig. 4 lists out some of the more common career positions that support the development and operation of a timeshare
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Fig. 4. Positions within a timeshare company.
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operation. You should note that many of these positions, at least by title, appear to be quite similar to those from other hospitality-related businesses. However, it should also be noted that some of the positions listed are indicative of a real estate industry and not that of the traditional lodging sector. This fact truly indicates that the timeshare, alias the vacation ownership industry, is a combination of both industries.
8. Call to action The timeshare and the vacation ownership industry as a whole has a tremendous need for quantitative and qualitative research studies. At this point in time, this 30-year young industry has a tremendous need for quality research in the general fields of consumer behaviorism, human resources, marketing, sales, training and development, legal, accounting and finance, and property management. Of course, this is not an exhaustive summary of the research needed, but the main call to action is for academics to reach out and contact timeshare developers to determine their needs and then to enter into partnership or consulting agreements.
References American Resort Development Association, 1999a. State of the US Vacation Ownership Industry: The 1999 Report, ARDA, Washington, DC. American Resort Development Association, 1999b. Phenomenal Growth in the US Timeshare Industry. ARDA, Washington, DC. Baiman, G., Forbes, R., 1992. Vacation Timesharing: a Real Estate. Rapport Publishing, Burlington, Ont. Butler, R., 1980. The concept of a tourist area cycle of evolution: implications for management of resources. Canadian Geographer 24, 5–12. McMullen, E., Crawford-Welch, S., 1999. Looking into the crystal ball: vacation ownership 2000. Timeshare and Vacation Interval Ownership Review 2 (1), 82–91. Molinell, H., 1991. Wanted Timeshare Bandits. Timeshare Posse Publishing, Carbondale, IL. Pryce, A., 1999. Timeshare: Coming of Age. Travel and Tourism Intelligence, UK. Trowbridge, K., 1981. Resort Timesharing. Simon and Schuster, New York. Vacation Ownership World, 2000. Source: Bothell, WA, January. Vacation Ownership World, 2001. Source: Bothell, WA, January.
Randall S. Upchurch holds the ARDA Professorship in Timeshare Resort Development in the Rosen School of Hospitality Management at the University of Central Florida, Orlando, FL, USA. Dr. Upchurch has over 21 years of experience in the lodging industry, working 16 years for a variety of hotel companies including Drury Inns, Hilton, Holiday Inns, Ramada Inn, and Red Roof Inns. As part of this industry tenure he was responsible for operations management, training and development, marketing, sales, strategic planning, and quality control.
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In his present position at the University of Central Florida, Dr. Upchurch is actively working with the American Resort Development Association to deliver a resort development concentration. These courses include (a) Principles of Resort Timesharing, (b) Development of Timeshare Resorts, (c) Property Management of Timeshare Resorts, (d) Sales and Marketing Strategies in Timesharing, and (e) Database Mining in the Timeshare Industry. He currently holds the ARDA Professorship in Timeshare Resort Development from the American Resort Development Association.