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Timeshare - The Timeshare Indust

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					The Timeshare Industry


      Hyung-il Jung
      Virginia Tech


      April 22, 2002
         The Timeshare Industry
   Timesharing

    – A term used to describe the joint ownership of a resort
      property by several families. Each family owns a
      certain period of time.


   Features & Information
    – Timesharing began in French Alps in the 1960’s
    – Concept immigrated to U.S. in 1970’s.
    – By 1998, the fastest growing sector with $3 billion
      sales volume with 1.9 million owners.
        The Timeshare Industry
   Features & Information (cont’d)
    – Fraction of cost of full vacation home
      ownership
    – For a one time purchase price and an annual
      maintenance fee, purchasers own their
      vacations forever (or predetermined period
      depending on the agreement).
    – Timeshares are a hedge against inflation
    – Takes a variety of forms: resort condominium,
      hotel rooms, cabins on cruise ships, houseboats,
      motor homes.
          The Timeshare Industry
   Timeshare Purchase Options:
    –   Fixed Week
    –   Floating Week
    –   Points Systems
    –   Deeded Agreements
    –   Right-to-Use Agreements
   Timeshare Exchange
    – The system that allows timeshare owners to
        trade the accommodations they own for
        comparable accommodations
           The Timeshare Industry
   Cost for a Timeshare
    – Average price for a 7-day timeshare unit in the
      U.S.
          $10,325 (1998 RCI estimate)
          $12,500 (other sources)
          Studio:             $ 7,380
          One Bedroom:        $ 8,620
          Two Bedroom:        $10,790
          Three Bedroom:      #13,925
          Maintenance fee: an annual fee that timeshare
           owners pay for upkeep and improvements at the
           home resort. Average of $360.
       The Timeshare Industry
   Timeshare Then & Now

                1978       1998     Growth Rate
Sales (mil) $        300 $    3,000        12.2%
# of Resorts          240     1,200         8.4%
Owners (000)          100     1,900        15.9%
med. Income $     23,000 $ 68,000           5.6%
        The Timeshare Industry
   Demographics of Owners (2001)
    – Median Household Income:           $74,000
    – Average Age:        54 years old
    – Marital Status:     87% couples


   Big Players in Timesharing Industry
    – Disney, Hilton, Marriott, Four Seasons,
      Embassy, Hampton, Ramada, and others
        The Timeshare Industry
   1.5 million more households are likely to
    own timesharing in next few years.

   The U.S. market will grow to 10%
    penetration among those with an income
    more than $50,000. Currently, it is at 4%
    rate.
The Timeshare Industry
 Interest in Purchasing Timeshare by Annual
              Household Income


60%
50%
40%
30%                           52%
20%                  30%
10%       18%                           14%
 0%
       Less than   $30K -   $50K -   More than
        $30,000     $49K    $100K     $100K



      Source: 2001 National Leisure Monitor
 The Timeshare Industry
        Interest in Purchasing Timeshare by Age


50%

40%

30%
                      44%
20%                             37%

10%                                         12%
           7%
0%
      21 & younger   22-35     36-54    55 & higher



        Source: 2001 National Leisure Monitor
        Hospitality Education in relation with the
                   Timeshare Industry
   Timeshare programs are beginning to appear in
    various stages (currently offered at two universities).
   Mr. John Sweeny at UNLV says,
       “It’s a natural progression of the industry. It creates a
        career, and moves it up to the next strata.”
       “A number of students first learns of the concept as
        consumers of the product.”
   Which aspects of the business shall we focus on in
    this burgeoning trend?
       Knowledge on Real Estate, Financial valuation (or
        appraisal) beyond our focus on customer service.
     Hospitality Education in relation with the
                Timeshare Industry

   Timeshare industry has introduced a new concept.
   Consumers found it quite attractive.
   There is a match between supply and demand.
   Hospitality service providers can contribute to both
    sides in achieving their goals.

                        (Real Estate)
                         Developers


         Hospitality
                                         Consumers
         Operators
     Hospitality Education in relation with the
                Timeshare Industry

                      (Real Estate)
                       Developers


        Hospitality
                                       Consumers
        Operators

   Consumers focus on experience (87%) and financial
    benefit (53%).
   Developers focus on financial goals (real estate
    value).
   Hospitality operators can coordinate both sides and
    achieve their own goals (career development).
                        Savings on Accommodation
         Conditions:
            –     Initial payment: $12,000
            –     Equivalent Hotel Room: $2,000 per week
            –     Inflation Rate: 2.5% per year
            –     Bank Interest Rate: 3% per year

Year               1            2           3           4        5         6       7          8            9           10
Inflation                        2.5%        2.5%        2.5%      2.5% 2.5% 2.5%              2.5%         2.5%         2.5%
Accommodation $    2,000 $      2,050 $     2,101 $     2,154 $ 2,208 $ 2,263 $ 2,319 $       2,377   $    2,437   $    2,498
Interest Rate                    3.0%        3.0%        3.0%      3.0% 3.0% 3.0%              3.0%         3.0%         3.0%
Present Value $     2,000 $     1,932 $     1,923 $     1,914 $ 1,904 $ 1,895 $ 1,886 $       1,877   $    1,868   $    1,859
Accumulation $      2,000 $     3,932 $     5,855 $     7,769 $ 9,673 $ 11,568 $ 13,454 $    15,331   $   17,198   $   19,057
Profit & Loss $   (10,000) $   (8,068) $   (6,145) $   (4,231) $ (2,327) $ (432) $ 1,454 $    3,331   $    5,198   $    7,057
      Advantage of Timeshare beyond
             Financial Profit
 Apartment (condominium) style facility rather
  than a hotel room (larger space)
 Kitchen facility
 Exchange programs available
 Resale value is possible (currently not that easy to
  resell).

				
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posted:8/24/2010
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