Timeshare’s financial forecast for 2013

Last month we interviewed William Ward, vice president of Ward Financial, to get an idea of how the timeshare industry is doing financially. This month, we wanted to get another viewpoint, so we asked Michael Szwajkowski a few questions.

Michael is the executive vice president of the commercial and specialty finance business at Capital One Bank. In this role, he is responsible for leading multiple broad lines of business within the commercial and specialty finance business, including receivables-oriented businesses such as the bank’s vacation ownership lending platform which provides financing across the United States, Canada, Mexico and the Caribbean.

Michael is a Trustee of the American Resort Development Association (ARDA). He has been active in the vacation ownership industry since 1995, having built substantial portfolios at a number of institutions. Currently, he serves on the board of directors of American Medical & Life Insurance Company.

What were some of the most significant financial trends from 2012 affecting the timeshare industry?

From our perspective, there were three marked trends in 2012 which most significantly impacted the timeshare industry. First, the financial condition of timeshare operators continued to improve as operators maintained a more conservative posture with respect to credit practices and balance sheet management.

Secondly, consumer credit generally continued to improve as the economy slowly recovered from the recession. As a result, the performance of receivables portfolios continued to strengthen, and most operators experienced better overall performance.

Lastly, another trend we observed during the past year was a renewed interest in the timeshare market by banks and other balance sheet lenders.

How would you describe the financial health of the timeshare industry today?

The financial health of the timeshare industry is the best that it has been in years. Overall, timeshare companies have employed lower levels of leverage since the crisis, improved the credit quality of receivables portfolios, streamlined operations and improved operating margins.

At the same time, the availability of debt capital has improved as banks have become more active and the securitization market has demonstrated strong demand. Finally, consumer confidence continues to improve and, as a result, sales should continue their upward growth trajectory into 2013.

How is the timeshare sector doing compared to the hospitality industry as a whole?

The two markets are running somewhat in tandem, which is what we often observe in stable or upward trending markets. In downward trending markets, timeshare tends to be the more defensive industry.

What are your projections for the timeshare industry in 2013?

Based on what we observe with our clients and the results of Capital One Bank’s proprietary industry survey from the annual ARDA conference, we anticipate market-wide sales growth in 2013. The key driver of sales, consumer confidence, has gradually improved over the past two years and continues to solidify. However, we’ll need to continue to watch broader economic trends that impact consumer behavior.

From a banker’s point of view, where does lender confidence in the timeshare industry stand currently?

Lender confidence in the industry is probably the highest it has been since pre-credit crisis. Today, operators employ more prudent credit standards and company balance sheets have been delivered. There is renewed interest and activity by banks seeking to write loans to be held on balance sheets. Non-bank investor appetite has similarly grown as evidenced by the increased activity in the timeshare securitization market.