Simon Crawford Welch, Ph.D, RRP

The U.S. Vacation Ownership Industry: Commoditization, Sustainable Competitive Advantage & Brand Differentiation

Simon Crawford Welch, Ph.D, RRP August 29, 20243 months ago

1.Industry Consolidation: A Decade of Transformation

The timeshare and vacation ownership industry in the United States has undergone significant consolidation in recent years. Small and regional independent companies have been absorbed by larger, often publicly traded entities, fundamentally altering the competitive landscape.

According to the American Resort Development Association (ARDA), the timeshare industry generated over $10.5 billion in sales in 2022. This has resulted in large companies controlling a significant portion of the market. The top 5 companies now account for more than 70% of the industry’s total inventory. This shift in control underscores the growing dominance of major players and the diminishing presence of independent operators.

Major acquisitions, such as (1) Hilton Grand Vacations’ purchase of Diamond Resorts International (2021), and Bluegreen (2023); (2) Wyndham Destinations’ acquisition of Shell Vacations Club (2012), Alliance Reservations Network (2019), the Travel & Leisure brand (2021), and Accor Vacation Club (2024); and (3) Holiday Inn Club Vacations’ acquisition of Silverleaf Resorts (2015), and Royal Resorts (2022).

This article we will focus on three companies only – Travel & Leisure (formerly Wyndham Destinations) (TNL), Hilton Grand Vacations Company (HGV), and Holiday Inn Club Vacations (HICV).

2. The Risks of Commoditization and the Need for Brand Differentiation

As consolidation progresses, the risk of commoditization in the vacation ownership industry becomes more pronounced. Commoditization occurs when products and services become indistinguishable from one another in the eyes of consumers, leading to competition primarily on price rather than on unique value.

Dangers of Commoditization

Price Wars: Commoditized markets often lead to price wars, which erode profit margins and reduce the overall value of offerings.
Customer Loyalty Decline: When customers perceive little difference between brands, loyalty diminishes, and switching costs lower, making it easier for customers to move to competitors based on price.
Reduced Brand Equity: Brands that fail to differentiate risk losing their equity, becoming interchangeable with others in the market.

Strong brand differentiation is essential. To quote the guru, Philip Kotler, “the art of marketing is the art of brand building. If you are not a brand, you are a commodity.” It is vital to create and maintain a distinct brand identity to secure a competitive advantage.

3. Examining the Industry through Strategic Models

To understand the changing nature of the vacation ownership industry and how companies can navigate it, strategic models can come in useful. Three of the most useful are:

Porter’s Generic Strategies Model

Michael Porter’s model outlines three primary strategies for achieving competitive advantage: (i) cost leadership, (ii) differentiation, and (iii) focus.

Hilton Grand Vacations: Employs a differentiation strategy, emphasizing luxury and exclusive locations. By leveraging the Hilton brand, they offer superior service and amenities.
Travel + Leisure Co.: Uses a broad differentiation strategy, offering diverse vacation products and leveraging the Travel + Leisure brand to provide curated travel experiences.
Holiday Inn Club Vacations: Focuses on a differentiation strategy targeting families, providing family-friendly resorts and activities at an affordable price point.

Ansoff Matrix

The Ansoff Matrix helps businesses decide on growth strategies through market penetration, product development, market development, and diversification.

Hilton Grand Vacations: Engages in market development by acquiring properties in new geographical locations.
Travel + Leisure Co.: Focuses on diversification, expanding into broader travel experiences beyond traditional timeshares.
Holiday Inn Club Vacations: Uses product development to introduce new family-oriented vacation packages and activities.

Customer Value Proposition (CVP) Model

The CVP model emphasizes delivering superior value to customers through functional, emotional, and economic benefits.

Hilton Grand Vacations: Provides functional value through luxury accommodations, emotional value through the prestige of the Hilton brand, and economic value through flexible points-based ownership.
Travel + Leisure Co.: Offers functional value through diverse vacation options, emotional value through unique travel experiences, and economic value through comprehensive membership benefits.
Holiday Inn Club Vacations: Delivers functional value through family-friendly resorts, emotional value through memorable family experiences, and economic value through affordable vacation packages.

4. Specific Strategies to Avoid Commoditization

Strategy #1: Enhance Customer Experience

(a) Hilton Grand Vacations (HGV)

Personalized Service: HGV uses advanced CRM systems to offer personalized services and tailor vacation experiences based on individual customer preferences. Members receive customized communications and recommendations, ensuring a highly personalized vacation experience.
Member-Only Events: HGV organizes exclusive events for its members, such as private concerts and special access to local attractions, which enhance the overall vacation experience and foster a sense of exclusivity and belonging. This approach was significantly enhanced by the acquisition of Diamond Resorts International.\

(b) Travel + Leisure Co. (TNL)

Curated Travel Experiences: Travel + Leisure Co. offers curated travel experiences through its diverse portfolio of brands. By leveraging the Travel + Leisure magazine’s expertise, they provide unique itineraries and travel packages that cater to niche markets and specific customer interests.
High-Tech Customer Interaction: The company uses cutting-edge technology, such as virtual reality (VR) for property tours and mobile apps for seamless booking and trip management, to enhance customer interaction and satisfaction.

(c) Holiday Inn Club Vacations (HICV)

Family-Oriented Services: Holiday Inn Club Vacations focuses on enhancing the family vacation experience. They offer kid-friendly amenities, organized family activities, and spacious accommodations that cater specifically to families’ needs.
Personalized Vacation Planning: The company provides personalized vacation planning services that help families create memorable and hassle-free vacation experiences.

Strategy #2: Invest in Technology

(a) Hilton Grand Vacations (HGV)

Mobile Apps and Digital Platforms: HGV has developed mobile apps that allow members to book vacations, manage their reservations, and access exclusive deals and offers. These digital platforms provide a seamless and convenient user experience.
AI-Driven Customer Service: HGV uses AI-driven customer service tools, such as chatbots, to provide 24/7 support, answer queries, and assist with bookings, ensuring high levels of customer satisfaction.

(b) Travel + Leisure Co. (TNL)

Innovative Booking Systems: Travel + Leisure Co. leverages advanced booking systems that integrate various travel services, offering customers a one-stop-shop for all their travel needs. This technology simplifies the vacation planning process and enhances customer convenience.
Predictive Analytics: The company employs predictive analytics to forecast travel trends and customer preferences, allowing them to tailor their offerings and marketing strategies effectively.

(c) Holiday Inn Club Vacations (HICV)

Enhanced Online Platforms: Holiday Inn Club Vacations uses enhanced online platforms for booking and managing vacations. These platforms offer easy navigation and a user-friendly interface, making it simple for families to plan their trips.
Smart Room Technology: Some properties feature smart room technology that allows guests to control room settings, access entertainment options, and request services via their mobile devices.

Strategy #3: Develop Unique Offerings

(a) Hilton Grand Vacations (HGV)

Exclusive Locations: HGV offers properties in exclusive, high-demand locations such as Waikiki, New York City, and Orlando. These premium destinations attract customers seeking luxurious and unique vacation experiences.
Customized Vacation Packages: HGV provides customized vacation packages that cater to different interests, such as adventure, relaxation, and cultural exploration, ensuring a wide appeal.

(b) Travel + Leisure Co. (TNL)

Themed Vacations: Travel + Leisure Co. offers themed vacations, such as wellness retreats, adventure tours, and culinary experiences. These specialized packages cater to specific interests and differentiate their offerings from standard vacation packages.
Exclusive Membership Benefits: The company provides exclusive benefits to its members, such as access to private resorts, discounted travel packages, and special events, enhancing the perceived value of their membership.

(c) Holiday Inn Club Vacations (HICV)

Unique Family Experiences: Holiday Inn Club Vacations offers unique family experiences, such as waterparks, adventure zones, and themed entertainment, which create memorable vacation moments for families.
Local Cultural Activities: The company integrates local cultural activities and events into their vacation packages, allowing guests to experience the local culture and traditions of their vacation destinations.

Strategy #4: Foster Brand Loyalty

(a) Hilton Grand Vacations (HGV)

Hilton Honors Integration: HGV integrates its offerings with the Hilton Honors loyalty program, allowing members to earn and redeem points across a vast network of Hilton-branded hotels worldwide. This integration adds significant value and flexibility for members.
Exceptional Customer Service: HGV prioritizes exceptional customer service, ensuring that members feel valued and appreciated, which enhances brand loyalty.

(b) Travel + Leisure Co. (TNL)

Wyndham Rewards: Travel + Leisure Co. leverages the Wyndham Rewards program to foster loyalty. Members can earn points through stays and redeem them for various travel-related rewards, creating a strong incentive for repeat business.
Personalized Loyalty Programs: The company offers personalized loyalty programs that provide tailored benefits and rewards based on individual customer preferences and travel patterns.

(c) Holiday Inn Club Vacations (HICV)

IHG Rewards Club: Holiday Inn Club Vacations is part of the IHG Rewards Club, which allows members to earn and redeem points across a global network of IHG properties. This program enhances loyalty by offering additional value and flexibility.
Family Loyalty Initiatives: The company has initiatives specifically designed to foster loyalty among families, such as special discounts for repeat visits and exclusive family-oriented events.

The Bottom Line:

The consolidation in the U.S. timeshare and vacation ownership industry over the past decade has shifted control to a few major players. This shift brings the risk of commoditization, where products and services become indistinguishable, eroding profit margins and customer loyalty. To combat this, these companies have adopted strong brand differentiation strategies, leveraging personalization, technology, unique offerings, and robust loyalty programs.

Looking forward, AI will play a crucial role in maintaining a competitive edge, enabling these brands to deliver unique, tailored experiences that resonate with customers. Through strategic differentiation and innovation, companies can avoid commoditization and secure a sustainable competitive advantage in the ever-evolving vacation ownership industry.

Simon Crawford Welch, Ph.D, RRP has held multiple executive roles in the vacation ownership industry ranging from President & COO, Diamond Resorts International; President & Partner, Envie Holdings; Chief Sales & Marketing Officer, Royal Resorts; Executive VP, Shell Vacations Club; to President, Tesoro Resorts. He currently acts as an advisor to several companies.

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