A Changing Industry

It’s getting harder and harder to keep track of who’s who and who’s doing what these days. This was brought home to many during the 2017 ARDA World convention in New Orleans this past spring. But stick with us at Resort Trades, and we’ll try to keep you current with the ever-changing industry and notify you when we spot trends that might be coming down the pike. Since this edition of Resort Trades focuses on “top resorts,” this seems like a good time to perform a general overview of the companies creating and managing vacation ownership’s asssets.

View at the Top

Thanks to the recession, larger developers, management companies and exchange companies have been gobbling up other businesses, making the term ‘consolidation’ the over-arching theme of the convention. This was reflected in the sharply reduced number of ARDA members (now 600 as compared with a previous high of 900) and conventioneers. Past attendance records have been as high as 4,000; the unofficial estimate of this year’s ARDA World is somewhere between 1,500 and 2,000.

ARDA President Howard Nusbaum told attendees, “If you’re here [at the convention], you’ve survived.” As moderator of an educational session entitled, “Industry Consolidation: Are We There Yet?”, John Melicharek Jr., Esq., a partner of Baker & Hostetler, gave a short-list of companies that he recalled having been acquired over the last decade or so, including Hyatt, Starwood, Escapes, Sunterra, Tempest, Gold Key, Silverleaf, Shell, Resort Quest, Fairfield, VRI, Vacation Break and others. Adam Budgor, SVP of corporate development for Diamond Resorts International, which boasts over 420 managed and affiliated properties and cruise itineraries, noted there’s more consolidation ahead of us. In other words, no. We’re not there yet.

If there are currently less than a dozen top development companies – among them, the Berkley Group, Bluegreen Corporation, Disney Vacation Club, Hilton Grand Vacations Company, Holiday Inn Club Vacations, Hyatt Hotels Corporation, Marriott Vacation Club International, Westgate Resorts, WorldMark by Wyndham and Wyndham Vacation Resorts Asia-Pacific — some say there will eventually be only two or three.

John Alvarez, VP of acquisitions for Holiday Inn Club Vacations, predicts the top three companies will have the largest growth. “Currently, we’re at $8 billion in timeshare sales. The top three are doing 50 percent of that!” Jason Shroff, whose company Capital Resorts Group recently acquired SPM Resorts and Defender Resorts in order to gain their command of resort management, predicts, “There will be less competition, but it will be stronger and better capitalized.”

The Rest of the Story

With your permission, allow us a brief disclaimer for any shortcomings, errors or inaccuracies of the following, but in an attempt to list smaller developers we drew from the ARDA membership roster and our often faulty memory. To the best of our knowledge, these are most of the mid-tier U.S. resort companies still in active sales and which may (or may not) still be developing inventory: Amber Group, Breckenridge Grand Vacations, Bushkill Group, Inc., Divi Resorts, Escapia!, FantaSea Resorts, Festiva Development Group, Global Connections, Inc., Grand Pacific Resorts, InnSeason Resorts (although lately acquired, we have been told), King’s Creek Plantation, LLC, QM Resorts, Raintree Resorts International, LLC Inc., River Run Company, Spinnaker Resorts, Inc., Star Island Development Corp., Timescape Resorts, LLC, Vistana Signature Experiences, Welk Resorts.

More than 70 percent of the resorts in the U.S. are older than 25 years, according to the 2016 AIF State of the Industry Report. Typically, these “legacy” properties are no longer under developer control, have no onsite sales and marketing talent and are either individually HOA managed or managed by a multisite management company. Legacy properties have an average 84 units each, consist principally of studio and one-bedroom units and have a variety of use types that range from the original fixed unit, fixed week to more flexible regimens.

The list of challenges facing these resorts is growing daily, it seems. Here are a few of them:

1. Infrastructure –aging structural issues include exterior and interior issues and range from outdated plumbing and wiring to non-ADA compliance.
2. Owners are aging out.
3. Future buyers are millennials – They are resistant to buying perpetual vacation ownership property and reluctant to sit for a 90-minute (or more) presentation.
4. Limited exit options.
5. There is no sales and marketing entity, although there might be a relationship with a third-party provider.
6. There’s a lack of expertise in promoting and operating an effective rental program.
7. Relief companies/increased delinquencies.
8. Many resorts have tapped into their reserves to offset the lack of revenue. Others may not have properly budgeted for reserves at all.

Many of these older resorts have serious delinquency issues and there are quite a few which have owners or members whose annual maintenance fees are years in arrears. More and more of them are at a crossroads as to whether to invest the dollars, time and energy in reviving the project or winding it down. These challenges are compounded by the fact that most legacy properties are governed by what is typically an under-qualified homeowners’ association (HOA).

These HOA Board members are usually well-intentioned, but rarely are they experienced in operating a multi-million-dollar operation as complex as a timeshare resort. Therefore, it is often entirely up to a single manager to handle the day-to-day operations as well as to direct the long-term strategy of the Board. These managers are the real backbone and strength of our industry’s reputation. The vast majority of them are self-sacrificing, selfless and generous people who are genuinely interested in providing great life experiences for their owners/members.

What are the Opportunities?

We’ve covered the glass-half-empty; what about the more positive aspects of the business? What opportunities exist for individuals or companies that seek to do business in the timeshare industry? The good news for many is that there are paths to build a business or a career in timeshare, even if you’re not working for one of the ‘Big Guys.’ Millennials are fast becoming a promising market for vacation products: There are more of them than there are baby boomers, after all. They want vacations and adventure; they thrive on variety and demand choices. Plus…and this is the best part…they are beginning to accumulate wealth!

Businesses that can promote rentals and exchanges to these emerging prospects, therefore, are becoming more vital than ever. A travel company that utilizes social media tools, understands search engine optimization and can figure out how to speak to each type of vacationer, including millennials, can write their own ticket.

Another opportunity lies in the realm of management, particularly for those with any experience in marketing and promoting rentals. There’s also plenty of room for a professional management company that can offer a deeper bench of expertise to HOAs than can a single manager.

Managers need all sorts of tools: software of all kinds from handling reservations to tracking reserves; housekeeping and landscaping tools or outsourcing, HR and payroll services, etc.

Even resorts whose rentals and sales are being handled by a professional management company need a custom website. In his article on pages 18 and 19 of the January 2017 edition of Resort Trades “Marketing Your Resort Online,” Tim Wilson said, “the website is absolutely the most important component of a business’ relationship with customers or potential customers….” In the article Wilson continues, “it is shocking in the resort industry, with its total product consisting of recreational services offered to customers, how many projects have terrible websites or none at all!” [Anyone intimidated by technology should read Kelley Ellert’s article, “The Technology of Online Marketing for Resorts,” on page 23 of the May 2017 issue of Resort Trades.]

Managers cannot be expected to be experts at web design, social media or search engine optimization, as well as all the other myriad number of responsibilities they must handle. Neither can they necessarily be expected to have the time or experience in providing interior design, resale marketing, customer surveys, purchasing of promotional items or programming computers.

The bottom line for individuals looking for opportunities in timeshare is to be creative. There’s still opportunity out there for entrepreneurs. Resort operators will continue to need all kinds of services, and so, there’s plenty of room out there for innovation and good, old-fashioned hard work.