Better Times(haring) Coming
While we’re all suffering during this Covid-19 induced slowdown, Whitebriar sees reasons for optimism and opportunity.
We believe that drive-to timeshare locations, especially those with strong web marketing & reservations platforms, will be the first to rebound. We are already seeing reservations pick up at regional projects with profitable amenities and popular rentals. Based on what we learned during the RTC crisis and the 2008 Financial crisis, we expect that simpler and cheaper ownership and operating platforms, like right-to-use and trust Certificates, will prevail.
While this slowdown is hard on Vacation Clubs, we think those companies nimble and creative enough to manage their Portfolios and obligors through the crisis will be fine. Maintenance fee collections & management fee revenues will decline wherever the consumers are not getting real value. So, ensuring that business models are built on fulfillment, not breakage, will be key. As will be a laser focus on providing service and flexibility to the consumer.
Smart Developers who know how to nurse their customers and projects through the crisis should see only modest fall-off in financed Portfolio cashflow. Keeping in regular contact and getting customers back on vacation will be great tools to accelerate a resumption of payments as the economy begins to rebound, also for salvage later on.
On the financing side, no doubt there will be some unwinding of highly-leveraged positions. But most of the Lenders in our industry have strong balance sheets, and teams of seasoned professionals who have seen booms and busts before. The best of us know the timeshare business ‘from the bottom up’, and see this unfortunate slowdown as an opportunity to strengthen borrower relationships. Meanwhile, certain Developers will learn (or re-learn) not to seek excessive advance rates on their receivables, and that they should improve, renovate and build Inventory out of free cashflow, or equity. Not debt.
As for sales and marketing, developers who are providing good value and flexible vacation and payment options are always the first to see their sales pick up. We believe that this will be an organic process starting early in Q3, moving from reinstatements through referrals through reloads and upgrades, and into mini vacs and on-site guest conversions. We do not think there will be a wholesale return to day tours in some locations.
Whitebriar is hopeful that one ‘silver lining’ of this Covid-19 slowdown may be a failure of some “Timeshare Exit” scamsters. While fewer timeshare owners will make their timeshare loan or maintenance fee payments during this temporary economic crisis, we believe that very few (hopefully none) will pay the exorbitant up-front fees and other charges that the scamsters try to extract.
Finally, we think there will be some unique collections opportunities, for agencies which are consumer-friendly and who can help developers monetize their receivables while re-acquiring customers.
Harry Van Sciver has been a receivables financier since 1986, and a developer since 1995. He is the President of Whitebriar Financial Corporation (see www.whitebriar.com), and also a Director of Resorts Group, Inc. Whitebriar offers receivables financing, portfolio valuation, CRO services, resort consulting, and resort equity. Harry can be reached at 508- 428-3458.
