Lifetime Value of a Timeshare Owner and the Role of Alternative Accommodations

For those for whom the term, Lifetime Value, as we use it in this case, is new, think of it as the sum of all the money a family pays for vacations over their entire life.

In a narrower sense, it also could be defined as the sum of all the money spent by a vacationing family to purchase and maintain a timeshare interest, for the period that they own and use that interest. If you are in the business of selling or managing timeshare, which I will refer to herein as “developers,” one of your goals probably is to capture as much of what your timeshare owners spend on vacations as you can.

When you consider the amount of money that vacationing families spend on their vacations, the timeshare industry has done a great job in capturing their share of that lifetime amount. The timeshare product is all about capturing, up-front and for many years after, the vacation lodging expenditure of the owners who buy that product. However, most of the large timeshare companies, even those with the most innovative product designs, are leaving some of this “value” on the table.
When you think about the lifetime vacation “spend” of families, the amount spent breaks down into these components: transportation, lodging, food & beverage, and activities (entertainment and shopping):

The best timeshare companies have already captured most of the lodging part of this formula, which amounts to about 30-35% of the lifetime value of their owners. They probably capture a bit more of this “value” when they include in their product other travel benefits such as transportation (e.g., Hertz discounts, theme park discounts, etc.), and by offering food & beverage and shopping with on-site stores. If a developer has 500 owners, capturing just one more percentage point of their Owner’s spend could put another $1,600,000 in their pocket. However, additional value exists that most developers have NOT yet captured and are leaving on the proverbial “table” unnecessarily.

The opportunity lies in the owners’ alternative vacations.

It is a known fact that timeshare owners do NOT spend ALL of their vacation time at their respective timeshare resorts. They spend a lot of time, as much as 5-15 days per year, at “alternative accommodations,” such as cruises and, especially, the vacation rental homes one finds on HomeAway.com, AirBnb.com, Booking.com, Expedia.com, TripAdvisor.com, and other online marketers of vacation rental homes, condos, and cabins. often, these “alternative accommodations” serve needs of vacationing families that are not well supported by timeshare accommodations, such as family reunions with lots of people, urban short-term trips, smaller destinations in less-traveled areas, etc. Many vacation rental homes are available in locations not available through the developer’s resort network or even through a timeshare exchange.

“alternative accommodations” not only fill the non-timeshare vacationing needs of timeshare owners, but they also compete with and may serve as alternatives to the actual use of an owner’s timeshare each year. So, they may even become a factor in the abandonment of timeshare ownerships or result in reduced reload propensity.

“alternative accommodations” may fulfill a vacationing family’s needs so well that prospective timeshare buyers may see less value in buying a timeshare, or if they already own, say, one week, they may see the availability of “alternative accommodations” as a reason not to buy more timeshare. In other words, these “alternative accommodations” are taking business away from timeshare companies as well as, in some cases, taking away from the usage of the timeshare interests they already own. But developers don’t need to stand by and let this happen.

What can a timeshare company do to mitigate this competitive factor that is siphoning-off some of the lifetime value of their owners? They can incorporate “alternative accommodations” into their timeshare product. Through a branded third-party website, “alternative accommodations,” the same ones seen on HomeAway.com, Booking.com, Expedia.com, Airbnb.com, etc., can become part of a developer’s timeshare product offering (referred to below as “the added benefit”). These accommodations can be set up for booking with points, cash or a combination of points and cash. When a developer makes these otherwise competing accommodations available to their owners as a benefit of their club, their owners need to look no further for ANY and ALL of their vacation needs. This added benefit also provides a new counter-argument on the sales table when a prospect says that they can use these alternative accommodation websites more easily and have greater flexibly. With this added benefit attached to your product, your sales person will be able to respond that the capability to reach the same alternative accommodations is a feature included in their ownership with you.

Having this added benefit available to your owners, through your club, also will save your owners money, because such rentals, when offered through a club, are often available at a discount and with fewer fees when compared to the cost of renting a vacation home online, through the websites mentioned above. And, as their developer, there are opportunities for benefiting financially through these arrangements. This added benefit can provide another opportunity for incremental revenue, through an option that provides for the pre-purchase (or rental guarantee) of an entire year’s availability of select vacation rental homes. Such guarantees can ensure that your owners have access to high-season availability and the best quality homes, as well as creating additional opportunities for savings and revenue.

Providing this added benefit to allow your owners to book vacation rental homes, through their club, increases the real value of the timeshare interest that an owner owns and might encourage the owner to own more. There exists anecdotal evidence of higher close rates from having this added benefit, as well. This benefit also binds the owner/member more tightly to their club, creates an additional reason for holding onto their ownership, and keeps all their vacation spend focused around their timeshare company. Adding vacation rental homes as a vacation alternative for your owners will benefit your owners and your bottom-line.

In summary, the ability to book alternative accommodations through your club is no longer a nice benefit to offer but has become an essential benefit — provided you want to capture and retain as much lifetime value of your owners as possible.

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Charles Patton is Senior Vice President of Business Development for VacayHome Connect, a Chicago-based B2B distributor of Vacation Rental inventory. He is a veteran of the Timeshare industry with past senior leadership roles at RCI, Disney, Marriott, Orange Lake, Gold Key Resorts, Four Seasons USA, and Grand Crowne Resorts.