Resort Fees for Rental Guests
What has become common practice in the traditional resort lodging industry segment is virtually non-existent in the timeshare industry. For years, hotels have assessed resort fees averaging as much as $15 – $25 per night, reporting that approximately 80 percent of the fees collected is profit. Hotels started collecting fees in 1997 to offset the costs of increased services and amenities that consumers desired and to keep the hotels competitive in a market with increasing supply. Because fees are collected at check-in or check-out, hoteliers are able to advertise a lower rate but accumulate more revenue from each room night sold. In 2013, the hotel industry generated $2.0 billion in revenues from fees.
Renting developer or HOA-controlled inventory has become a growing component of the timeshare industry, but very few resorts have implemented a resort fee. ARDA’s International Foundation, in its 2014 State of the Industry Report, states that rental revenues from the timeshare segment accounted for $1.8 billion dollars annually. This revenue is generated from 11.5 million rental room nights with an average daily rate of $160. Further, ARDA reports that approximately 14 percent of timeshare inventory is rented. Regardless of whether your resort rents more, less, or an equivalent percentage of timeshare inventory, an additional revenue-generating opportunity exists in implementing an incremental resort fee for rental guests. Perhaps more importantly, the revenue produced from resort fees drops directly to the bottom line, thereby providing an incremental revenue stream for the HOA to utilize in offsetting increasing costs, delinquent maintenance fees, or costs associated with increased services or amenities.
Since implementing and collecting the fee is an issue that is contained within the front office and can be resolved fairly easily, it is likely that HOAs or management companies have not implemented these fees because they are uncertain as to whether rental guests will accept such fee structures. To resolve this question, a survey was distributed to rental guests of timeshare companies throughout the United States. Responses from 461 surveys were analyzed to determine the level of familiarity with hotel fees, feedback on acceptable items included for a fee, and the general acceptance level of resort fees. The results suggest that an opportunity exists to generate incremental revenue through the implementation of a resort fee, but more importantly, the results demonstrate that acceptance of the fee is increased with education and implementation.
For 24 percent of the respondents, reported encountering resort fees “all” or “most” of the time when traveling for leisure purposes. An equal amount (38 percent) of the respondents stated that they encounter resort fees “sometimes”, as those that stated they encounter them “rarely” or “never.” All of those participating in the survey were presented with a nightly hotel room rate of $140 and a daily $25 resort fee. Interestingly enough, 72 percent of the respondents reported that this fee structure was “definitely” or “somewhat” acceptable. However, when presented with a $185 nightly rate and a $25 resort fee for a stay at a timeshare resort, only 53 percent of the respondents reported that this fee structure was “definitely” or “somewhat” acceptable. In both cases, the participants were informed that the resort fee was collected to cover parking, fitness center access, and wifi. Verification of the practicality of the amenities was validated with more than 80 percent stating that they intended to use the parking and wifi, but only 48 percent intended to use the fitness center. Despite the lower acceptance of the resort fee associated with the rental of a timeshare resort, in comparison to a hotel, one should not overlook the importance that more than half of the respondents (all timeshare renters) reported the fee as acceptable. In fact, that number increased to 58 percent when the respondents were told that other renters deemed the fee as appropriate.
If timeshare HOAs or management companies were to implement resort fees and successfully collect them from 53 percent of the renters, timeshare resorts could potentially collect approximately $250,000 annually. This assumes the industry averages reported by ARDA’s International Foundation in the 2014 State of the Industry Report with the average timeshare resort unit count in the United States (125 units), running 78 percent occupancy, with 14 percent rental inventory, and an average rental stay of 4 nights, where 50 percent of the rental guests are charged and accept the $25 nightly resort fee. Presuming that traditional lodging estimates of 80 percent of the revenue dropping directly to the bottom line, timeshare resorts could potentially gain $200,000 annually through the implementation of a resort fee.
Before jumping in with the fee, however, it is important to understand what amenities or services are valued by rental guests, if the amenity or service can be restricted if the fee is not paid, and how the resort plans to communicate and educate rental guests about the fee. Because timeshare owners (and exchangers) pay for amenities and services in their annual maintenance fee, it is not suggested that a fee be charged to owners or exchangers. Front desk employees and management need to understand why the fees are being implemented, how they are to be administered, and what escalation process exists should renters complain or reject the fee.
For more information on this particular research project or to extend the research within your resort, please email [email protected]. Amy Gregory – PhD, RRP is an Assistant Professor at the University of Central Florida’s Rosen College of Hospitality Management. With more than 25 years of industry experience, including 18 years in the timeshare industry, Amy’s goal is to increase formalized timeshare education at the university level and to conduct and promote meaningful research that contributes to the advancement of the timeshare industry.
