Timeshare Industry Sees Business Uptick
Unlike many other sectors of the economy, the timeshare industry is facing an improved business environment in 2023. Perhaps the most favorable tailwind is the consumer’s rebound from the pandemic years. “Coming out of COVID, there has been a unique combination of pent-up demand and significant individual savings,” said Travis Bary, COO of Capital Vacations. “Consumers have been spending and we have seen the results in rental rates, and in our association revenues.”
Joseph Takacs, CEO of TheMVPService, LLC, acknowledged that the last two or three years have “not been fun.” Even so, he characterized the timeshare industry as a remarkably resilient one that has fully recovered from what he labeled the “punch-in-the-gut” from COVID. “People are traveling again, and the rental programs at all of the resorts I deal with are putting up record numbers.”
One evidence of a more robust travel industry is the noticeable increase in activity at the nation’s airports, according to Gordon McClendon, CEO of System Products International. “The first thing I look at is what’s happening with airlines, and they are doing a great deal more business now than a year ago,” he said. “The planes are full, they’re raising prices, and they’re even going back to their old ways of charging for bags and not forgiving charges for changes of travel plans.”
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Maybe consumers are traveling more, but they are still concerned about the high price of gas. Some in the travel industry have noted that many travelers are opting for shorter-length, regional “drive- tos” to save on costs. Yet this expense may see a bit of moderation in the months ahead. “I anticipate that gas prices will pretty much take care of themselves by the first quarter of 2023,” said McClendon. “Oil demand has stabilized, which means that oil will likely be between $70 and $80 a barrel by March. That will put fuel prices at between $3.00 and $3.50, which is palatable and about the average for the last couple of years.”
And how about the rise in the cost of borrowing money? There may be a silver lining here for the time share industry. “The recent rise in mortgage rates has changed the perspective for a lot of people,” said Takacs. “The general real estate market has softened and there’s more inventory available. I’m hoping that lower demand for second homes will translate into more folks buying timeshare. For example, I just spoke with someone who bought four weeks of timeshare in a row, rather than invest in a second home.”
Rising costs
Despite the generally favorable outlook for 2023, timeshare companies face a number of challenges in the months ahead. One is a scarcity of help. “Nobody has enough workers,” said Takacs. “Especially when you look at resorts, it is difficult to fill jobs for housekeeping and similar work. We’re still trying to figure out how to deal with that.”
Bary noted that the Federal Reserve, through higher interest rates, is trying to force unemployment to rise. “While that should make it easier to find employees, I don’t think that our labor costs will be reduced,” he said. “We need to be creative in how we will maintain good levels of service in the independent timeshare management space, if revenues are challenged while the cost for employees remains high.”
Too, some resorts have allowed their installations to deteriorate during pandemic times. “Resorts need to assess whether their rooms are as welcoming as they were when owners first bought into their properties,” said McClendon. “Does the furniture look fresh, or do rooms have tables with coffee stains and broken hideaway beds? Typically, the timeshare resorts are located in vacation destinations that have done a tremendous job improving the surrounding landscape and environment. That makes it all the more important that timeshare resorts make sure they are keeping up with what’s going on around them.”
Another important challenge is financial in nature. “When the pandemic put a halt to travel, some owners reassessed whether they even wanted to continue holding properties,” said McClendon. “That created collection problems for a significant number of timeshare resorts, which led to budgeting and financing problems, especially for the standalone, sold-out ones that rely 100% on the collection of maintenance fees.”
When resorts fail to collect enough to maintain sufficient reserves, noted McClendon, they end up doing special assessments to fund necessary upkeep. And that can cause them to lose owners who don’t want to spend additional money on their vacation home.
“Late payments will be even more of a problem going into 2023, since bills are going out now for another year’s maintenance fees,” said McClendon. “As for what can be done about it, resorts need to be more aggressive in terms of analyzing who has paid, and in getting in touch with who still owes.”
Related: Managing Maintenance Fees – Resort Management Gets Creative
The road ahead
As the resort industry enters 2023, many are focusing a wary eye on the larger inflationary trend. Consumers, after all, are only too aware of the erosion in their purchasing power. “Our foremost concern for the resorts we serve is how macroeconomic factors might affect revenues in 2023,” said Bary. “Prices are going up, and while consumers haven’t blinked so far, I think we should all be planning for a possible decrease in demand after nearly 24 months of record occupancy and rental revenue.”
Bary noted that all operators need to ask if they have been planning sufficiently for a continuation of inflation. “Are we considering the proper costs of the goods that we use? Failing to take into account rising costs can lead to a budget shortfall as we move into the new year.”
Related: Resort Tips for Battling Rising Costs of Inflation
Resorts should also seek alternative revenue sources. “If many of our resorts have unsold inventory, we need to ask what we can do to create new owners,” said Bary. “We also need to focus on our service. We need to ensure that owners in good standing love and utilize their product, and continue to pay their maintenance fees.”
Phillip M. Perry is an award-winning freelance writer based in New York City. His byline has appeared over 3,000 times in the nation’s business press. He can be reached at https://www.linkedin.com/in/phillipmperry/
