Healthy growth in the time-share business indicates marketers are making strides in correcting past promotional mistakes. Chris Pitchard reports on the state of play in this controversial industry.
An indulgent sun-soaked romantic holiday – or a wake-in-fright nightmare? The time-share industry swears it has cleaned up its act.
Nonetheless, Debbie Coloma isn’t impressed and won’t be giving time-share a second chance. A bad experience eight years ago remains a vivid memory for the Singapore resident who pulled out before signing but still sidesteps approaches from people “sounding like typecast second-hand car salesmen – pushy, over-pitching and throwing in discounts”.
Time-share’s biggest change is that buyers are not now always locked into specific properties for holidays year after year. Sophisticated systems exist, allowing exchanges with networks of partner resorts around the world. Some new products no longer involve a single piece of real estate but require payment of money into a trust, enabling holidays at any member of that conglomeration if there’s space (much like regular resorts; in fact, some are part of regular resorts).
Changes are overdue and widely welcomed – but aren’t enough to tempt Coloma, a media and public relations consultant, back into time-share. She recalls contact began in a standard way. Many of us have received similar mail (and the industry still relies heavily on mail-outs). Hooray, she’d won a prize. A personally addressed letter on expensive stationery announced Coloma and her husband could claim an unexpected holiday trip for two, only by turning up personally at a predetermined place at a given time on a designated date.
“The room was nicely done, with about a dozen people waiting,” she recalls. “Tea, coffee and sandwiches were in a corner. Think seminar set-up in a five-star hotel – that’s how it aimed to impress those who walked in.” Coloma ignored all this, marched to the desk and presented her letter – intending to claim her prize and make a quick exit.
No way, said the receptionist. She would have to wait 30 minutes like everyone else for a sit-down presentation. Alarm bells rang in Coloma’s brain. This was the first mention of any presentation. When she asked the subject, she was told everything would be explained in due course. An argument ensued. A “pushy” employee tried to prevent the Colomas from leaving – which, in the end, they did after correctly surmising “this was time-share condominiums”.
Coloma remains convinced time-share isn’t a worthwhile investment because “there are other more secure options available. The idea of holidaying once a year in the same place is not going to happen. We want to explore new destinations when we go on holiday. We fly on budget airlines or use frequent-flyer miles and re-channel money ‘saved’ by splurging on accommodation and shopping.” (Contemporary products address this issue but Coloma’s mind isn’t changed by such improvements. Despite the efforts of time-share companies, a perception remains that customers will be locked into repeat vacations at the same place. Time-share executives say this is precisely what some – but by no means, all – of their customers want. They buy because they return regularly to the same destination.)
While Coloma didn’t buy, Philippine resident Miriam Coronel Ferrer did. She and her husband purchased a time-share apartment 15 years ago. She fumes that it was only after they’d been talked into buying that the sales agent informed them their dream address was in India, a faraway destination for them.
“We later dropped it after not being able to use the facility. We thought paying annual dues was throwing good money after bad,” says Ferrer. The resort, in Goa, remained unfinished by the due date and the family was offered use of another member-resort in Bali.
Recalling the pitch, Ferrer says the sales team focused on their two young children “who found the presentations attractive they influenced our decision – which turned out not to be a good one financially.”
Looking back, she insists: “Today I wouldn’t even think about buying in a time-share resort. With so many places to see, it doesn’t make sense to co-own one and pay for maintenance.
“With the internet, it’s much easier to make reservations without consideration of time-share schedules of ‘ownership’, membership category and so on.”
The industry has reacted to consumer gripes by trying to improve its image. Healthy growth suggests it is succeeding, though anecdotal evidence claims new customers are being successfully targeted rather than those who can relate past bad experiences.
“It’s rather like the second-hand car business,” one time-share executive confided to me. “Salesmen have shocking images but people still buy second-hand cars. They’re just careful about where they do business. We’ve done away with sleazy salespeople and are more focused on keeping customers happy – they’re our best form of advertising.”
A survey for industry giant RCI (formerly Resort Condominiums International) showed fewer than half of time-share owners in Asia-Pacific consider themselves satisfied with their deals (47 percent in Japan, 48 percent outside Japan). RCI specialises in exchange of time-share holidays – an aspect time-share marketers nowadays highlight as routine – and claims more than three million members globally who exchange holidays with other time-share owners at 3,700 linked resorts.
According to RCI, average time-share cost is US$14,800. This can be more or less depending on property size, location and popularity – and whether buyers demand access at high-season’s peak. Time-share buyers make payments in different ways, say industry sources. They fork out cash, hand over credit cards or borrow from finance companies.
Conceived by a European ski resort in the 1960s, the concept spread rapidly in the US – still the biggest market by far. Average purchasers there are aged 53 with considerable disposable income, according to the American Resort Development Association.
Major hotel chains have become deeply involved, including Accor (with Sofitels and Novotels), Four Seasons, Hilton, Hyatt, Marriott, Radisson, Ritz-Carlton and Starwood (which recently spread beyond its well-established United States and Caribbean base).
To fight lingering unattractive reputations, marketers now accentuate links to trusted hotel chains and stress ownership no longer locks buyers into the same holiday location annually. Instead, they tout “points based” systems with earned points exchanged if buyers join organisations such as RCI – opening windows to holidays in various parts of the world.
Trendwest, for instance, claiming a market share of 41 percent of Australia’s booming time-share industry, acknowledges “many people find it too restrictive (to be tied) to a fixed week in the same unit in the same property. With people taking shorter more frequent vacations... a more flexible system of vacation ownership was needed,” notes a company document. So, points-based systems grew, allowing vacations anywhere available in the network.
According to Mark Potgieter, former marketing director at Trendwest and now an independent marketing consultant to the company, “time-share promoters usually adopt one of these structures: title-based (where the time-share is deeded and a title issued in terms of local property laws), share-based (where purchasers own a share in a club with a holiday entitlement attached), unit trust (similar but structured as a trust), right-to-use (mostly for shorter-duration programmes, usually of no more than 20 years) and combinations of these.
In addition to purchase prices, owners pay maintenance fees or club levies to cover costs of running properties. Some of these are occupied only by time-share owners. Others are run as resorts where time-share owners blend in with regular resort users and constitute only a portion of occupants. In such cases, marketers make much of owning a chunk of a popular resort with its diverse leisure facilities.
Owners not wanting to use their week – it’s typically a week – can opt to rent it out, give it to friends or employees, exchange it with other users of the same property or exchange it for time at another resort through membership of an exchange club. Alternatively, the unused week can be sold by the resort company (providing the owner with an income) and holidaying occupants may be unaware the roof over their heads is a time-share property.
For instance, Accor Première Vacation Club (APVC), prominent in the relatively developed Australian market, recently opened Bali’s Novotel Nusa Dua – its first Asian time-share property. Rapid expansion of the concept across Asia is planned, according to APVC chief executive officer Jim Sabot. APVC has chosen newer points-based structures, with owners not buying traditional time-share stakes but investing an amount (typically A$17,500/US$13,580, depending on their level of membership) in a trust which runs until 2080. According to Accor, such an investment should pay for a one-week one-bedroom mid-season annual stay in an apartment for the life of the trust. Investors can pick stays at any available property in the group.
Accor says its regional foray will target both local and expatriate residents of Asian countries. “Bali was perfect to commence our sales,” observes Sabot. “It’s popular with foreign tourists as well as Indonesians from Jakarta, Surabaya and other major cities. After Bali, we anticipate entering the market in Thailand, (elsewhere in) Indonesia, French Polynesia, Singapore and India in the short to mid-term with China to follow sometime after the 2008 Beijing Olympic Games.” The operation owns 23 apartments in the Novotel Nusa Dua Resort for use of members, who blend in with other holidaymakers.
How big is time-share? Accor’s data estimates there are 6.7 million time-share owners worldwide, with access to 5,400 resorts in 200 countries and territories.
Marriott typifies major-chain involvement. Marriott Vacation Club International’s Asia-Pacific managing director Harrold Derrah, acknowledges consumer perception is “hugely important”. Perhaps predictably, he advises prospective investors to “deal with a trusted company” and points out “the Marriott name has been around for 80 years”. Among Marriott’s time-share properties is the JW Marriott Phuket Resort & Spa.
Echoing a trend, Derrah tells BTAP: “We set up a trust with a major bank, HSBC, and they own property titles. Consequently, everything’s secure to protect consumers. What’s more, we emphasise our ability to deliver customer service after sales. The buyer – or us, on their behalf – can re-sell. Owners can introduce friends as investors. For doing this, owners earn extra points to use at other Marriott resorts – perhaps Hawaii or Las Vegas.”
According to Derrah, “entry level at Phuket is around US$12,000. This means you can use it for one week every two years in Phuket – or every year for from US$20,000 off-season or US$26,000 high-season (except $50,000 for three prime weeks a year).”
While wariness among a good number of consumers persists, it seems enough potential investors exist to keep time-share growing healthily.
HEADING OFF DISAPPOINTMENT
- Deal with well-known brands, not some new developer no-one knows.
- Do as much research as possible about the location and the attractiveness of the deal.
- Check on the company and its track record (do more than call a couple of “satisfied” customers whose names are supplied by salespeople).
- If you’re pushed too hard, don’t be reluctant to back away – even if salespeople say you’re missing the chance of a lifetime for a very modest investment.
- Consumer laws in some countries (these differ from place to place) allow cooling-off periods for backing out of any deal. Marriott’s Harrold Derrah points to his company’s own cooling-off period giving customers “a few days to decide. We don’t want unhappy customers saying bad things about us down the track.”
- If you know someone who’s dealt with the marketer, so much the better. Pick their brains.
- Will a time-share investment prove more financially rewarding than alternatives? If you like going somewhere different each year, perhaps being a conventional hotel guest is a better option.
- Check how easy it will be to re-sell your purchase, either back to the marketer or to another buyer.
- Check the trust structure to confirm there are no liens or mortgages against the property, which should be owned by a third-party trust, advises Derrah.
- Have a lawyer read the fine print – it’s there for a reason – before you sign anything, even if the sales agent blusters you’ll miss out by delaying.
HOT SPOTS
Thailand’s Phuket and Indonesia’s Bali remain main industry focuses. More distant Asia-Pacific options include Hawaii, Australia (time-share centres include the Gold Coast, Sunshine Coast and Cairns in Queensland as well as the Western Australian coast near Perth) and New Zealand. Through the region, Malaysia, Singapore and Indonesia have fast developing time-share industries. Japan and South Korea are well developed but widely viewed as expensive. India (where a recent survey found 200,000-plus time-share owners) and China have rapidly growing time-share niches.
Time-share has also caught on in the Philippines. However, developers there are playing catch-up after successfully battling consumer suspicion in the wake of past controversies. Now the industry is on a surer footing. For instance, Active Group has developed The Suites at Mount Malarayat, a condominium time-share product in highlands near Lipa City in Batangas, a province easily accessed from Manila. Owners can use a country club with restaurants, health spa, sports (including tennis, badminton and basketball), a swimming complex and the highly-regarded Mount Malarayat Golf Course (a former Philippine Open venue).
Thailand’s time-share industry has spread throughout the country with many options in northern Chiang Mai – and the resort areas of Hua Hin and Koh Samui.
While the emphasis is on resorts, time-share developments have become more popular in downtowns throughout the region, including apartment complexes. “But, frankly, when people think of time-share, it’s usually resort areas they have in mind,” says Trendwest marking consultant Mark Potgieter.
