Thursday, August 17, 2006


Timeshare Owners Avid Hotel Room Buyers

While it may be logical to think those consumers buying into a timeshare resort would use less hotel room nights during a typical year, experts actually believe timeshare ownership doesn’t impinge on the industry’s ability to sell room nights. Turns out once timeshare owners buy into vacation ownership they become more brand loyal and continue taking trips to other locations throughout the year or extend their stay before or after utilizing their resort week.

“I don’t think the timeshare business takes away from the hotel business: It adds to it. The hotel industry and timeshare are symbiotic,” said Howard C. Nusbaum, American Resort Development Association’s (ARDA) President, noting the largest purchaser of hotel rooms in Myrtle Beach, SC, for example, is the timeshare industry. In this instance the rooms go to people interested in purchasing a timeshare and utilize the rooms during their stay. In Orlando, Nusbaum estimates the timeshare industry is responsible for selling a 200,000 room nights or more.

According to recent consumer research conducted by ARDA, the organization pinpoints that 21.5 percent of people traveling on a timeshare vacation will stay in the area beyond their allocated resort time. Additionally, timeshare is a near $8 billion a year business. At the start of 2005, ARDA research showed there are 1,668 resorts located in 47 States and more than 3.9 million U.S. households own 5.8 million timeshare weeks.

At Las Vegas based Sunterra Corporation (NASDAQ: SNRR), a vacation ownership company founded in 1996 with nearly 100 branded or affiliated vacation ownership resorts throughout the world, Chief Marketing Officer Dave Lucas is also finding timeshare owners to be strong purchasers of hotel rooms. Here, proprietary market research is suggesting the company’s target customers take a variety of trips throughout the year in addition to their annual timeshare experience. This opens up the opportunity to form synergistic relationships with hotel brands.

“Timeshare can be a very complimentary business. People will stay in hotels in an urban or business situation, then when they vacation they will be more interested in going to a resort.”

ARDA’s Nusbaum agreed. “Hotel companies wouldn’t come into [the timeshare business] if there weren’t synergies. People buy into a timeshare brand and they become more brand loyal.”

And for large companies such as Starwood Hotel & Resorts Worldwide, having a timeshare entity is helping boost brand loyalty and ensuring that when its timeshare owners need somewhere to stay overnight, its at one of the company’s branded properties. To help grease the loyalty wheels, Starwood timeshare owners automatically become Gold level members. This benefit gives those individuals special benefits such as automatic room upgrades, a 50 percent Starpoints® bonus which can be traded for free room nights, and other extras such as a 4 p.m. checkout.

“They have a vested interest in staying at other Starwood properties,” said Dave Matheson, Starwood Vacation Ownership’s VP Corporate Communications. “The typical owner of one of our products travels more than the typical hotel guest and stays longer. They will stay in their timeshare, then they do a night or two in one of our hotels. The incremental benefit of unrealized income at hotels is something that I don’t think anyone anticipated.”

Starwood’s Matheson also said timeshare is chipping away at the second home ownership market, especially at the higher levels of timeshare. He explained people would rather check in somewhere and jump right into a vacation, whereas second home owners typically have to make sometimes frustrating repairs fixing what broke since the last time they were there.

Richard L. Ragatz, President of Ragatz Associates -- an international consulting and market research firm to the resort industry founded in 1974 -- said this is especially true at the highest end of the market where consumers purchase fractional ownerships rather than a traditional timeshare product.

He said the average income of someone looking to buy a second home is $250,000, an income level that makes fractional ownership an intriguing option. In 2005, the fractional industry in North America was about $2 billion in 2005, which increased an astounding 28 percent from 2004.

“The product out there now having an impact on second home sales is fractional,” Ragatz said.

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