Tuesday, August 22, 2006


The Virgin Islands Tourism Industry Poised For A Major Jump In Timeshares

The Virgin Islands tourism industry is poised for a major jump in the number of its accommodations that will be timeshares rather than hotel rooms - and industry leaders are waiting to see how the shift could change both visitors' habits and the revenues that tourism produces for the government.

The Ritz-Carlton St. Thomas in June finished converting 48 of its hotel rooms to two-bedroom luxury timeshare suites, adding the units to its 80 Ritz-Carlton Club "fractional ownership" units.

The Westin St. John Resort & Villas is changing more than 186 hotel rooms into 94 two- and three-bedroom vacation villas, adding them to the 93 villas the resort already had offered for timeshare ownership. Once the Bay Vista conversion project is finished, the resort will have just 100 regular hotel rooms left.

And the new Marriott's Frenchman's Cove, which is rising next to Marriott's Frenchman's Reef Beach Resort at the entrance to St. Thomas Harbor, will include 220 two- and three-bedroom units spread among seven buildings.

On top of those imminent developments are others:
The 48 hotel rooms that were converted to luxury timeshare units at The Ritz-Carlton Club in June include living rooms, dining areas and expansive kitchens.

The already-approved Preserve at Botany Bay calls for 31 timeshare units and 40 villas alongside its boutique hotel on St. Thomas' West End.

The Ritz-Carlton Club at Cabrita Point would offer 73 ownership units on the opposite end of the island if its plans are approved.

The numbers are adding up quickly and dramatically, V.I. Hotel and Tourism Association president Beverly Nicholson Doty said.
To an existing room count of about 4,500 on St. Thomas and St. John, Nicholson Doty estimated, around 600 timeshare units will come into service in mixed-use developments, which include traditional hotel rooms, during the next two years.

The number of overall rooms does not take into account timeshare stalwarts such as Magens Point Resort and Bluebeard's Castle because they are not hotel members of the association, she said. The tourism association's board will work on integrating timeshares into its membership and its marketing strategy within the next few months, Nicholson Doty said.

St. Croix's numbers are harder to calculate because its tourism product includes so many condominiums that are not timeshares, St. Croix Hotel and Tourism Association president Patrick Henry said. "I think there are a lot of part-time residents - people who come down more than a week at a time," he said.

Mixed-use developments like Divi Carina Bay Resort & Casino, which has set aside 20 timeshare units, also are few on St. Croix. Henry, who also works as general manager of Divi, said the resort calls those units "pre-paid accommodations" rather than timeshares. They are part of Resort Condominiums International, considered the world's largest timeshare exchange program, but have not been thoroughly marketed yet, he said.

Several proposed projects on St. Croix have pledged to be mixed-use developments. Plans for a development at Annaly Bay call for three hotels, plus European-style hilltop residential villages, estate homes and villas. Another proposal, by William and Punch, envisions a hotel, casino and both whole- and fractional-ownership condominiums.

Such plans attest to a demand for St. Croix that has grown during the last three years, Henry said. "As its occupancy rate increases, interest increases and demand increases."

Why everyone is doing It
The local shift toward mixed-use accommodations is in keeping with a Caribbeanwide trend.

A panel discussion called "The Explosion of Condos and Mixed-Use Developments in the Caribbean" attracted hundreds of regional industry players at the Caribbean Hotel Industry Conference in late June. Panelists said the mixed-use model launched on Turks and Caicos nine years ago has accelerated.

"Florida has few development opportunities and beachfront properties remaining, so the Caribbean has huge potential," panelist David Callaghan said at the conference. Callaghan is eastern region vice-president of Interval International, a vacation-ownership exchange company that has upward of 2,000 affiliated resorts in more than 75 countries.

"It is definitely the wave of the future," Nicholson Doty told The Daily News. "I suspect that any development in the region in the future will have split use as a part of the core offering."

Spokespeople for the leading companies increasing their timeshare offerings in the Virgin Islands say that brisk sales of the units here show that buyers are eager for more such development.

"Certainly it was demand," Ritz-Carlton Club spokeswoman Beth Ridenour said of the conversion of hotel rooms into luxury timeshare suites. "We were seeing a great deal of success with the Club and we saw an opportunity to expand that location." Nearly all shares in 80 previous club units had been sold by the spring of 2005, she said.

When Westin St. John Resort & Villa announced the shift in July, Graeme Davis, area managing director for property owner Starwood Hotels and Resorts, also said demand drove the resort's decision to change more hotel rooms to ownership units. An estimated 90 percent of shares in the resort's existing 93 villas have been snapped up.

Vacation ownership continues to play a larger role in the overall tourism market in St. John and throughout the Caribbean," Davis said. "We are basically doubling the size of our vacation ownership resort in St. John to meet the demand of consumers."

The appeal to developers of offering fractional ownership units is clear to tourism industry veterans like Paul Doumeng, general manager of Bolongo Bay Beach Resort on St. Thomas.

"It's liquid assets," Doumeng said. "They can pay to build rooms upfront instead of waiting - they're getting good returns on their investments now."

Doumeng's father, Dick Doumeng, started selling sixths of a unit at the family-owned resort in the 1970s. Buyers received a month's share per year along with some revenue sharing, essentially turning loyal repeat guests into limited partners. About 30 rooms once were in that early model of fractional ownership; the Doumeng family bought back most units over the years, and now a small percentage are held as timeshares.

Paul Doumeng said he has been studying the trend toward timeshares closely and believes that larger resort companies increasingly are moving toward the model also because it builds brand loyalty. Fractional owners can trade a week in the Virgin Islands for a week at another resort elsewhere - but their investment remains within the corporation.

In the Marriott's case, for instance, previous hotel guests make up a large market of those who become timeshare owners, Marriott Vacation Club International spokesman Ed Kinney said. "Historically, across all our properties that are adjacent to Marriott hotels, that has typically been the case with owners," he said. "They know they will get that outstanding Marriott level of service."

Mixed-use developments that include ownership and hotel components will be a lasting setup in the Caribbean tourism industry, Caribbean Society of Hotel Association Executives president Sue Springer believes.

On her island, Barbados, The Four Seasons will break ground within the month on such a project. Another 10 or so developments being built along the island's "platinum" western coast include condominiums or villas, she said.

"The multifaceted units are the way to go," Springer said. "People are looking at real estate because they get a quick return on their investment. Then they get a long-term investment with the operation of a hotel. We're seeing that kind of development particularly in Anguilla, Virgin Islands, St. Lucia, Grenada."

Economic impact

Where demand exists, the benefits to developers of building timeshares is clear, but the costs and benefits to the territory still are not.

With investors eager, Springer said, it will be up to each Caribbean island how much development to allow.

"It's only lasting for as long as the land is available," she said. "Eventually someone somewhere along the line has to make a decision on how much development you can take. If local people can't purchase land at an affordable price, you'll create a certain amount of social unrest."

Barbadians, Springer said, have been calling for a national land-use and tourism plan to be created. "Governments have to look closely at what is economically and socially acceptable for the society," she said.

The V.I. Bureau of Economic Research, which tracks tourism indicators such as visitor arrivals and hotel occupancy rates monthly, is casting a keen eye on the shift toward timeshares - and trying to figure out what it could mean economically, executive director Lauritz Mills said.

She said the bureau will include timeshares in its occupancy-rate calculations, and it plans to conduct a study on the financial impact of such developments to the territory - particularly on how deposits into the Tourism Revolving Fund are affected.

The primary contributor to the fund is an 8 percent occupancy tax that hotel guests pay. Deposits into the revolving fund totaled $16.6 million last fiscal year, the bureau calculated, and $14.5 million has been collected so far this fiscal year. The fund is required by law to be used exclusively for tourism promotion.

In April 2001, the V.I. Legislature amended a section of the V.I. Code to specify that timeshare owners would not be considered guests subject to occupancy tax but that one-time renters of timeshares would pay it.
A month later, another bill clarified that visitors staying in Virgin Islands accommodations because they had "swapped" their timeshare interest at a development outside the territory would not be exempted from the occupancy tax.

How an 8 percent tax would be calculated for those visitors is unclear, however, because they have paid a one-time purchase price to own a timeshare interest, so the cost of their lodging is not figured by the night.

The territory's Tourism Department also is wondering how much timeshare owners will contribute to the Tourism Revolving Fund, marketing director Steve Bornn said.

The timeshare phenomenon could lead to an increase in overnight visitors without necessarily increasing the revenues into the revolving fund if timeshare holders pay primarily property tax rather than occupancy tax, Bornn said. "How do we derive, from the tourism department's standpoint, a revenue from the fractionals and timeshares to promote the destination, and for product management as well?"

Bornn said he expects that issue to be a priority of the next gubernatorial administration if it is not taken up during the remaining several months of Gov. Charles Turnbull's term.

Owner characteristics

At the prices for which units are sold in the Virgin Islands, timeshare owners are nearly guaranteed to be highly affluent.

Marriott's Frenchman's Cove units are selling for between $14,300 and $67,500, a one-time price that allows fractional owners a stay of one week per year for life. On Marriott's other island timeshare properties, which in the region include Marriott's Aruba Ocean Club and Marriott's Aruba Surf Club, the average head-of-household income is $127,000 per year, spokesman Kinney said.

The Ritz-Carlton Club's luxury units range from $148,000 to $269,000 for a 21-day share. Club members' average total household income is at least $300,000 annually, spokeswoman Ridenour said.

For a week's interest in a vacation villa at The Westin St. John, Starwood Hotels and Resorts spokesman David Matheson said, prices start at $20,000 and soar to well more than $100,000 depending upon the size of unit and time of year. Matheson said he could not provide average income figures for owners.

Because timeshare owners pay a one-time purchase price, industry players hope they will be prepared to spend more on dining, shopping, excursions, attractions and transportation during each stay on-island.

"There's more of a discretionary income in their pockets," Bornn, the V.I. Tourism Department's marketing director, said. "They're paid for already, so they come here ready to shop."

Having a greater percentage of repeat guests has its own implications, however.

Bornn cautioned against "trying to analyze and read into" the increase in timeshare visitors and their demographics "more than it really warrants."

"It's difficult to look into the crystal ball," he said.

But Springer said Barbados already has experienced some differences between highly affluent villa and timeshare owners and other tourists.

"They're very independent. They will have car rentals and utilize restaurants, but they won't utilize what I call the 'general tours,'" she said. "The boat crews that take 100 people? They're going to rent a private catamaran instead. They will do private excursions, parties, entertaining."

Having more such visitors has opened up opportunities on Barbados for more personalized services, from private chefs to yoga instructors, Springer said.

Locally, Nicholson Doty, the V.I. Hotel and Tourism Association president, said she is looking carefully at how each segment of the tourism industry could be affected by timeshare developments - from the staffing they will need to the transportation and attractions their guests will want.

Her hunch, after talking to other industry leaders in the region, is that repeat guests will develop local favorites in stores and restaurants. Still, she said, they will want variety - and business operators can cater to that by serving up changes and variety in menus, activities and inventory.

"It's about addressing the need and offering things that are new and different to a visitor," she said.

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