Below is a very interesting article that we stumbled across, which sumarises the rise and fall of the timeshare industry throughout the years.
It is written by Scott Bahr, a Strategic marketing and business development executive.
Every industry has its set of inflection points, that determine what leaders will fall and what upstarts will rise to the top, and the timeshare industry is no exception. A set of forces have set up a perfect storm that are about to throw the existing timeshare segment of the hospitality industry for a loop that some major names will not survive.
In the late 1950’s through the early 1970’s, timeshare in it’s original form made sense. For Baby Boomers seeking a sense of tradition for their young families in a time when finding quality accommodations for a family was a risky, hit-or-miss proposition, buying into that same condo in Hilton Head for two weeks every June and splitting the costs with other similar families made a lot of sense. Baby Boomers also remembered a tougher time and had a big focus on leaving something of value for their children, so deeded timeshare properties appealed to them. A lot of less reputable companies capitalized on this emerging trend, giving the industry the reputation for slick, tricky salesmen and high pressure tactics.
By the 80’s and 90’s, the big brands had taken an increasing share of the market, playing on their brands’ reputations for integrity and quality. They built resort after resort, growing a portfolio of properties and increasingly pushing the value of this network of resorts and the flexibility it provided to a generation whose kids were now off to college and vacationing with their own families. Now this same Boomer generation of timeshare owners started exchanging for other properties, wanting to visit Hawaii or Palm Desert instead of Hilton Head and Orlando.
In the early 2000’s, the big brands took more share by moving to points-based product forms and pressing the flexibility of their network of resorts. Through these same changes, however, their organizational structures also became increasingly burdensome and complex, driving up maintenance fees at a pace far ahead of inflation rates for many brands. Sales tactics were becoming more and more effective, perhaps pushing the boundaries of what was considered acceptable to government regulators, and bringing increasing numbers of new leads into the pipeline to keep these growing machines growing and profit lines expanding.
Then 2008 came and the marketplace changed forever. The Dotcom Bubble burst, and with it went many Boomers’ retirement savings and a lot of Gen X jobs, drying up most of the new leads in the critical pipeline of sales tours for timeshare companies. DoNotCall and AntiSpam regulations were implemented by an increasing number of states and countries, further contracting that pipeline of potential new customers. Internet access and costs were exponentially increasing the amount and quality of information about lodging options available to everyone globally. HomeAway and AirBnB were just emerging and many timeshare leaders viewed them as just a flash in the pan, but many options to rent condos and homes at good prices were hitting the market. The only ones who seemed to be conspicuously vacationing were Millennials, vacationing in groups, with little advance notice, and much more open to crashing on somebody’s couch or renting a house with a dozen friends than older generations.
In the next few years, several of the large brands took a cash-cow strategy, spinning off their timeshare divisions with tightly constraining franchise agreements and fee structures that took timeshare’s inherent cash flow variability out of their earnings and capital budgeting. These changes further increased the overhead costs to be borne by timeshare owners in their up front costs and annual maintenance fees.
Now it’s 2015… Baby Boomers are approaching their postponed retirement dates or have already retired – they don’t need a timeshare on the beach because they’ve left the Rust Belt and are moving into their retirement homes in The Villages or escaping New Jersey for Boca. Neither GenX nor Millennials share the same attraction to traditional timeshare that older generations once had – they’d rather explore new places and venture to the now more accessible far ends of the Earth where big timeshare capital investments have never made sense. HomeAway and Airbnb each have over 1,000,000 listings, complete with extensive descriptions and pictures, many with rates of $100-$200 / night – more options and often better prices than the biggest timeshare companies or even the largest hotel chains. In contrast, maintenance fees for leading timeshare companies now equate to over $2,000 a week, and that’s after you pay your $25,000-38,000 up front – that increasingly important value proposition is becoming increasingly challenging. Timeshare companies are suddenly painfully aware that they represent just a subset of a consumer’s choices for that same vacation dollar (or Yen or Euro).
The US timeshare industry WILL reinvent itself – it has no choice. The real question is in what form? Some suggest there is still a place for the original fixed-week, fixed unit form due to its lower overhead and stronger sense of community. Some of the big brands continue to cling to the validity of their current structures, thinking a shorter product form might work if they can overcome the loss of tax shelters that accompany those 3-8 year products. The reality is that turmoil is likely to be the mantra for the industry over the next decade as the current leaders and rising upstarts battle for the same set of customers. At the end of the day, the savvy consumer will ultimately be the only guaranteed winners”.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk