Regular visitors will know that for some time we have been reporting that, with the exception of the USA, the sales of new timeshare are at some of the lowest levels recorded. Europe as whole has a contracting timeshare market; back in November 2017 we reported that Diamond Resorts were closing their entire European sales division with job losses estimated to be around 1,000. Recently, Diamond were acquired by Hilton, but even before that they ranked in the top five of global developers, for Diamond to have taken this action they must have surely spotted the writing on the wall. If a market is profitable, no company in their right mind simply walks away, Diamond did.
The UK timeshare scene
Dotted across the UK are a number of owner operated timeshare resorts surviving and existing in various degrees of success. Added to this there are resorts run by the big boys such as Diamond/Hilton et al but there are also some fair sized multi venue developers two of which are Seasons Holidays and MacDonald Resorts who we will take a closer look at later.
It’s fair to say the Covid pandemic made a major impact on both travel and the hospitality industry as a whole, however when lockdowns were lifted but travel restrictions remained, the “staycation” market flourished. Unfortunately, this honeymoon period soon came to an end, with the lifting of restrictions the masses once again made a run for the sun. UK holiday destinations once more slipped on to the back burner whilst the Mediterranean destinations flourished.
The timeshare two edged sword
As a business concept, timeshare is not too difficult to understand, client pays to buy future holidays with a lump sum, client goes on holiday every year, client pays an annual fee to maintain the resort, simple, but there are complications. As with any market, two components are required, sellers and buyers, too many of one and not enough of the other causes an imbalance; either too much stock or too little, for timeshare it’s no different and this is where the problems start.
The major cash flow profit comes from the initial sale, this is especially true with points based timeshare, which is the norm nowadays, if the sales are dwindling then so are the profits. It’s fair to say that owners are committed to paying annual maintenance fees but supposedly this money is spent on maintaining the resort, although for the most part, mathematically the amount collected cannot possibly all be spent on maintenance, so it’s fair to say a considerable amount will find its way to the corporate accounts bottom line but this cannot possibly cover the deficit created by the loss of sales.
Many owners report to us that the quality of both resorts and accommodation are falling year on year thus proving that maintenance fees are being diverted elsewhere to keep the developer afloat. Seasons Holidays have invented some cunning plans to fill the void created by missing new sales, more on that later.
The age demographic
A further complication to timeshare UK is an ageing ownership. According to an extract from the Parliament paper on timeshare problems published in April 2022, and we quote:
“Many owners bought their timeshares in the 1980s or 1990s, their average age being around 50 to 60 years old (rising each year).”
The age demographic in the UK is considerably higher than that of say the USA. With the onset of age, travelling becomes more difficult and income expenditure is often required in areas other than holidays, especially taking the current economic crisis into account, these factors often fuel a desire to terminate timeshare ownership.
With the younger traveller seemingly having no interest in the timeshare concept and existing owners wanting to get out you can clearly see where a financial hole is being created in the developers accounts.
Seasons Holidays
For those not in the know, Seasons Holidays are a Bristol based family run timeshare developer. Their estate comprises 8 resorts in the UK, one in Lanzarote and one on the Costa del Sol, Spain. Over the years the directorate of Seasons have come up with a number of schemes to attempt to fill the void caused by falling new sales. Annual maintenance fees are the bain of timeshare ownership so Seasons created the “Keys” scheme. In exchange for giving up a fixed week, fixed resort ownership, a number of holidays could be purchased for a fee in order to take holidays at any time in any resort without the need for paying the annual maintenance fee. Other schemes Seasons created consist of Loyalty Nights, The Lake Collection, The Park Collection and The Garden Collection.
As a further means to further bolster funds, Seasons took the unprecedented move of placing the leases of their lodges at Slaley Hall resort on the market for a combined projected sales value of £4.9m and at the same time removing occupancy rights of owners. We have reported extensively on this subject.
Those owners who do not belong to one of the seasons schemes are known as “core members”, in a recent email sent by Seasons, use of some resorts have been made exclusive to scheme members at the expense of core members. This move has not been taken well, as may be seen by comments on Trust Pilot. In basic terms, if core members wish to use the entire estate they must stump up more money to join a scheme as may be confirmed by a line from the email communication:
“Alternatively, there are also opportunities to explore our other Memberships.”
The latest accounts are overdue at Companies House but taking a look at the last published accounts for year ending 31-12 2020 the auditors Mudd Partners LLP state:
“Revenue is generated from the sale of holiday lodges, accommodation hire, and management fees. The operating loss of the Group is £3.2m (2019: profit £0.4m).”
The accounts profit – loss balance shows a loss of £1,637,744
MacDonald Resorts
MacDonald comprises 39 resorts throughout the UK and Spain. There isn’t much to say about MacDonald Resorts coming up with schemes such as Seasons because they haven’t. On checking the Companies House records MacDonald Resorts only submitted their annual accounts for 2020 on the 7th March last year, no sign of the 2021 accounts. The 2020 accounts make grim reading with a gross profit showing as just 3% against 15% the previous year. According to the profit and loss summary, during the accounting period the gross turnover was £9,784,000, however we now venture a small poem:
Turnover is vanity
Profit is sanity
Cash flow is King
Well we see little evidence of cash flow being king because the profit loss account shows a whopping loss of £8,414,000 on the year, profit and cash flow almost gone in one foul swoop. So the question is what will the 2021 accounts look like?
MacDonald Resorts 2023 maintenance requests have, in the worst case, shown a hike of 40% above that of 2022 but again, sales to new owners are scarce. In the section of the accounts headed Sales and marketing, the following statement appears:
Sales and marketing: significant efforts are made to develop the company’s brand and ensure new business is being won continually; new markets have been developed in line with the company’s strategy; key customer relationships are monitored on a regular basis.
To develop new business requires ideas and significant marketing expenditure, with a hole of over £8.4m one has to wonder how this may be funded and achieved.
Papering over the cracks
Once profits start falling and gaps between profit and loss appear it’s quite common for the corporate minds to come up with plans and schemes that attempt to fill the gaps. We came across a real example back in 2017 concerning Croatia Airlines. Croatia is a small country boasting a population of only 4 million; nevertheless it has a national airline, albeit very small. The airline has never shown a profit so in order to prop up the business, Croatia Airlines sold a number of slots at Heathrow airport to US based Delta. The sale agreed so Delta paid $19.5 million for five Heathrow slots.
Moving forward, the last published accounts show Croatia Airlines registered a net loss of 13.1 million Euros during the first three quarters of the year, up from a loss of 6.5 million Euros during the pre-pandemic 2019.
If the product isn’t right and the public aren’t buying it then any ideas such as demonstrated by Croatia Airlines, and others mentioned in this article are merely short term gains that will ultimately still lead to longer term losses, so as this section implies, such schemes merely paper over the cracks.
TCA Comment
We asked the question “Is the UK timeshare industry on its knees?” from evidence we publish here the scene is not looking too good. The timeshare industry as a whole is faced with extreme competition from alternative methods of holidaying, all of which don’t require any form of initial expenditure or annual commitment. Without a queue of new buyers knocking at the door, significant cash flow cannot be guaranteed.
The reliance of keeping existing customers in the fold is becoming increasingly difficult in light of age, desire and affordability. It doesn’t really matter how the product is tweaked its rapidly falling out of favour with the holidaymaker. No matter what the product is, time and development render all obsolete at some stage as next generation improved products emerge.
Holidays have not changed but how we take them and what’s on offer has. Choice, flexibility and cost all factor in to today’s holiday buyer and we’re afraid that the timeshare concept hasn’t kept pace with these requirements, in essence, timeshare has changed little in the last 50 years but what’s on offer, people’s attitudes and requirements’ have. Is it then any wonder that the timeshare industry in general is in the state it is? We will leave you to decide.
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