Volume per guest otherwise known as VPG is a metric used primarily in the USA timeshare world. Before we go on, let’s explain what it is.
Although a bit complex, basically VPG works out the value of each timeshare tour by dividing the overall sales income by the number of tours taken. It measures the effectiveness of the sales process.
As a simple example; let’s say the total revenue over a given period was $10,000. During that period the resort sales team carried out 500 tours, then the maths are simple $10,000 divided by 500 equals $20, therefore the VPG is $20.
Some real numbers
We recently studied an article looking at the current and predicted sales income at Travel + Leisure, undoubted the largest timeshare company in the world. As the Americans love acronyms we need to throw another one at you, this time VOI. Vacation Ownership Interest or VOI is actually simple it’s merely the gross figure representing total new timeshare sales.
In the case of Travel + Leisure, gross VOI sales are anticipated to be between $2.25 billion and $2.35 billion in 2024, which would be up from $2.15 billion in 2023. Meanwhile, volume per guest (VPG) is predicted to be down slightly from an average of $3,128 in 2023 to between $2,900 and $3,000. So all clear as mud so far, but where is all this going? Let’s explain.
The normal timeshare sales process
As we all know, timeshare sales presentations are known as tours, ok prospects will get a tour of the resort but will then have to sit through hours of high pressure sales talk. Some will buy, however, many will not. A motivator to go through this torture is the lure of a free gift to attend, whatever that gift may be. A glaring question would be, does the system work?
The answer is, of course it does, with Travel + Leisure forecasting 2024 sales of between $2.25 billion and $2.35 billion, pretty big numbers. The more important question is are these sales cost effective, here the answer may be not really. How do we come to this conclusion? Well again we will have to crunch some numbers.
Crunching the numbers
We have already established that the VPG is expected to be around $3,000 and forecast sales of $2.35bn, what we don’t know is the projected number of tours, however that can be answered by simple maths. $2.35bn divided by $3,000 equals 783,000, this then could equate to the total expected tours.
According to the American Resort Development Association (ARDA) the average cost of a one week timeshare is approximately $24,000, therefore if we take the VOI of $2.35bn and make the VPG $24,000 the using the same maths as above only 98,000 tours would take place.
What can we conclude from this little game of numbers, simple, the majority of tours end in sales failure. More prospects walk away (with their free gift) than sign on the dotted line.
TCA comment
Buying anything is a predominately emotional desire. When Apple issue a new iPhone, on the day of launch there are queues and queues outside all outlets, stocks are likely to run out before everyone is served. Whatever the cost of the new phone, buyers will pay it. The latest iPhone 15 Pro sells for about $1,000. The Apple VPG will be as near as dammed $1,000 because 100% of those wishing to buy will.
Here is the stark contrast, consumers buy phones willingly but the same consumers have to be sold, and sold hard to buy timeshare. No one ever wakes up in the morning and decides today is the day I buy a timeshare. Whilst the VPG is an interesting figure, surely the sales failure rate must flag up serious flaws in the sales system, or more importantly, the product.
Whilst the VPG shows the profit from every single tour, technically, it’s a very false way of looking at the real story. Finally the figures quoted above make an effective closing rate of 12.5% meaning that 87.5% of tours fall by the wayside.
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