Timeshares - Global - March 2004

SUMMARY

Timeshare developments are located in at least 115 countries around the world, with around 5,425 projects now existing and nearly 7 million consumers, owning approximately 10.7 million timeshare weeks. Timeshare owners live in roughly 190 countries and by year end 2003, annual global sales of timeshare are estimated to exceed $10 billion, up from an estimated $9.4 billion in 2002. Over the last two decades, timeshare has been one of the most consistent and fastest-growing sectors of the travel and tourism industry, with an average annual growth rate approaching 14% since 1985.

This, the latest strategic report from Mintel Travel & Tourism Intelligence, offers a valuable overview of both the structure of the industry and the trends that are influencing it's size and characteristics. Mapping out the dynamics of the industry in the US, Latin America, Mexico and Europe, it provides expert comment on:

• The timeshare product (including discussion of topics such as the development process, creating legal plans and the Sales impact of purpose-built designs)
• The role of exchange (including profiles of the two principal exchange companies)
• Industry approaches to regulation and legislation
• The impact of the hospitality brands
• The economics of timeshare
• The marketing and selling of timeshare
• Points and vacation clubs
• Financing within the timeshare industry
• The timeshare consumer
• Urban timeshare
• Fractional interests and private residence clubs
• Key Issues and future prospects
• Company profiles.

TABLE OF CONTENTS

Worldwide Timeshare Industry Overview

• Definition
• Data sources and acknowledgements
• Industry evolution and growth
• Figure 1: Locations of timeshare resorts worldwide, 2003
• Figure 2: Growth of the timeshare industry worldwide, 1980-2002
• Figure 3: Estimated total timeshare projects worldwide by market with corresponding market share 2003
• The US - Market leader
• Other regions
• Figure 4: Numbers of resorts and owners in remaining established markets, 2003
• Annual sales volume
• Figure 5: Global industry - annual sales, 1990-2004
• The top 10 countries
• Figure 6: The top 10 countries for timeshare projects, 2003
• Timeshare's economic importance
• Figure 7: Worldwide timeshare ownership, 1990-2004
• Resort location preferences
• Figure 8: Industry recreational property trends

History and Development of Timeshare

• The origin of timeshare
• A European concept
• Timeshare introduced in the USA
• The arrival of the exchange companies
• RCI established
• Interval international established
• Trade associations develop
• Resort quality rating system
• US industry pioneers
• Industry pioneers - Europe
• Hapimag
• Holiday property bond
• Club La Costa
• Resort Properties
• Industry pioneers - Southeast Asia
• Berjaya Vacation Club Berhad (BVC)
• Entry of the first major hospitality brand
• Exchange companies expand
• Protecting consumer interests
• European legislation
• EU timeshare directive
• Industry Evolution: Clearly defined phases
• Phase 1: Birth and infancy
• Phase 2: Childhood
• Phase 3: Adolescence
• Phase 4: Towards early adulthood
• Interest of investors and travel groups
• The industry today - well positioned for continued growth

Industry Structure

• How the industry is structured
• Barriers to entry
• Increasing consolidation
• Impact of leading developers
• Figure 9: Worldwide industry concentration, by annual sales volume, 1998, 2002 and 2003
• Owners
• Figure 10: Worldwide industry concentration, by owner base, 1998 and 2003
• Resorts
• Figure 11: Worldwide industry concentration, by numbers of resorts, 1998 and 2003
• Figure 12: Top ten timeshare resort companies, by annual sales volume, 1994
• Figure 13: Top ten timeshare resort companies, by annual sales volume, 1998
• Figure 14: Top ten timeshare resort companies, by annual sales volume, 2003
• US non-branded developers
• Figure 15: US industry's leading non-branded developers, 2000
• Figure 16: US industry's leading non-branded developers, 2001
• Figure 17: US industry's leading non-branded developers, 2002
• Figure 18: US industry's leading non-branded developers, 2003
• US domination
• Increasing globalisation
• Hospitality chains
• International expansion of leading companies
• Figure 19: Top ten companies, by number of resorts, end 2003
• Owner bases
• Figure 20: World's top ten timeshare companies, by ownership base, end-1998
• Figure 21: World's top 12 timeshare companies, by ownership base, end-2003
• Market segmentation
• The Industry's two largest non-branded developers
• 1. Cendant Timeshare Resort Group
• 2. Sunterra Corporation
• Conclusion: consolidation and segmentation ahead

The US Market

• Figure 22: Timeshare resorts within the US, 1975-2004
• Figure 23: Spread of timeshare resorts, by key states, 2003
• Figure 24: Number of timeshare units within each of top ten states, 2003
• Figure 25: Growth of timeshare accommodation units in US, 1975-2005
• Figure 26: US timeshare developer sales volume, 1975-2004
• Timeshare purchases
• Figure 27: Timeshare purchase prices in the US, 2003
• Purchase prices
• Figure 28: Timeshare price details and trends - US
• Financing of purchases
• Figure 29: Purchaser financing percentages, US compared as between May 1999-April 2000 and August 2001-July 2002
• Consumer benefits
• Community benefits
• Size of unit purchased
• Number of weeks per purchase
• Type of use plan
• Figure 30: Type of use plan
• Figure 31: Average maintenance fees on recent acquisitions
• Figure 32: Maintenance fees per week
• Figure 33: Average maintenance fee per week of annual use

Markets in Europe, Mexico and Latin America

• Figure 34: Growth in number of European timeshare resorts, 1981-2001
• Figure 35: Spread of European resorts, by country
• Figure 36: Europe's top ten countries for timeshare resorts
• Figure 37: Timeshare resort distribution within the Canary Islands
• Figure 38: Timeshare resort distribution within mainland Spain and Balearic Islands
• Figure 39: European resort distribution, by location type
• Figure 40: Distribution of Spanish resorts, by resort size
• Figure 41: Resort ownership, by country of residence
• Figure 42: Attraction of European resort location, by type
• Figure 43: Type of use plan, by European market region
• Headline figures for the timeshare industry in Europe
• Timesharing in the United Kingdom
• Figure 44: Analysis of resort distribution in the United Kingdom
• Figure 45: UK owners, by ownership and location
• Latin America
• Figure 46: Resort distribution in Mexico and Latin America, by country, 2003
• Figure 47: Listing of resort projects by country with units per country and average resort size, by country
• Figure 48: Showing owners owning in country and owners residing in country for Mexico and Latin America
• Summary of magnitude and distribution
• Figure 49: Intervals sold by country in Latin America
• Figure 50: Mexico's largest vacation ownership companies measured by sales volume

The Timeshare Product

• The starting point - Resort location
• Feasibility
• Development process
• Creating the timeshare legal plan
• The timeshare use plan
• Vacation clubs
• Sales impact of purpose-built design
• Original use
• The physical product - bigger units
• Figure 51: RCI Minimum Size Guidelines
• Figure 52: Interval International unit size guidelines - excluding Urban Sites
• Figure 53: Interval international unit size guidelines - urban sites only
• Unit design
• Role of the developer
• Resort management
• Basic product concepts
• Property law systems
• Multi-ownership
• Multi-use
• Rental for periods of time
• Periodic right-to-use
• Personal right or contract law systems
• Club trustee format
• Company share schemes
• Comparison of fee-simple deeded ownership and right to use
• Forms of deeded product
• Advantages of deeded ownership
• Disadvantages of deeded ownership
• Right-to-use products
• Duration of right-to-use product
• Advantages of right-to-use
• Disadvantages of right-to-use
• Variations in use offerings
• Fixed period
• Floating period
• Split weeks
• Points based products
• Biannuals or biennials
• Recent developments in product concepts and legal structures
• Vacation clubs
• New products
• Gaming
• Fractional interests
• Canal boat timeshare
• Catamaran and cruise timeshare
• Timesharing a single cruise ship
• Cruise based vacation club
• Fractional jet ownership

The Role of Exchange

• Two types of exchange
• Profiles of the two principal exchange companies
• RCI - part of Cendant Corporation
• Figure 54: Vacation rental group properties
• Figure 55: RCI affiliated resort locations
• RCI Travel
• RCI Holiday Network
• RCI Resort Management
• Exchange - a key role
• Interval International
• Competition
• Dual affiliation
• How exchange works
• Advanced technology systems
• Ancillary services
• Resort categorisation and quality standards
• Performance levels - high level of satisfaction
• Monitoring customer retention
• Industry role of the exchange companies
• Exchange trends
• Wholesale inventory swaps
• Diverse strategies
• Technology a major asset
• Entry of industry innovators and new exchange companies
• International Cruise & Excursions, Inc. (ICE)
• Affiliations
• Membership
• Development and promotion of internet technology
• The San Francisco Exchange Company
• Dialanexchange
• The Abercrombie and Kent Registry
• The World's Finest Resorts

Industry Approaches to Regulation and Legislation

• Key principles of fair legislation
• Full disclosure sales process
• Cooling-off period
• Protecting purchasers' deposits
• Assurance of occupancy
• 1. Exchange companies
• 2. Trustee companies
• 3. The trade associations
• The American Resort Developers Association (ARDA)
• ARDA's organisational development
• Do not call
• SPAM
• Accounting standards
• The Organisation for Timeshare in Europe
• AMDETUR
• Canadian Resort Development Association (CRDA)
• La Federacion LatinoAmericana des Arrolladores Touristicos AC (LADETUR)
• Timeshare Industry in South Africa (TISA)
• The Thai Vacation Ownership Association (TVOA)
• The Malaysian Holiday Timeshare Developers Federation (MHTDF)
• The All India Resort Development Association (AIRDA)
• The Australian Timeshare & Holiday Ownership Council Limited (ATHOC)
• The Global Alliance for Timeshare Excellence (GATE)
Early approaches to legislation
• THE US Alda/Narello Model Act 1979
• The Alda/Narello Model Act 1983
• International bar association paper, 1991 - international regulation of the timeshare industry
• The current regulatory approach within the US
• Timeshare registration
• Additional laws and legal issues
• Management regulation
• Sales and marketing laws
• Financing laws
• Construction/development laws
• Securities laws
• Europe
• Figure 56: European legislation relating to the timeshare directive EC/47/94, as at January 2004
• Potential new legislation impacting the timeshare industry in Europe
• The Proposed Unfair Commercial Practices (UCP) Directive
• Aims of the proposed directive
• General prohibition of unfair commercial practises
• Misleading and aggressive commercial practises
• Continuing issues
• Holiday packages
• Australia
• Legal framework and history
• Structures of timeshare - Premanaged Investment Act
• Structures under the current legislation
• Overall impact of legislation
• Legal and tax complexities

The Impact of The Hospitality Brands

• Hospitality industry interest aroused
• Profit and growth opportunities
• Focus moves from sales via product to customer
• Redefining the hospitality industry
• Customer equity
• The appeal of timeshare's strong growth
• Mixed-use properties
• Marketing synergies
• Striking a balance
• The impact of the hospitality brands
• Figure 57: Percentage share of the global timeshare market, measured by sales volume, achieved by the leading participating hospitality brands, 1998-2003
• Figure 58: Percentage share of the global timeshare market held by hospitality brands, measured by sales volume, when also including Cendant Timeshare Resort Group
• Figure 59: Percentage share, measured by sales volume, of the US market achieved by the major hospitality brands, 1998-2003
• Segmentation
• Sub-brands
• Rating systems
• Main hotel brands involved in timeshare
• Figure 60: Hospitality brands and the timeshare industry
• Marriott Vacation Club International
• Figure 61: Marriott's brands
• Segmentation
• The Horizons product
• Marriott Grand Residence Club
• The Ritz Carlton Club
• The travel trade and timeshare
• Tour operator challenges
• Cannibalisation
• Fear of competition
• Opportunities in timeshare
• Early entrants from the tour operating environment
• Airtours vacation ownership
• Thomas Cook
• TUI AG
• The key to broader market acceptance

The Economics of Timeshare

• The timeshare business model
• Basic industry economics
• The timeshare business model
• Primary operations
• Economic drivers
• Figure 62: Timeshare economics
• Figure 63: Timesharing economics - preliminary project pro forma - hypothetical resort
• Constructing a project pro forma
• The factors which will influence success or failure

The Marketing and Selling of Timeshare

• Perceptions of the product
• Public image
• Changing the image of timeshare
• How timeshare is sold
• Traditional commercial strategy
• Core marketing methods
• Sales techniques
• Resale activity
• Affinity marketing
• Owner/member referrals
• In-house programmes
• The sales process
• Post-sales - cancellation/rescission
• Post-sale consolidation and follow-up work
• New distribution channels
• The secondary market
• Resale options
• Marketing resales
• Unwanted timeshares
• Supply and demand
• The impact of the internet

Points and Vacation Clubs

• Vacation Clubs
• Figure 64: Multi-faceted club structure
• Points
• Figure 65: Inventory bucket concept
• Rationale
• Figure 66: Comparative advantages and disadvantages of points
• Key capabilities
• How points systems work
• Operating challenges
• Start-Up Costs
• Automation
• Figure 67: Points Management
• Extra staffing needed
• Pricing of points
• Points allocation
• Inventory management
• Practical operating challenges
• How points are presented
• History of points
• The South African experience
• Figure 68: Examples of vacation clubs and points systems, 2003
The response of the exchange organisations
• RCI Points system
• CRI Points and RCI Points
• Interval International's different approach
• Legal Issues associated with Points
• Development
• Branding and product differentiation
• Sales and marketing
• Need for controlled sales process
• Points systems - further issues
• Benefits of points systems for the consumer
• Industry regulation
• Industry consolidation and polarisation

Financing Within the Timeshare Industry

• Developer financing
• End loan financing
• Hypothecation and sale/purchase of receivables
• Hypothecation
• Sale/purchase of receivables
• Securitisation
• Key participant
• Static pool analysis
• Loan servicing and collections

The Timeshare Consumer

• No longer an unsought product
• Public image
• Figure 69: The public image of resort timeshare
• Figure 70: Hesitations before purchasing resort timeshare
• Research indicates contented purchasers
• Figure 71: Satisfaction of existing resort timeshare owners
• Figure 72: Timeshare owner satisfaction levels around the World
• Consumer profiles
• US timeshare purchasers
• Demographic characteristics of US timeshare owners
• Figure 73: Key demographic characteristics of US timeshare owners
• Top five timeshare purchase motivations
• Figure 74: Top five timeshare purchase motivations
• Satisfaction with timeshare ownership
• Figure 75: Overall satisfaction with timeshare ownership
• Utilisation of timeshares
• Figure 76: How US timeshare owners utilised time during prior year
• Awareness and opinions of timesharing among public
• Figure 77: Awareness and opinions of timesharing US households, never owned timeshare, income $25,000+
• Europe
• Consumer demographic characteristics
• Figure 78: Demographics of European timeshare owners(1)
• Figure 79: Demographics of European timeshare owners (2)
• Motivations for purchasing
• Figure 80: European timeshare purchaser motivations (1)
• Figure 81: European timeshare purchaser motivations (2)
• Hesitations about purchasing
• Figure 82: How European timeshare purchasers utilise time
• The consumer benefits of resort timesharing
• Figure 83: Satisfaction with timeshare ownership in Europe
• Latin America
• Consumer demographics
• Timeshare owner satisfaction levels
• Figure 84: Satisfaction with timeshare amongst Latin American owners
• Future timeshare buyers
• Customer valuation
• Figure 85: Cost of customer acquisition
• What are the key elements of customer value?
• Figure 86: Lifetime value of client
• Added value potential
• What is the approach to valuation methods?
• Figure 87: The value of customer loyalty

Urban Timeshare

Urban timeshare in Europe
• Figure 88: Spread of European urban resorts, 2001
• Figure 89: Spread of Hapimag's European urban resorts, 2002
Established urban projects in the US
• The Manhattan Club, New York
• Examples of other US urban projects

Fractional Interests and Private Residence Clubs

• Fractional interests market profile 2003
• Industry size
• Product characteristics
• Purchasing process
• Satisfaction, use and future plans
• Consumer characteristics
• The supply side
• Figure 90: Geographic spread of fractional projects within North America, 2003
• Private residence clubs
• Background
• Product concept
• Product characteristics
• Pricing
• Marketing and sales
• Figure 91: Differentiating characteristics of timeshares, fractional interests and PRC's
• Examples of established luxury fractional and private residence club products
• The Ritz-Carlton Club
• Ritz-Carlton Club - competitive advantage
• Development focus
• Ritz-Carlton Club resorts overview
• Exclusive resorts - an alternative approach
• The demand side
• Outlook

Key Issues and Future Prospects

• Legislation
• Industry consolidation and polarisation
• Pricing
• Marketing and sales costs
• Human resources
• Consistent service delivery
• Technology and the Internet
• Changing consumer demographics
• Access to finance
• Ageing physical timeshare product
• Inadequate reserve funding
• Longer annual vacation entitlements
• Figure 92: Vacation days per year by country
• The secondary market
• Impact of low-cost airlines
• New and prospective entrants to the industry
• The vacation ownership company of the future
• Figure 93: Key components for a successful vacation ownership company
Remaining market potential in key established markets
• US market potential
• Figure 94: US market penetration rate
• Europe
• Figure 95: Ragatz Associates - 1995 study
• Figure 96: Remaining European market potential
• Figure 97: OTE European timeshare industry, 2001 study
• Latin America - Potential remaining market depth
• Figure 98: Latin America - estimated remaining demand for resort timeshares
• Future prospects
• Conclusions

Company Profiles

• Cendant Timeshare Resort Group
• Marriott
• Westgate
• Starwood Vacation Ownership
• Bluegreen Corporation
• Hilton
• Sunterra
• Disney Vacation Club
• Shell
• Consolidated Resorts
• Villa Group
• Club La Costa
• Orange Lake
• Pacific Monarch
• Anfi Sales SL
• Tempus
• Hyatt
• Royal Resorts
• Island One
• Intrawest