Starwood speaks in timeshare conference

[ltbullish]

http://biz.yahoo.com/bw/070928/20070928005709.html?.v=1

I am new to timeshare. But nevertheless very interested in the long term viability of the industry. It apparently is a very interesting concept, but many pieces must come together to make it work and become viable long term. One of the pieces is of course the development of the secondary market. With the resale price so low and timeshare is generally considered as non investment, i do not see how the industry can attract more and more participants. I like to see how starwood or other major players in the industry address this problem.

 

[DeniseM]

http://biz.yahoo.com/bw/070928/20070928005709.html?.v=1

It apparently is a very interesting concept, but many pieces must come together to make it work and become viable long term. One of the pieces is of course the development of the secondary market. With the resale price so low and timeshare is generally considered as non investment, i do not see how the industry can attract more and more participants. I like to see how starwood or other major players in the industry address this problem.

Timesharing is working very well for most of us on TUG. I am not sure what you mean by becoming viable long term. What do you mean by development of the secondary market? Have you seen the listings on ebay alone? The secondary market is a great deal for informed buyers. And of course, it's not an investment at all - but it is a way to travel better, for less. It will attract more and more participants just like any other product - about every 20 years another generation of consumers comes of age.

 

[ltbullish]

I talked to some of my friends after I bought mine. Many of them shy away from TS because of the low resale price and high maintainence fee. Informed buyers get great deals at the expense of the direct buyers, which by itself discourages buy direct from developers. But, then, you need direct buyers before some one can buy at resale. The direct price is kept high by developers to cover their high marketing cost. Until the day that comes down and when the direct price gets closer to resale, I think many people would opt to stay away from TS.


Starwood estimates that the only 7% of the eligible consumers own the TS. Good thing about it is that there are still a lot of room for growth if more people start to warm up to the idea. But, then, the low resale price is turning away many of the potential buyers.

 

[mtnpilot]

Why would the low resale value turn away potential buyers? Most of those who buy from the developer are totally unaware of the option of purchasing resale, so the existing resale market would not influence their decision. People who are aware of the resale market are not likely to purchase from the developer, but many of them see the value in purchasing from the resale market, and in most cases, the timeshares they purchase on the resale market will hold value if not appreciate.

There is no question that timeshare developers make loads of money marketing timeshare resorts, based at least partly on an uneducated target audience. But those of us who have reasonably evaluated the value of timeshares over hotel or condo rentals have come to the conclusion that owning resale timeshares can save money and guarantee residence at a key location (like, for me, Park City UT in Winter). I know my units are worth the purchase costs.

 

[johnmfaeth]

Dear LT,

If only your words were true. Unfortunately, the timeshare salesfolks of the world manage to attract thousands of "marks" every day. The lucky ones buy a Marriott or Starwood unit and only lose 20-30% of their purchase price the day their recission period ends (3-14 days after pruchase).

The folks who buy many mid-range and low end units lose 90% of their "investment" once the recision period ends. And outside the US, many locales have no recision period. Sign and you own it.

Most TUG members started off by buying a unit directly from a developer. Their second purchase was then resale.

I am one of the few who started off with resale only because I was active on Ebay since 97 and finally bought one in 2000.

Courtesy of my resale timeshares, I can vacation in my St. Thomas, St. Maarten, Grand Cayman and Aruba units for under $100 per night. The couple in the room next door pays $1,500-$2,000 to rent the identical unt for a week hotel-style. Some of my purchases have paid for themselves the 4th night of the first week I used them.

But it is one of the greatest "buyer's markets" that has ever existed. Sure maintenance fees go up but so do hotel rates. They are all subject to the same economic factors. But the timeshare almost always costs 1/2 to 1/3 the price of a hotel.

For those who never travel, it is a horrible purchase, but for those of us who want to see the world, it's a passport to much more travel than we could otherwise afford.

Welcome to TUG!!!

 

[calgarygary]

If you have viewed the pdf file of the presentation, Starwood has a lot to boast to shareholders regarding SVO performance. It seems that their operating income margin is substantially larger than Marriott's or Hilton's. Problem is, if you turn it around, maybe owning a ts in SVO means you will get less bang for the buck.

 

[myip]

If you have viewed the pdf file of the presentation, Starwood has a lot to boast to shareholders regarding SVO performance. It seems that their operating income margin is substantially larger than Marriott's or Hilton's. Problem is, if you turn it around, maybe owning a ts in SVO means you will get less bang for the buck.

Wow... it will be nice if they really going to start selling Sheraton Kauai in 2009. It will be a race between Hyatt in Kauai and Sheraton Kauai.

 

[Steamboat Bill]

Not all timeshares are bad investments....in fact my Disney Vacation Club has earned me a profit after 2 years of ownership.

 

[DavidnRobin]

If you have viewed the pdf file of the presentation, Starwood has a lot to boast to shareholders regarding SVO performance. It seems that their operating income margin is substantially larger than Marriott's or Hilton's. Problem is, if you turn it around, maybe owning a ts in SVO means you will get less bang for the buck.

Thanks for the link - interesting to see the buildout numbers for the resorts.

 

[tomandrobin]

I am surprised that only 13% of Starwood owners are multiple week owners.

 

[Courts]

I am surprised that only 13% of Starwood owners are multiple week owners.

Yes, and makes me wonder how the "elite" upgrade problem came about, perhaps one or two properties like WKORV?

..

 

[Fredm]

I am surprised that only 13% of Starwood owners are multiple week owners.

Give it time. Most Starwood owners (not former Vistana) have owned for 4 or less years. Expansion is just now picking up steam. I would guess that many will acquire additional shares over time.

What I found surprising was that 70% of Starwood sales were financed.

Not surprising, though interesting, was the industry's accelerating growth of new sales in '05 & '06. So, it appears that resales have not hurt developer business at large. Just a piece of a larger pie.

 

[nodge]

I am surprised that only 13% of Starwood owners are multiple week owners.

I would be interested to learn what percentage of Hilton, Hyatt and Marriott owners are multiple week owners. If it is remarkably higher than SVO’s 13%, I would think SVO’s parent company (at least) would be on notice that something is not quite right with SVO’s current “efforts” to promote additional sales among existing owners.

Moreover, I would be even more interested to learn if sales to existing owners have improved or decreased since SVO’s “Good News! We’re cancelling the elite upgrade benefit” email a few months ago. That sure knocked the wind out of my SVO additional purchase sails.

On the plus side, I hope SVO keeps making its huge, huge profits on developer sales (so long as NONE of those sales are to me). This translates into more properties for us existing owners to exchange into. Who knows, some day SVO could even decide to use some of those profits (or even some of the $20 million we owners pay SVO each year in “membership fees”) to improve its inventory management system above its current rudimentary, brute-force, barely functioning level.

-nodge

 

[DavidnRobin]

Don't forget that they define Starwood Owners as people who bought from SVO.

As to the 70% that finance their VOI - this does not surprise because this is likely one of those 'numbers games' that SVO likes to play. For example - when we bought (and rescinded) WKORV-N we signed up for financing with the intent to pay off entirely when we go home - so perhaps people that are doing this (financing then paying off in full soon after) are getting counted in the finance group.

I have always said that resale owners (and even less so - SVO Tuggers) are a drop in the bucket to the masses out there.

Another surprise was the revenues for TSs vs. Hotels for the entire industry - I don't think I read this correctly since I would not expect it to be so overwhelming.

 

[tomandrobin]

I wonder if using your American Express for the purchase is considered part of the financing? We were offeded the American Express option and paid off the balance when we got the bill.

 

[calgarygary]

On the plus side, I hope SVO keeps making its huge, huge profits on developer sales (so long as NONE of those sales are to me). This translates into more properties for us existing owners to exchange into. Who knows, some day SVO could even decide to use some of those profits (or even some of the $20 million we owners pay SVO each year in “membership fees”) to improve its inventory management system above its current rudimentary, brute-force, barely functioning level.

-nodge

Don't go holding your breath on that. It could be that Starwood's pillaging of elite benefits was a direct result of losing 1% of margin from 2005 to 2006. If they need to find ways to cut costs when getting 96% of Marriott's profits on just over 50% of Marriott's sales, I wouldn't expect them to make major investments in their inventory system.

 

[tomandrobin]

I guess considering how much the new resorts cost, it becomes less attractive to own multiple developer weeks. I the new California resort is almost double the cost then Mission Hills.

 

[DavidnRobin]

Don't go holding your breath on that. It could be that Starwood's pillaging of elite benefits was a direct result of losing 1% of margin from 2005 to 2006. If they need to find ways to cut costs when getting 96% of Marriott's profits on just over 50% of Marriott's sales, I wouldn't expect them to make major investments in their inventory system.

Except - in hope that SVO bothers reading this - they could save money and therefore increase their margin - by improving their database and reservation system (both intranet and internet) for SVO and SPG. This has a multitude of savings - the biggest saver would be in reducing annualized FTE burden (FTE = full-time employee) - not to mention better inventory control.