Timeshare Report "Gloomy"

[drgary]

This link explains the current economic reality in the timeshare industry:

http://in.reuters.com/article/businessNews/idINIndia-37001920081212

drgary
www.travelbesttips.com

 

[Jbart74]

Thanks for the link... interesting read.

Here's my favorite part with my own added emphasis...

"We don't think 2008 will show much growth," said Howard Nusbaum, president of the American Resort Development Association.

"We kind of feel like victims -- the inability to monetize the consumer debt has forced developers to slow their sales," Nusbaum said.

Aww shucks. The developers are feeling 'like victims!"

:rofl: :hysterical: :rofl: :rofl:

 

[rickandcindy23]

Developers target those who are basically clueless (I am not meaning to offend anyone, since we did buy from the developer ourselves a couple of times), have no idea what they are getting themselves into, and probably have terrible credit to boot. So now the clueless people with bad credit cannot get credit to buy their overpriced product. It's about time the creditors said "NO" to people who cannot afford a luxury item like a timeshare. :ignore:

Yeah, I don't feel too badly for those developers.

 

[otis8756]

cash speaks loudly

I don't know about the rest of you, but I'm finding these times exciting...

 

[drgary]

Responses are interesting

When I read the article......I felt concern for the ultimate fate of Wyndham, Marriott, Starwood etc.

Sort of like GM, Ford and Chrysler......I don't want them to fail. They are caught in the down draft of the times and no easy solutions are available......unintended consequences await all of us if destruction and collapse awaits all of these economic parts of our society.

Question: If the timeshare developers collapse.......what happens to the resorts partially sold out? (I wouldn't want to be an owner in those resorts.)

Also, trading as we know it (RCI, II, etc.) would also be affected. Not for the better......maybe greatly reduced if the business model no longer works.

What do others think?

drgary
www.travelbesttips.com

 

[Jbart74]

When I read the article......I felt concern for the ultimate fate of Wyndham, Marriott, Starwood etc.

Sort of like GM, Ford and Chrysler......I don't want them to fail. They are caught in the down draft of the times and no easy solutions are available......unintended consequences await all of us if destruction and collapse awaits all of these economic parts of our society.

Question: If the timeshare developers collapse.......what happens to the resorts partially sold out? (I wouldn't want to be an owner in those resorts.)

Also, trading as we know it (RCI, II, etc.) would also be affected. Not for the better......maybe greatly reduced if the business model no longer works.

What do others think?

drgary
www.travelbesttips.com

I'd like to think that I'm lucky to own a TS from a private developer, but anyone who knows anything about David Morritt and the problems we've had ever since Ivan hit the Caymans would know better. All those problems aside, I still prefer the Private Developer aspect of the market. We really love our vacations there every year.

I'm not sure about your correlation with the Big 3 US Auto manufacturers. I don't think they (timeshares) will fail, however, I do think the developers are going to have to get reasonable in order to stay in business and to continue making money.

The timeshare business model remains strong, in that, as long as there are suckers, there will be timeshare sales. Don't get me wrong, we bought BOTH of ours from the developer, long before we were smart enough to find TUG. But the sucker thing remains. There are lots of people out there with cash to buy, and with prices falling, through the floor... they will buy and continue the tradition. I've been close to buying a couple of resale weeks with cash in the past two months but I'm waiting for a few more accounts payable to push through to make me more comfortable with those purchases. February will be good to me in that respect.

How does everyone else feel? I like this thread.

 

[Kal]

The story only talks about HALF the problems - developer and new sales. The real issue for those who already own is yet to be told. Every property operates on a budget. The budget is based upon MFs. When an owner goes into default due to non-payment of MFs (and/or a purchase loan) the planned revenue for the year falls short. T/S resorts are not hotels and therefore have very limited options to counter the revenue short-fall. Aside from decreased services, raising MFs and Special Assessments is the cure. And that option is a Catch-22 as the more the annual costs increase the more owners walk.

So watch for major changes in the annual cost of ownership. And remember this IS a discretionary expenditure which might be the first to go in difficult economic times.

 

[pgnewarkboy]

The reality is that times are tough. It is also the reality that times will improve. Timeshare owners and prospective buyers are no more or less "suckers" then anyone else. The economy and the timeshare business will come back. Timesharing has been great for me and my family. It STILL allows me to travel at about 1/2 the room cost of renting hotels.

 

[timeos2]

Resal buyers and current owners will bounce back first

The reality is that times are tough. It is also the reality that times will improve. Timeshare owners and prospective buyers are no more or less "suckers" then anyone else. The economy and the timeshare business will come back. Timesharing has been great for me and my family. It STILL allows me to travel at about 1/2 the room cost of renting hotels.

It would seem to me that the recovery will occur first with current owners who feel there is value in what they already own and can use by simply paying the annual fees. For a number of reasons - no more upfront money required, protecting credit rating, avoiding collections/foreclosure, low to no resale value in current economy - they see it as a reasonable cost to maintain a vacation option. Next would be those who are more confident or are sitting on cash. They can take full advantage of the depressed resale market to snatch some prime resorts at very low cost. Hopefully to use not with the idea of future resale at higher prices as there is zero guarantee that prices will ever rise by much in the ultra-competitive timeshare resale world.

Last, and maybe never, is the return of the uninformed buyer willing to commit to years of payments for full freight developer purchase and flush with easy credit to make that most likely poor decision. The tight credit markets will prevent many from a costly error they couldn't figure out for themselves. It is not a good time to be a timeshare developer. Just keeping existing, sold out or nearly sold out resorts healthy will likely be a challenge. Trying to sell retail timeshare sans the easy credit and most worried about where their income is headed is beyond troublesome and may be nearly impossible. That model of high pressure, uninformed sales may effectively and thankfully ended. None too soon either as it was killing any long term viability of timeshare ownership as a value due to over saturation. A slow down to more realistic and sustainable levels can only help. Too bad it took an economic meltdown to force the change

 

[rsnash]

The story only talks about HALF the problems - developer and new sales. The real issue for those who already own is yet to be told. Every property operates on a budget. The budget is based upon MFs. When an owner goes into default due to non-payment of MFs (and/or a purchase loan) the planned revenue for the year falls short. T/S resorts are not hotels and therefore have very limited options to counter the revenue short-fall. Aside from decreased services, raising MFs and Special Assessments is the cure. And that option is a Catch-22 as the more the annual costs increase the more owners walk.

I think this may be a hidden benefit of owning from a major like Marriott. Others, who don't own timeshares, can also book into MVC properties just like a hotel, when there is availability. And, I'm not talking only via II Getaways or other private rentals, but right on Marriott.com. And, hotel customers see these as 2 BR suites, the rates are very high. I'm sure that revenue adds some significant change to the resort budget.

For example, MPB has a 2BR II Getaway available Sept 6-13, 2009 (Labor day week) for $826. The MF for an owner of that week is approximately $1000. However, there is also availability for that week via Marriott.com, for around $299-450 (depending on night & view) per night, or ~$2500 for the week. It is also rentable via other websites, like Travelocity.com (those dates don't show as available yet, but a similar search showed the 2 BR for ~$500/night). So, if Marriott has vacancies, they can rent them out. But a private company TS usually does not, except via private rentals or II Getaway or RCI Extra Vacations (for not as high a rent).

 

[caribbeansun]

Of course the question is just what percentage of those rental $'s actually make their way back into the revenue stream of the particular TS location in question AND are they sufficiently high enough to cover the unpaid MF's?

These options existed previously in the establishment of the MF's - people not paying MF's, people not traveling as much (less $'s from the rental pool) and you still get the same end result - a budget deficit that those that are paying their MF's have to subsidize.

I think this may be a hidden benefit of owning from a major like Marriott. Others, who don't own timeshares, can also book into MVC properties just like a hotel, when there is availability. And, I'm not talking only via II Getaways or other private rentals, but right on Marriott.com. And, hotel customers see these as 2 BR suites, the rates are very high. I'm sure that revenue adds some significant change to the resort budget.

 

[timeos2]

Theres more - and its not good

Of course the question is just what percentage of those rental $'s actually make their way back into the revenue stream of the particular TS location in question AND are they sufficiently high enough to cover the unpaid MF's?

These options existed previously in the establishment of the MF's - people not paying MF's, people not traveling as much (less $'s from the rental pool) and you still get the same end result - a budget deficit that those that are paying their MF's have to subsidize.

And the fees due tend to be MUCH higher for the "name brands" than the independents. Look at the long thread about Marriott fees and it applies to others. You are correct that the amount of the rental that gets back to the resort often doesn't cover the fees due. And if it's II/RCI doing the rental ZERO goes to the resort as those are owner deposited weeks (already paid) or bulk banks that don't generate income.

Add in the near total collapse for rental prices and its a losers game to be depending on rentals for income at a timeshare. Annual fees to owners is always the primary source of income and holding those fees to a reasonable level while properly maintaining and operating it is the real answer to resort stability.

 

[Twinkstarr]

The story only talks about HALF the problems - developer and new sales. The real issue for those who already own is yet to be told. Every property operates on a budget. The budget is based upon MFs. When an owner goes into default due to non-payment of MFs (and/or a purchase loan) the planned revenue for the year falls short. T/S resorts are not hotels and therefore have very limited options to counter the revenue short-fall. Aside from decreased services, raising MFs and Special Assessments is the cure. And that option is a Catch-22 as the more the annual costs increase the more owners walk.

So watch for major changes in the annual cost of ownership. And remember this IS a discretionary expenditure which might be the first to go in difficult economic times.

Not T/S but my sister lives in a condo developement with a HOA. They said this is a concern for them too. Plus dealing with the people who can't abide by the rules. They have 2 villas that people planted additional trees in their yards(which you really only own the property your villa was built on).

 

[Kal]

Agree, single T/S properties will be in serious financial risk as owners bail out from paying MFs. With the major hotel chain properties rental options will help somewhat but by no means is it the solution to shortfall budgets. When an owner walks the unit will almost always revert back to the developer. The developer then has the option do manage that unit as he sees fit. Any rental proceeds would go to the developer and not to the HOA pool of T/S owners.

And you can bet the developer isn't paying MFs for units under his control!!

 

[timeos2]

Big means big overhead. Guess who pays?

Agree, single T/S properties will be in serious financial risk as owners bail out from paying MFs. With the major hotel chain properties rental options will help somewhat but by no means is it the solution to shortfall budgets. When an owner walks the unit will almost always revert back to the developer. The developer then has the option do manage that unit as he sees fit. Any rental proceeds would go to the developer and not to the HOA pool of T/S owners.

And you can bet the developer isn't paying MFs for units under his control!!

I don't see that single, independent resorts are any more or less at risk than the big names. In fact a case can be made for either side that they are more at risk. What really matters is the management and fees. If owners feel they are getting value they will pay and stay. If they think things aren't being done right or fees rise too much - bye bye. Given that in general fees for the brand names tend to be considerably higher than well run independent resorts (acknowledging that exceptions exist for both) the risk would seem to be greater for the name brands. Add in the need for the overhead of the name brands and things take on a bleaker look for them not the independents. Time will tell.

 

[funtime]

The independents may be at less risk. Small resorts such as Winner's Circle in Solana Beach (a VRI resort) has been managing their timeshare for 20 plus years and have a fairly stable core of owners - many of whom may now to be retired. This group is not as likely to walk the contract. Also, to the extent that resorts are well run and stable, that factor may cushion the budget in a downturn. Funtime

 

[Kal]

Since we are breaking new ground in the economy, the only thing we do know is that people are watching every dollar they spend and that their investment dollars have been hit very hard. Expenditures for time share MF are discretionary.

It really doesn't matter how well a resort operated in the past nor that owners are "good stable people". It's a whole new sheet of music. However, if the owner pool is well healed and have very deep pockets the likelihood of walking should be low.

The matter is simply arithmetic. If the cash inflow is less than the budget something has to give. Unfortunately, history tells us the timeshare industry looks quickly at special assessments and MF increases. Every owner has a breaking point where rapidly increasing discretionary costs get eliminated.

All I'm saying here is we really don't know the level of walk-aways but it will increase. Small independent resorts where the entry level capital costs are relatively low have very little degree of freedom. The upper tier resorts and resort chains largely cater to well healed owners so that helps. Those resorts also have more resources available.

 

[AwayWeGo]

Name Brand = Mariott, Hyatt, StarWood, Wyndham, Disney. Any Others ?

And the fees due tend to be MUCH higher for the "name brands" than the independents.

Are the DRI timeshares considered Name Brand ?

Or are DRI timeshares just like all the other independent dogs & cats out there ?

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[timeos2]

Whats in a name? Fees? To fee or not to fee, is that the question?

Are the DRI timeshares considered Name Brand ?

Or are DRI timeshares just like all the other independent dogs & cats out there ?

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

Well, they aren't a hotel brand thus lacking the better known aspects of a name brand. But they are large - 100+ resorts - which many names don't have. And the management fees are in a "name brand" class from what I read. You make the call.