Time share
Definition : Time
share is a marketing concept in which hotels are marketed on a membership
basis. Members can avail accommodation in the time share property by paying the
upfront advance for the stay of a fixed number of days every year for a
specific number of years.
Salient Points:
v
Time share is a marketing concept
v
It is on a membership basis
v
Specific Period
v
Advance payment
Major International brands for
timeshare:
- Disney
- Hyatt
- Starwood
- Marriots
- Four Seasons
- Hilton
- Ritz
Domestic Brands :
- Club Mahindra
- Kamat Group
- Sterling resort
- Toshali Resort
- Cambay group
BRIEF HISTORY OF TIMESHARE
Timeshare is any arrangement
whether by membership or agreement
whereby a purchaser receives a right to use accommodation for a specific period
of time every year and which extends for a period of more than three years.
It started as a simple idea based
on the assumption that people do not need vacation lodging accept for a week or
two per year. Take a room, cabin or villa and divide ownership into 52 weeks
(in practical, it is divided into 51 weeks with 1 week for maintenance). It
allows you to purchase 1/51 of the ownership of the house. The next logical
step in the development of timeshare was to be able to exchange time in these
places between different people who wanted vacation in theses area each year.
So, too entitle a customer deals with are time company itself and an exchange
company.
Leisure travel has always
symbolized luxury, freedom, pleasure and satisfaction. In fact the word luxury
is derived from the Latin word luxu, signifying sensuality, abundance and
splendor. The Greeks even believed that leisure was the prerequisite for
civilized living. Following the independence, our grandfathers worked for a
life of freedom and relaxation. It was after all, the promise of democracy. Yet
for most of them, the good life remained a dream. Years later, technology would
leverage their hard work for our benefit and the generation to come.
Timeshare, as a form of,
vacationing, began in the early 1960’s in Europe ,
when various families share in the ownership of vacation homes. Instead one
family owning a vacation home and using it for years, it made more sense to
share the time with others. This way each family owned, what they used and
shared the upkeep cost proportionally. When this hared vacation home concept
came to America
in the early 70’s, it took the form of furnished condominium and mega resorts.
Like any new concept timeshare had their teething problem. Once renowned for
high pressure sales, long term promises and short earn delivery, the industry
had undergone regulations both inside and out, greatly improving public
acceptance and security. Resort developers discover that greater consumer
satisfaction leads to greater profits. Recognizable
names like Disney, Marriots, Hilton, Hyatt, Four Seasons, Ritz Carlton,
Starwood etc now offer timeshare and they have helped to improve its image.
Leading timeshare company in India include Club Mahindra, Sterling resorts and
holiday pvt ltd, Toshali resort , Kamat Group ,etc. Today, more and more
people are discussing the benefits of timeshare. Till date 45 million household
worldwide own a time share and over 5000 resorts, in over 30 countries. In
fact, time share is the fastest growing segment in hospitality industry.
Advantages of Time Share
v
Time share membership provides the member
immunity from rising costs and inflation. Accommodation is available even after
10 years at the amount paid today as per the current value of money. More over
it has a one time cost for the customer.
v
Time share has an emotional connect as it is a
commitment of the member to his family of spending quality time with them every
year
v
Time share stay is safer for a member compared
to conventional hotels as only the members are given a right to admission. All
the guests staying in timeshare are properties are known to the management and
they primarily constitute family clientele.
v
Depending upon the company policy members can
gift, sell, and transfer their membership to others. Time share may also be
considered as an investment in such cases.
v
Facility of exchange provides large range of
options for time share members.
v
Overall cost of time share holiday comes out to
be less expensive in the long run of time.
v
From the time share company’s perspective there
is a guarantee of business and sgenerally it is not affected by recession.
v
Advance payment received by the company helps
them to repay their loans. This reduces the interest cost burden on the
property and substantially lowers the fixed cost of the property.
v
Time share industry is an employment generator
for the locals and it helps in promoting domestic tourism.
Disadvantages of Time Share
v
Large amount taken as an upfront payment is a
major deterrent for potential customers.
v
Fly –by- night operators have created a negative
publicity for the time share industry and create an anxiety in the mind of the
buyer.
v
Sometimes timeshare companies do not provide quality
service which creates negative word of mouth publicity for the industry.
v
Time share industry has a very high marketing
cost which reduces the profit margin of the promoter.
v
Maintenance cost is high for time share
properties.
v
Time share membership is considered expensive by
a buyer when he starts calculating the interest component and other associated
costs on his investment.
Government’s Role in Time Share
Although, government should not
be in the business of running a business but it’s their job to facilitate an
environment which is conducive for business. This creates an atmosphere in
which confidence of the investor is high and they can focus only on running
their business instead of focusing on other issues.
Some of the areas where
government plays a pivotal role in time share industry are listed as below:
(1)
Security:
Safety and security is an important concern for any industry and specifically
so for tourism industry. No tourist wants to visit a destination where he
perceives a threat for his life or belongings. It is government’s duty to
ascertain that law enforcement agencies such as Police and Para-military work
properly to maintain security at the destination. At some places government has
also started a concept of tourist police who are specifically responsible for
policing in tourist areas.
(2)
Infrastructure:
Time share industry is dependent upon infrastructure provided by government to
run its operation and to facilitate the convenience of its customers. The
infrastructure to be provided by government includes proper roads, continuous
supply of electricity, clean drinking water, sewage pipe lines, garbage
disposal facility, street lighting, etc.
(3)
Loans and
Subsidies: Time share industry is capital-sensitive. It requires huge
initial investment to start a time-share business. Government can play an
important role in this regard by providing financial assistance on a loan basis
through nationalized banks and through other financial institutions. Government
also provides subsidy on interest of these loans and other things like import
duty, excise duty, etc. to promote industry which is in a nascent stage.
(4)
Regulatory Body:
Time share industry has received a setback due to unscrupulous activities of
the fly-by-night operators which resulted in loss of credibility for the
industry. Government in this case helps the industry by playing the role of a
regulatory body which curbs the dishonest players and controls the financial
transactions between the properties and their members.
(5)
Taxation:
Government’s role also includes collecting taxes and dues from the time share
operators and the money collected from the taxation is then used for
infrastructure and developmental activities in the region.
AIRDA: The industry must protect the right of both consumers
and the industry in order to have a long term profitable business, to protect
the rights of travelers/ consumers and the timeshare properties an association
by the name “All India Resort Development Association (AIRDA)” was formed. Most of the important timeshare properties
are today the member of AIRDA. And the
slogan given by them is “Ensuring fair practices. Assuring Safe Holidays.”
FIXED AND FLEXI WEEKS
With timeshare,
you own a portion of time within years. There are two common methods for ownership
of time:-
·
Fixed weeks
·
Flexi weeks
In fixed weeks, you buy a
timeshare for specific week/weeks during a year. This is the most straight
forward method, since you can deposit the timeshare directly or the one, you
find yourself.
Under flexi weeks, you purchase
the right to a certain block during the week. But others also have right
of those weeks and you might have to
negotiate for the availability.
MULTI-LOCATION
Some timeshare programs have
further expanded their offering with multiple locations, within the same
timeshare organization. The obvious advantage of such an arrangement is the
additional flexibility to visit others timeshare in other location, which
belong within the group. Some assign you a ‘home resort’ with the right to
‘internal exchange’ for other resorts, while others are totally open, depending
on your reservation request.
Maintenance and Fees
Maintenance Fee
The maintenance fee is an annual
charge that goes toward the upkeep of your timeshare. Your maintenance fee usually
covers property taxes, insurance, utilities, cable, telephone and all property
upkeep, such as furniture, carpet ant the resort’s common facilities. The
resort’s Homeowners Association usually decides upon the fee.
Transfer Fee
A transfer fee is what resorts
charge to transfer the ownership from one party to another. The fee applies
directly to resale timeshares. Transfer fee are determined by the resort and
vary.
Recording Fee
As in all deeded properties, the
recording fees are the nominal costs associated with the country from which the
deed is being drawn. It is the country to which the timeshare resort is
located.
Assessments
If a resort’s maintenance fee
does not have a built in reserve fund for replacement and or major repairs, the
timeshare homeowners association may reserve the right to charge a special
assessment in the event improvements or repairs are required
Split in time share :
Time share is an ownership of a
fixed number of days every year. As an example it may be 2 weeks per year for next 10 years. Some
companies may allow its members to split this time to twice a year or thrice a year vacations.
It is known as split and its done with prior intimation to the time share
company. Some companies may also allow to club the time share of two years
again with prior intimation.
Condominiums
They are apartotels or apartment
hotels. These units are developed on joint ownership
basis. Each ownership purchases and has full right
of and unit he has purchased and shares the cost common to the complex such as
taxes, insurance, maintenance and upkeep of public areas including swimming
pool, health club, parking, security, air conditioning, heating, cable, broad
band, etc. Each owner can occupy or sell
his unit independently but is required to follow the rules and regulations laid
by the management. The owner enjoys the
benefits of property, appreciation but need not bother about its maintenance,
security, upkeep, insurance etc. He is
required to pay yearly maintenance charges.
In some cases a corpus can be made and the maintenance expenses are paid
from the interest earned from the corpus.
In some cases the management can help the owner in renting out the
property. They take the full
responsibility of the owners’ units’ safety and also pay to the owner a major
portion of the rent earned from renting out.
Usually, the management requests the owners to rent out in case of major
conferences. The management earns a
major portion by renting out conference hall and from catering.
EXCHANGE COMPANIES
You can purchase a timeshare
either to use yourself as a vacation or to exchange other timeshare for other
location. If you choose to go with the independent exchange company, you need
to prove the timeshare availability for that week and that all the utilities
and maintenance are paid for. Making a time share available with the exchange
company for a week, you should expect to be able to choose the timeshare of
similar value and for same amount of time.
Some exchange companies allow you
to browse their space-bank (a term for the time shares that are available at
one exchange company), before having to place deposit your own timeshare, while
others require you to deposit a timeshare before accessing their space-bank.
You will specify the geographic location, the time of the year, length of stay,
minimum size unit and any amenities you would like. If you don’t immediately
find, what you want, it is only because the exchange company may not be having
at that moment. Everything in the time share depends on availability and that
fluctuates daily.
RCI is the largest and the first exchange company for timeshares.
Resort
condominium International
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RCI is a
division of the firm Wyndham Worldwide (spin-off
from Cendant).Founded in 1974 by Jon
and Christel DeHaan, it has grown to become one of the larger brokers
of timeshare trades and has
evolved from that into travel clubs. RCI's CEO and president is Geoffrey
A. Ballotti. RCI's corporate headquarters is
in Parsippany, New Jersey. Currently,
RCI's biggest competitor in the timeshare market are Dial An Exchange
(DAELive) and Interval International.
RCI has over
6,300 affiliated resorts in over 100 countries around the world. Its
membership base is approximately 3.8 million members worldwide. RCI operates
two main exchange programs - RCI Weeks and RCI Points It is the registered international organization which
facilitates exchange of timeshare between members. RCI has an access to
400,000 rooms in more than 100 countries.
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Although
RCI is affiliated with over 6300 resorts worldwide, their role in the
timesharing industry is to provide exchange services to vacation owners at
affiliated properties. RCI does not buy
or sell timeshare weeks.
RCI
prioritizes exchange requests according to established Trading Power
guidelines. The Trading Power of customer’s deposited holiday is based on the
supply, demand, and usage of the week, resort and area they deposit. Other
factors that influence deposit's Trading Power include season, unit
configuration, the resort's Vacation Experience Profile (VEP), and how early
you deposit the vacation time with RCI. Depositing your week in deposit
System early, and submitting an exchange request well in advance, maximizes
opportunity to confirm a desired exchange
Interval International
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Industry
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Founded
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1976
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Headquarters
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Key
people
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Number
of employees
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5,000
(2012)
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Interval
Leisure Group
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"The
Quality Vacation Exchange Network"
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Website
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Interval Leisure Group,
Inc., or ILG, is a
global publicly traded company. ILG is the parent company of Interval International, a
leading global provider of membership and leisure services to the vacation
industry. As of December 31, 2012, nearly 2,800 resorts located in over 75
countries participated in Interval's primary exchange network. As of that date,
the Membership and Exchange segment had approximately two million members
enrolled in its various membership programs including approximately 1.8 million
in the Interval Network. The biggest competitors for Interval are RCI, Dial An Exchange (DAE) and
Platinum Interchange. Interval is the second largest timeshare exchange company
after RCI
Marketing of Time share
Effective marketing is one of the most important aspects of
the success or failure of time share business. Problems faced in the marketing
of time share may be listed as below:
v
Negative
image of the industry: Some dishonest people in the industry who vanished
after collecting money from members have created a negative image of the
industry. This makes it difficult for the marketers to convince a customer to
buy membership unless the timeshare company is backed by a very reliable
brand.
v
Large
upfront payment: As advance taken as a membership fees is relatively large
it substantially reduces the total market size of the potential buyers.
v
Intangibility:
Hospitality experience is largely intangible as comfort, friendliness; courtesy
etc. can not be measured but only experienced. Marketer finds it difficult to
convince the potential buyer as they can not carry their product along with
them but can only create a mental image or show pictures, video etc.
v
Cost:
Cost of marketing is relatively very high because company has to reach
different cities in the country through their own executives and time share
product can not be sold through travel agents unlike in the case of
conventional hotels.
v
Lack of
holidaying culture: In India
holiday culture particularly the concept of leisure vacations is still in an
infancy stage. This makes it difficult for marketer to convince the customer as
there is no pressing compulsion on the buyer to purchase a holiday product.
v
Uncertainty
of future : As timeshare business is about selling a product for future use
and the future itself is considered to be uncertain by most of us it creates a
conflict in the mind of the buyer whether to buy this product or not.
