News for the Hospitality Executive
|By Jerry W. Jackson, The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News
Nov. 10, 2003 --The time-share industry is still growing, and corporate pilot Bob Lowry from New Jersey is one reason. Lowry liked the three-bedroom Marriott Grande Vista time share he bought in 1999 in Orlando so much that he recently popped for another three-bedroom unit for about $25,000.
"We like coming down here," said Lowry, who has a wife, three sons, a sister-in-law and her family who often travel with them. "We need a lot of room." The family hits Walt Disney World and other attractions, stocks up at Publix to save on meals, and considers Orlando almost a second home.
Lowry, 58, said he never figured he would be a time-share owner and felt "uncomfortable" sitting through the sales pitch four years ago, but one point sealed the deal for him: Marriott's brand.
"I just trust the company," said Lowry, a frequent guest in Marriott hotels through the years. "That may be foolish on my part, but that's what put me over the edge."
Brand comfort is partly what is powering time-share growth today, defying the recent economic slowdown. About the time Disney World opened in Orlando in the early 1970s, the time-share industry was getting off to a bumpy start, first as a way for condominium developers to unload excess units. A lack of regulation and sales abuses gave the industry a seamy reputation that it's still trying to shrug off.
But today the time-share segment is an increasingly accepted part of the leisure travel industry, grossing more than $5 billion a year in sales, in part because Marriott, Disney, Hilton, Hyatt and other brands are bringing greater credibility to the market.
"This industry is only 30 years old, and it's just coming of age," said Howard Nusbaum, president of the American Resort Development Association, the time-share industry's main trade group.
Florida is the nation's leading time-share state, with 366 resorts and 27,700 units, or 23 percent of the nation's total, and Orlando is the leading market in Florida. The Orlando area accounts for about 50 percent of all of the state's time-share resorts, and a number of major players have their headquarters in or near the city, including Fairfield, Westgate, Hilton, Starwood and Marriott.
"Orlando is the time-share capital, for sure," said Jay Wilson, director of resort sales and service for Interval International, a worldwide time-share exchange networkin Celebration. "Disney is one of the reasons."
Disney Vacation Club, the entertainment giant's time-share operation, now has six time-share resorts with more than 70,000 members and is in the process of building Saratoga Springs, its seventh and largest time share. Saratoga, scheduled to open next spring on 16 acres, will have a total of 552 units in 12 buildings.
When Saratoga is completed in 2005, it will give Disney 2,120 time-share units, or nearly one out of every 12 time shares in the state.
Just last week, Disney announced the appointment of Senior Vice President Jim Lewis to take over the fast-growing time-share operation, allowing him more time to focus solely on that operation. Lewis, 43, had been in charge of public affairs, government relations and other high-profile tasks but now will have a chance to run what is essentially a separate business for the entertainment giant.
Disney opened its first time-share, the Old Key West Resort, in 1991. But Marriott was the first major brand to get into the business, in the mid-1980s, and other hotel operators followed suit. Those brands undoubtedly have helped bring credibility to the industry, said Mike Cochran, chief of compliance for the Florida Division of Land Sales and Condominiums, which regulates the time-share industry.
"The big people have concerns about their reputation, and that helps," Cochran said. "We get far fewer complaints about time shares than we do about condominiums, although there are a lot more condominiums," Cochran said.
At any given time, Cochran said, the state has 100 to 130 complaints against time-share companies under investigation, fewer than10 percent of the total number of complaints the bureau gets each year. In the past five years, the state has levied an average of about $88,000 a year in fines for time-share industry violations. In many cases, Cochran said, it turns out that consumers failed to read or failed to understand the terms of their contract.
Today time-share buyers have 10 days to rescind contracts, deposits must be placed in escrow accounts, and salespeople who sell on commission must be licensed.
While the industry chafes at regulation that states have imposed through the years, the oversight is one reason the industry has blossomed, said Nusbaum, of the industry trade association.
"I think this has been healthy," Nusbaum said. "You have a lot more regulation today for someone buying a $12,000 time share than you do for a $40,000 automobile."
But too many consumers are still attracted solely by vacation deals and other giveaways, and then succumb to high-pressure sales, said Lisa Ann Schreier, who sells time shares in the Orlando area.
"It's a great product marketed and sold in a rather strange way. There's no other consumer product I'm aware of where the consumer is bribed to come in and take a look at it. We've created our own monster," said Schreier, who is writing a book titled How to Survive a Timeshare Presentation -- Confessions from the Sales Table.
Schrier said too many consumers "come into a presentation with no information or misinformation and allow a slick salesperson to take advantage of them, and it's not necessary."
With preparation and research, Schrier said, consumers should be able to make a more informed decision. Too many, she said, can't afford a time share.
"For a family of four, you should be spending about $2,000 a year on vacation," Schrier said.
But time-share companies pressure their staff to meet sales goals, Schrier said, and don't always bring in pre-qualified consumers -- folks who could afford a time share -- and the combination leads to abuse.
"Are we high pressured? Yes," Schrier said. "But we only have 90 minutes to do a presentation," and time-share companies weed out low producers. "They don't want to keep someone with a 5 percent closing rate." The national average on sales per presentation, according to industry estimates, is 10 percent.
Time-share companies finance about 70 percent of sales, with buyers paying an average of 14.6 percent down and interest averaging 14 percent, according to a recent industry survey by PricewaterhouseCoopers. Although the industry has high borrowing costs, in part because banks are leery of lending to time-share operators, time-share developers still net about 50 percent on financing alone, another powerful incentive to close a sale.
The industry's sales tactics, while they have softened through the years, still irritate potential buyers.
Orlando immigration attorney Ed Beshara said he sat through a sales presentation in Daytona Beach a few years ago and was turned off by the pressure. "I was made to look like a fool if I didn't buy right then," Beshara said. "It was a terrible experience."
A Disney time-share representative said Disney uses a softer sales approach and allows people to take material away from a presentation to reflect on a possible purchase.
Other time-share executives say the sales process does rattle people. There is always going to be "anxiety" during a sales presentation, but reputable companies try to strike a balance, said Edward Kinney, senior director of brand and public relations for Marriott Vacation Club, the global time-share giant based in Orlando.
"We've adopted the counselor-sales approach," Kinney said, to "tailor the product to their needs. One of the overarching things is that we want them to leave us with a good impression of us, at least as good as when they came in, in part to protect shareholder value."
The company does no cold-calling and uses a huge database of Marriott customers and clients of affiliated companies to target travelers who have some "affinity" for the company, Kinney said.
While the new national no-call list law is being contested by the telemarketing industry, Marriott expects to do well in any event, Kinney said, because it began preparing for calling restrictions five years ago. "We saw the handwriting on the wall," Kinney said, and the company's smaller, more tightly targeted contact list has actually proved beneficial.
"The quality of the people we have permission to call is higher, giving us a higher receptiveness," Kinney said. Smaller companies with fewer resources will not fare as well with calling restrictions, however, and that could spur more consolidation.
In addition to greater regulation and more industry sophistication, time shares also are benefiting from more flexibility. A growing number of time-share buyers can exchange their week or part of a week for time in another resort, or convert time into "points" that can be used for things such as frequent-flier miles or hotel discounts.
Some companies, such as Disney, deal only in "points" rather than the standard, one-week fixed unit-for-life plan that is the industry standard.
Lowry, whose New Jersey family now owns two units, or two weeks worth of time, at the Marriott Grande Vista in Orlando, said his wife, Joann, and her sister recently used some of their time in Palm Springs, Calif. And they are looking forward to trying a new one in Las Vegas.
But Lowry said he expects to always spend more time in Orlando, in part because of Disney, and his sentiments could be a predictor of continued growth for the time-share industry in the nation's vacation capital.
"I'm 12 going on 13 when I come here," Lowry said.
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(c) 2003. Distributed by Knight Ridder/Tribune Business News. MAR, DIS,