The timeshare industry has finally entered a new era. Major hotel company brand affiliations and the influence of the capital markets have pushed vacation ownership from a prolonged infancy into adolescence. 

Since 1993, $1.3 billion has been raised through the capital markets for the segment. More than $700 million of that figure came in the last 12 months. Timeshare companies such as Signature Resorts, Fairfield Communities, Vistana, Silverleaf, Trendwest and Bluegreen have experienced dramatic growth in stock offerings-regardless of when these companies actually began to be publicly traded. 

Wall Street has embraced timeshare companies lately. Signature raised more than $500 million in its initial public offering in 1996. Fairfield, which has been traded publicly for some time, has raised $125 million, and Silverleaf's IPO in 1997 netted it $61 million. The acceleration really took off between 1995 and 1997, when the industry went to $3 billion market capitalization from $200 million market capitalization. 
 

Posting these figures has attracted the attention of hotel companies and developers to timeshare's promising concept-which is best understood as ownership of a resort property by several different owners. Each has a certain period of time at the property that may be exchanged for periods held by other owners. 

Exchange programs exist that allow timeshare owners to trade accommodations they own for comparable accommodations with affiliated resorts. Two companies-Indianapolis-based RCI and Miami-based Interval International- control the majority of the exchange process for the industry. The process begins when members deposit their owned week into the exchange company's pool. Industry studies indicate that consumer acceptance has never been higher for timeshares. The demand far outpaces supply, and that trend will continue into the foreseeable future, according to industry observers. The market conditions have prompted one analyst to suggest that investors and developers have an unbelievable buying opportunity now. 

Amid the euphoria, however, timeshare executives advise hoteliers not to be fooled. According to Rip Gellein, chairman of Orlando-based Vistana, there is widespread misunderstanding about traditional hotel products mixing with timeshare products. 

"Is it a wonderful addition, or an illegitimate child trying to horn in on the business?" Gellein said. 

The market is largely untapped, according to Gellein. By his estimate, only 4 percent of the potential market of those who can afford to purchase a timeshare have done so. In North America, the timeshare concept has just recently shed an unsavory image-an image created in large part by overzealous, high pressure sales tactics of a bygone era. Now, with a new found respectability and favorable market conditions, there are many who think the industry is poised to mature. Traditional lodging operators are among those ready to take advantage of these variables. 

"Hotel companies have seen the great potential for unlocking the value in the existing resort properties and their brands by adding a timeshare," Gellein said. "But you have to understand what it takes to be successful in the [timeshare] business." 
 

Craig Nash, president and c.e.o. of Interval International, said developers and franchisors have to understand what the timeshare product mix can-and can't -do for them. 

"Franchisors' motives may simply be to add another distribution point for the brand," Nash said. "It's another vehicle to sell roomnights through the reservation system, as well as obtain a royalty income." 

For a developer, Nash said, timesharing is probably nothing more than an equity product. 

No matter what a developer's or a franchisor's purpose is, they often make the mistake of looking at timesharing the same way they do typical lodging. That can be a big mistake, according John Cully, national vice president, resort sales for RCI. 

The basic difference is that hoteliers deal with guests, and timeshare operators deal with owners, Cully said. 

That dynamic is critical for a new timeshare operator to understand and appreciate. It dictates how the property is maintained, as well as the types of amenities and level of service that is expected. Traditional hoteliers who are new to timeshares are often in for a rude awakening if they are not prepared for this mindset, Cully said. Developers are willing to find sites and build the facilities just as they are with hotels, but it is the operation side of the business that is the challenge. 
 
 

Because of this, RCI has devised RCI University, a program that provides an overview of the industry. According to Ann Barker, director of industry curriculum for RCI, it is an A-to-Z look at what is needed to be successful. Barker said there are five components of the curriculum that cover everything from feasibility studies, development protocols, sales processes and marketing to property management. 

Property management is where the real differences emerge. It is critical that operators sustain satisfaction of the owners, or they are not going to continue to pay for the products they have purchased. 

"We spend a great deal of time talking about the importance of property management," Barker said. 

Barker said one branded hotelier, operating a timeshare in Las Vegas, wanted to use the same housekeeping staff that was used at the hotel property. It turned out to be a labor-union issue because housekeepers were not allowed to do anything in a kitchen. Since timeshare units typically have full kitchens, the operator eventually had to hire another group of unionized housekeepers separate from the hotel housekeeping crew. 

It's these type of nuances that are often overlooked by developers and operators from the hotel industry, Gellein said. 

"The typical cultures in the hospitality company and the timeshare business don't match very well," Gellein said. 

That's why Gellein advocates management teams that understand the business. Cully said the marketing is different as well. 

"We have hotel reservation and operation people come to our facility for tours and they don't understand what all the fuss is about until they experience some time in our call center," he said. 

Marketing or booking a night for a hotel is a transaction that takes about four minutes and there is typically only one call placed, Cully said. 
 
 

That's different than the typical timeshare reservation experience. "Our call center reservationists, or vacation counselors as they are referred to at RCI, are booking an entire vacation experience," Cully said. 

Guests will want to know about scuba diving, local shopping and a whole gamut of things that come into putting a vacation together that are not included in that basic hotel transaction, Cully said. These types of calls generally last about eight minutes and there can be several calls before a unit is booked. "From an operational standpoint, we are talking about something that is a lot more complicated," Cully said. 

Complexities aside, there is also more money in it for the developer. The developer is not just getting a one-time rental, but an owner who will pay subsequent maintenance fees. 

According to Cully, the developer stands to make more on his investment in a timeshare than a hotel project, all of which is based on the premise that hotel guests are transitory and timeshare guests are owners who repeat their stays. The developer also reaps the benefit of higher occupancies at timeshares, which operate at between 80 percent and 85 percent occupancy. With higher occupancies, amenities such as golf courses and food-and-beverage operations can be better used, Cully said. 

Timeshare guests have already paid for accommodations and are not strapped with 
he nightly hotel charges. According to Cully, the company's research shows that timeshare owners typically dine out more, attend more local attractions and partake in amenities such as golf more frequently. 

Timesharing is not a panacea-it does have costs that a hotel doesn't have to deal with. The maintenance of kitchens, for example, can become costly with local service providers to maintain the appliances. 

"There is generally a bigger float in terms of equipment appliances and things like that," Cully said. 

The whole check-in and check-out process is different as well. Hotels have 24- hour check-in and check-out. Turning beds every day has it own set of problems. Timeshares, however, typically have a check-in process once a week.  Instead of several rooms, there could be a need to ready 90 percent of the property in a 24-hour period. 

There are striking similarities between timeshare resort management and traditional hotel management. 

Though the influx of capital in the timeshare industry may tempt a developer's instincts, be aware there are some striking differences as well.