Home Sweet Time Share
Vacation retreats go upscale as hotel chains cash in on their growing popularity
Chasing the big dollars are the destination clubs, which are aimed at individuals who can afford membership prices starting at $100,000 and going much higher.
While still a fledgling industry, destination clubs have recently piqued the interest of heavy hitters like Steve Case, former AOL Time Warner chairman. Case is now chairman of Exclusive Resorts, founded in 2002. Exclusive Resorts and Tanner & Haley Resorts control about 75 percent of the marketplace.
Resale rights. These clubs, modeled after the exclusive country or golf club, offer access to multimillion-dollar properties across the world rather than a deed to a unit like time-share and fractional properties. "Members are buying a right to use," says Rob McGrath, who is credited with creating the concept in 1998 and now runs Tanner & Haley. "They are not buying an interest in a specific asset." Members may be able to resell their interest, depending on club policy. Exclusive Resorts offers a flat 80 percent back of the original membership fee while Tanner & Haley will refund the full fee at the going market price.
The upward march of home prices in many desirable vacation spots has raised the cost of time shares and destination clubs alike. Still, compared with the price of a second home, a time share may seem approachable. "Real-estate prices are astronomical," says Bill Logan, 58, a pilot with Alaska Airlines. "The benefit of a time share was, for less money upfront, I'm able to go to Maui or Barbados. I could go to the south of France." Logan, who frequently vacations in Hawaii, considered purchasing a second home there before turning to the less expensive time-share option. "It bought me more power for travel and vacation than a home did," he says.
But unlike in the red-hot housing market, experts see few speed bumps ahead for growth in the time-share industry. Relatively few Americans own a time share or fractional or have joined a destination club. As of 2003, only 2.7 percent of all U.S. households owned at least one time-share interval--and just 6.7 percent of those earning over $75,000 a year. Industry analysts believe this leaves ample room for growth. "There is a lot of money out there in the marketplace for these properties," says Ragatz. He thinks time shares and their cousins may take business away from second homes among the 17.8 million upper-income, middle-aged American households that are the industry's target market. Time-share ownership in this group could hit 15 percent, experts say. That creates a revenue potential of $42 billion, according to a recent report by Bear Stearns.
Beyond demographics, analysts see a promising trend of "togetherness" among families that like to vacation as a group and find traditional hotel stays awkward. "This is a way for them to orchestrate the fun family reunion," says Weisz. "It's not uncommon for couples or large groups to tour our properties and all decide to buy."
Typical of this new breed is Marla Yessenow, 49, and her husband, Jeffrey, who often take their three teenage children and one or both sets of parents on vacation. "When you try to make hotel reservations over the holidays, you maybe end up with three different rooms," says Marla Yessenow, who owns a fractional with the Ritz-Carlton Club in St. Thomas, Virgin Islands, that the couple bought for $95,000 (and could probably sell for $250,000 today, she says). "This is so nice because you all end up in the same place." As for that second home, Yessenow says she's not in the market yet. "We're too young," she says. "Maybe in four or five years. But for now, this is perfect."
That attitude is what time-share and destination-club operators are counting on for the future. Just perfect.
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