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From the
December 2008 issue of:


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Vacation Ownership Conference: Exploring Greater Challenges & Opportunities
 
by Alan N. Schlaifer
Principal
Law Offices of Alan N. Schlaifer, P.C.
 
For the 10th consecutive year, Interval International held its Vacation Ownership Investment Conference at the Peabody Hotel in Orlando. Throughout all three public floors of the hotel, hundreds of executives from the U.S. and many other nations involved in shared ownership exchanged ideas and cards, as they discussed ways to deal with challenges and opportunities.

Representing every significant aspect of the industry, conference delegates included veteran and prospective developers, plus marketers, lenders, consultants, attorneys, designers, architects and others., This event, one of the perennial annual favorites among industry insiders, included sessions that covered all of vacation ownership’s market segments, from timeshare and fractionals through condotels and private residence clubs.

Every executive, from novice to seasoned expert, can and does benefit from the vigorous interchange, whether in the sessions, networking receptions, or informal meetings in the hotel or elsewhere. High-level interaction is even more vital to success and survival when the economic barometer appears to be wobbling in our industry, as well as nationally and globally.

Perhaps our new President-Elect Obama, in transition and once sworn in, will find bipartisan ways to move our economy, and our industry and other aspects of travel and leisure, forward. That is a topic too vast to explore now, but too important to be left unexamined. No doubt, ARDA’s Fall Conference in DC will probe the business and political implications.

But at VOIC, sessions covered major aspects and segments of shared ownership with leading industry experts as speakers from Interval, as well as top executives from developers, marketers, consultants, architects, and other highly acclaimed industry thought – and action – leaders. Key topics included Successful Financing, Legal Structures and the Regulatory Environment, Fractional Finance, Designing for Tomorrow’s Buyer, and Workout Strategies: Viability of Shared Ownership as an Alternate Use. Delegates also had the opportunity to learn about Thriving Latin American and Caribbean Markets, in Canada, and Emerging Mixed-Use Resort Trends. Those who stayed until the final day had the opportunity for site visits at any of three area resorts.

Delegates owe a great debt to Interval for its leadership in organizing this important event, and to its fellow major sponsors. This group includes Patron Sponsors Interval, Preferred Residences, HVS Shared Ownership Services and Meridian Financial Services, and Corporate Sponsors such as Bank of America, Capital Source and Textron Financial.

A large and active group of domestic and foreign journalists representing print, online and broadcast media, including Resort Trades, actively covered the many facets of this important program.

Global View, Industry Trends
After a golf networking event at Orlando’s Shingle Creek Golf Club and a welcome reception attended by hundreds of delegates, the first full day began with “Fundamentals of Shared Ownership” to give prospective new industry entrants proper grounding before starting to develop a project.

The opening session featured Jean-Claude Baumgarten, President, World Travel and Tourism Council, London. He provided a global perspective, apt in view of the increasingly international nature of shared ownership.

Given global economic challenges, it is not surprising that the WTTC foresees a dramatic drop in travel and tourism from 3-4 percent in recent years down to less than 1% next year. With increased emphasis on sustainable tourism, human resources and other major issues, the WTTC is seeking to add to the overall travel industry’s image and growth, while seeking to the challenges of what we may call “the 3 E’s:” the economy, energy and environmental issues that have dramatic impacts on travel.

The WTTC is the forum for business leaders in the Travel & Tourism industry. With chairmen, CEOs and presidents of 100 of the world’s leading Travel & Tourism companies as its Members, WTTC has a unique mandate and overview on all matters related to Travel & Tourism. WTTC says it works to raise awareness of Travel & Tourism as one of the world’s largest industries, employing approximately 238 million people and generating over 10.4% of world GDP.

The Big Picture
No, it’s not a 52-inch LCD, but it is still more attractive than the gloomy outlook you could have from reading too many stories in the daily (de)press. Several speakers, including Howard Nusbaum, President and CEO of ARDA (the American Resort Development Association), presented their interpretation of “the story behind the headlines.”

Nusbaum, one of the industry’s most vocal proponents and cheerleaders, emphasized that these products give consumers better vacations.

“People who buy timeshare value their vacations. They’re just trading the dollars they would have spent for more value, benefits, and rejuvenation.” And what, after all, could be more needed, in stressful times?

He thinks, “the value proposition will hold true even in these economic times.” He expressed his relief that, even so close to the election, Congress had passed the $700 billion relief package. “If you can’t go to the marketplace and find liquidity, you can’t stay in business.”

Another element of optimism is his strong belief that vacation ownership “will continue to outperform other segments of real estate and hospitality if credit markets loosen up.”

He added, “I have great confidence in the entrepreneurial spirit of timeshare” and other segments of shared ownership. “We are not passive marketers. Our ability to sell is still there, as is the desire of people to buy.”

To support his comments, he cited the favorable demographics, “millions and millions of people who want better vacations for price of a modest auto. Some people are letting their Visa and MasterCard bills go, but not their timeshares.”

Finally, “the industry only has 6% market penetration. All we need to do is unfreeze the capital markets.”

Adding It Up: Fractionals & Private Residence Clubs
That was the next session featuring an in-depth discussion of shared ownership among veterans including John Burlingame, EVP, Hyatt Vacation Ownership; Brian Ten Broek, Interval; Rob Goodyear, VP, Destination Club Management; and John Sweeney, President, Global Resorts. John Melicharek, Partner, Baker Hostetler moderated. (Please note: many excellent comments of John Sweeney’s were included in last month’s issue, “Affordable Luxury Travel in Tough Times.”)

Melicharek noted that these segments benefit in the current economy because consumers can still purchase the use they need in vacation home on a much more affordable basis. In a sense, the downturn creates a much larger pool of buyers for whom these products are affordable.

Burlingame distinguished between timeshares and fractionals, which are often deeded, and PRCs and destination clubs, which are not.

Panelists commented on the considerable differences between fractionals and PRCs in sales price per square foot, number of weeks usage per year, total sales price per unit and annual maintenance fees.

Burlingame said “there’s very little liquidity or financing today.You can’t do deals today without payment guarantees and equity.” He didn’t think deals would be done unless there’s more liquidity,” a point on which many attendees agreed.

Ten Broek predicted “we will tend to see smaller fractionals, with fewer weeks, to make them more affordable.”

Yet, according to Goodyear, “Good, well-though out projects are still selling. But that’s not where they are based just on promises” of what is going to be done in the future.

A promising note from John Burlingame is that “there will be some projects that go forward, others that won’t.” He is looking for ”opportunities with a hotel component because Hyatt is an integrated hospitality brand.” But he was also willing to concede there is a “lack of urgency for up-market buyers to buy anything today.”

The brand is still very important, says Ten Broek: “Three-quarters in a survey indicated a brand would have positive impact on purchase. But plenty of independents are thriving.”

A positive sign for the industry is that Ed Watkins, in a recent Lodging Hospitality, recommended that any new hotel should consider a timeshare component.

Symbolic Serenity, in Only One Area
With all of this buzz in many areas, serenity and business-as-usual played a role in one small area of the venue. Each morning and evening, a ceremony marked with great pomp and music the march of the signature Peabody Hotel ducks into, and later out of, the calm waters of fountain in the lounge on the main floor.

With these ducks clearly in a row every time, the VOIC aptly gave attendees insights and inspiration into how to do likewise in their companies. In contrast to the tranquility for the waterfowl, economic turbulence and uncertainty face the resort industry, national and global economies amid layoffs, an apparent recession, lower consumer spending and more disruptions in the news.

The three most important factors in real estate, we were long told, were “Location, location and location.” But it sometimes seemed, beneath the surface optimism at VOIC, that three of the major challenges facing the industry have been uncertainty, limited financing, and gloomy news.

Industry leaders are now facing heightened challenges. Instead of double-digit sales gains that occurred annually in years past, many companies are facing the reality of double-digit sales declines.

VOIC injected positive realism in that troublesome brew. Keynote Peter Yesowich, Ph.D., Chairman and CEO of Ypartnership, a leading vacation ownership and travel consultancy in Orlando, Florida, provided an important spark. In his annual review of key data from his firm’s yearly National Leisure Travel MONITOR™, he reviewed some of the opportunities that abound in the United States with an overstressed populace that needs vacations now more than ever. We discuss of the highlights of his remarks below.

As always, his insight and wit merited a Five Star rating which, in Michelin guidebook parlance, means “worth a special trip.” That is truly the measure of Dr. Yesowich “prescription” for the industry and his expertise, even more essential to survival in a challenging economy than a less turbulent one.

As a service to the industry, Interval takes key data from the MONITOR for its annual market profile, Future Timeshare Buyers. The buyer report helps developers, marketers and others successfully assess travel and lifestyle trends involving Americans who may be interested in vacation ownership purchases, and distinguishing the best prospects from the least promising.

New Challenges, New Approaches
As we learned during the V.O.I.C. conference, what was successful in the past will not necessarily work now or in the future. In the challenging current economic climate, everyone in virtually every aspect of shared ownership is looking for new and better ways to improve their business.

Careful ongoing analysis, not merely assumptions, and willingness to test new approaches, innovate, and listen more carefully to consumers and staff, may provide a more powerful formula for combating current challenges. As all VOIC speakers made clear, complacency is not part of the formula.

Perhaps the single most important session was the Peter Yesawich keynote. With his usual insight and wit, he reviewed what’s happening in world of leisure travel, of which the vacation ownership industry is a subset. His comments were based on results of his firm’s annual National Travel Monitor, now in its 17th year.

Early each year, they contact 2,150 individual active travelers, nationally representative in the U.S., to learn their views, experiences, plans and more. This data is used in conjunction with other information to assess key issues and trends.

One of the major forces that is affecting timeshare and travel is technology. He noted that 11 years ago, 11% of US households had access to Internet at home in 1996, and now it’s about 70%.”

Although soon after 9/11, he believes there was a “travel market meltdown, American travelers got the message from 2002 thru 2004, with 50 million unique visitors to the top ten websites. They started looking for good deals in a buyers’ network.”

Once again, thanks to the virtual transparency offered through the Web, “We will see this replicated exponentially in next year because it’s a buyers’ market. Consumers are comfortable using this technology to be sure they don’t overpay.”

Dr. Yesowich cited the most important travel website features now are:
1. Ability find the best price – 88%
2. Easy to book – 81%
3. Photos and information – 68%

He says “we’ve arrived at the point in time where prices are being ‘outed’ - price transparency – as prices become more transparent, brand clarity becomes more important,=;” that this will apply to timeshare and other segments of vacation ownership.

Buyers also want to consult independent sources for travel information, a growing trend. Of those surveyed in his firm’s Monitor, “20% are regularly reading blogs and other often anonymous reviews. About one-third of NextGen (Next Generation) travelers have written a travel review online.”

Your firm “needs conversational marketing, a new marketing science. It’s the buzz online.” His firm’s approach is called “chatline.”

Connect, Reconnect, Celebrate
He labeled “breaking news” what he observes: “Consumers want to reconnect with what they feel is really important in their lives. Of those surveyed, 73% now spend more time thinking about what works in their lives and what doesn’t.”

Despite travel and timeshare industry growth overall in recent years, the only form of travel that has grown in the last three years is travel with children. He says, “A new opportunity for the timeshare business is multi-generational travel. This will grow significantly in coming years because every nine seconds, someone turns 50.”

Celebration vacations are also increasing. “Vacations are no longer just about R&R (rest and relaxation). Over 70% of leisure travelers have taken time to celebrate a special occasion.” They planned and budgeted ahead, with longer trips for milestones, such anniversaries and birthdays divisible by five.

One example is that Disney will admit you to its theme parks for free if you present an ID that shows it’s your birthday that day. Their promotional question is “What will you celebrate?”

An emerging travel preference is that two-thirds of those surveyed would like to visit a new place. He reviewed the top selections in the U.S. and abroad.

Cruising also remains a popular preference.

Yesawich sees “oversupply” now, but believes that the demand for travel services, more likely on a “pay-as-you-go” basis, to an increasing extent compared to just charging it, will “remain robust.”

“Americans are trading down, not out, and negotiating more aggressively, thanks to most potent weapon, the Internet,” he says. “Value is king. Even affluent travelers feel a significant amount of uncertainty.”

So you “have to be creative in bringing your product to the marketplace.” Fortunately, as ARDA’s Howard Nusbaum reminded us, that has always been a great strength of the shared ownership industry.

SIDEBAR


Lead-ership Through Lead Domination

Jamie Klein, President, The Lore Institute, San Clemente, California, described for VOIC attendees techniques that can generate much higher results and ROI – return on investment – for many vacation ownership and other businesses. The Lead Management system Klein discussed will be presented in more depth in his forthcoming book Lead Domination, being released in February 2009.

In researching lead management for his presentation and book, Jamie says he was struck by three telling statistics:
  • In a recent survey, 65% of all companies that responded indicated they would be increasing their investment in lead generation over the next 12 months
  • Of those companies increasing their investment in lead generation, 85% said that leads were the single biggest investment in their sales and marketing budgets.
  • Yet, amazingly, only 20% of the leads given to sales are effectively worked by the salesperson.


These three statistics taken together demonstrate an overwhelming need for better processes and management around lead generation and sales process. After looking at all of the information available, Jamie found many resources for how to generate leads, but few on determining if the leads being generated are quality leads and fewer still on how to effectively convert leads into sales. Given these circumstances, Klein decided to write Lead Domination. He developed his system during his 30 years of experience with the top brands in the Shared Ownership business including Marriott, Four Seasons and Starwood.

As the head of the fractional sales divisions for both Four Seasons and St. Regis, Jamie says he “perfected this system, and our success was based upon our ability to measure and track the performance of leads throughout all key elements of the sales and marketing cycle.” In addition to the upscale nature of the companies for which he worked, the end results achieved from using his lead management systems have yielded more than $1 billion in shared and whole ownership product sales. These are very impressive results based upon his past performance.

At its core, his Lead Management system includes 21 traits, each to be rated with a number from one to ten: 12 marketing and 9 sales. “Each of these traits has become a proven strategy.” Klein says has refined them over the years with his sales and marketing teams.

From a marketing standpoint, he says “the system will enable marketing teams to distinguish more cost-effectively among prospects, inquiries and leads generated by marketing program. Teams can then more effectively measure the performance of each program from a cost per lead and revenue generated per lead perspective than is the case with other systems.”

For the sales component, he points to the system as “an interactive tool that will enable sales to more effectively manage their lead database, provide management the information it needs to ensure that the leads given are being worked, and to forecast their future business from leads in progress.”

Klein also notes the versatility of the system; “These 21 traits are applicable to any business that generates leads and converts them to sales, including resort or other real estate and financial services.”

His company has created a Marketing Lead Domination Rating (MLDR) and a Sales Lead Domination Rating (SLDR) tool that will be accessible online. This review will help companies identify their current areas of opportunity with their lead management process and dedicate resources to improve it.

In today’s business climate, where uncertainty is driving so many businesses to re-examine their overhead and expenses, companies can ill-afford not to review their lead management process and ensure they are maximizing their return on this important investment. Klein says, “I can assure you if you are not taking care of your leads, your competitor will be.”

While this system may not be what you need on your next trip to the tables in Las Vegas, it may be just what you need for your business. To paraphrase Arnold Schwarzenegger, you could become the “Lead Dominator.”



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