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|Market, Sell & Service Passionately:Timeshare Survival Strategies & Tactics from the Economic Trenches (Part 2)|
by Alan N. Schlaifer
Law Offices of Alan N. Schlaifer, P.C.
|In the current economy, the survivors and winners will share traits including “five Ps:” passion, purpose, perceptiveness, persistence, and professionalism. The first of those features prominently in Virginia Tourism’s current campaign: Live Passionately, with the long-successful subtitle, “Virginia is for Lovers.” |
The passion they are seeking to inspire in consumers, together with that in the comments and actions of resort industry leaders, created the spark for this two-part series.
Last month, we began coverage of this key topic. We discussed remarks from three leading voices at ARDA’s recent Convention in Orlando:
- Sherry Levitin, President, Levitin Group, a top sales training and consulting firm, Park City, Utah
- Steve Phelps, Bluegreen Director of Sales, Orlando
- Maria Margenot, SVP Training & Recruiting of Wyndham Vacation Ownership, Orlando
We also presented guidance from consultant Michael Denisoff. His “Four Big Opportunities & Four Big Musts” may help you and your company get – and stay – on track in sales, marketing, service and other vital elements of your business.
Taken together, the wise words of all four of them may help ignite the passion that helps you and your business survive in any economy.
To further fuel those flames and help you stay on course, we are offering more guidance from other inspirational leaders with many decades of weathering all types of economic conditions.
Recession Realities of Resort Property Sales in 2009: Long-Term Perspective, Short-Term Solutions
The first to whom we had the good fortune of speaking is Ken Miller RRP, the CEO of Global Marketing, New York City (212-247-6060). With several decades of experience, Ken is one of the resort industry’s most knowledgeable, respected and achievement-oriented veterans. He has been involved in marketing, developing and selling resort property and other realty with total sales of over $3 billion.
Miller says that going through booms and busts “engrained in me the belief that while it is always a bit painful, especially in the troughs, there is also opportunity for a select group of wise professionals.”
He continues, “It may not make you feel good that this has happened before, and you may be among the victims. Yet, you can be buoyed somewhat that it will end. If you are positive and wise now, you will be in an excellent position to be in the right place when the market returns.”
A central premise of Miller’s underlines the position of ARDA and other resort leaders, “It will be different but people will need to take vacations. They need a second place to go to – whether it is a timeshare/fractional, multifamily condo or single home. People worldwide will buy again, and some are continuing to do so. The problems today, while different than in the other recessions, need to be understood. Only then can a developer make a wise decision.”
Miller cites four key problems that have stripped away motivation to buy from many prospective customers for all types of resort interests:
- Lack of confidence in the economy – people worried about their jobs and income, the area’s viability and our national economy.
- Financing is either non-existent or not enough for a second home or timeshare/fractional purchase. Buyers’ finances are under more scrutiny, with jobs lost or at risk, foreclosures continuing at high rates, and other factors. Therefore, they have to put down 50 % or more. Many developers are also going through financing hoops
- Falling prices: Buyers still believe prices in many second home markets will continue to decline, so it’s better to wait.
- Too much inventory takes away prospects’ motivation to make a decision. They feel confident that if they pass on one unit that another, perhaps better value will be available sooner or later.
How to Counter These Issues: Options For You to Consider
Given those possible challenges, how do you deal with them? Ken Miller offers these alternatives for you to consider:
- Be honest about your situation. Is your inventory something that a buyer must or needs to have – chances are not
- Do you have competition in your area that has better value or faced facts and is offering more value?
- Are your partners on the same page and realistic, given each comes from another situation?
- Is your lender sympathetic and willing to work with you?
- Have you provided a wise “workout” plan to your partners and lenders?
Miller sees two extremes, with obvious variations between them. If you do not have to sell your project, these are actions he suggests you consider:
- Rent or lease your units, and operate like a hotel if possible. Bring in an expert on hospitality to do this. Your current marketing/sales team may not be right.
- Price your units as low as you can. Sell quietly to residents who come to your resort.
- Contact all past lookers, and offer a smart deal – tell them they were wise to wait.
- Contact all current owners. Offer them another unit or week at a great price.
- Work your referrals program many times over. Bring in an expert on referral marketing. Present offers that are hard to resist.
- Use time to build relationships with lenders, and other suppliers for the future.
- Enhance the value of your resort by adding a hot new amenity called “Health.” Miler is involved with an exciting new company named “SanteVu LLC”– created by a group of health and resort professionals – that can provide appealing health and wellness services.
- Rethink your marketing. Use cutting edge programs that understand all aspects of 21st Century marketing via social Internet media. But make smart use of traditional media.
- Get better financing if you can. If you can’t, select a number of unsold units, and create a rock bottom price. Offer them to current owners as a special recession deal, as in packages of 10 to 20 weeks, or sell as a premium or investment. Check with your attorney to assure it is done legally.
Knowing When to “Hold ‘Em or Fold ‘Em”
Viewing two of the options from Kenny Rogers’ classic, “The Gambler,” Miller asks, “What if you can’t hold on to all of your property?” Miller offers three choices for you, if you must sell now.
- Auction: A one-day global auction will reach three sets of buyers – professional investor groups that may buy in bulk, individual investors seeking a great deal, and end users who believe now is the right time to get that great deal in a place they want.
- Blowout Sale: Two-day blowout or inventory reduction – creates the same motivation as an auction –but do not call it an auction. Call it “Global Blowout Sale” or “Inventory Must Go Today!”
- Patience: Continue to market wisely with low expectations.
Miller offers more observations on the evolving timeshare and resort situation. “While the timeshare concept is an accepted system for millions of families worldwide to enjoy vacations, the financial slump has taken its toll. Some 60 % of timeshare resorts have dramatically slowed down or shut down their sales operation given lack of financing or the onerous qualifications for the developer, making it unprofitable to make a sale.”
He says, “The projects with financing are doing okay to well, given less competition. The reality or the appearance that they are in a healthy position to work through difficult times gives comfort to buyers.”
Some good news Miller cites “is that with reduced competition the cost to attract qualified tours has dropped. Also, the closing ratio has increased, given those that take the tour are more qualified and smart developers are offering extraordinary deals.”
“Create your workout plan with knowledge that, if all possible objections must first be overcome, nothing will ever be attempted.” --Ken Miller recasting the prudent views of Samuel Johnson (1709-1791)
Show Me the Money: Financing Developments
We have received valuable input from other industry veterans who we will call by a collective name, “Ty M. Schare,” to maintain their anonymity. This is what we have learned:
Some developers have resorted to selling “club memberships.” This does not include a deed and is a contract for service only. The club economic business model allows them to keep the better employees, but does not have the cost of product that timeshare has. The price is usually about 25% of the sale price of a timeshare.
Without the cost of product of timeshare, the cash for commission and overhead comes from the sale of the membership, while the POA (property owners association) carries the “inventory” until time (financing) becomes available. Most plan to go back to the club member who complains and offer them an “upgrade” to a deeded product.
This is somewhat risky, but some feel they must head into “any port in a storm.”
On the brighter side, some of the larger developers are obtaining some financing on aged receivables on hand, and or keeping creditors advised of other positive developments.
Smaller developers with forward commitments are doing fine. They say the cost of prospects has not changes that much, but prospects are slower to “jump into a deal” with the usual first time visit incentives. Several have dropped the first day incentive and have follow-up programs in place.
These follow-up programs include a tool that was very effective at Fairfield (now Wyndham). Sometimes referred to as “test drive,” the prospect “purchases” a one-time visit. Consumers are solicited at the time of their “use” and usually receive all their “purchase money” as a credit on a full membership (with deed - except on the West Coast, where deeds are seldom important in the sales relationship). The main difference is that now the front line sales people are getting a chance with the prospect instead of the “in house” line.
All this shuffling around has give developers a chance to rework their commission schedules. Smaller developers are picking up a better class of sales reps who are castoffs from big operators cutting back.
The heart of the problem is financing. Until credit becomes more available it will remain tough, especially for the big-ticket operators (fractionals and $20,000 minimum price timeshares).
Some small developers are finding money with the local banks. This is not by discounting their receivable paper, but rather by pledging the real estate and other assets for cash flow.
Three Keys to Success: Product, Opportunity, Capital
Another perspective comes from Don Harrill, President & CEO, Orange Lake Resorts. He says, “We’ve spent the last 4 years working on a growth plan. We developed a strategy that was a combination of product, opportunity and capital. So far, it is working in our favor.” He explains:
Over the last few years, we’ve evolved our product and amenities to have a new story to tell – examples for Holiday Inn Club Vacations at Orange Lake Resort (Orlando)
- In 2008, we completed phase 3 of our West Village renovations with the opening of our $2.7 million pool complex featuring zero-entry pool, full-service restaurant overlooking an 80-acre spring-fed lake and a family arcade. The West Village was our first of four resort villages, built in 1982.
- In 2009, we announced that our upscale Signature Collection villas joined RCI’s Registry Collection, the world’s largest luxury timeshare exchange program. The Signature Collection villas are 56 1-, 2- and 3-bedroom luxury villas and 4-bedroom penthouse suite villas located in the top three floors in one of the buildings at our River Island village, featuring either a sunset view or a view of the tropical 12-acre River Island recreation complex.
- We’ve expanded the benefits our Club members enjoy by joining forces with IHG to create Holiday Inn Club Vacations (see John Sutherland sidebar)
We sought an alliance partner that could help put more opportunities in front of our sales folks (see John Sutherland interview in this article). IHG was a great fit because Orange Lake and IHG’s Holiday Inn brand share the same legacy and ingenuity of our founder, Kemmons Wilson, and a similar customer profile and vision for growth.
We’ve spent over 5 years working with our banks, nurturing the relationships to have the support we’ve needed to grow. Year over year, we’ve increased our sales since we set this plan in motion.