Fractional Resorts, Destination Clubs and Timeshares: A Closer Look at Vacation Ownership

By Kim Hehir VP of Strategic Planning, The Leading Hotels of the World | April 15, 2010

Residence clubs, condo-hotels, timeshares, fractional resorts, and destination clubs are all elements of a booming phenomenon that is having a strong impact on the luxury hotel and travel industries.

However, these concepts are not entirely new. They are variations of a concept that began in Europe in the 1960s as families realized that owning a vacation home made more sense when it was shared among friends who wanted to use the home during different time periods. Over the past 40 years this concept has evolved to encompass a number of different business models within the vacation ownership industry. Among them are:

The upsurge in the vacation ownership industry over the past two decades has been remarkable. Sales have been growing at a compounded annual rate of more than 17% for the past 22 years. In 2002, high-end and Private Residence Clubs (PRC) accounted for USD 357.9 million in revenue, a growth of USD 197.2 million in just four years.

One of the most remarkable aspects of the industry as a whole has been its proven resiliency. It has continued to grow, even during the recessionary periods surrounding the Persian Gulf War, the September 11th attacks, and the most recent Iraq conflict. In 2003, timeshare resorts enjoyed occupancy rates averaging above 85% while traditional hotels experience occupancy rates that averaged significantly lower.

According to Peter C. Yesawich, PhD., managing partner of Yesawich, Pepperdine, Brown & Russell. "Fourteen percent of the of active leisure travelers in America are interested in becoming vacation owners within the next two years, roughly the same percentage as those interested in playing golf on vacation." This statistic translates into approximately 13.4 million adults.

His study also revealed the demographic diversity of those interested in purchasing timeshare: 71 percent are white, 15 percent are African-American and six percent are Hispanic. The highest concentration of interest is among Gen-Xers (between 25 and 38 years of age), while 10 percent of those over 58 are interested in purchasing. The "over 58" segment represents empty-nesters who spend their leisure time with their children and grandchildren. Therefore, being able to stay at a home with all of the services and amenities is extremely appealing. The Gen-Xers, on the other hand, tend to be jet-setters who do not want to be tied to one particular place. Many of the Gen-Xers are likely to be the children of earlier timeshare owners and are familiar with the advantages of the concept of interval ownership; however, they are looking for a product that is more exciting than the timeshare their parents owned.

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