Designing Vacation Clubs and Timeshares for Today's Buyers
By Bill Caswell Principal, Hospitality Practice Leader, North Highland | November 24, 2019
Timeshares and vacation clubs are working to determine what their next product sets should be in order to attract younger buyers. The industry as a whole has consistently increased its revenues over the past decade, according to data from the ARDA International Foundation (AIF), the industry' trade association, but many believe this has been done on the backs of existing owners. There is still a generational disconnect between the product, the marketing and sales processes, and today's younger buyers.
The problem for operators is that many are using decades-old acquisition and sales models to reach today's generation. Millennials, who are now the largest generation in the workforce and beginning to accumulate more wealth and buying power, have different expectations than previous buyers. Having come of age during the Great Recession and seen firsthand how many in their parents' generation overextended themselves financially, they are less willing to make big financial or ownership commitments.
Of course, not all millennials fit this profile, but a sizable portion of them have downsized their appetite for traditional investments compared to their parents' generation. Cars, homes, timeshares and vacation clubs are optional, replaced by ridesharing, renting and Airbnb. Personalization, flexibility and freedom are top priorities.
If you pitch a traditional timeshare product to this type of person, closing the deal is a longshot.
These generational shifts are not lost on timeshare and vacation club companies, which are recognizing the need to change and are in various stages of that evolution.
Timeshares Versus Vacation Clubs
To understand how vacation clubs and timeshares need to change to catch up with the mindset and desires of younger vacationers, it's important to know how they differ from each other.
A timeshare is an ownership model in which multiple owners share the use of a single property or collection of properties. Typically, timeshares are a long-term or perpetually-owned product registered in the jurisdiction where they are sold. These homes, condominiums, campgrounds or vacation resorts are owned by the individual buyers and often come with maintenance and cleaning costs, among other expenses.
Older versions of the timeshare typically involved a deeded, fixed or floating week when the owner was able to use the property. Some versions even specified a particular unit. Today, however, most timeshare products provide a points-based system. The underlying real estate often resides in a trust, in which an owner has an interest, and they "spend" the points on a variety of destinations, experiences or travel services such as cruises or airfare.
Timeshares are regulated, so most offer a variety of consumer protections.
Like timeshares, vacation clubs involve a group of consumers buying into a vacation program or discounted travel offering. However, the main difference is ownership. A vacation club, by definition, is a right to use product and does not guarantee access or availability. The key term is "right to access"; vacation clubs do not provide perpetual ownership of real estate products.
The marketing challenges and opportunities for both property types are similar: Younger consumers are reluctant to make long-term financial commitments, but they are willing to build long-term relationships with brands they trust.
Vacation Clubs and Timeshares are Evolving
One of the key reasons that timeshares and vacation clubs have found it difficult to attract younger consumers is the absence of an exit option. Naturally, owners and developers have been reticent to make this change retroactive on products they have already sold. They incurred significant marketing and sales costs at the time of the original sale, they argue, and it is hard to make the math work when reselling a product that may be decades old.
Despite reluctance among developers to change the financial structure of their properties, there are signs they are beginning to adapt to consumer and owner demands for greater flexibility and transparency. Regulators are adding additional pressure, scrutinizing timeshare products in particular. Some states are considering rules that would require new products to offer an exit program.
As a result of these pressures, many large operators now offer exit programs for owners whose products have been paid for and who have accounts in good standing. These types of programs may become more commonplace, both for existing owners and new buyers.
Another key adjustment that operators of timeshares and vacation clubs have had to make is providing upfront product and price transparency. Consumers now are less trusting of large companies, and as a result they have a lower tolerance for unexpected expenses that could be attributed to disreputable business practices. Some large brands have begun to allow consumers to learn and understand more about the product and sales process prior to attending a presentation. For today's consumer, transparency for product and price are table stakes.
Disney Vacation Club is an industry leader in this area, capitalizing on their unique brand trust to increase process and product transparency. This approach is producing tremendous public interest in their vacation products and services and may prove to be the exception to the industry adage that "nobody wakes up today and wants to buy a timeshare."
Using Data to Improve Customer Experience and Drive Sales
Beyond exit options and product and price transparency, understanding potential buyers in more substantive ways is also emerging as an important next step for the industry. Improved data analysis in particular is an area of focus and promises to be the key to unlocking customer insights, improving customer segmentation and creating new and unique offerings that appeal to millennials' desire for customized experiences.
Consumer expectations for experience and personalization have been set very high by companies that offer a brand relationship and lifestyle – such as Disney, Apple and Amazon – and people are bringing this mindset to their interactions with timeshares and vacation clubs. For many people, identifying with a brand is a prerequisite to transacting with it – especially when making a major financial commitment. To achieve this level of service, timeshare and vacation club operators realize they need to understand their customers better.
Transforming the Sales Experience
Developers and brands not only have to upgrade their product sets and invest in data analytics, but they will have to rethink their approaches to advertising, marketing and the sales process. Lengthy, high-pressure sales presentations feel antiquated to today's buyer.
Consumer and purchase data are now informing sales practices. For example, information about a particular prospect can be used to create a personalized marketing program. Some developers are considering personality profiling to match consumers with the right salesperson and content, personalizing the sales experience and increasing the odds of closing the deal.
Hilton Grand Vacations is an example of a company that has dramatically enhanced its sales experience to appeal to younger prospects. Their groundbreaking Envision system has made the sales process more personalized, improved guest participation and increased product knowledge among associates and customers.
As today's timeshares and vacation clubs evolve their business models, they will no longer have to rely on high-pressure, high-cost marketing tactics, but can come out of the shadows and participate in more traditional product advertising methods that put consumers at ease and build trust instead of suspicion. We also expect to see more online sales, improving their reach to consumers who are less apt to participate in a traditional sales center visit.
Timeshares and Vacation Clubs for Today's Buyers
The ideal timeshare or vacation club would combine various analytics and data strategies to attract and retain consumers, especially younger prospects. They would anticipate a consumer's needs and offer a program uniquely tailored to them – based on a variety of data points collected about that individual from various touch points and third-party data sets.
Product offerings would also consider generational preferences, such as the desire for flexibility and transparency, by providing personalized experiences, exit strategies to those who might otherwise be wary of a long-term commitment, and a clear articulation of the financial costs for those who are wary of the fine print.
To ensure their long-term success, timeshares and vacation clubs must continue evolving to attract a new generation of buyers. Leading companies in the industry are already making the necessary changes, but others should pursue a similar path or risk being left behind.
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