-by TS Newshound
It’s a mixed bag of news these days regarding the timeshare scene. Some of it points to recovery, some of it not so much.
On the plus side, Standard & Poor’s Ratings Services points to a rebound in issuance of timeshare asset-backed securities (ABS) in 2009 to show the sector might be “on the road to a robust recovery”, remarkable because it is happening “amid declining sales, diminished property values, and higher consumer delinquencies for timeshares”, according to S&P analyst Weili Chen.
The issuance of such securities passed the $1 billion mark in 2009, well above the 2008 total, which had plunged to just over $600 million. Volume in 2007, though, was a record $1.77 billion so there’s still lots of room for improvement.
Chen also pointed out that timeshares have been weak during the global economic crunch with sales falling some 30% last year– a record decline for the industry. That sure doesn’t come as a surprise to those of us working in the industry, does it? But S&P said the increase in delinquencies and defaults since September 2008 “has been relatively modest, and we believe preliminary signs indicate that the worst may be over.” From S&P’s mouth to God’s ear…
Another hopeful sign is an increase in timeshare occupancy around the globe, especially notable in areas that are not drive-to destinations because that means people are confident enough to spend extra money getting to their chosen destinations. One example is the Caribbean island of St. Maarten, with November occupancy rates rising by 3.2 per cent to 72.7%. In November of 2008 timeshare occupancy was only 69.5%, according to the Daily Herald, which described the timeshare industry in St. Maarten as a “silver lining”.
Standard hotel occupancy in St. Maarten fell 9.6%, clocking in at 44.8% compared to 54.4 per cent in November 2008. Only two Caribbean nations (Jamaica and Cuba) recorded any increase in hotel occupancy. A similar pattern is emerging in many other markets, with tourism down but timeshare occupancy either holding its own or increasing.
On the other hand, timeshare owners seem to be spending less on food, entertainment and shopping once they reach their destination, so we shouldn’t read too much into the trend just yet.
Though some of the independent developers seem to be holding their own in the world’s largest market, the USA, others are clearly having difficulties. It isn’t just declining sales that is causing the problem, but rather the difficulty smaller operators have in attracting financing.
I assume you’re all aware that ILX Resorts is working its way through bankruptcy, hoping to come out safely on the other side. Consolidated Resorts never made it that far, being forced into liquidation after Goldman Sachs pulled out of their partnership and wrote their investment off as a loss.
Giant Westgate Resorts, having painfully pulled in its horns, appears to be doing its own financing (correct me if I’m wrong) and is counting heavily on success with its new Las Vegas resort to help them over the hump until financing loosens up.
Similarly, Bluegreen Corp. is struggling to refinance its debt, having recently won some extensions on loans that will hopefully improve its situation. The company is thinking outside of the box, too, in interesting ways that may help it survive.
Most recently, Dallas-based Silverleaf Resorts received a notice of noncompliance from NASDAQ as a result of the closing bid price per share of the Company’s common stock being below the minimum trading price of $1.00 for thirty consecutive business days. Silverleaf has a grace period of 180 calendar days (until June 28, 2010) to regain compliance. It won’t be good news for the company if they can’t make the cut.
Other independent operators are largely an unknown. Shell Vacations, for instance, shows very few sales/marketing positions open at its resorts and issues very few press releases compared to past years. They do not seem to be expanding, either, so at least on the surface it appears that they are hunkered down for the duration.
U.S. companies such as Monarch Grand Vacations, Grand Pacific, Island One, Spinnaker Resorts, etc. never did talk much about what they were doing, so beyond the fact that they still exist it’s hard to tell how they’re faring.
The one sector of the industry that seems to be flourishing is timeshare resales, with several companies expanding and hiring. This looks like a “make hay while the sun shines” opportunity, good for the business models that charge upfront fees for listings, not so good for the timeshare owners who are trying desperately to sell. There couldn’t be a worse time to be trying to resell a timeshare, and the resale field is unfortunately a breeding ground for the ethically challenged who look for such opportunities to take advantage of the situation.
So all in all we’re still in a holding pattern as we wait to see what 2010 will bring. Good news, bad news, another mixed bag? Time will tell.