November 2, 2012 — I have been involved in timeshare sales, marketing, sales management, sales training, etc. since the President Carter era and with zillions of dollars in sales (personal/managed) under my belt, like many of you, I, too, am a tried, true and tested industry Professional with the bona fides.
So here’s the Scoop. I won’t cover all topics relative to this week’s column but to lay the foundation if you read one or two of the recent publicly held timeshare corporate quarterly filings you’ll discover, as in Bluegreen’s 2012 2nd quarter documents, that: “Sales to existing Bluegreen owners as a percentage of system-wide sales of VOIs was 57% in both Q2 2012 and Q2 2011.”
Essentially it seems they are saying that less than 50% of their total sales volume is generated from sales guests (prospects such as street tours, sales guests originating from phone room operations, renters/exchangers, referrals etc.).
I’m guessing Bluegreen prefers existing timeshare owners in their sales centers over ‘non-owners’, like another ‘Big’ timeshare company (which for confidentiality restraints I can’t name at this time) which also seems to prefer to market and sell to existing owners.
In fact that ‘Big’ company is in negotiations at this very moment with a marketing entity, and if the deal gets inked soon the arrangement will be to exclusively generate sales guests who are existing timeshare owners for their many sales centers. They simply don’t want non-owners as their current closing ratios and VPG’s to that ‘crowd’ is incredibly low.
There are more examples I could cite but after the financial calamity hit a few years back it is widely known that many developers started cutting marketing programs left and right and annual sales reportedly plummeted from an all time high of about $10.4 Billion to around 4.6 Billion. Now, according to ARDA (American Resort Development Association), we are led to believe we’re in the $6 Billion (annual sales) neighborhood.
There are indeed other developers who’ve survived the ‘crash’ by selling upgrades, etc. to their existing owners and from the looks of it that once-lucrative method of gathering ‘warm body’ sales guests from (e.g.) a ‘Street’ program is or may rapidly becoming a thing of the past. If the ARDA number is correct ($6 + Billion) then our annual sales to those prospects now may only be in the $2-3 Billion range.
From an economy perspective, many of us who’ve been around the timeshare biz for more than a handful of years have truly lived through it all, starting with the gasoline (shortage/oil/energy crisis) lines during the 1970’s and up to the recent ‘Great Recession’ that reared its ugly head just a few short years ago.
And yet through all those challenging times such as: Double dip inflation (13.5% 1980), 10.8% unemployment in 1982, the stock market crash on ‘Black Monday’ (1987), the S&L crisis (80-90’s), the first Gulf War with Iraq (1991), the Dot Com bubble (2000), the aftermath of 9-11 (2001) terrorist attacks, the War in Afghanistan (started October 2001), the Enron & WorldCom crisis (2002), the War in Iraq (started in 2003), the never ending War on Terrorism, $145 per barrel oil (2008) etc. our industry thrived in spite of the ‘Chicken Little’ types shrieking the sky is falling.
I was working in Mexico when the 1st Gulf War began while President George H. W. Bush was at the helm and I was still there during the onslaught of the December 1994 Peso devaluation (aka: The Tequila Crisis) when nearly everyone, including timeshare developers, were caught with their pantalones down around their ankles and timeshare sales took a serious ‘hit’.
Though many of us had concerns and valid reason(s) to be only cautiously optimistic, over the years the ‘biz’ continued to prosper the world over up to and until the most recent global financial crisis which devastated many corners of the worldwide economy and nearly killed our industry.
However, what was different this last time (beginning in late 2008) was a set of events that should have been recognized and then avoided at all costs. The warning signs were everywhere, starting with the most recent of issues which was out-of-control, unsustainable, skyrocketing real estate prices that hit the market by 2005.
Preceding those years and prior to the ultimate crash, while writing for another timeshare publication I often cautioned developers in my articles that a perfect storm of sorts was brewing. But even when I raised specific issues with some developers during sales/marketing consultations my counsel on the subject was unconditionally ignored or outright rejected.
Most developer didn’t want to hear about it; they simply turned a deaf ear. Instead of listening to the blaring sirens cautioning that an 8.2 earthquake had struck and a massive unstoppable financial tsunami was well on its way to a ‘coastline near them’, they pretty much kept their horse blinders on and their noses glued to their VPG reports while they unknowingly whistled past the graveyard, so to speak.
Up until the colossal wave ultimately devastated the shore, business (sales) seemed to be booming, all was well in the land of ‘Time’ and many developers continued making marketing/sales decisions as if there would be no end to a false and fabricated ‘Bullish Market’.
And then BAM! When it hit many lives in Timeshare Land were ruined, partial/total fortunes were lost, homes were foreclosed on, thousands were laid off, bankruptcies were filed and some timeshare developers even went so far as to outright ask the U.S. Federal Government for a ‘bail-out!
Another huge factor that created the current situation was the foolish belief held by many developers and management for decades that somehow our industry was not susceptible to or affected in any manner by regional, national or real world economic issues, the stock market, lending rates/practices, legislation, unemployment trends, inflation, housing markets, wages, etc. To them, the ‘biz’ was recession proof!
There were more wailing sirens, too, for example warning management or developers to address the resale needs and concerns of their own owners (aka: CLIENTS). But that, too, was ignored and when that issue came to the forefront in record numbers the general response was: ‘You own it, it’s your problem – Just keep sending in the maintenance fee or we’ll ruin your credit history for many years to come’!
That issue alone led to untold thousands of dirt cheap and/or free ‘time’ on the market currently being offered by owners and resale companies (legit or otherwise) and today those ‘intervals’ are often located at the same resort where active developer ‘retail’ sales continue.
And of course the exchange companies jumped into the mess many moons ago and started renting out weeks (‘time’) in bulk to the general public— often at rates far less than a typical timeshare owner’s annual maintenance fee (and other associated exchange costs)— at the very same property where the timeshare owners owned & the exchange company renters rented.
Let us also remember that by the late 1990’s the ‘extended stay’(ES) market took off like a rocket and all around the world consumers were quickly able rent those accommodations, with many ES properties providing the same amenities that a timeshare accommodation offered but at a lower rental cost.
Then of course along came the information era (Internet) and with desktop and laptop computers soon to be in nearly every home or office the ‘cat’ would ultimately get out of the bag, because that period was followed by the next generation of this, that and other types of info gadgets (hand-held devices) and consumers could now get timeshare ‘info’ anywhere, anytime, 24/7/365.
And today what we have from a sales perspective is an industry in chaos, including record breaking rescissions by ‘first time buyers’ that are directly attributed to new owners getting online after leaving the sales centers.
‘They’ are discovering one meaning of ‘what the market will bear’. And when they do they become very unhappy campers to learn that they just paid (e.g.) $15,000 for exactly (or nearly) what they could get for just the cost of the annual maintenance fee of $750.00.
As many will admit, there are other issues that make this financial/economic crisis different than before and unless more needed changes are made we’ll never, as an industry or individual developer, make a comeback to the sales volume we enjoyed a brief 60 months ago.
Stay tuned next week for “The Cure”! That however will only be informative for developers demanding to be around well into the future, as said future is bright indeed and filled with opportunity for our industry.
For everyone else I can only say you did have the ride of your life but the fat lady has sung loudly, concisely and repeatedly. So good luck with whatever new enterprises (including retirement) you will undertake next.
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Contributing sometimes extravagant, bombastic, emotional, pompous or even pretentious writings about the timeshare industry, Scoop covers an array of industry related subjects each week including inside information, tips, scandals, interviews, forecasts as well as new (good or bad) products and services--- and, of course, all the 'Good', the 'Bad' and the 'Ugly'.
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