April 24, 2015 — For those who may not know I’ve been in most sales, management and various marketing capacities in our industry since 1980 so it’s a pretty safe bet to say that I’ve seen it all. That includes our global growth over the decades and like many of you I have been through the great times and the not-so-good days. And that is also why I’m able to assert that in 2015 and for the foreseeable future this is likely one of the best times in our industry for ‘lodging owners’ to market and sell TS vacationing plans.
So Here’s The Scoop: It would not be a stretch to also claim that those already in our industry who adhere to conventional timeshare wisdom, theories and their ways of doing business would say that I’ve lost my mind for making that statement, that I must be insane or that I have one oar out of the water, etc.
That is fine because naysayers are often wrong — like when I constantly wrote articles in 2006-07 sternly warning developers that a massive global financial calamity was certain to hit soon and that it would be devastating and would also include our industry. The naysayers back then also said I was crazy.
They claimed that the timeshare industry was not susceptible to economic realities like huge layoffs & high unemployment, a crashing stock market, lenders not lending and so forth — you know, like the Great Global Depression that roared in at the end of 2007 and cost TS developers dearly, and 7 years later affects many to this day!
As such I stand behind my assertion that in our own unique little corner of the enormous and very lucrative global hospitality industry the future for new independent timeshare developers is as bright as it has likely ever been throughout our 50 + year industry’s track record and history.
The caveat, however, is this one absolute thing, which is any new-comer must – I repeat must – not listen to the advice from most of the existing developers, their ‘Exec’ management folks and especially the independent marketing and sales ‘Gurus’ — aka: TS consultants preaching their wasteful & costly ways of doing business, because about 90% of them have been dead wrong going back decades – and I’ll prove that now.
35 years ago when I began my journey in the Land of Time I first worked as a closer for an ITD and our sales center averaged 40 sales guests (‘tours’) each day. During that era our average TS contract was $8,000 and ‘we’ wrote about $1 Million a month in processable business yielding our developer an $834 VPG (Value Per Guest).
Now comes the scary part rarely discussed in our industry. Using a Consumer Price Index (CPI) inflation calibrated calculator, to equal those 1980 VPG dollars in 2015 that same developer’s sales center must produce — with the same number of sales guests (40 daily) — a VPG of approximately $2,450.
Sadly, as most of us know and with few exceptions the majority of sales centers (developers) around the world today produce VPG’s much lower than $2,450 – some as low as being in the not so attractive $1,000 (VPG) neighborhood.
For a look back in time that means:
A $1,500 VPG in 2015 = a $511 VPG (in 1980 dollars)
A $2000 VPG in 2015 = a $682 VPG (in 1980 dollars)
Translated: Many developers today with VPG’s below $2,450, on a per sales guest basis, are earning less per sales guest than some developers did decades ago!
Another way to look at that is to realize that in 2015 it takes a $23,400 average (contract) selling price per sales guest to equal the $8,000 average selling price that our company/developer/we (and others) produced back in 1980.
It surely doesn’t take a rocket scientist to clearly see that unless a developer improved their marketing and selling tactics, systems & processes to perk up their ‘numbers’ or continually increased their annual sales guest (tour) flow each year and came up with new inventory to sell, over time many were destined to lose money and go out of business.
Indeed their days were numbered and the time would come about when the real cost of doing business would be prohibitive so many ITD’s would, and did, over time, either sell their resort(s) off to bigger developers, sold out their limited inventory to consumers, filed for bankruptcy protection and/or just closed down their marketing and sales operations altogether.
Should anyone doubt that then consider how many TS lodging properties there are just in the RCI and II exchange system. There are several thousands and at some point in time many were involved in active marketing and sales campaigns. But not today!
And excluding acquiring that new inventory along with a significant increase in the number of sales guests to sell to each year, what also contributed to crippling so many independent developers were the all-knowing TS ‘Guru’ consultants and/or Exec ‘management’ types who bounced from new and upcoming ITD project to the next new ITD company, etc., promising to lead each ITD to the promised land, so to speak.
Those folks glad-handed, patted the backs and smiled their way into running the marketing and sales operations for those ITD’s and by implementing their underperforming marketing and sales tactics, techniques, methods & systems — accompanied by a total lack of a long term business strategies — many ITD’s would not succeed as far into the future as they should have.
I.E. ‘They’ were in it for the quick $$$ ‘hit’ and tomorrow be damned!
And I’d be remiss if I didn’t point out the same was true of many of those independent developers’ back then as the money was fast, furious & seductive, and though many surely did well most missed out on the big picture & bucks they could have generated to this day.
But that was then and this is now and for those ‘lodging owners’ today who have suitable accommodations and amenities that ‘vacationers’ would like, use and enjoy they, too, can become ITD’s and – wait for it – without the disproportionate traditional ulcer-causing marketing and sales costs most TS developers continue to stomach.
For example, the new independents could have a sales guest cost as low as $75.00! That’s right, under $100 to have a qualified sales prospect in 2015 who would be more than willing to sit through a sales presentation, listen to the company ‘rep’ sell the timeshare owner/membership merits of their vacation ‘plan’ – and each sales guest will agree prior to the presentation that they’ll make a yes or no decision at the conclusion of the presentation.
‘Some’ who’ve read this far will claim “that is impossible”!
Another thing the new ITD’s can do is eliminate their new owners/members from canceling within the rescission period. Many developers today have ‘kick’ ratios within the cancellation period in the very costly double digit range.
‘Some’ will claim “rescissions are just part of the cost of doing business”.
And yet another advantage the new generation of ITD’s can accomplish is to provide all their owners/members a conditional ‘out’ from their ‘slices of paradise’ should the need arise such as a death in the family, a divorce, loss of a job, etc. That alone will help close more sales than traditional developers, big and small, could ever dream about!
‘Some’ will assert that “Hey, they bought it – they own it – not our problem”!
While I’m on the topic of closing sales, the new generation of independents can have net closing ratios upwards of 40% + (4 out of 10 will buy) and VPG’s two and three times of other developers and that means the new ITD will also be able to pay a lower sales commission (%) on each transaction. That, combined with the lower marketing cost will profit the new independents handsomely.
‘Some’ will be adamant “that just can’t be done”!
With higher closing ratios and other improved STATS the new ITD’s will also experience incredibly low marketing and sales rep (management, too) turn-over ratios because these ITD’s will have a loyal, gratified, happy & satisfied staff earning a really good living and they will stay on board with the new ITD’s for many many years.
‘Some’ believe “hire in masses, barely train them in classes then fire their sorry asses’!
And when you combine everything I said the new independents will be more competitive with the millions of ‘resale’ weeks available online. In fact, due to the very nature of those old TS ‘plans’ Vs the new ITD’s TS plan – the new ITD’s vacation plan will be far more appealing to consumers (aka: buyers) and they won’t want to touch most of that old available resale inventory (plans) – regardless of low costs.
‘Some’ will claim “developers can’t compete with resale inventory”!
One last advantage for the new independents is that if they choose they can bypass lenders altogether. They won’t need them, and that means more earnings stay where they belong – with the new ITD’s – and, oh by the way a high percentage of all the new ITD’s buyers will be happy as clams to pay all cash!
‘Some’ will say “you can’t operate without a huge influx of funding”!
‘Some’ will also claim that most “TS buyers can’t afford to pay all cash”!
If the truth be known, everything I’ve said also applies to existing TS developers, big and small, however they are so burdened by the system they’ve clung to for decades that even though they could be weaned off their nasty little habits starting with baby steps, in their minds they are forever held captive and exiled to their self imposed status quo.
‘Some’ will claim “our way is the only way that works”!
But for the new independents around the world there is a bright & profitable future just for the taking because believe it or not there is already a handful of small ITD’s who have and continue to operate exactly as I’ve described!
‘Some’ who’ve read this far will say “Don’t believe any of this rubbish”!
Good Luck Out There
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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’.