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What to do in a market such as ours

Written by editor

US timeshare and travel markets will have to ride the crisis out longer than previously expected. Everybody will have to adapt while waiting for ‘any sort of’ outcome.

US timeshare and travel markets will have to ride the crisis out longer than previously expected. Everybody will have to adapt while waiting for ‘any sort of’ outcome.

At the 10th Annual Vacation Ownership Investment Conference held in Orlando, Florida, Scott Berman, principal and US leader, Hospitality & Leisure Consulting Practice, PriwaterhouseCoopers LLP said that until the consumer confidence meter rebounds through the bailout or government tax incentive programs, the industry, operators and owners will have to adjust. “They are already invoking contingency plans in order to keep consumers loyal to the brand such as the idea behind a new term ‘staycation’ to lure the local marketplace into local hotels,” he said.

The tourism industry has seen a low cycle before. The vacation ownership business has not seen the valleys that traditional lodging has. “But this is a real estate-led recession and timeshare, I think, will not escape it. The good news is that one in every three timeshare owners is a repeat buyer. It speaks to the value of the vacation in the consumer’s eyes – the vacation ownership programs appeal to the leisure consumer and the family market who will take the vacation whatsoever, but may have changed their patterns—driving closer to home rather than getting on a plane or choosing to go to the destination closer to home than going to a beach far from base,” said Berman.

If one owns a timeshare (and not foreclosed on, unlike residential), the chances are one has a vacation in perpetuity.

“The timeshare business is in the ‘triple witching hour’ just as the leisure travel business is due to three converging forces – technology, a growing sense of anxiety, and consumer changes in demography,” said Peter Yesawich, chairman and CEO, Ypartnership.

Job security (more like job insecurity) contributes largely to the anxiety consumers feel in the current market. More than 170,000 jobs were lost last month. This has the greatest impact in Americans’ outlook and perspective. “Demand for travel services will remain robust however. Indeed people will still travel. But some 16% of people we surveyed who said they will travel less reasoned tremendous pressure in household budget or finances,” added Yesawich.

Out of 116 M households in America, 90 M own their homes; and one out of three owners used their homes as an ‘ATM machine’ in the last four years; some economists say that the waterline has been drawn with this and now suffer the tough consequence.

Instalment debt, or the amount of debt Americans carry on their credit cards, is now hovering around $10,000 on average per household. Most people have left-over money after they pay their bills. 49% of people surveyed said they don’t agree with this anyway, because they are not probably in the market anyway, said Yesawich. “But this still represents millions upon millions of household in America. And America will continue to travel but will negotiate more aggressively than ever before especially that they are more equipped with the most potent tool in commerce which is called the internet,” he added.

Berman said, “In timeshare specially, it’s not like you have to outlay a lot of cash for accommodation. Yes, you pay maintenance fees, fill up the car, buy the groceries – which you do if you’d stay home anyway.”

As travellers will tend to travel shorter, of the 600 commercial airports in the US, approximately 100 will lose the short-haul service as the domestic airline business is under siege. Although it’s inconvenient to get to some destinations, the big question on profitability threatens most markets. When accessibility is a main issue, travellers can easily tick the destination off their list. And they will, said Yesawich.

Lodging Executive Sentiment Index (LESI), a leading economic indicator based on opinion of lodging executives, developed by the University of New Hampshire’s Hospitality Management Department shows the present situation index declining (slightly faster than last) from 53.6 last year to 46.6. The reservation expectations index, which shows projections of room reservations for the next 12 months, has flat-lined (very slightly faster than last). Executives however expect the future expectation index to expand, though very slightly slower, this year to 56.9 from 57.1, as well as the employment expectations index from 59.3 to 55.4 this current period.

The LESI also reported that 4 out of 10 surveyed thought business conditions would improve in the next 12 months, significantly better than last period’s 24%; 41.7% feel business conditions will be the same as compared to 52% last period; some 16.7% say business will be worse 12 months from now.

“It’s a shame to look at the US relative to major tourism destinations around the world when it comes to marketing spend. We spend so little as a nation in promoting our own country to our own citizens and to foreigners. Even an island market such as Puerto Rico has a marketing budget running in the hundreds of thousands of dollars which the total Continental US pales in comparison with. Federal and state-level officials should understand the economic impact of timeshare which runs in the billions,” said the PWC president.

All will have to wait and see or do without much hope.