A recent study, Future Timeshare Buyers 2008 Market profile prepared by Ypartnership for Interval International, revealed that though Europe continues to be the preferred international destination among 72 percent of leisure travelers interested in purchasing vacation time, nearly one quarter or 22 percent are interested in visiting the Caribbean and about 15 percent are interested in Mexico. Overall, outside the US, Mexico, the Caribbean and Canada are the fast-growing vacation ownership venues in the world.
Not oblivious of the US financial disaster, these destinations are still enjoying their fair share of timeshare guests.
Richard Corso, CEO, The Royal Resorts said that sales numbers have not gone south at the Mexican resorts. But certainly the island of St. Martin has seen sales decline almost 20 percent as well as slower pace of development. “Twenty percent is not that serious, but we’re more worried about how one third in receivables of the portfolio is doing. Ahead we may see an increase in delinquencies in timeshare. Delinquency upticked slightly but to a level of no real concern to us. Timeshare is extremely versatile. People are flipping back into whole ownership at the time-being as timeshare sales continue to decline,” he said.
A number of resort developers armed up for “ugly 2009.” Jim Walters, vice president development, Glacier Lake Development Corp., said that with what’s been happening in the market, a lot of developers have been taking measures to react to what’s coming. Walters said, “We also look at how markets performed in 2006 and 2007 which were phenomenal years with great sales, plenty of cash around and people were buying. Today, their sales may be flat for 2008 and if it could be flat in 2009 too, they may just be fine with that!”
Industry executives are now looking for cost-cutting strategies. In general however, Walters said he looks forward to a better 2009 with resorts in Mexico, Central and South America. “Over there, they have access to money. They can build and finance themselves though this credit issue is alien to them. They are however working harder despite seeing no impact at all to their market. They have taken the necessary measures to prepare for the future.”
Few whole ownership programs have issues. “With the $1 to $2 mullion products we have, the US customers are no longer there. But having the international diversity has provided mobility and business in Europe, Canada and Costa Rica rather than if we were just a single location product relying heavily on the US market,” added Walters.
“We do best in tough times. Most of our deals are being made this year more than last year. Cash flow-wise, we’re seeing budgets in smaller projects. Two years ago, we had a hard time selling the small stuff. Now we’re going back to the front,” further said Glacier’s head.
According to Corso, even if revenue is falling 15-20 percent today, the industry is still so much ahead of compared to just a few years ago.
Walters said his biggest fear is if the credit crunch will later affect the islands. “Because the islands have airlines that are bankrupt, run high costs, and airline tickets are very expensive, islands could be at risk. But if they don’t get the US consumer, they will be in trouble. So we got to make sure the US consumer can get there,” he said. Airlifts should remain intact in the Caribbean for business to go on.
According to Peter Yesawich, CEO, Ypartnership, 2008 average travels to the Caribbean has gone down to 12 percent. “Interest waned due to higher price values and fewer flights. Last month, American airlines flights to the Caribbean went down form 33 to 20 today,” he said.
Access to Cancun versus St. Martin raises fear. “It’s much more difficult and more expensive to get to St. Martin at this time of the year from the US. For Cancun, there’s a very slight decrease with the number of tourists, not just due to timeshare and some ‘emotional’ decisions. Some are looking back to their financial positions and being cautious. God bless Americans who want to spend money and that vacations are part of their God-given rights. No business has nothing but positive growth forever. Efficiencies have gone down but we will see a rebound, whether in 2, 6 or 12 months…”
Our outside line has been less productive which has been good for us too because it is where the efficiencies as supposedly impacted, Walters said. “Compared to our boom years, our in-house business is highly satisfactory. It doesn’t portend if the economy keeps falling,” said Walters who added their . Belize resorts today have limited appeal – as people have to get there. Belize is a challenge in the villa-resort type design concept . Employee issue is something that we also consider when expanding abroad…We start looking at fractionals with 13-weeks of usage; the good thing about fractionals is we still treat it as real estate not vacation package. Hopefully, it stays recession proof,” he said.
Industry leaders disclose that Mexico has access to local banks and US lender involvement. Central America gets sustained by their local banks. The Caribbean has a real mix of large banks and some developers are actually banks themselves. Puerto Rico can get plenty of local financing. There will be capital source to get by despite the US crisis. However, the US consumer is going to be in absentia for a longer time to come.