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Diller adds to travel holdings
By MARK ALBRIGHT, Times Staff Writer Barry Diller's USA Interactive Inc. said Friday it would buy the nation's second-largest time-sharing exchange for $578-million in cash and stock. The deal is the latest in Diller's plan to create an e-commerce travel juggernaut that combines his ownership of Expedia and hotels.com with a new cable TV travel channel that would air from Home Shopping Network's studios in St. Petersburg. Diller is buying Interval International Inc. of Miami, an exchange where 1.3-million owners of time-share units can swap their vacation time within a network of 1,900 resorts around the world. Unit owners call toll-free numbers or use a Web site to make swaps that fetch a transaction fee of $121 to $141 for Interval International. "USA Interactive is a travel services intermediary, and so are we," said Craig Nash, chief executive of Interval International, a 26-year-old time-sharing pioneer that employs 1,700 people in 28 countries. Company officials declined to reveal closely held Interval International's revenues for 2001 but said the exchange is profitable. Diller projected the exchange, which is second in market share to Cendant Corp.'s RCI unit of Fort Lauderdale, would generate $220-million in revenue and $60-million in pretax operating income in fiscal 2003. Diller envisions USA Interactive, which sells everything from cubic zirconia to concert tickets and matchmaking services online, expanding Interval International's multimedia capability and exposure. Typically a time-sharing resort developer signs with an exchange, using the service as a marketing tool to sell units that on average fetch about $15,000. The exchange membership, which entitles the owner to swap vacation weeks at other time-sharing resorts, usually lasts a year before the unit owner must pay for renewal. Diller, however, is talking about opening up time-sharing resort vacations to nonowners as well for the first time. "Exchanges are best served with the largest exchange audience, presuming the customers are getting the service they need," he said. Some analysts were intrigued by the direct marketing possibilities. "Once you know where people will be and when, you can start hitting them with offers for plane tickets or sporting events. Plus this opens the door for open exchanges in general, the way Ticketmaster is experimenting with the sale of unused event tickets," said Peter Mirsky, an analyst with SG Cowen Securities Corp. The time-sharing industry has earned a tarnished reputation because units were frequently sold through high-pressure sales techniques and telemarketing and direct mail come-ons. In the early days many resorts were unsold condominiums or old beach hotels given a cosmetic overhaul. In the past decade the industry has cleaned up its act. Many big hotel operators, including Marriott International, Hilton Hotels, Hyatt Corp. and Walt Disney Co., are operating their own time-sharing resorts. The industry, which was created during the 1974 recession, also fared better during recessions than traditional hotels, largely because customers prepaid for their vacation time years in advance. "Our occupancy rates sank to the 50 percent range after Sept. 11, while the hotel industry was down in the teens," Nash said. -- Times staff writer Kris Hundley contributed to this report. Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.
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From the Times Business report
From the AP
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