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Better times

The once-notorious time-share industry has cleaned up its act, and even major hotel chains are getting in on the boom.

By MARK ALBRIGHT, Times Staff Writer
© St. Petersburg Times
published April 14, 2003


NORTH REDINGTON BEACH -- Jack Hogg spent $95,000 tying up the penthouse at the Grand Shores West Resort here for 13 weeks every winter.

His two-bedroom time-sharing unit has a sweeping view of the gulf, a wet bar, a chandelier hanging over the dining room table and a Jacuzzi tub.

"I've stayed at the Don Cesar and rented condos at Hilton Head, but nothing compares to this," said the 73-year-old Canadian insurance broker, who has spent 10 winters at the time share. "It's cheaper than a hotel room. I know exactly where I'm going when I leave Ottawa for Florida every winter. This feels like home."

Recession, terrorism and war may have sent the tourist industry reeling the past two years. But time-sharing resorts barely missed a beat. While the hotel business slumped, sales of time shares rose 14.5 percent to $5.5-billion in 2002, and unit sales volume increased 7 percent, according to the American Resort Development Association, the industry's trade group.

"We had some cancellations when the war began, but it quickly stabilized. We lost no sales," said John Burlingame, who heads Hyatt Vacation Ownership, which has eight resorts and is opening four more this year, including one in Naples. "A few years ago people were ashamed to say they worked in time sharing. Now it's a viable part of the hotel business."

Once the tawdry stepchild of the hospitality business, the time-sharing industry claims it has largely cleaned up its act since the hardball, frequently questionable sales tactics of the 1980s. While a time share usually proves an abysmal investment that's harder to ditch than a summer cold, the industry has found a loyal and growing audience. Together, major hotel companies now control more than half the market. Marriott and Hyatt even mix time-share villas into some of their new conventional hotel resorts.

The hotel chains aren't just fearful of losing hotel regulars who switch to time share. They're salivating over estimates that only 5.3 percent of the time-share market has been tapped. The average buyer is 55 years old, an age 75-million baby boomers will reach in the next 20 years.

Florida has 27,600 time-sharing units, more than any other state. About 70 percent of them are in Orlando, where every hotel and shopping center seems to have someone swapping discounted theme park tickets to anyone willing to endure a sales pitch.

Industry veterans are puzzled that the time-sharing development boom of recent years has bypassed the Tampa Bay area. Pinellas County's beaches were among the first big time-share markets in the United States in the early 1980s. Yet today's 31 resorts and 1,194 time-sharing units are essentially the same numbers as 15 years ago.

There are signs the Tampa Bay market may be coming out of its slumber.

Hotel owners are pondering whether to lease some of their rooms to time-share marketers in order to hedge their risks in future downturns. The TradeWinds Islands Resort on St. Pete Beachis negotiating to convert as many as 200 of its 1,150 suites into time-sharing units marketed through a vacation club run by Bluegreen Corp. of Boca Raton.

Hyatt Vacation Ownership recently moved its 40-person national administrative headquarters to St. Petersburg. American Vacation Resorts Inc., a vacation club that runs five resorts, moved its headquarters to Dunedin and relaunched as the 41-unit Belleair Beach Club, a time-sharing complex that went bankrupt years ago after selling only nine units. And Marriott is scouting the beaches.

"We just haven't gotten the right opportunity," said Ed Kinney, spokesman for Marriott Vacation Club, which is headquartered in Orlando.

* * *

Time sharing has evolved dramatically from its origin in the Swiss and French Alps in 1964.

The form of ownership was created so wealthy Europeans could buy extended annual stays in chi-chi ski resorts without having to buy a second home.

They split the cost of a well-appointed suite or townhouse among several owners every year.

By the late 1970s, real estate entrepreneurs brought the idea to the United States. They used it in places like Pinellas to whittle down a glut of beach condominiums and turn dated mom-and-pop beach hotels into cash cows.

Time-share marketing companies swarmed the Pinellas beaches dangling prizes to attract people to sit through a high-pressure sales pitch on the virtues of buying a week's vacation forever.

The 1950s-vintage Glades Hotel in North Redington Beach, for example, became Grand Shores West in 1981 after a $1.5-million remodeling.

"It was wild back then," remembered Bobby Papolos, general partner of Grand Shores West. "A marketing company would run 200 people a day through here. People working the beach got $80 to $90 a head bringing them in. All the time-sharing resorts were wheeling and dealing out free weeks and no-money-down deals. But the marketing companies made their money selling out the peak season units and left. Then the developers bailed out, and banks ran them for a while. Finally, the owners' associations and new developers came in to pick up the pieces."

The worst of the high-pressure tactics disappeared when Florida law gave buyers a 10-day cooling-off period to cancel a sale.

"We have a different philosophy," said Papolos, who still has 2,000 off-season weeks to sell of the original 6,000 but is 85 percent full year-round thanks to renters. "My sales pitch takes 15 minutes. If people like staying here, they'll buy. The best prospects are people whose friends or relatives already own here."

In fact, 40 percent of time-share buyers are already owners.

Papolos spurns traditional time-sharing come-ons such as free meals and attractions tickets. Because Grand Shores West is a budget property, he's kept the annual maintenance fee low at $215 this year, half the industry average of $456. The only advertising is an occasional ad in small newspapers in towns where current owners live.

His complex has its own seasonal pattern. The Canadians dominate in March. They give way to New Englanders as March turns into April, then people from upper Michigan take over.

About a quarter of the owners are Tampa Bay area residents who use the place as a year-round beach club for their families. Among the amenities: a place to change, a heated pool, free sea kayaks and a catamaran.

"I can't compete with all the amenities the Hyatts and the Marriotts have," said Papolos.

Marriott, for instance, now has four time-share products, from the budget-priced Horizons that start at $12,800 a week to $500,000 for 28 days in a deluxe villa at the Ritz-Carlton Grand Reserve in Aspen.

Marriott built its Horizons in Orlando to appeal to families that drive to the theme park mecca. The two-bedroom units sleep eight. They are decorated like homes rather than hotel rooms with duvets and coverlets, pricy plumbing fixtures and cozy breakfast hutches. Instead of a hotel pool, Marriott commissioned three pirate-themed pools worthy of a water park.

Guest research prompted Marriott to add a car wash, restaurants and a 150-seat first-run movie theater because families on the road prefer to steer clear of unfamiliar streets at night.

Resorts are designed for potential buyers, too. On a busy day 120 gawking prospects wander through. So villas are laid out to be seen fast and flashy.

"You must have killer bathrooms with lots of marble counter tops and hot tubs in the luxury units," said Richard Hurlbert, a Vancouver, B.C., architect who specializes in time-share resorts. "But you need a circular traffic pattern through the entire unit. Otherwise tours dead-end at a toilet."

After concentrating on ski resorts and entertainment spots such as Orlando and Las Vegas, the industry is shifting to beaches. The Pinellas beaches have so far been bypassed because the big hotel chains cannot assemble enough land.

Their economics don't work with building restrictions that require clearing out six to eight old motels for a 300-unit resort.

"We've talked to every chain, and none can justify paying $100,000 a unit just to level a motel," said Tony DeGeorge, president of Greene, Canfield and DeGeorge, a Clearwater hotel broker.

* * *

Time sharing has morphed several times in its first 39 years. In the old days, complexes sold a deed to use a suite for the same week every year.

Now, most of them sell points loaded down with a bewildering set of fees, waiting lists and rules on cashing them in. Buyers can vacation at their "home resort" or at others owned by the same chain or pay still more fees to swap among 5,400 time-share resorts spread around the world through two big exchanges.

Originally conceived by Walt Disney Co.'s time-sharing unit, the points systems added flexibility. Now owners can split vacations into shorter trips taken any time of the year. They can stay in any price range. Some hotel chains convert time-sharing points into currency that can be spent in their hotels.

"You can even cash in points for airline tickets, cruises and other travel services," said Marianne Myers, president of American Vacation Resorts.

The points system increased the clout of the two time-share exchanges, which generated $2-billion in revenues in 2002, mostly from fees. The biggest is RCI, owned by Cendant, which franchises the TrendWest, Fairfeld and Ramada brands. Interval International, which is about half as big, was acquired last year by Barry Diller's USA Interactive, the owner of Ticketmaster and Home Shopping Network. Because one vacation clubs' points are valued differently from another's, the exchanges are becoming the industry's arbiter of value.

The confusing rules have helped make what was a tough sale even harder for comparison shopping.

The big-name hotel chains are credited with leading the industry to ease off the hard sell.

"The Marriott philosophy is to keep a customer for life," spokesman Kinney said. "We do not want to do anything that endangers that relationship."

But potential buyers evidently think there's still room for improvement. According to one survey in 2002, about 23 percent of customers had a negative perception of the time-share industry before hearing a sales pitch. After a sales pitch, that rose to 40 percent.

"The industry is still not doing it right," said Richard Ragatz, the market researcher. "They need to be more subtle and not fall into the trap of pressure, pressure, pressure."

Even Marriott sales pitches can feel like a determined auto salesman's.

At the Orlando Horizons, Marriott salesman Steve Wilson caught up with a couple headed for the door.

"I'm just trying to get you to open your wallet a little wider," he said, "and treat yourself to the level of comfort you truly deserve."

-- Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

The cost of the come-on

Time-sharing resorts generate huge amounts of cash but remain a tough sale to consumers. As a result, up to half the cost of each unit goes to marketing. If a new 200-unit project sold out, it would generate $153-million in cash. However, about $76-million of that goes to sales commissions and come-ons used to prod prospects to sit through 90-minute sales pitches. Here's how it breaks down:

Response to telemarketing and mailed invitations: One in 200

Cost of goodies such as hotel bills, meals and theme park tickets to get prospects to attend a sales pitch: $200 to $500 each.

Prospects who admit they are only there for the freebies: One in four.

Actual buyers: One in 10 of those who endured a sales pitch.

Who buys time sharing?

Average age: 55

Median household income: $80,000

Marital status: 84 percent married, 31 percent have children living at home.

Percentage of owners who bought more time sharing in 2002: 25 percent, with 59 percent saying they are interested in buying more.

Pluses: Certainty of quality accommodations and possibilities of exchange with other time-share resorts. Overall, 84 percent of owners say they are satisfied.

Dislikes: Prices, maintenance fees and sales pressure (23 percent had a negative image of the industry after being lured to a sales pitch, 40 percent after they heard a sales pitch).

What are the going rates?

Average one-time price paid for a week annually or the equivalent in points: $14,200

Average price of a resale: $5,000

Average annual maintenance fee: $456

Number of pitches attended before buying: 2.9

Default rate of buyers: less than 5 percent

Time-share states

Florida has more time sharing than any other state, and 70 percent of its units are in the Orlando area. (Pinellas County has 1,184 time-share units.)

Time-share units by state

Florida 27,600

South Carolina 12,010

California 11,850

Colorado 6,250

Virginia 5,560

Missouri 5,530

North Carolina 5,360

Nevada 5,000

Hawaii 4,800

Arizona 4,630

-- Sources: Raggatz Associates, American Resort Development Association, Plouff Equities, PricewaterhouseCoopers
Time sharing by the numbers
Time-sharing resorts generate huge amounts of money but remain a tough sale to consumers. As a result, up to half the cost of each unit goes to marketing.
graphic
Pluses: Certainty of quality accommodations and possibilities of exchange with other time-share resorts. Overall, 84 percent of owners say they are satisfied.

Minuses: Prices, maintenance fees and sales pressure (23 percent had a negative image of the industry before a sales pitch, 40 percent after they heard a sales pitch).

Source: Raggatz Associates, American Resort Development Association, Plouff Equities, PricewaterhouseCoopers

[Times art: Jeff Goerzen]


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