Introduction and Decription of the (changing) Landscape and (challenging) Marketspace of the International Service Indjustry

INTRODUCTION AND DECRIPTION OF THE (CHANGING) LANDSCAPE AND (CHALLENGING) MARKETSPACE OF THE INTERNATIONAL SERVICE INDJUSTRY (AND/OR SERVICE SECTOR)

Vacation ownership better known as timeshare continues to outperform the hospitality and leisure market.  What turns out to be the main factor in the industries continues innovation and improvement are the constant changes in the consumer’s lifestyle and needs. This market was once dominated by private seller selling one week intervals, but is now actively developed by hospitality companies offering different price points in different resort and destinations. Key factors that are currently influencing the growth of this market include the increase of the high-net-worth individual (hnwi) and employed population, combined with increasing demand in leisure and recreation, increasing internet penetration. The growth is more noticeable in the eco-friendly timeshare resorts; however this growth is being hindered by the low resale value and stringent government regulations.

The vacation ownership industry, has evolved in terms of sales volume, number of consumers and array of developers that have entered the field, and more importantly product lines and the diversity of product designs have expanded over time as well (Upchurch, 2002). Many operators have chosen to develop timeshare alongside traditional hotel or other holiday accommodation developments. These projects have been referred to as ‘mixed use’ resorts and this has already proved to be a winning formula in other markets, especially the United States (Sharma & Chowdhary, 2012). Timeshare first started from fixed unit, to a more flexible arrangement, the float weeks and ultimately the purchasing of points which allows the owner to exchange and trade weeks, units, and seasons (Kaufman, Lashley, & Schreier, 2009).

Many owners are interested in timeshare ownership because of the many opportunities that exist. In most cases, a resort becomes affiliated with one or more major exchange companies which organizes the exchange transactions for resort owners (Kaufman et al., 2009). The two widely known organizations that dominate the exchange business are: Resort Condominiums International (RCI) and Interval International (II). RCI is the bigger organization with more affiliated resorts, consumers serviced, a larger stock of weeks, as well as a larger number of confirmed exchanges (ARDA, 2002). The timeshare product was sold primarily as a fixed type of arrangement in which the consumer held the rights to use a specific unit during a specific week per year (Upchurch, 2002). As the consumer became more demanding, the float system emerged enabling the user to use a specific unit while the week ‘floated’, thus giving consumers more flexibility. According to WTO (1997), the future growth within the timeshare industry is likely to emanate from three factors i.e. the emergence of new types of timeshare products such as the point system, the emergence of new markets for the timeshare product and the expansion of existing timeshare markets. The latest revolution is the points system in vacation clubs where consumers can simply purchase or gain points to satisfy vacation needs (Kaufman et al., 2009).  

Vacation ownership product and processes are changing. The majority of the vacation ownership industry comprises independent or small companies. Recent years have seen the entry of multinational hotel companies. These new players in the vacation ownership arena have dramatically changed the face of the industry. The product offerings alone have changed from sales of converted condominium units to purpose-built vacation destinations with intricate point systems allowing for trade of many travel related products. Betsy B. Stringam 2009

Product

Overwhelmingly, the greatest strength of the vacation ownership industry is the flexibility of the product.  The vacation ownership industry has embraced product development and product extension strategies. The product has evolved from a fixed-week, fixed-unit real estate purchase to an evolving travel currency that can be used to enjoy many different travel products for varying lengths of time. Vacation ownership developers and players within the organizations have shown a great ability to ascertain consumer travel needs and wants, and to develop product to meet these travel preferences. The flexibility of product, point systems, lock offs, exchanges or trade with point currency are just some examples of the creative product developed in recent years’. Primary strengths to the industry are changes to week structure or calendar, changes to units, and changes to exchange product or process. Travel patterns of consumers have changed over the past 20 years, with fewer people taking an annual weeklong vacation and more taking more frequent, shorter vacations. This led to a demand for a split week. Many vacation ownership exchanges now allow the week to be subdivided into several stays of several days each. In a similar division of product, vacation ownership units are being developed with lock-off units, which can be divided or locked off similarly to a connecting room in a hotel, allowing owners to use part of a unit for their stay and accruing or using the other portion for another time or stay. Inspired by the plethora of travel offerings of hotel and airline frequent traveler programs, vacation owners sought to exchange the vacation ownership product for additional travel products. This led to the introduction of cruises, rental cars and many other travel products that can be exchanged for the vacation ownership week. Betsy B. Stringam 2009

Human capital

A discussion of the changing product in vacation ownership would not be complete without the inclusion of human capital. Perhaps the greatest strength is the people, their ability to anticipate the changing needs of the consumer and their tremendous creativity in developing product and exchange to meet those needs. Betsy B. Stringam 2009

Marketing

The marketing model used to sell most vacation ownership units is a considerable weakness. The sales process is in need of significant reengineering. The current sales models incur high costs, and strong

consumer dislike of the sales process. The marketing models employ consisted of transactional and relationship sales. The vacation ownership industry has not embraced target selling or the process of selling to an individual in the manner that the individual desires. Current sales processes include tour schedules that are typically arranged according to the needs and convenience of the resort and not the customer. Betsy B. Stringam 2009

Taxation / legal

Vacation ownership presents a complicated model for taxation and legislation. As vacation ownership products are exchanged for points or other travel products, it becomes currency or a transparent product, which is then taxed’. According to an timeshare executive:  ‘timeshare is regulated as real estate, taxed as real estate but it is really a tourism product’. Several communities have already faced legislation that sought to tax the vacation ownership product as hotel rooms. Executives involved in legislative arenas anticipate further attempts at taxation as the product evolves. Betsy B. Stringam 2009