Canadian Resort Development Association’s Resort Development Summit Reports Positive Trends; Economy Has Affected Consumers ‘Differently’ than Their American Counterparts
By Steve Luba
Opportunity exists for the timeshare and fractional industry in the Canadian marketplace according to a consumer survey released at the Canadian Resort Development Association’s Resort Development Summit in Toronto, Canada.
Approximately 120 industry representatives gathered for the conference on Thursday, October 14th to hear the latest developments in the Canadian shared ownership industry. Attendees were given the results of a survey, commissioned by CRDA and conducted by the research firm Ipsos Reid, which discovered that 80% of Canadians know about timeshare but 72% have not been exposed to offers for the product and 68% have never attended a timeshare presentation.
The perception of shared ownership has also remained relatively positive in Canada, as 89% of those surveyed said that their opinion of the product is either the same or better than it was 10 years ago.
Such statistics indicate that the Canadian marketplace is open to the good news of vacation ownership.
Of those Canadian consumers who have been offered the product, direct mail was cited as the most influential method of contact but outreach over the phone seemed to be a turnoff for Canadians. About 45% of those surveyed sought their information from the Internet and another 37% primarily from friends and family.
As expected, the economy was the primary topic of conversation and conference speakers acknowledged that the marketplace is slowly emerging from the effects of the recession. However, the impact has affected Canadians somewhat differently than their American counterparts according to CRDA president and CEO, Ross Perlmutter.
“The [housing] prices have dipped slightly, but nothing like we’ve seen in the states, so I don’t think people have had the same impact of ‘oh wow, my personal wealth dropped.’ But their personal wealth measured by investments definitely took a hit in a major way and I think that may have had a deeper psychological effect on people than the home values,” said Perlmutter. “The banks are strictly regulated up here, but they still invested in U.S. bonds and invested in U.S. financial products, so they definitely felt it.” [member]
Perlmutter added that some of the difficulty in the industry may be due to perception and a lack of confidence rather than a problem with the fundamentals of the business model.
“It’s a challenging environment and I wonder how much of it truly is in our heads and how much of it is for real. I assume and believe that it is real but, quite frankly, one of the biggest hurdles that we have to get over is this idea of this crisis of confidence that we’re dealing with ourselves,” Perlmutter said. “You ask people and they seem to be interested in the product. People are still traveling, they’re spending money, they’re buying cars. You have to be careful of what you read in the papers and we seem to be our own worst victim in a lot of cases.”
Delegates heard encouraging news from the U.S. as Howard Nusbaum, president and CEO of the American Resort Development Association, delivered the keynote address of the conference. He stated that the average sale price per interval increased slightly to $20,468 at a time real estate prices have fallen across the country. Occupancy rates continue to hover around the 80% mark, about 90% of timeshare owners with mortgages are current with their payments and 87% of owners are current with their maintenance fees.
The satisfaction rate for shared ownership products continues to be an impressive 84%, with a timeshare owner’s average age of 52 and median household income of just over $78,000 per year.
Regarding new consumer loans for vacation ownership products, Nusbaum added that interest rates are up slightly to 14.3% with increased down payments of nearly 20% now being required of consumers looking to finance their purchase.
Nusbaum also explained that ARDA is looking to change its membership criteria to further promote the positive aspects of vacation ownership. While details are still being worked out, the overall message is that companies who do not promote the product in a positive light will not be allowed to be members of ARDA in the future. This is seen as a way for ARDA to not allow those companies engaged in controversial resale activities to use the credibility of the association as a way to enhance their image.
Other areas discussed at the conference were ways to save money through administrative changes, creative ideas to generate revenue, the need to tackle problems in the resale market and using social media as a customer service outreach tool. One resort saved over $1,000 per month just by adjusting their trash pick-up schedule while another spoke of using renovations as a way to improve the collection of maintenance fees.
Regarding resales, conference speakers examined the issues and potential strategies going forward. ARDA is working on a model resales act that can help states in the U.S. establish regulatory requirements for oversight of resale companies. The consensus from the delegates was that resales need to be addressed in a constructive manner, according to Andrew Pearson, Chairman of British Columbia developer Aviawest.
“When somebody needs out, (we need) to find out that they really mean it. Do they want out because they need the money or do they want out because the thing’s not working and we haven’t done a good enough job for them,” said Pearson. “That’s a real important distinction. If you find out that they want to get (buyer) interest because we haven’t done a good job for them, then that’s something we can correct.”
The creation of short term shared ownership products was also a hot topic, with ideas being discussed such as trial memberships and a 3-year product with owner renewals at the end of the ownership period. However, short term products have inherent taxation and regulatory problems that need to be ironed out, according to Rob Webb, a partner at Baker Hostetler and a top legal advisor to the industry.
“There’s really a limit to how much you can regulate them. Something that has a term of less than [three years], it’s hard to say you have to go anywhere near the length that you do with timeshare in terms of protecting the consumer,” said Webb. “You’ve also got a huge problem with taxes. You’re going to be paying sales and use tax on that product in almost every jurisdiction [in the U.S.] that you don’t have to pay with timeshare.”
Challenges are also present for resort sales teams due to the information accessible over the internet, where some potential buyers may know more about a resort than the salesperson across the table. Such situations can be addressed through adapting sales strategies and acknowledging the realities of today’s marketplace. According to Shari Levitin, CEO of The Levitin Group and a consultant to some of the top brands in the industry, the process is the key.
“If we make the product look too good, we lose our credibility. If we don’t tell the customer the bad news, they will not believe the good news,” said Levitin. “What happens when the customer comes in armed with that information, very often the salesperson gets nervous and they deviate from their process and that’s where the challenge comes in.”
Levitin added that “a salesperson does a discovery so they can see not only what the customer knows but how they feel about what they know, and that’s really the key.
So if a customer comes in armed with lots of information, this gives the salesperson the ability to say, ‘Great, I’m so glad that you know that. How do you feel about it? What concerns do you have?’ And they still have to go back to their discovery process.”
Despite the slowdown, CRDA has grown as an organization by attracting fractional developers and taking advantage of Canada’s improved economic fundamentals, according to Perlmutter.
“We’re fortunate this year to have the fractionals come to us and we embrace the fractionals. I see a lot of room for growth in the fractionals,” said Perlmutter. “They’ve found themselves legislatively in the exact same position as timeshares. They realize that there is a need for one voice, so we definitely see growth in that area.”
“We’ve done extremely well with U.S. companies becoming CRDA members and I think part of that is our dollar is at par [with the U.S. dollar]. Consumers here are credit worthy, they don’t tend to, historically and culturally, default on loans, so they are very interested in Canadian prospects,” Perlmutter said.
Attendees certainly had a busy schedule with nine sessions to choose from throughout the day. Perlmutter added that the packed agenda led to stimulating and informative discussions which produced an effective conference.
“There was a lot of energy in the room … I found it to be a lot more intense and a lot more engaging with the people. The response I’ve received from the attendees has been extremely positive and I think it just bodes well for the future that people were so engaged in the sessions we had this year,” Perlmutter said. [/member]