Industry Insights Blog

Industry Insights Blog
Timeshare sales
Your exchange guest should be your next prospect
May 6, 2015
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Bob McGrath
Vice President, Business Development

I’ve heard it time and again over the years: “Bob, exchange guests just don’t buy…” 

Timeshare sales and marketing teams are constantly looking for the next big “win.” In certain markets, it’s like an arms race, as resort A outspends resort B for marketing locations or marketing programs.

After all, to increase your sales performance, you basically have three options: 1) increase the number of prospects you see, 2) increase your conversion rate or sales prices on the prospects you are already seeing, or 3) decrease the overall cost of sale. Historically, conversion rates seem to have a ceiling that many developers have already hit. And because timeshare is not considered a “sought good,” cost of sale decreases are always challenging due to higher marketing expenses.Insert text here

So that leaves lead generation. The primary emphasis tends to be on finding ways to book more qualified tours, see more families and have more opportunities to tell a compelling vacation ownership story.

However, sometimes sales lines overlook one of the easiest lead generation sources: timeshare exchange.

Traditionally, many developers or sales executives write that segment off. “They already own.” “They’re hard sells.” “You can only use so many weeks or points.”

But the numbers tell an interesting story. While you may not see the same close rates that you would enjoy with a non-exchanger, the efficiencies you can achieve may make it worth another look.

Here’s a hypothetical example*: Consider 100 tours a month coming from various sources (OPCs, mini-vac packages, etc…) with a marketing expense of $500 per tour. If the sales price for each interval is $15,000, here’s how that scenario might look for that month:

NET CLOSE RATE
(POST-RESCISSION)

12%

TOTAL GROSS SALES REVENUE

$180,000

TOTAL MARKETING EXPENSE
FOR 100 TOURS

$50,000 (APPROXIMATELY
28 PERCENT
OF GROSS SALES)

GROSS SALES revenue
LESS MARKETING EXPENSE

$130,000
($10,833 PER SALE)

 

But, how would those numbers look when we take a group of 100 exchange guests in a month? First of all, we do know a few things about exchange guests: generally, they already own a vacation product, so they have been through the sales process before and are generally more comfortable with the product. Best of all, they are being delivered to the property through an exchange, so the cost of acquisition of the tour is dramatically reduced. The costs associated with most front-line lead generation (phone rooms, booth costs, staffing, marketing commissions, admin support, etc.) are all removed or greatly reduced.

Let’s look at the same hypothetical example, but using timeshare exchange guests. Let’s suppose the marketing expense per tour is 25 percent of the expense for the previous case. Let’s also suppose that the assumptions about exchange guests prove to be true and that these tours are significantly harder to close. How is that impacting your sales?

NET CLOSE RATE
(POST-RESCISSION)

5%

TOTAL GROSS SALES REVENUE

$75,000

TOTAL MARKETING EXPENSE
FOR 100 TOURS

$12,500 (APPROXIMATELY
17 PERCENT
OF GROSS SALES)

GROSS SALES revenue
LESS MARKETING EXPENSE

$62,500
($12,500 PER SALE)

 

So, even if we assume the exchange guest tours close at a rate that is about 60% less (5% close versus 12% close) than a traditionally acquired tour, they would still provide a greater marketing efficiency because the marketing expense per sales is significantly lower. Carrying those results out over the course of a full year would generate a total of $900,000 in additional gross sales, and at a greatly reduced cost. Yes, you will probably get fewer net sales when compared to more traditional tour-generation channels. But you're not spending additional marketing dollars to help bring the exchange guest to your resort, so you are getting additional qualified traffic at significantly lower cost.

I’ve seen sales teams that are excited to learn their mini-vac is already an owner, but virtually ignore the timeshare owner staying at (and enjoying) the property who came in through an exchange. The only real difference between the two is our perception.

Exchange guests don’t always fit the traditional profile of the “ideal” prospect, but they’re still an inexpensive source of qualified tours who are predisposed to purchasing vacation products, and a segment that can provide significant incremental revenue for your company. Will every exchange guest buy another timeshare? No. Are they worth the try? Absolutely, yes.

Bob McGrath is vice president of business development at RCI with 23 years’ experience in the timeshare industry.

 

*Rates and percentages used in the examples above are hypothetical and not intended to guarantee a specific result. They are used strictly for illustrative purposes.