Affiliate News

By: James M. Casey
Senior Vice President,  Managing Director,
Commercial and Specialty Finance,
Capital One

The timeshare industry is all about giving consumers the chance to slow down and relax. But as a sector, it's anything but slack. In 2012, Capital One conducted its first annual vacation ownership survey at the American Resort Development Association (ARDA) World conference. Over the subsequent years, we've observed significant shifts in the industry’s outlook on financing, sales and other key trends. However, we’ve also seen the remarkable optimism and resilience the industry continues to offer investors.

In 2012, liquidity was a paramount concern for most timeshare professionals. More than fifty percent of survey respondents that year indicated access to capital as the top challenge for the industry. We heard multiple stories about developers facing challenges with regards to sourcing funds for their projects.

According to our most recent survey, the level of concern has plummeted, especially as new sources of funding such as non-bank entities and private equity have come available. We see this as positive evidence of the industry’s overall stability amidst economic pressures. Rather than simply declining in parallel with the economy, developers have been pleased to find (and capitalize on) investor interest.

Despite the uptick in liquidity, there's been a decline in the number of independent developers. This isn't because developers are leaving the industry. Rather, they’re being absorbed. Consolidation has been on the rise, with larger developers buying up the smaller businesses. Whether this will cause a "startup effect," wherein we see the formation of new developers whose primary aim is to be acquired, remains to be seen.

Our 2015 survey found a rising demand for construction financing as developers seek to build new properties, as well as expand and rehabilitate existing ones. Thirty-three percent of those surveyed cited construction and development lending as most important for the industry—nearly triple the 12 percent response in last year’s survey.

Themes of flexibility have trended upward in our prior surveys, and are at the forefront in 2015. Points-based programs, which allow for vacationers to enjoy different locations at different times of the year, are more popular than ever. Fifty percent of industry professionals expect points-based structures to generate the most interest in the next year, followed by travel club memberships.

There has been an increased interest in new and emerging markets, such as urban destinations – previously considered unorthodox locations for timeshares. Unsurprisingly, this emphasis on flexibility and non-traditional destinations has served to attract younger timeshare owners. Twenty percent of survey participants said adapting developments to attract younger vacationers was the trend that would gain the most momentum in the coming year. Certainly a good thing for an industry, which has struggled with perception issues at times.

Moving forward, we see points-based programs further increasing in popularity. Likewise, we also expect to see even more timeshare development in emerging markets and urban destinations. Not only have these shifts successfully tapped into a new customer base, but they are serving to dispel the notion that owning a timeshare means “the same single week in the same single place.”

Of course, in times of growth and in new markets, developers have valid concerns about whom they should market to, and where they should source their funding. As for the latter question, we hold strategic discussions with our clients to determine the best financing solution to meet their needs. Ultimately, lenders should be more than a mere source of dollars, but rather partners with a vested interest in their clients’ success.

James M. Casey is a senior vice president and managing director of Commercial and Specialty Finance at Capital One. In this role, Mr. Casey leads the bank’s vacation ownership lending platforms, which provide notes receivable and other financing products to resort developers.

 

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