Will Short-Term Rentals Kill The Timeshare Industry?

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Will the recent rise and availability of short-term vacation rentals seen from countless startups kill the timeshare industry?

Consumers have become more demanding and are opting for flexible travel arrangements and accommodations, which have never been easier to acquire. That juxtaposition would logically cause investors to assume death was imminent for the inflexible, outdated timeshare model.

Timeshares Don't Align With Millennial Values

Joe Liebke, CEO of luxury vacation rental service Villaway, does not see the timeshare industry's business model or values aligning with the millennial consumer.

“The new generation is a very travel oriented generation,” Liebke told Benzinga. “I do think, to this generation, alternative accommodations are just their movement. Today you have options and flexibility. The problem with timeshares is that they are so pre-packed with fees.”

“Now there are more business models to allow people to travel and take advantage of real estate. The flexibility is huge and I don't think you can get that flexibility with a timeshare,” he added.

Is The Timeshare Industry Dead?

Cliff Johnson, co-founder and chief development officer of Vacasa, the second biggest player in the alternative accommodation space, chimed in.

Benzinga: Why do you think people are gravitating away from timeshares?

Cliff Johnson: I believe many people have been burned by timeshares in the past or know someone who has, so the industry has taken on a negative connotation. I also think people inherently think of timeshares as a restriction on their travel, and today's travelers value as much freedom as possible.

BZ: Why do you think people are opting for vacation rentals more than ever?

Johnson: Vacation rentals come in all forms — from condos to cabins to expansive beach villas — so there is really something for every type of traveler and group. I think people prefer the unique experience that a vacation rental provides and enjoy the ability to spend more time together as a group with the right amenities in the right location. Common vacation-rental features like shared living spaces and fully stocked kitchens bring people together comfortably, and we find that consumers are drawn to that.

BZ: Where do you see the timeshare industry in five years?

Johnson: I predict that the timeshare industry will continue to decline in the coming years, and I expect it to be replaced by a more varied travel industry. This varied industry will include alternative accommodation options like Vacasa or Airbnb, but also a rise in fractional ownership or crowd sourced funding with a twist (like https://fundrise.com/) that allows people to use a pool of vacation homes that they are investing in for a discount. This would flip the switch on timeshares, making shared ownership a real investment as opposed to a financial drain.

BZ: Anything else you'd like to add?

Johnson: I see a lot of opportunity for timeshare companies to "make things right" and repurpose existing timeshare inventory as vacation rentals that have sole or fractional ownership, or as a crowd funded investment pool.

The Big Takeaway

With the millennial generations reluctance towards ownership and commitment, it is clear that the time-share industry must adapt their business model to appeal to a younger generation that is very travel oriented. Timeshare’s are generally sold in perpetuity and it can be difficult to get out of them.

Timeshare Industry Figures

Wyndham Worldwide Corporation WYN provided Benzinga with the following figures, supported by ARDA:

  • Currently 1,547 timeshare resorts in the U.S., with 200,720 total units.
  • 9.2 million timeshares are owned in the U.S.
  • U.S. vacation ownership sales represent $8.6 billion.
  • The industry has seen sales growth for six consecutive years — it was up 9 percent year over year from 2014–2015 (2016 stats expected later this summer).
  • Average timeshare owner demographics:
    • Average age: 47
    • 63 percent college educated or higher.
    • 68 percent married.
    • 56 percent no children at home.

But, new owners are shifting the needle on demographics.

  • 39 percent are Gen Xers; 30 percent are millennials.
  • Median age: 39.
  • 42 percent are African American or Hispanic.
  • 72 percent are college educated or higher

According to figures from ARDA, the American Resort Development Association, the U.S. Vacation ownership sales come in at $8.6 billion annually.

Future Outlook

The industry has seen sales growth for six consecutive years, although 2016 statistics have yet to be released. With vacation rental startups starting to get mainstream adoption, it is likely that this trend could reverse if the industry does not respond and adapt its business model to the current consumer.

“I expect the timeshare market to continue to decline. Timeshares were once an economical way for people to own a part of a vacation rental in the past. Now, with the ability to buy a vacation rental and then rent it out when they are not using it, the need and demand for this type of ownership is decreasing,” said Debi Steigerwald, director of marketing operations at Vacasa.

Related Links:

This Startup Is Utilizing Machine Learning And AI To Determine Vacation Rental Pricing

Airbnb Vs. Accor: The Battle For Vacation Rental Market Supremacy

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Posted In: TravelTop StoriesExclusivesTechInterviewGeneralReal Estatealternative accomodationsardaCliff johnsondebi steigerwaldJoe LiebketimesharesVacasaVILLAWAY
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