City Insider: Beware the reinvented timeshare

City Insider - A City perspective on the travel industry from FT journalist David Stevenson

The art of reinvention is one of the most precious skills in modern business.

By and large everything has been done before – in one form or another – and the art of the possible in business increasingly hinges on getting consumers to pay more for something they’ve actually grown rather tired of in the past.

This marketing infused art form of reinvention will soon be needed on a truly epic scale on the beaches of Spain and Portugal as hotel operators are forced to spruce up a huge tidal wave of 1960s and 1970s built hotel complexes.

Arguably reinvention is also constantly in demand within the core of the travel industry itself  – redefining and reinventing the package holiday is essential to the survival of the sector with the all inclusive family resort complete with extra sports facilities the latest and best example.

But travel industry execs might want to look to allied sectors for inspiration and new ideas, with the timeshare sector offering some especially insightful examples. Obviously the reinvention needs to start with a name change followed closely by a business model restructure.

For really big operators like Marriott timeshare as a term is a thing of the past and fractional ownership is the new ‘new’ thing. But it’s obviously more than just a name change – the business structure has also been changing fast. New operators like Rocksure and the Hideaways Club for instance have been pioneering a particularly innovative model here in the UK, incorporating a range of properties within what is in effect a syndicate of property owners, structured around a club of some form.

The key distinction is that actual ownership of the properties rests with the fractional investor’s who collectively own the property which is in turn managed by the likes of Rocksure and Hideaways.

Obviously these managers aren’t charitable institutions and make their money by capturing some of the upside in the value of the properties, as well as making administration charges plus a cut of the rental income from selling on spare weeks.

But the key idea is indisputably innovative and obviously fairly alluring given the spate of recent product launches – pool your money with other wealthier investor’s and then buy a globally diversified range of properties, and aim to benefit from an increase in the value of these ‘special’ properties as well as enjoying more than a few holiday’s over the coming years.

In effect your holiday becomes something of a lifestyle investment for the future, where the ultimate payback comes when you sell the property portfolio.
Obviously there’s a mountain of detail and clauses that make these anything but conventional investments, including the obvious annual maintenance/administration charge (frequently in the thousands of pounds).

But the key point is that these syndicated models are proving hugely attractive. Rocksure, for instance, recently launched not one but two new funds, one in partnership with the Quintessentially Group. And Hideaways has also been very active recently.

It’s just followed in the wake of Rocksure by launching a property collection aimed at city apartments. The Hideaways model is called the Club City Collection and will begin with 10 apartments including New York, London, Paris, Venice, Miami and Istanbul – the ultimate target  is 120 city properties over the next three years. 

Up to £1.8 million is invested in each apartment and membership is split into two classes – premium membership at £120,000 (plus £5,300 per annum).  Associate membership by contrast is aimed at slightly poorer folk who can afford only a half-share plus 12 membership nights (plus £2760 per annum).

Clearly these lifestyle investments aren’t going to appeal to anything but exceedingly wealthy folk who can afford a spare few hundred thousand pounds. But the fractional ownership model has a range of mass market applications – as is obvious from the success of outfits like Holiday Property Bond where the standard entry price is more likely to be between £10 and £30,000.

What’s to stop a large travel group allying with an established syndicate operator and stamping their brand on lifestyle investment’s that cost less than £50,000? The advent of these city apartment collections also raises another interesting idea – investor’s clearly like the idea of visiting major cities and then staying at centrally located apartments with all the mod cons plus good house service and concierge add-ons.

That may all sound a bit like the description you’d apply to a nice hotel but clearly some travellers like to stay in something that feels rather more personal, with more room and where they don’t need access to extortionately over priced in-house restaurants.

Again, if I was in the luxury travel sector I’d be taking note – luxurious serviced villas may be the big new thing but it’s clear the future is in serviced uber-luxuruious city centre apartments. 

But I’d suggest the biggest lesson is one about ownership and cost. As the cost of a good holiday accommodation continues to escalate, many affluent families will prefer not to see a large chunk of their money vanish into the hotel owners back pocket.

They’ll be attracted to the idea of upmarket timeshare, with lots of genuine choice and good customer service – even more so when it isn’t called timeshare but fractional ownership.

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