Travel Through Time
Despite the slowdown in tourism, the time-share market is invincible.
Time share [tim sher] n. a type of vacation-facility ownership that divides the use of a property into weekly intervals. Time-share intervals can be exchanged at other timeshare properties, such as at hotels, condominiums, cruise ships, airplanes, recreational vehicles or campsites.
Sixty-eight resorts. Sixty-nine programs. Four-thousand-six-hundred units. Six-and-a-half percent of the state’s total hotel room inventory. And about $276.4 million in annual sales. That is the size of Hawaii’s time-share, or vacation-ownership, industry. It’s miniscule compared to other time-share destinations, such as Florida and Arizona. But its economic impact on the local market is outstanding.
Despite the slowdown in tourism after Sept. 11, local time-share operators outperformed traditional resorts and hotels across the state, according to a study by PKF Hawaii. The average occupancy at time-share units in Hawaii last September dropped 7 percent from 86.52 percent to 79.94 percent. The occupancy rate at resorts and hotels during that same month, meanwhile, plunged 24.7 percent, from 77.9 percent to 58.6 percent.
Ed Kinney, senior director for brand advertising and communications for Marriott Vacation Club International, explains: “Some people have some anxiety about traveling, but as a whole, a high percentage of time-share owners continue with their plans. They either use it or lose it.”
Consider Maui. During the week of Sept. 12-15, the occupancy rate at time-share units on Maui was slightly higher than in the previous year, up to 93.74 percent from 92.53 percent.
Advocates – especially after Sept. 11 – say the time-share industry directly competes with the MCI market (meetings, conventions and incentive trips). Approximately 490,000 MCI visitors and 412,000 time-share owners traveled to Hawaii in 1999. Says Mitchell Imanaka, managing principal of the law firm Imanaka Kudo & Fujimoto, “We’re bringing people to Hawaii in comparable numbers. That’s the untold story.”
Incredible growth is expected over the next decade, according to a study last year by the American Resort Development Association. In about five to 10 years, more than 3,000 timeshare units will be added to the state’s existing inventory.
The reasons for growth are clear: the quality and reputation of time-share products have improved since their introduction to the local market in the 1970s; international hotel chains plan to build new time-share properties on Maui, the Big Island, Oahu and Kauai; more financing options are available; and time-share programs have become more flexible, allowing owners to reschedule, split and trade weekly intervals at non-Hawaii destinations.
Unlike in the past, owners today no longer are forced to take a seven-day vacation at the same property, year after year. That change itself is an attraction. “You may not want to stay at a condo for the rest of your life, but you may want to go to Paris one year, or go to Cairo to see the pyramids,” says Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts. “That’s why time shares have taken off so well.”
Between 1995 and 2000, Hawaii’s time-share units have grown about 1,900 units per year. The biggest growth spurt occurred in 1999 and 2000, when more than 800 units were added to the statewide inventory. Today, Maui and Molokai are home to 1,053 units, while the Big Island and Oahu each have 969 and 934 units, respectively.
Industry leaders are confident that future growth will take Hawaii’s time-share industry to the next level. Oahu, especially, has not had any time-share developments in more than a decade. “There’s potential to grow on Oahu,” says Mark Wang, vice president of Hawaii’s Hilton Grand Vacations Club. “The only thing that makes it difficult here is there is not a lot of availability, not a lot of developable land.” Kauai, on the other hand, traditionally has been the center of time-share growth, with 1,647 units, or about 36 percent of the state’s overall inventory. Hurricane Iniki’s destruction in 1992, combined with a real-estate and tourism slump in the early 1990s, forced the island to rebuild or renovate new resorts, with a new emphasis on time-share. Existing condominiums on Kauai also were converted into time-share units during the early- to mid-1990s Converted condos today represent about 61 percent of the state’s overall time-share inventory. However, that number is expected to drop, as major hotel brands introduce purpose-built units (properties that are made only for time-share purposes). Such projects are pending on the islands of Oahu, Maui, Molokai and the Big Island.
Here is a look at international hotel/time-share operations in Hawaii: Hilton Grand Vacations Club – Hilton’s first time-share property opened in January 2001 at the Hilton Hawaiian Village. The new 264-unit Lagoon Tower, a converted apartment that underwent a $36 million renovation, features condominiums with full kitchens and living rooms. As of this writing in January, more than 30 percent of the time-share blocks, or intervals, were sold. Buyers from Japan comprise 40 percent of existing owners. “We’re the only company with a sales distribution center that’s selling almost equally to two different nationalities – Japan and the U.S. mainland,” says Wang.
Hilton also announced plans to build a second time-share condominium adjacent to the Hawaiian Village. The 400-unit building will be located on two acres of land, which previously housed an apartment, retail shops and the Tahitian Lanai restaurant. As of December, an environmental impact statement and design plan were being conducted.
Approximately 40,000 members belong to the Hilton Grand Vacations Club program, which operates 29 clubs in Hawaii, Las Vegas and Florida. Marriott Vacation Club International – Marriott’s vacation ownership division this year announced plans to build new time-share properties on Kauai and Oahu. Meanwhile, it continues to manage the 232-unit Kauai Beach Club and Maui Ocean Club, a 154-unit resort in Lahaina. “Kauai has allowed us to do our first mixed-use property, and it’s been tremendously successful. We’re also doing that in Maui,” Kinney says. The company broke ground on May 24, 2001, for the 750-villa Ko Olina Beach Club in West Oahu. It is located in the same neighborhood as the JW Marriott Ihilani Resort and the Ko Olina Golf Club. Once the first phase of the $450 million resort is completed in January 2003, it will be Marriott’s fourth timeshare property in Hawaii.
Also scheduled to open in January 2003 on Poipu Beach, Kauai, is the Waiohai Beach Club. In October 1999, Marriott Vacation Club purchased the 227-villa beach club, which previously was the Stouffer Waihohai Resort. The Marriott Vacation Club International, established in 1984, manages 51 resorts in 29 locations.
Starwood Vacation Ownership Inc. – When Starwood Hotels & Resorts purchased Florida-based time-share developer Vistana Inc. in 1999, it paved the way for expansion in the vacation-ownership market. The company on Nov. 30, 2001, broke ground on the 280-unit Westin Kaanapali Ocean Resort Villa on Maui, the first Westin timeshare in Hawaii. In the first five weeks of marketing, the company sold approximately $8.1 million in intervals, or blocks. “We rolled that out in mid-October,” says Vieira. “The biggest thing was that it was a purpose-built product.”
The Kaanapali time-share units are unlike other vacation-ownership properties in the state. These are not converted hotel rooms or condominiums, but luxury villas, made for buyers who cannot afford multimillion-dollar, beachfront property otherwise. Forty units are scheduled to open by March 2002, followed by 100 units by the end of this year.
Starwood also plans to build additional vacation-ownership properties, two on the Big Island’s Kohala Coast, and another in Princeville, Maui.
“The credibility of the industry and the product has reached its highest levels,” says Kinney, about the hotel brands. “In the past, the way the products were developed was inconsistent. Developers didn’t have the resources, such as an adjacent hotel that helps out the business.” The time-share industry is here to stay, as long as developers play their cards right. According to resort association, there are three reasons buyers might hesitate to buy a timeshare unit in Hawaii: the high cost of travel to Hawaii; high annual maintenance fees; and the possibility that the buyer may not have time for an annual vacation.
If the future of Hawaii’s time-share industry mirrors past performances, then Hawaii’s hospitality market had better be ready for a new breed of traveler (see Profile of a Timeshare Owner). “The convention business has been getting a lot of attention over the past 10 years,” Imanaka says. Not anymore. Maybe it’s time for time-shares to share the limelight.