What You Really Need To Know About Resort Development In 2009

by Lawrence Hefler

Where is the resort development and shared ownership industry headed in 2009? One thing for certain is it will be at least as tumultuous as 2008. If there ever was an industry that has its year of dramatic change, this is it. Perhaps because after forty years not much has really changed… at least until now. 2009 will be a defining year for an industry that has enjoyed many years of often self proclaimed success.

Resort development from the business perspective, and shared ownership from the consumer perspective, is an umbrella view of travel and vacation options. It might include vacation ownership, fractional ownership, vacation clubs, residence clubs, destination clubs, and even wholly owned leisure real estate. It’s either you stay somewhere as a renter or you stay somewhere with some form of “ownership” or “membership.” Why? Because from the consumer perspective, it comes down to where they will spend their vacation time and how they will spend their discretionary leisure dollars every year. They will always need for a place to sleep when they are away from home.

The New Economic Bite
The reality of the vacation ownership segment of the business now is impacted by economics but not necessarily in favor of the developer any longer. Credit markets and all things financial are redefining the audience for current and future purchases. With banks cutting back on lending, and consumers on their spending, it’s certainly going to be difficult for industry players to use their customers’ mortgages to raise cash. Expect to see declining new sales and far more resales. New sales will only happen when it’s the right product for the right family. It’s no longer enough to be a credit card impulse purchase.

Serve Ice or Serve Us
Service, has always been, and is now more than ever, the big differentiator. Only trained, motivated, and happy people can deliver exceptional service. Fractional ownership and leisure real estate projects will
increasingly look the same, offer the same thing, and promote the same messages. At the end of the day, it will come down to the service and the guest experience. This is what leads to trust and confidence in the brand. A customer not only knows what to expect but will always be pleasantly surprised and delighted by the experience. In an environment filled with concerns about portfolio pain, consumers still have too little time to be faced with offerings have similar quality and features. Choices will be based on trust and stability.

Barketing channels
The new year will still see millions of people from around the world spend all, or part of, their leisure time at holiday properties, vacation ownership resorts, fractional residence clubs, and even condohotels. Given the state of the industry, millions probably may not be called as much on the phone, e-mailed, direct mailed, or solicited at hotels, resorts, malls, stores, beaches, pools, ski slopes, festivals, airports, and trade shows. What may still change for many of them is a consumer experience in the marketing process that comes from branding, demographics, digital media, channel preference, online experience, strategic alliances,
ethics, and globalization.

Today’s demographic and psychographic for fractional ownership and residence clubs, however, is still not the mass affluent buyer. It’s a super affluent audience sometimes referred to as the new or middle class millionaires. It’s as much of a lifestyle and life stage purchase as it is about joining “the club.” Many high net worth individuals do not display their affluence making them harder to find. However, as a lifestyle purchase that provides quality family time and authentic experiences, the market demand will come back sooner.

Branducation
At its very core, some shared ownership products can be a good consumer proposition for many families. There has always been, and will continue to be, a need for consumer and media education, customer relationship building, and trust in a brand (global or independent.) The industry challenge is to adapt to a
more sophisticated marketing and brand environment that must be embraced in order to be relevant to consumers. That’s means changing an industry mindset and behaviors. This will be the first year which is far less positive about the economics of the industry. Question remains whether the consumer experience
will intensify. If it was competitive when times were better, it can now go either way. This time it will take a dramatic cultural shift for the industry to further evolve and prosper.

Fractional resort developments may become more distant from their industry cousins (resort vacation ownership.) Every business needs people to talk to about their product. Developers often adhere to “build it and they will come…” That just doesn’t happen with fractional resort development. Some of the reasons again are too many choices and too little awareness and education about fractional ownership products.

Independent developers often have consumer based perceptions of branding as we all do. Many do not appreciate the power of branding or how to create and maintain a brand. The biggest misconception is that a project will be competing with an established hospitality based brand. Those brands certainly do enjoy some advantages in terms of recognition and acceptance. However, they also have their share of economic expectations and consumer challenges. There’s a need for branding because it differentiates the product,
reduces the need to compete on price only, and provides an internal focus and sense of purpose.

Whether you are branding fractional ownership, a residence club, a destination club, a hotel residence, or a second home, you are, in essence, a “luxury” brand. The reality of a luxury brand is that sometimes it means
creating a desire for something that no one really needs and then charging a lot of money for it. In building a brand, just having a great product is not enough as functionality, quality, and image are expected. The customer experience is critical to the luxury business model.

Marketing and selling to the highly affluent has its share of challenges. When economic conditions were better, there were more people in the market considering fractional ownership products. It was discretionary and they could still make that decision. Now it’s the core group (higher affluents) that’s still buying what they want to fit their lifestyle.

Economicks, demographicks, and clicks
It is still an uncertain economy. For many this is a challenge and for others it’s an unchanged but limited opportunity. There are affluent groups that are still spending. It’s a question of how do you find these super affluent customers? Where are the people who buy what they want, when they want it?

On one level it can be affluent people seeking a lifestyle for a vacation home or homes… and with the financial resources to make such a purchase when they want to do so. Part of this group may be called aspirational. They are not the core group. They are stepping up to something that was previously out of their reach because of the price points. They can afford a fractional (as opposed to whole ownership of a second home) but now really do need to evaluate it, financially (rationally as much as emotionally.) These are the ones sitting on the sidelines today watching and waiting for changes in the economy and the government.

Relevance and timing
Align the messaging with buyer concerns and offer more choices. Marketers that want to ignite their projects will want to make their offering truly irresistible and the rewards more immediate. Even super affluent
consumers like to know they are getting a good deal. The right buyer just may come from word of mouth – consumers providing information to other consumers. Word of mouth can be encouraged and facilitated. You can work hard to make people happier, you can listen to consumers, you can make it easier for them to tell their friends, and you can make certain that influential individuals know about the differentiated qualities of your project. The focus on just product and sales needs to shift to more of a focus on branding, consumers, and marketplace. (The trust and the sales would follow.) Replace outdated resort industry marketing, selling, and management practices with customer focused brand marketing and consultative, relationship selling. (It is after all a major, lifetime purchase.) Change the mindset of casting a wide net to capture the masses to immediately convert one out of ten through psychological manipulations. The New Year calls for targeted, independent, objective, and consumer oriented messages that recognize consumer trends, needs, and behaviors.

Around the world in many ways
Where might 2009 buyers come from if there is still a downturn? It often depends on the destination. For many North American fractional projects, domestic buyers are the majority group but Canadian, Mexican, and Europeans are key audiences as well. In Europe and Asia, there is a more of a mix of international buyers. Generally speaking the majority of buyers into a destination can often be correlated to the travel accessibility (more so than distance) from their primary residence. There are certainly exceptions in the vacation ownership category. In Orlando, for example, buyers come from over 100 different countries.

Image is almost everything…
The traditional image of timeshare is commonplace in the US as well as in Europe. That image, though, was becoming increasingly neutral rather than negative, especially among consumers that understand or have experienced it. For fractional marketers it will take distancing themselves from a culture and image perpetuated by its own style of sales and marketing practices. Often, consumers see fractional ownership and PRCs still as a “timeshare.” There are distinct differences in these products: real estate aspects of shared ownership, the destinations, usage plans, price points, size and quality of residences, and amount of time
spent in a “second home.”

Tackling this issue requires innovative management strategies. One effective way is through fractional sales training. According to Susan Adams, president of Fractional Sales Solutions, “many good sales people become immersed in their product and its features and benefits as well as the industry culture and nuances. They forget the most successful client interactions are those in which the customer talks most of the time. The affluent audience for fractional ownership is not truly focused on features and benefits (or worldwide
exchange.) They are sophisticated buyers who want the sales person to understand what they’re trying to accomplish with a purchase, allow them time to do the appropriate due diligence, and have everything
presented to them in a clear, concise, and factual manner.”

You should also know…
While the economy and credit markets will still play a role in the growth and stability of the industry, we see the next economic cycle having built up demand for fractional ownership products. But even that sales and marketing process will need to better align with the highly affluent and sophisticated buyer. The influence of the traditional industry model has little place in the fractional, private residence, and destination club worlds.

Finding and keeping a qualified sales team is now a bigger factor. Way too many people bounce around the industry creating a constant drain on team stability, product knowledge, and morale…not to mention bring
“traditional” habits along. Finding qualified workers from other industries and backgrounds is part of that challenge and opportunity. The resort development industry needs to keep up with emerging consumer trends from around the world. Beating the downturn and gaining momentum in 2009 will take knowing and following consumer trends. It’s a compelling way to get inspired and to think up profitable vacation products, services, and experiences for customers.

Lawrence Hefler is principal of BrandShares International – a marketing and branding consultancy that helps resort developers and fractional ownership properties find, keep, and grow customers worldwide. His brand heritage includes Hilton Hotels, Walt Disney, American Express, and Sol Meliá. He can be reached at hefler@cfl.rr.com.

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