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RCI Research Measures UntappedTimeshare Resort Supply, Demand

RCI Research Measures Untapped Timeshare Resort Supply, Demand Group RCI, Ragatz Associates -- Hotels, 9/2/2009 2:20:00 PM I. INTRODUCTION The purpose of this report is to measure untapped demand and supply for resort timeshare ownership in the United States. It contains two primary components. The first component concentrates on the “demand” side of the resort timeshare industry, i.e., the consumers. This component estimates remaining market depth for resort timeshare ownership amongst income-eligible households (+$50,000) in all 50 states and 291 Sectional Centers (i.e., cities). Such information provides excellent insights into where monies for off-site marketing programs should be directed. The second component concentrates on the “supply” side of the resort timeshare industry, i.e., the resort timeshare projects themselves. This component suggests where new projects should be located, on either a purpose-built or conversion basis, as well as on a one-off or an addition-to-multi-location-club basis. Emphasis is on the top 100 tourist destinations in the U.S. Both components suggest not only demand and supply locations that should be considered due to being relatively untapped, but also locations to avoid due to possible market saturation. The resort timeshare industry has existed in the U.S. for over 30 years. It represents a major component of the overall resort real estate and hospitality industries, with annual sales normally exceeding $10 billion. About 1,640 resort timeshare projects exist, and about 4.5 million households own about 6.75 million intervals in these projects. In other words, the resort timeshare industry in the U.S. is substantial. Despite these impressive figures, the industry has traditionally lacked any degree of sophistication in deciding where to build new projects and where to market (especially off-site) new inventory. The typical approach in selecting project locations has been the “opportunistic model,” e.g., inexpensive land, capricious deal making, friend or family referral, etc. The typical approach in selecting off-site markets has simply been total population or proximity to the resort. It is felt this report at-hand is the first effort to add any degree of sophistication to the two selection processes. It does not pretend to be the all-in-all model, but it at least provides consistent data and benchmarking statistics. Despite the rationality of the research, results should still be viewed at the “firstcut” level. From the supply side, additional variables to consider include land and construction costs, public regulations, proximity and accessibility to the market, seasonality of tourist flow, etc. From the demand side, additional variables to consider include public regulations, cost of living, tourist-outflow patterns, etc. Both components are fully explained in narrative and summary-tabular form in the report. An Appendix at the end of the report contains 26 tables with a massive amount of numbers. They provide full detail for the 50 states, 291 Sectional Centers and 100 top tourist destinations. II. THE DEMAND SIDE The first part of the report concentrates on the “demand” side of the resort timeshare industry, i.e., the consumers. It includes four steps: • Step One: determine the distribution of income-eligible (assumed at $50,000) households • Step Two: determine the number of such households who already own resort timeshare, as well as penetration rates (i.e., percent of such households who currently own) • Step Three: determine the remaining number of such households who do not already own, with results being termed total remaining “market potential” • Step Four: apply hypothetical penetration rate scenarios of 10 percent and 20 percent to the preceding figures, with results being termed total remaining “market depth.” These are the most important figures in regard to locating untapped areas in which to direct off-site marketing. Remaining “market depth” estimates are provided for all 50 states and 291 Sectional Centers. They vary greatly, with such variation caused not only by the absolute number of income-eligible households, but also by the percentage that currently own and do not own resort timeshare. Results reveal many markets in which remaining demand is significant, and for some reason, appear to have been passed over by previous marketing efforts. Conversely, some markets already have been extensively penetrated, and perhaps should be avoided in the immediate future. A few highlights from this component of the report include: 1. There are 113.6 million households in the U.S. Some 59.9 million (52.7 percent) have incomes over $50,000. 2. Among the 50 states, the proportion of households with incomes over $50,000 ranges from 63.7 percent in New Jersey to 35.8 percent in West Virginia. Among the 291 Sectional Centers, the range is from 92.9 percent in Charleston, South Carolina to 34.8 percent in the Bronx. 3. There are about 4.4 million households living in the U.S. who already own resort timeshare, both at projects in the U.S. and elsewhere. More importantly, 73.6 percent (3.2 million) have incomes over $50,000. The majority of the other 26.4 percent represent: (a) older, retired households who purchased years ago when prices were lower and/or when their incomes were higher; or (b) recent buyers of low-priced resales. 4. Existing penetration rates for resort timeshare ownership range widely among the 50 states and 291 Sectional Centers. Among the states, the range is from 9.6 percent in Arizona to 1.2 percent in Hawaii. Among the Sectional Centers, the range is from 15.3 percent in Hot Springs, Arkansas to 2.2 percent in New York City. 5. The penetration rate among all households in the U.S. is 3.9 percent. More importantly, it is 5.4 percent among households with incomes over $50,000. 6. Some 109.2 million total households reside in the U.S. who do not own resort timeshare. This includes 56.6 million with incomes over $50,000. These figures can be termed total remaining “market potential.” 7. The “market potential” figures are interesting, but have limited application since they assume 100 percent penetration. More appropriate figures for directing new off-site marketing programs can be termed “market depth.” These figures are derived by applying hypothetical penetration rates of 10 percent and 20 percent to the number of income-eligible households minus those who already own. 8. At an overall assumed penetration rate of 10 percent, the remaining market depth for resort timeshare ownership among income-eligible households residing in the U.S. is about 2.7 million. It is 5.5 million if using the 20 percent scenario. This means that 45.0 percent of the market remains at a 10 percent penetration rate, and that 62.5 percent remains at 20 percent. 9. We also can assume that over time, each new owner will purchase 1.5 intervals and that the average purchase price per interval will be $25,000. These assumptions mean that a 10 percent penetration rate will generate demand for about 4.1 million additional intervals and a gross sales volume of $100 billion. At a 20 percent penetration rate, these figures would be about 8.2 million intervals and a gross sales volume of about $200 billion. Needless to say, remaining “market depth” for resort timeshare ownership and sales among U.S. households is significant. 10. As previously noted, “market depth” estimates are provided for all 50 states and 291 Sectional Centers. Such information is critically important for resort timeshare marketing entities since it provides insights for: (a) directing new off-site marketing programs; (b) finding untapped pockets for new demand; and (c) avoiding areas where demand is perhaps approaching saturation. 11. Remaining “market depth” is over 100,000 households in eight states, as listed below. They contain 52.0 percent of the total. remaining “market depth” percent State at 10 percent penetration of total Texas 262,930 9.6 California 252,730 9.2 New York 199,640 7.3 Florida 155,490 5.7 Illinois 151,570 5.5 Ohio 143,210 5.2 Pennsylvania 134,840 4.9 Michigan 121,750 4.5 Total 1,422,160 52.0 12. Listed below are the 20 Sectional Centers where remaining “market depth” is greatest. All but three have existing penetration rates of less than 5.0 percent. The overall report also shows numerous other Sectional Centers with lesser remaining “market depth” but very low existing penetration rates. These and the 20 listed below represent significant pockets of untapped demand. “market depth” at existing Sectional Center 10 percent penetration penetration rate Atlanta 60,800 4.7 Dallas 51,790 3.7 Houston 44,280 3.4 Royal Oak, MI 39,420 3.9 Miami 37,020 4.9 New York City 31,820 2.2 Chicago 31,360 3.7 Detroit 31,320 4.1 Tampa 30,450 5.7 St. Louis 29,600 5.1 Denver 27,220 5.9 San Francisco 26,990 4.4 Philadelphia 26,880 4.4 Cleveland 26,750 3.6 Boston 26,150 4.4 Kansas City 25,290 4.5 Columbus 23,680 3.9 Newark 23,530 4.9 Queens 22,470 4.7 Ft. Worth 22,270 4.3 III. THE SUPPLY SIDE The second part of the report concentrates on the “supply” side of the resort timeshare industry, i.e., where to locate new projects. This could include purpose-building from the ground-up, or converting existing product from other uses. It also could include developing one-off projects, or adding pieces to a multi-location club. Four steps are included: • Step One: determine the location of the existing resort timeshare inventory in the U.S. • Step Two: determine “incidence quotients,” i.e., relative comparisons of annual tourist flow with existing resort timeshare ownership for the top 100 tourist destinations in the U.S. • Step Three: determine “untapped ratios,” i.e., suggestions for where to locate new resort timeshare projects in accord with absolute comparisons of tourist flow and existing resort timeshare ownership for the top 100 tourist destinations • Step Four: determine the most important locations in which to conduct off-site marketing programs for the suggested new project locations, i.e., where potential buyers reside A few highlights from this component of the report include: 1. There are 1,640 resort timeshare projects in the U.S. They contain about 179,220 units for an average size of 109 units. 2. The 1,640 projects are found in 46 states, with concentrations being in Florida (22.6 percent), California (8.8 percent), South Carolina (7.0 percent), Hawaii (6.1 percent) and Colorado (5.2 percent). 3. An estimated 6.75 million intervals have been sold in the 1,640 projects. Buyers include those living both in the U.S. and in other countries. 4. The top 100 destinations for resort timeshare ownership in the U.S. generate 80.5 percent of the 6.75 million purchased intervals. The remaining 19.5 percent are scattered over a wide variety of locations throughout the country. 5. The top 100 destinations include 14 in Florida, six in California and five in Arizona. No other state contains more than four destinations. The Orlando area of Florida accounts for 21.4 percent of all intervals sold. 6. When looking at the top 100 tourist destinations in the U.S., it is found that 27 do not currently contain any resort timeshare projects. This includes nine urban destinations and 18 vacation destinations. 7. The derived “incidence quotients” make relative comparisons between amount of annual tourist flow and amount of resort timeshare ownership in the top 100 tourist destinations. 8. More importantly, “untapped ratios” are derived by multiplying the “incidence quotients” times the annual number of leisure-oriented overnight household trips in the 100 destinations. These figures provide more appropriate absolute estimates for remaining resort timeshare ownership. 9. Listed below are 30 destinations that seem to pop to the top in regard to untapped locations for new resort timeshare inventory. As with the previous list for “market depth” potential, it is subject to change. Ten destinations on the list are urban-oriented and 20 are more traditional vacation destinations. The 10 urban destinations are included because they all annually attract millions of leisure-oriented repeat-visitation tourists who stay for extended periods of time. For the most part, urban centers have long been overlooked by the resort timeshare industry. Many destinations are omitted from the list because of severe seasonality, thereby perhaps creating challenges in selling all weeks of the year. Included with the names of the destinations are their numbers of leisure overnight household trips and “untapped ratios.” urban leisure overnight “untapped destinations household trips (mil.) ratio” Los Angeles 9.585 n.a. Chicago 8.600 n.a. Dallas 8.250 n.a. Atlanta 7.510 n.a. Denver 4.560 n.a. San Antonio 6.115 1,460.7 San Francisco 6.950 1,326.9 New York City 18.100 736.5 Boston 3.630 658.8 Seattle 3.960 627.3 vacation leisure overnight “untapped destinations household trips (mil.) ratio” Long Beach, California 2.885 n.a. Albuquerque, New Mexico 2.100 n.a. Savannah, Georgia 2.080 n.a. Niagara Falls, New York 1.790 n.a. Boulder, Colorado 0.800 n.a. Jacksonville/St. Augustine,FL 5.940 496.6 Anaheim (Disneyland), CA 8.100 481.4 Monterey/Carmel, CA 3.055 388.9 Nashville (and environs), TN 4.465 363.1 Oregon Coast, Oregon 3.065 261.3 Austin/Hill Country, Texas 4.275 209.5 Gulf Coast, Alabama 2.545 188.0 White Mountains, NH 2.015 179.3 Santa Barbara, California 2.640 117.0 Charleston, South Carolina 2.145 115.7 Aspen, Colorado 0.750 112.5 Padre Island, Texas 5.330 102.3 Adirondacks, New York 2.145 76.2 Tucson, Arizona 1.965 51.1 Catskills, New York 1.690 31.1 10. Conversely, 20 of the top 100 tourist destinations rank at the bottom of the consultant’s list for locating new resort timeshare projects. These destinations are ones with lowest “untapped ratios.” Such ratios are low due to limited tourist flow, and more importantly, where existing resort timeshare inventory is extensive relative to the amount of tourist flow. The bottom 20 include: leisure overnight “untapped destination household trips (mil.) ratio” Berkshire Mountains, MA 0.870 1.2 Wasatch Mountains, Utah 0.730 1.3 Williamsburg/Central Mountains, VA 2.440 1.7 Hilton Head, South Carolina 1.575 1.7 West Palm Beach, Florida 3.420 3.4 Fort Lauderdale, Florida 4.550 3.9 Bend/Central Oregon 0.985 5.0 Florida Keys 2.000 5.5 Newport, Rhode Island 1.125 6.3 Boone/Blowing Rock, North Carolina 0.910 6.5 Poconos, Pennsylvania 2.525 9.0 Hot Springs, Arkansas 1.415 9.1 Coeur d’Alene, Idaho 0.975 9.7 Sedona, Arizona 2.275 9.9 Palm Beach/Melbourne, Florida 2.070 9.9 Outer Banks, North Carolina 2.220 10.3 Branson/Lake of the Ozarks, Missouri 3.710 10.9 Tunica, Mississippi 1.035 11.2 Ocean City, Maryland 1.990 14.9 Cape Cod, Massachusetts 2.565 15.5 11. The final step in this part of the report shows the most appropriate locations in which to direct off-site marketing programs for the new resort timeshare projects. This is done by showing the top five cities from which leisure oriented visitors originate to all 100 top tourist destinations in the U.S. It also shows the number of visitor nights originating from each city. This massive amount of data complements the “market depth” figures in the first part of the report, and again, provides guidance in regard to most appropriate allocations of off-site marketing monies. To obtain a copy of this study, please contact Bob McGrath at RCI. Email: Bob.McGrath@rci.com Office: 702-869-9924 Cell: 702-338-2537 Talkback We would love your feedback! Post a comment » VIEW ALL TALKBACK THREADS Related Content Topics Author Related Content By This Author There are no other articles written by this author. 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