LETTER FROM CHAIRMAN

Sunday, September 06, 2009

Can timeshare makes things tick for Indian hotel chains?

In a recent article in the magazine “Hotelier India,” Syed Ameen Kader makes a logical case for sharing inventories – especially how traditional hotel chains can earmark low occupancy segments in the year to timeshare customers. The downturn is a particularly good time to explore a lateral business model that could bring in new customers, convert existing customers and yes… boost revenues as well.

For a long time, timeshare was beyond the visible horizon for hotel chains and did not come within their radars or business plans. But with the recession and the consequent ripple effects, hotel chains can now look at ways to drive home new business from timeshare. There is a sizeable extension market out here.

While industry watchers like us can see this as an opportunity waiting to be explored, I can see some apprehensions that are well-based. For starters, hoteliers need to study the inside operations of timeshare resorts - especially the methods employed to generate revenue when the customer has already paid for his stay. We also need to consider the level of investment a hotel makes on its interiors, based on billable returns from its regular customers. Would these investments be overdone for the timeshare customer?

Let us now view the other end of the spectrum and look at things from the existing timeshare promoter’s point of view. Should he be worried about hotels opening their doors to timeshare?

• If you are a timeshare promoter, here’s some reassurance for you.
• The markets could be different
• The locations could be different
• The offerings could be different
• Timeshare periods could be different
• Target customers could be different
  

So, the competition may not even rub shoulders on the business front. On the other hand, when large hotel chains move into timeshare, the share of voice for the industry goes to a higher level. It gives timeshare the strength of numbers and industry weightage. It also makes timeshare more visible in media terms, which is certainly useful on a larger canvas.

The mixed use model where hotels add timeshare to their business plans has been tried and tested in the Western world. International hotel chains such as Hyatt, Hilton, Starwood, Holiday Inn, Disney and Marriott have seen the fallback value that timeshare can provide in recessionary times. Some hotel chains have found the mix so upbeat that they have reserved a good 50% for timeshare. And the results have been encouraging - larger revenue inputs and better cash reserves with member sign-ups. Ultimately “erasing the reds” on the occupancy calendar - which is good news in more ways than one.

In India, this is just the beginning of the curve for a similar exercise. And it is a matter of time before hotel chains see the benefits of short term gains and long-term stability. What they may need to do is hire middle-to-senior professionals from the timeshare industry, to understand how this business works from the ground up. For some of the hotel chains it is also an opportunity to understand a whole new customer profile. Especially in terms of what he expects during a vacation and the revenues he will contribute to during his stay.

• Here is the first slide hoteliers will see on their marketing plans to size up markets and opportunities in India.
• No of companies: 45
• No of resorts: 80
• Timeshare memberships: 2,50,000
• Average annual additioins: 18,000
• No of units: 5,000
• Total investments: 0 million
• Growth rate: +15% CAGR
  

If you can read between the lines, there’s room for everybody!
 
I personally think that hotels getting into timeshare will improve and elevate the profile of timeshare as a marketable product. It will increasingly be seen as a safe, viable proposition with long term benefits. And that is something we at AIRDA will be happy about.

B. S. Rathor
Chairman, AIRDA