Revenue Management in Timeshare Businesses

Yuan ShenUndergraduate Student

Oxford Brookes University

The Concept of Timeshare• Timeshare as a business emerged in 1960s in Europe and ‘has grown

substantially over the past decade in both size and product configuration’ • Involves the purchase of a business asset to give owners a period of time for

usage. The member owns their portion of the holiday unit for the time they plan to use it, and could receive a deed for that portion of the property.

• Timeshare owners are allowed to exchange schemes to other membership resorts or clubs worldwide by paying some extra fees

• Creates jobs, promotes tourism and assists economies to grow • 3 types:

– fixed week timeshare scheme is the same week owned each year which is the most common

– the floating week scheme is the owner could select any week of the year (floating - annual) or

– a particular season (floating - season); the points timeshare schemes are very flexible and for daily or weekend stay

• Strong at sales but relatively weak at operations

Strengths & WeaknessesConsumers perspective • Strengths

– Save money on vacations;– Once owned, only pay management

fee;– Exchanges during membership

resorts; • Weaknesses

– Limited usage;– High price to purchase;– High maintenance fee;

• Opportunities– Investment;– Earn money;

• Threats– Lack of legal protection;– Economic crisis;

Developers perspective• Strengths:

– Get capital return quickly– Increase the profitability– Nice location– Full occupancy when all other hotels

are empty (low season)– Savings on maintaining a consistent

staffing level• Weaknesses

– High pressure selling required• Opportunities

– Resale business & Increased sales• Threats

– Still a low penetration rate– Economic crisis– Increasing taxes– Credit crisis

Not as Successful as Expected• Timeshare developments will be scaled back, as Wyndham

struggles to find customers with sufficient credit quality• The timeshare segment, including Marriott, Ritz-Carlton,

Renaissance Hotels, the Fairfield Inn and Suites, accounted for just 13% of total sales in the last quarter in 2008, but its operating losses of $681 million wiped out the $160 million in pre-tax gains from lodging; in fact, the timeshare business has been a drain on cash flow for three years running because decreased sales demand and fewer opportunities to sell packaged timeshare receivables

RM in Timeshare Business• Should consider following the model where the core

product is given away i.e. Printers, mobile phones etc. • Optimal capacity management is a good option to increase

revenue. • Optimal demand forecast can be implemented to enable

classic application of RM tactics• The overselling/overbooking opportunity should be

explored further • Maximisation of ancillary sales should be the focus due to

captive audience