Since discussions began on the introduction of timeshare to the Middle East, developers have been waiting for proposed legislation to be made official. According to industry insiders, the end is in sight. Holly Sands reports.
Enter, timeshare. One of the world's largest industries is set to penetrate the Middle East, bringing millions of dollars in revenue to the regions' economies and diversifying the real estate market.
"Dubai and other countries in emerging markets have the distinct advantage of addressing timeshare legislation at the beginning of the dynamic growth period," says Tom Bell, Senior Vice President of Governmental Affairs for Interval International.
The approval represents recogniton by the government and timeshare industry that dubai may become one of the world’s largest timeshare venues. - Tom Bell, Senior Vice President of Governmental Affairs for Interval International.
The company is one of the world's largest timeshare operators with a network of more than 2,400 resorts around the world.
"It was announced in March 2008 at the Vacation Ownership Investment Conference hosted by Interval International that authorities from the Dubai Real Estate Regulatory Authority (RERA) and Dubailand have approved timeshare regulations for Dubai," says Bell, who in the past has represented Hilton Grand Vacation Club in his previous role as partner with Foley & Lardner, a US-based law firm.
"The approval represents recognition by the government and timeshare industry that Dubai may become one of the world's largest timeshare venues," he adds, though he acknowledges drafted regulations are yet to be established as a law.
"None of the UAE emirates have as yet published a timeshare law. A draft law was issued for Dubai but, as far as I know, it has not yet been published in the official gazette and is therefore not binding," says Sydene Helwick, partner at Dubai-based Al Tamimi and Company Advocates and Legal Consultants.
"The draft was issued some time back, and I think people have been commenting on that law. The land department has said it's on hold at the moment, pending the issue of the pre-registration law and the new mortgage law. Once those laws are up in a couple of month's time, they will look at issuing the new timeshare law."
By recognizing from the start the need for a law to govern the industry, Dubai appears set to avoid the past mistakes made in markets such as Europe, where initial legislation failed to protect consumers.
Many timeshare buyers fell victim to bogus agents, using aggressive marketing techniques and targeting people on the streets. Different scams included selling non-existent properties and taking money from people in order to bankroll marketing schemes for a company's existing timeshare projects.
"The first thing you find with legislation in place is that it gives consumers confidence there is legal protection for their investments," says Nick Turner, Managing Director of Group RCI for the Middle East.
His company was involved with drafting legislation for Dubai and contributing a wealth of knowledge from the markets of North America and Europe.
"The second thing is that legislation provides developers with the assurance this is now deemed an acceptable real estate model to develop and market," continues Turner, who is keen to encourage growth in the sector among Dubai's resident developers as well as international players.
"There have been an awful lot of developers waiting to learn that vacation ownership is an acceptable form of real estate," he claims, explaining the potential success of timeshare in Dubai lies with implications the sector could have for the emirate's tourism industry.
According to Turner, Emaar and Dubailand has already voiced interest in the holiday ownership sector.In fact, Emaar recently announced its Emaar Residences at Abraj Al Bait in Makkah will be leased on a timeshare basis, and aimed at pilgrims and families.
"Look at a relative newcomer to shared ownership and fractional ownership like Las Vegas. Last year the timeshare and fractional industry brought roughly US$2bn to the local Nevada economy," explains Turner.
"The good news for Dubai and the UAE is it's going to have a positive impact on revenues for the developers and a positive impact on tourism in Dubai. People who buy a timeshare property for 20 years will invariably come back year after year," he says.
Legislation provides developers with the assurance this is now deemed an acceptable real estate model to develop and market. - Nick Turner, MD of Group RCI Middle East.
Turner tells how the industry could act as an antidote for what he describes as "ghost-town projects", should there be too small a population to fill the many developments.
"The most important thing is that it ensures these huge projects being built in Dubai, Abu Dhabi and Ras Al Khaimah are utilized by timeshare tourists, as opposed to being purchased by speculators who have no intention of using them. Timeshare tourists will have a positive spin-off effect; they'll be eating in restaurants and shopping in the malls, so it's hugely important for Dubai's sustainability and economy."
Today, the North American timeshare market appears untouched by problems still faced in Europe, and is continually proving to be a very lucrative business.
"I think it's a very professional tourism and real estate sector. Highly reputable professionals are employed, it's a multi-billion dollar business and it attracts all the big hotel brands," says Turner, referring in particular to Hilton, Wyndham and Marriott, who he describes as "the big three."
One thing which will perhaps capture the interest of developers is Turner's claim that timeshare is bearing-up against a slowing economy in the US.
"They drive healthy revenues and cash flows through their businesses. We understand that in 2007 they were still growing, in a market where every other real estate model has collapsed. So, it's also proved recession-proof," he says.
Positive though the enthusiasm of developers in the region may be, the process of issuing timeshare licences will need to be stringent in order to protect the brand Dubai has become.
This is something that clearly doesn't worry Turner, and he talks candidly of the faith he has in the government to thoroughly regulate the industry.
"I know that the government and RERA will look very closely at the track record of the developer, its credibility, financial status and the robustness of business. All of this to ensure that these projects sell-out, they're delivered on time and are of the quality that people expect them to be," he says, emphasizing the importance of consumer protection.
"I think, within the legislation, it details the fact RERA reserves the right to see marketing materials and vet them, in order to make sure what's being marketed is going to be delivered," he says, in reference to the past scandals of the European market at the hands of ruthless touts and sales callers.
However, he explains, Europe's efforts to rid itself of these associations should be noted.
"The good news is that improved legislation in EU countries has closed the doors on a lot of unorthodox marketing, therefore the developers that are left are good quality and practicing good forms of sales and marketing," he adds. Growth potential
Unfortunately, the salvation of Europe's timeshare market has not been as widely publicized as its demise, though the industry continues to thrive.
To date, there are 1,500 timeshare resorts in Europe, generating 2.2 million bed nights per annum, according to The Organisation for Timeshare in Europe (OTE).
The latest research suggests that the value of the fractional ownership and timeshare market would exceed US$2bn in sales every year as the market grows.
Turner is optimistic and is adamant timeshare in Europe "will grow significantly," despite the fact the European Commission will not be implementing stronger regulations until 2010.
This, according to Bell, is why the industry in Dubai- perhaps with thanks to proactive timeshare operators- should ultimately be far less tainted. "Sound legislation protects the consumer and allows the indsutry to flourish.
This is one of the primary reasons why Interval has been a strong advocate for timeshare regulations on a global basis," he says.
Bell, who understands the negotiated legislation is not likely to be changed by the government before it is passed, claims regulations will apply to timeshare schemes offered, marketed or located in Dubai.
Some of these will include a ten day cooling-off period for purchasers, the creation of an escrow account to protect purchaser funds and the necessity for anyone marketing or advertising timeshare sales to hold the appropriate license from the Dubai Economic Department and registration from RERA.
Turner is keen to promote timeshare as a region-wide activity for the Middle East, something he will be discussing as a speaker during Cityscape Dubai 2008 at the Hotel & Tourism Investment & Development Conference, "It's an educational opportunity to help the developers of the region look at highly profitable real estate alternatives," he says, speaking of the event, where he will also hold a workshop for developers, looking at a number of successful case studies including IFA Hotels & Resorts.
"We have an advisory group called NorthCourse, and every year we conduct a regional report on the opportunity for fractional ownership and timeshare from Saudi Arabia, Kuwait, the UAE, Iran and Egypt," he explains, noting research has shown a number of places in the region, including Makkah, would be popular timeshare destinations.
"Research suggests the value of the fractional ownership and timeshare market in the Middle East would exceed US$1.2bn in sales annually as the market grows. Quite a compelling reason for developers to consider diversification from traditional real estate."
Turner claims many developers and hoteliers share a positive outlook on the industry that could potentially support Dubai's colossal real estate sector, as well as push tourism in the Middle East to even dizzier heights.
"It's safe to say they're probably taking the very best practices of the market of North America, and taking note of lessons learnt in parts of Europe," he says, perhaps encouragingly for regional developers who may be treating this ‘new' model with caution.
"I think Dubai legislation will provide the best of breed, in terms of consumer protection and developer protection. We believe it's probably going to be one of the most thought-through starting points of any timeshare market."
If Turner is correct, the emirate could embark on the final countdown to what could prove a cash cow alternative for real estate developers.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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