By Chris Jackson
As the industry waits with baited breath for fractional ownership legislation to be introduced, Chris Jackson looks at the market demand.
For many years timeshare has been burdened with an unsavoury reputation for pushy salesmen, hidden clauses and lost money. But as the industry has matured to develop multiple products, and legislation has put an end to shady practices, the fractional ownership business model has become increasingly popular and profitable, particularly in so-called "super-cities" such as Orlando and Las Vegas in the United States.
[Shared ownership] has a lot of things that makes it attractive to the local market: it provides privacy, space and an element of luxury.
For many hoteliers, the Middle East looms as one of the last frontiers of virgin territory for new developments, with many countries preparing or signing off on legislation that will regulate fractional ownership.
RCI managing director for the Middle East region Nick Turner says timeshare is already established as part of the tourism model in some parts of the region, particularly Egypt, where there was a lot of development in the late 1980s and early 1990s.
He says the most popular locations for shared ownership properties are Sharm El Sheikh, Hurghada and other developments on the Mediterranean coast. Lebanon also has a number of timeshare properties, mostly offering three- and four-star accommodation.
"The timeshare market is [already] there," Turner says. "It is by no means mature, but it is established."
Interval International managing director Europe, Middle East and Africa David Clifton agrees destinations such as Cairo, Sharm El Sheikh and Beirut have been popular timeshare destinations for some time.
"Arabia is really coming into its own as a tourist destination, thanks to international excitement about Dubai, and now Saudi Arabia, Bahrain, Abu Dhabi, Jordan and Qatar are also becoming more popular," he says.
"As these markets develop and mature, they need a wider cross-section of accommodation options [other] than just conventional brands.
"Globally, timeshare is booming, recording double-digit annual growth for more than 20 years, helped by balanced legislation as well as the entry into the sector of major hotel chains such as Marriott, Hyatt, Starwood, Disney, Four Seasons, Accor and others."
According to Clifton, the Middle East region accounts for less than 5% of the world's vacation ownership products, with the US holding the majority with nearly 72% global market share.
But according to Turner, the market is ready, and willing, to take up the concept.
"We did a survey of several thousand people across the Middle East in 2006, which showed that one in three would consider shared ownership [products], compared with one in 10 who would consider a holiday in a hotel," he explains.
"It has a lot of things that make it attractive to the local market: it provides them with privacy, it provides them with space, and it provides an element of luxury."
Although Dubai is often seen to be leading the region in terms of hotel development, for the moment there can be little in the way of timeshare and fractional ownership development until the government approves appropriate legislation.
"Interval International has been working with the governments throughout the region, and key industry professionals, to create a sound and balanced regulatory platform that will provide consumer protection and allows legitimate businesses the ability to grow," Clifton says.
"Indeed, there has just been a timeshare awareness seminar, organised by Dubai's Department of Economic Development. The seminar involved timeshare operators, real estate developers and hospitality representatives in best practice discussions for the establishment of timeshare resorts in Dubai and the rest of the UAE."
Turner says the industry was still watching Dubai's lead closely in terms of shared ownership legislation, which will provide a framework for shared ownership developments across the emirate.
"As with many parts of the world and many new hospitality sectors, it has got off to a bumpy start [in Dubai], where you had one or two unregulated operators selling products," he adds.
"The government stopped it in Dubai until a framework could be put together. We believe now that this legislation will be approved in the course of this year."
Turner says RCI was also involved in consultation with the governments of Oman, Saudi Arabia and Qatar, which are also looking to introduce shared ownership legislation.
Clifton says the time spent developing appropriate legislation would pay dividends in the future.
"Balanced legislation is good for the consumer, the government, and for the developers, and it will create the platform for long term, sustainable growth for decades to come," he says.
"We have now been working with the government of Dubai on the creation of sound regulations for the industry for more than three and a half years - my hat goes off to the government and to the forward-thinking companies who want to protect this vibrant growth industry right from its inception."
Some critics of timeshare for the Middle East region have pointed to the cultural sensitivities of doing business, including the importance of physical or tangible assets as part of a product mix.
The slow take up of e-ticketing in the region has been pointed to as an example that consumers will be reluctant to buy a product where they may not get anything tangible in return, but rather a right to use a particular facility for a particular amount of time. "Of course it takes a little time for all markets to accept any new concept," Clifton explains.
"The Middle East has been no different than what we have seen in North America, Europe, and Asia. The good news is that the industry is already being accepted by consumers within the region in ever increasing numbers. We are confident that this region will continue to be one of the fastest growing - if not the fastest growing region - vacation ownership markets in the world during the coming decade."
According to Clifton, despite significant cultural differences between countries, most people want fundamentally the same thing.
"Everyone works too hard, wants to spend more quality time with their family and friends, be able to relax and enjoy life, and get away from the day to day hassles that we all experience throughout most of the year," he says.
"An ever increasing number of people from all over the world including the Middle East recognise this fact and understand the many benefits that vacation owner-ship offers."
RCI's Turner agrees that the market has a bright future in the region, despite any cultural concerns.
"We estimate the value of the market from Middle East consumers alone is worth US $1.1 billion in sales," he says.
"That's $600 million in fractional ownership, and $500 million in timeshare. I think fractional ownership will become more popular [than timeshare] - it is easier for developers to sell to four families rather than 52.
"Nowadays people want to own assets, and fractional ownership is asset linked. There is also a chance to make profit from capital appreciation. In the United States, fractional ownership is the fastest growing shared ownership model. It has gone from zero to $2 billion in five years in the US domestic market."
Clifton agrees that the product split will be an important factor in overcoming the potential cultural difficulties. "To reach maximum success, it is very important that developers and hoteliers look closely at the cultural preferences of their potential vacation ownership purchasers when designing the physical product, as well as the type of vacation ownership that they are contemplating introducing to the market," he adds.
If a destination is to become successful as a shared ownership destination, such as Orlando or Las Vegas, it needs two key ingredients, Turner says.
"You need a good pipeline of real estate, and you need a growing inbound tourism market," he explains, adding that Dubai meets both of these criteria.
"These two ingredients are fuelling the impetus for developers [to create the products] and also fuelling the consumers looking for shared ownership developments."
Turner says that the industry needs to develop trust with consumers by ensuring that items such as service charges do not rapidly increase, and that any rogues operating in the industry are quickly eliminated.
"A stable and steady approach is needed once it is up and running," he says.
"Political and economic stability in the region is also needed. Unrest will damage the process in the northern part of the Middle East."
Each destination must also be managed to retain its level of attraction, he continues.
"People will only keep coming back because there is something new to see," Turner says.
"There needs to be long term plans for the destination - just retail isn't enough."
The importance of a solid legal framework should also not be underestimated, Clifton adds.
"Balanced vacation ownership legislation is a must," he explains.
"Consumers' rights must be protected, but the legitimate developer must also be able to grow. The vacation ownership industry needs to be treated the same as the general real estate."
The legislation must be structured to benefit consumers, developers, and the wider community, he adds.
"As an example, there are a number of very strong developers standing by and waiting for the vacation ownership regulatory platform to be finalised in the coming months in Dubai, before they make huge financial investments into this very attractive sector in this dynamic community," Clifton says.
And, ironically for timeshare, it seems like timing will also be a critical factor for hoteliers seeking maximum success.
"It is the pioneers of today that are planning fractionals, and they will have the greatest success, because they will have the first products to place in front of the consumers," Turner says.
So where can developers and consumers expect the biggest uptake of timeshare in the region? As with most hotel industry predictions, there is only one answer: Dubai. But other destinations will still benefit from tailor-made vacation ownership products, the experts say.
"Everything they are doing in Dubai [in terms of rapid tourism development] is likely to make it more attractive for timeshare development. It's early days now, but there is certainly a case to buy-in now," Turner says.
"In Dubai, people are currently staying fewer than four nights, but we expect that will increase to more than seven days, as it becomes less of a stopover and more of an end-destination."
Clifton says Dubai leads the pack as the next ‘hotspot' for "obvious reasons".
"[The emirate] is destined to become one of the major global giants in the industry relative to size, quality, and desirability from both an ownership and an exchange standpoint," he explains.
"It is truly unique. However, we also believe that many other cities in the region offer great opportunities for growth in all aspects of timesharing, fractional ownership, private residence clubs, and condo hotels. Cities like Cairo, Sharm el Sheikh, Beirut, and many others offer great potential for also contributing to the growth of the industry."
Turner agrees that other emirates and countries in the region also have room for expansion.
"Of the 200 plus developments we expect to start in the next two or three years, probably two out of three will be in the greater Dubai area, because Dubai can support those longer stays," he says.
"After that it will be relaxation - Ras Al Khaimah and Muscat will become much more Acapulco or Bahamas style timeshare. There will be two separate markets: the families, and the couples looking for quality time on the beach."
In short, don't be surprised to see fractional ownership included in many new developments announced in the next few years.
"The Middle East is poised and ready to become one of the next vacation ownership markets in the world," Clifton says. "It is that plain and that simple."