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Mon 4 Aug 2008 04:00 AM

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Timeshare vs hotels

New legislation has seen a number of timeshare developments get off the starting block this year. But what does this mean for existing hotel operators? Sarah Campbell looks at the upcoming resort projects and how this could impact hotel profits in new ‘timeshare friendly' destinations.

New legislation has seen a number of timeshare developments get off the starting block this year. But what does this mean for existing hotel operators? Sarah Campbell looks at the upcoming resort projects and how this could impact hotel profits in new ‘timeshare friendly' destinations.

Since announcing a water-tight legal framework for the sales and operation of timeshare resorts in March, Dubai's timeshare market has come forward in leaps and bounds as new operators now enter the market buoyed with optimism and confidence.

The regulation, launched on March 12 at the Vacation Ownership Investment Conference (VOIC), hosted by Interval International in Dubai, is enforced by the Dubai Real Estate Regulatory Authority (RERA), and covers timeshare schemes offered, marketed or located in the emirate of Dubai.

A marketplace has been created which should hold a very bright future for the shared ownership industry.

It is a move welcomed by those involved in the industry, and one that looks to be duplicated in other leading tourism markets, including Abu Dhabi.

"The new regulations have been drafted to provide consumer protection while allowing the industry to grow and flourish. The regulations represent a merger of the practices from other regions and Dubai's existing practices and laws. In many ways they reflect the vision of Dubai's Government in building for the future using the best available to achieve that growth.

Because of that, a marketplace has been created which should hold a very bright future for the shared ownership industry," says David Clifton, managing director for Europe, Middle East and Africa at Interval International.

According to Group RCI managing director Middle East Nick Turner a number of developers and hotel management companies have been waiting for timeshare to be recognised by the Dubai authorities before committing any research or development capital into this area.

"Group RCI has now engaged with a number of large regional and international developers to support future timeshare developments, from feasibility studies through to assisting a developer finalise their timeshare product and prepare to take to market in Europe and the Middle East," Turner says.

Developers too have also welcomed the new regulations.

"The legislation will open the gates and lay a solid framework for a successful timeshare industry. RERA's cautious approach will ultimately lead to greater confidence in the timeshare market both in terms of attracting legitimate business investment as well as individuals looking to holiday in the UAE and invest in the property market at the same time," says Chris Jackson, general manager, Emerald Vacation Group.

Resort developments

Since the RERA regulations came into effect there has been a barrage of new timeshare developers and resort operators looking at the market, with numerous new developments being launched.

Emerald Vacation Group currently has two properties under construction, due for completion in 2009; Emerald Court situated in the heart of Dubai (Al Barsha) and Turtle Cove located in the Northern Huvadhu Atoll of the Maldives.

"As we are a Dubai-owned and based company, it is no surprise that our first venture would be in Dubai. Emerald Court is the company's first vacation ownership property and was systematically chosen for its excellent location. The property is within walking distance of the Mall of the Emirates and the new Dubai Metro, among many other attractions, making it easy for people to access tourism and business destinations in the city," says Jackson.

Marriott Vacation Club International (MVCI) was also quick off the block, announcing its long awaited resort development at Dubai Festival City in April.

In a joint venture with Al Futtaim Group, the company expects to open a 320-unit MVCI resort by 2011 in Dubai Festival City. The resort will be MVCI's first venture in the Middle East, and the company's largest resort outside North America.

The proposed 320 two-bedroom and three-bedroom unit resort will be located in Dubai Festival City's elegantly chic, bustling waterfront urban community. The timeshare resort will be constructed in four phases along the Dubai Creek.

"We are in the very early stages of design at this point," points out Edward Kinney, vice president, corporate affairs and brand awareness, MVCI and The Ritz Carlton Club.Marriott Vacation Club, Dubai Festival City, will offer a weeks-based product and owners of timeshare weeks will be eligible to exchange their week at other Marriott Vacation Club resorts around the world.

RCI, the world's largest vacation exchange company, has also been busy affiliating a number of new resort projects.

VH Dubai joined the RCI stable in May with its VH Residence Club, a 50-unit development offering two-bedroom apartments on a fractional ownership basis.

Also in May, RCI welcomed Nassima Tower in Dubai. The 50-storey tower's central location on Sheikh Zayed Road, five minutes from the Dubai International Financial Centre, will appeal to both business and leisure travellers, and the developers ACICO believes it represents an ideal property purchase with a variety of units ranging from one to three bedrooms.

Vacation ownership is one of the most evolving segments in the hospitality and leisure industry.

Group RCI has also affiliated Dubai's Bavaria Executive Suites Vacation Club, featuring no less than 450 one- and two-bedroom apartments.

Located adjacent to Dubai Media City and the access route to the Palm Jumeirah, Bavaria Executive Suites consists of two huge towers on either side of Sheikh Zayed Road.

In addition to the timeshare apartments, the development includes 2100 suites, a choice of eight restaurant concepts, sports facilities, shopping arcades and the latest Angsana Spa.

Meanwhile, earlier in the year RCI welcomed Dubai-based Ivory Grand to its worldwide network of affiliated resorts. Located in Dubai's fast growing Al Barsha district the development consists of 70 units destined for the timeshare market with a further 150 one- and two-bedroom apartments marketed for short term rentals.

Looking further ahead and Dubailand, one of the emirate's leading tourism developments, has also unveiled plans to enter the timeshare sector.

Dubailand, a member of Tatweer, launched Dubailand Vacations LLC, a new entity specialising in developing timeshare and fractional business models, at the VOIC conference in March.

Dubailand Vacations LLC will introduce timeshare developments within Dubailand, generating synergies with various theme parks within the destination.

"Vacation ownership is one of the most evolving segments in the hospitality and leisure industry. As a trend, publicly-traded hospitality companies are now actively developing a full range of offerings at different price points in resort and urban destinations, in contrast to what was once a sector dominated by private developers alone," says Mohammed Al Habbai, CEO of Dubailand.

"Timeshare and other forms of shared real estate ownership within Dubailand will allow us to cater to the varying needs of our future visitors with a world class offering."

Sales success

New resorts abound, but some timeshare properties are already up and running and have tasted success with membership sales too.

In July 2003 Arabian Falcon Holidays (AFH) commenced selling the Royal Club at Palm-Jumeirah (RCPJ) - the first ever Dubai timeshare resort. The 50-unit resort, completed in Q4 2007, was completely sold out by the first quarter of 2008.

"This remarkable sales success has given the RCPJ developer enormous confidence to set up a second resort through the acquisition of 100 apartments in a tower in the Burj Downtown complex, named Royal Club Downtown-Dubai (RCDD).

Sales of the RCDD commenced at the beginning of the second quarter of 2008 and the volume of this has virtually marched unchecked from level of the RCPJ's sales volumes," explains Al Mohannad Sharafuddin, founder of Arabian Falcon Holidays.

Both RCPJ and the new RCDD are based on the timeshare structure of ‘Right to Use - Fixed Apartment Fixed Week' ownership.

AFH, established in 1999, specialises in the sale of timeshare properties, with an integrated approach to sales, marketing, customer services and referrals business.

The marketing team runs numerous marketing programmes in order to generate qualified leads to the sales centre, which include - but are not limited to - telesales, shopping mall booths, hotel programmes and joint marketing programmes with some of Dubai's leading tourism attractions, including Ski Dubai and Dubai Summer Surprises."In order to succeed in this industry you have to have strong and unique marketing channels," Sharafuddin opines.

AFH has also been appointed as sales and marketing agent for various holiday ownership resorts in Egypt, Lebanon and Tunisia. These include Horizon Resorts, Hurghada, Egypt; Pyramisa, Cairo, Egypt; Doha Hills Resorts, Beirut, Lebanon; and Yasmeen Plaza Resorts, Hammamet, Tunisia.

AFH also opened a new office in Jeddah, Saudi Arabia under the name of Arabian Falcon International in July.

Timeshare Vs Hotels

With so many new timeshare accommodation options entering the market should traditional hoteliers be worried? Those working in the industry believe not, and state that rather than detracting from Dubai's high hotel occupancies, timeshare will in fact bolster the tourism market.

"Hotel groups across Dubai should look at timeshare as an additional revenue segment for their hotel businesses. Throughout the world hotels and timeshare co-exist in key tourism hotspots and often support each other. Timeshare drives high occupancies and higher F&B spend while hotels provide a good low cost source of sales leads for the timeshare sales and marketing teams," explains Turner from RCI.

Research conducted earlier this year by RCI's sister company, Northcourse Leisure Real Estate Solutions, has indicated that GCC nationals will be spending US $1.2 billion per year on shared ownership leisure real estate by 2020 and that up to 20% of Dubai's inbound tourists could be staying in non-hotel accommodation such as timeshare as the market matures.

"Timeshare resorts in highly desirable areas of Dubai are likely to enjoy the greatest success. Typically areas where high real estate and hotel costs prohibit or dissuade tourist will benefit.

Palm Jumeirah is a good example of a tourism related real estate project where real estate costs are becoming out of reach of most families therefore the option to buy a week of timeshare for 20 years for $30,000 will become very attractive as Dubai establishes some of its family attractions," Turner remarks.

Jackson of Emerald Vacation Club agrees that timeshare and hotels have a symbiotic relationship in mature tourism markets.

"Hotel and vacation ownership models do overlap, but in the main, they service different market segments. Ultimately the attraction is Dubai itself and the emirate is making remarkable inroads into the world tourism market," he says.

"Dubai is in an ideal position to take advantage of the vacation ownership opportunities. With the cost of hotel accommodation increasing year on year, some tourists are already beginning to be priced out of the market. For Dubai's tourism market to sustain its growth different price points need to be created for tourists."

Meanwhile, Interval's Clifton points out that developers can benefit too from a mixed use model: "The timeshare product in general is regarded as complementary to a resort hotel. Indeed, in a multi-site application shared ownership can bring economies of scale in the costs of development, better year-round occupancy and also allows a wider range of hotel amenities to be profitable."

With international players such as MVCI and a host of local giants like Dubailand embracing timeshare as an accommodation option, hoteliers and hotel owners need to educate themselves on this new business component and embrace timeshare as an untapped potential profit centre.

Timeshare typesTimeshare, or vacation ownership as it is often referred to, comes in many guises. HME details some of the leading timeshare concepts worldwide:

Timeshare Weeks - The most subscribed to timeshare plan, this is where an owner purchases a week or weeks at a specified resort. The weeks can be Fixed, whereby the owner has the right to use a specific week each year, or Floating, whereby the owner buys into a season (low, medium or high) and can then use their week at any time during that period.

Fractional Ownership - Ownership in a property for more than one month. Fractional ownerships can also include quarter shares. Properties offer a true ‘home away from home' with many offering storage of personal items, including clothing, so that each time a guest returns their unit is furnished with their personal possessions.

Condo Hotels - These are hotel properties that offer rooms for sale on a leasehold. The concept gives members the right to use a specific amount of time (usually about one month a year) and then rent the unit back to the operator for the rest of the year. The operator and owner then share profits.

Points - Some exchange companies, such as RCI, also operate a Points system whereby an owner's membership is awarded a points value, based on location, size and time of year. These Points then work as a currency for securing an accommodation exchange into another resort/s worldwide.

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