Tweet
The Wuhan Coronavirus is hitting the travel and hospitality industry hard. How will timesharing fare?
There are two categories of resorts to consider. The first is those under the control of a developer and often still in developer sales. The health of the overall company is the key here, and how deep their pockets are on financial reserves. They won't be doing any tours to sell timeshares for a while. Many of them rent unsold weeks to help drive both revenue and tour flow. That has dried up, too. If a big developer goes bust, the individual timeshare owners in such resorts are likely to lose out, but they are probably in a much better position to borrow money to try to ride it out.
The member-run resorts will probably be in a better cash flow situation. Annual maintenance fees have been collected by now and will not be due again until next December or January, which is plenty of time for this to blow over. The weak link is that when RCI changed its exchange system, the ability to resell off season weeks to new owners has tanked and HOA's are stuck with a lot more of them than they used to be. Some resorts have used rentals to make up some of that money, and at least on the OBX, February-March was a key time for that. This year, that revenue will not be there. Of course, on the other side of the ledger, expenses for things like utilities and cleaning will be way down. So over all, independent member-run resorts should be okay.
One potential fly in the ointment is how exchange companies will behave. I was an HOA president during the recovery from hurricane Isabell, and at that time the exchange companies were great and really helped out. RCI made no demands on us as to spacebanked weeks and gave us a bunch of free vouchers good for an timeshare exchange each that we could give to our owners who lost use of their weeks. They had very low trading power but at least got people a week somewhere they could use.. DAE was even better. They allowed our owners to spacebank weeks while the resort was closed for repair that they could exchange against elsewhere with full trading power.
That changed drastically in the last resort closure due to a bad Nor'easter. RCI not only gave us nothing but they came with their hand out. They demanded that the HOA make them whole for weeks they could not use due to closure for repairs. Fortunately, the closure was short and there were some deep off season weeks available to give them. Otherwise, they were demanding cash from the HOA. DAE did not give anything this time but at least they made no demands like RCI did.
What will RCI do this time? For the OBX, the resorts can be ready and willing to take exchangers, but the county is closed to tourists. The resorts should argue that is not the HOA's fault if RCI comes with their hand out. Fortunately, the OBX itself is not under lockdown but it just prohibits travel into the county by people who are not residents or property owners. Where a resort is in an area under lockdown, their argument with RCI might be weaker but it still should be made. I hope RCI does not try to pass their own pain onto HOA's.
There are two categories of resorts to consider. The first is those under the control of a developer and often still in developer sales. The health of the overall company is the key here, and how deep their pockets are on financial reserves. They won't be doing any tours to sell timeshares for a while. Many of them rent unsold weeks to help drive both revenue and tour flow. That has dried up, too. If a big developer goes bust, the individual timeshare owners in such resorts are likely to lose out, but they are probably in a much better position to borrow money to try to ride it out.
The member-run resorts will probably be in a better cash flow situation. Annual maintenance fees have been collected by now and will not be due again until next December or January, which is plenty of time for this to blow over. The weak link is that when RCI changed its exchange system, the ability to resell off season weeks to new owners has tanked and HOA's are stuck with a lot more of them than they used to be. Some resorts have used rentals to make up some of that money, and at least on the OBX, February-March was a key time for that. This year, that revenue will not be there. Of course, on the other side of the ledger, expenses for things like utilities and cleaning will be way down. So over all, independent member-run resorts should be okay.
One potential fly in the ointment is how exchange companies will behave. I was an HOA president during the recovery from hurricane Isabell, and at that time the exchange companies were great and really helped out. RCI made no demands on us as to spacebanked weeks and gave us a bunch of free vouchers good for an timeshare exchange each that we could give to our owners who lost use of their weeks. They had very low trading power but at least got people a week somewhere they could use.. DAE was even better. They allowed our owners to spacebank weeks while the resort was closed for repair that they could exchange against elsewhere with full trading power.
That changed drastically in the last resort closure due to a bad Nor'easter. RCI not only gave us nothing but they came with their hand out. They demanded that the HOA make them whole for weeks they could not use due to closure for repairs. Fortunately, the closure was short and there were some deep off season weeks available to give them. Otherwise, they were demanding cash from the HOA. DAE did not give anything this time but at least they made no demands like RCI did.
What will RCI do this time? For the OBX, the resorts can be ready and willing to take exchangers, but the county is closed to tourists. The resorts should argue that is not the HOA's fault if RCI comes with their hand out. Fortunately, the OBX itself is not under lockdown but it just prohibits travel into the county by people who are not residents or property owners. Where a resort is in an area under lockdown, their argument with RCI might be weaker but it still should be made. I hope RCI does not try to pass their own pain onto HOA's.
Comment