Fractional Ownership News

Marriott to suspend timeshare developments

Marriott International has said that due to lack of consumer interest it won’t be investing in new timeshare developments in the near future.

“We believe that based on the demand trends that we’re seeing right now, that we have adequate inventory to meet those demand trends,” chief financial officer Carl Berquist said in the company’s earnings conference call last week.

The move comes as an indication of how the upscale timeshare market is suffering. Kevin Brass of International Property Journal describes Marriott as “an industry bellwether”.

"Marriott is a longtime believer in the timeshare and fractional business. Under the umbrella of several of its luxury brands, including Ritz Carlton, it was rapidly expanding the model, particularly in the Caribbean. But the company’s timeshare business has struggled for the last two years. Sales and service revenues declined 23 percent in 2009, according to the annual report. The company took an allowance of $83 million for cancelled contracts in 2009, compared to a $115 million allowance for cancellations in 2008,”says Brass.

Marriott expects the timeshare business to pick up in 2010, forecasting $175 million to $200 million in net cash flow compared to $150 million in 2009, but consumer demand has not picked up enough to warrant any new investment in inventory.

“We don’t see in the next year or two significant capital infusions into the business,” Berquist said, adding that in a couple of years the company would “re-evaluate that based on how that consumer demand comes back.”

Marriott executives acknowledged that timeshares are unlikely to return to their peak levels, when they accounted for as much as 30 percent of the company’s profits. Even in a “strong consumer environment,” company president Arne M. Sorenson told analysts, the likelihood of timeshares contributing that type of revenue to the company is “very, very slight, and it will end up being a smaller part of our business than it was at the peak.”

www.marriott.com

15/02/10
 

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