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Sector Watch
Time-Share: Cementing Its Place In The Indian Hospitality Scene
 "The
time-share business is booming and there is no looking back. The concept, after
mental blocks in the initial stages in 1992, due to unfriendly sales and marketing
strategies adopted by European marketers saw the tide turn in its favour in
1999. The popularity of the concept has been growing rapidly since then and
has boosted confidence levels further," states Radhika Shastry, Director,
Global Business Group - India & Malaysia, Resort Condominium International
(RCI) Asia - Pacific Pte Ltd.
What was a nightmare till the late 90s is now a dream holiday concept for over
48,000 families in India and three million world wide with an annual average
growth of 18 to 20 per cent. The promise of time-share has not only attracted
brands from the conventional hospitality segment - real estate - but heritage
properties are also allocating inventory to time-share. The weeding out of poor
quality resorts by RCI, the entry of time-share trustees, and the self-regulatory
mechanisms have been facilitating a healthy growth of the time-share industry.
According to an industry observer the time-share business is undergoing an evolution
process in India and the near future will witness many hotel chains incorporating
the concept in their respective operations. Currently the numbers in India are
very small, about 45,000 to 50,000 time-share owners. There are now more than
5390 time-share resorts in over 100 countries. A majority of them are located
in the USA and Europe, and destinations range from the familiar, with urban
resorts in Paris and Edinburgh, to the exotic, located in such far-flung locations
as Zimbabwe, Indonesia and Brazil.
The Future Is Bright
Industry analysts are of the opinion that time-share is a buoyant market, one
which will grow tremendously with improved quality of resorts providing a more
fulfilling experience for the customer. The Indian consumer today is more mature,
has greater exposure and hence more open to the concept of time-share. In 2002,
the Indian time-share industry registered an impressive growth of 25 per cent,
with some of the resort developers registering a 70 per cent increase in sales
turnover. Brands such as Club Mahindra, Holiday Inn, Le Meridien, Royal Resorts,
etc, that added tremendous credibility to the industry in India are now set
to foray into new markets. While it was Sterling Group, that pioneered the concept
in India, it is RCI that has propelled the turnaround of the industry in the
country after the closure of the Sterling Group.
The industry was further boosted by the formation of the All India Resort Development
Association (AIRDA) which regulated the time-share market. The Association enforced
self-regulation standards among the member resorts. Commenting on the introduction
of regulations and set standards in the time-share industry, an analyst said,
"The recent move of bringing together all Indian time-share developers
to gradually phase out utility fees from the system is a positive step in the
right direction. As is the global practice, the time-share consumer would eventually
need to pay only maintenance charges to their respective resorts and no utility
charges whilst on an exchange holiday to another resort."
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MoT Finalises Times-share Classification Norms
After deliberating on the issue for over a year,
the Ministry of Tourism (MoT) finalised the classification norms and guidelines
for time-share resorts last month. A K Misra, secretary, MoT, confirmed
this development to the Express Hospitality. While the guidelines are
still to be made public, trade pundits opine that the classification guidelines
will enable time-share hotels and resorts to avail of all the incentives
of ownership as applicable to the hotel industry at large. Interestingly,
with this step the hotel industry will open up to vacation ownership and
similarly the vacation ownership can enter into hotel segment. The synergy,
will optimise room nights and there will be business opportunities for
operators of both, existing and the new projects.
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A Worthy Business Proposition For Hoteliers
Time-share has also been considered as a good business proposition for hoteliers.
According to an industry analyst, the economics of time-share, if one does a
cash flow and a financial analysis of the concept, makes it an extremely viable
and attractive proposition for the entrepreneurs to incorporate the concept
into their respective properties. "For instance, if a hotelier plans to
come out with a new venture with around 150 rooms, he can look into the possibility
of having approximately 50 rooms (out of the 150 guest rooms) built especially
keeping in mind the requirements of a time-share property. Thus, 50 rooms multiplied
by 52 weeks works out to approximately 2,600 room-weeks. Look at the financial
dynamics of the whole thing. If you are putting 2,600 room weeks full-time in
time-share, on an average cost of Rs 2 lakh, you get Rs 52 crore up-front over
a period of time, the same time it takes to sell your entire inventory in the
market. Besides, once you sell it off you can charge your customers an annual
management fee, which could again generate around Rs 1.5 to Rs 2 crore which
takes care of your fixed costs. This way an entrepreneur can generate enough
funds to enable him in financing his project either fully or partly depending
on its size. This is why I assert that from a financial perspective it's a very
attractive proposition for the hoteliers, especially for the big hotel chains,"
stated the analyst.
Talking about India, Kenneth May, president & CEO, RCI feels upbeat about
the country's tourism prospects. He says, "It is time that time-share is
integrated with the hospitality sector and its role is recognised by the government.
We would like to see a ten-fold increase in time-share members in the next decade
so that the country can emerge as a leading time-share destination globally."
- Reema Sisodia
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