Alliance Report Finds Timeshares Boom, Hotels Bust

Wednesday, October 27, 2010

Though occupied rooms in area lodgings have increased 50 percent over 1987 numbers, timeshares have muscled out hotels for the biggest share of that increase, according to a report by the Greater Williamsburg Chamber and Tourism Alliance.

Alliance President Dick Schreiber says the report is the latest in a series of informational tools the Alliance has collected for its members (earlier reports have focused on workforce compensation, tourists who come to the Triangle and local tourism in general). “We want to see if we can provide useful information to our members, and this is interesting information that has never been complied before. We hope it will be of use to those businesses that seek to do business here.”

What the Alliance found after looking at the data from the last 23 years was that occupied room nights have increased nearly 50 percent since 1987, but that in recent years room supply has increased more than demand. Also, since the recession began demand has declined while supply has increased, mainly due to timeshares continuing to build in the area.

According to Schreiber, “Demand growth of 49 percent over the period is pretty good, but with capacity growth of 62 percent, that makes it pretty hard to keep up” for hotels competing with timeshares.

Since 1987, occupied rooms in timeshares (including purchased rooms and those rented nightly like a hotel) have increased over 372 percent, while occupied hotel rooms have decreased 9.6 percent (with the largest drop in the years between 2007 and the present).

Almost one out of every two rooms currently occupied in the area is in a timeshare, according to the report.

“There’s no evidence that capacity growth will abate,” says Schreiber, “especially with timeshares. They have a totally different business model” than hotels, because empty rooms they rent out for a night or two are extra profit on top of their traditional timeshare sales model.

The impact has been felt strongly by area hotels, which have been dropping rates significantly since 2007. After a peak increase of nearly 50 percent over 1987 in revenues per available room in 2007, the current revenue per available room is back down to nearly the same as it was 23 years ago.

The report concludes that capacity has outstripped demand in the area, with scales tipping in favor of timeshares.

The hotel sector will continue to feel pressure and likely newer facilities, especially suite properties, will be more successful than older properties, according to the report. The number of rooms will have to adjust if the area wants to achieve balance.

The Alliance aims to continue trying to draw more visitors to the area through promoting the area beyond the primary summer season and diversifying its marketing of the Triangle, according to the report.

“This is a different period for hotels right now,” Schreiber says. His advice for hoteliers is to focus on “investment, either in marketing or in the product. That’s key. But it’s tough for them if daily rates are lower and occupancy is lower, and loans are hard to get.”

He expects the next generation of hotels, those like Great Wolf Lodge with a built-in attraction that draws people, will do well in the new climate.

Williamsburg Hotel Motel Association President Chris Canavos, who owns a Country Inn and Suites in Williamsburg, says hotels have a way to track their data through Smith Travel, and timeshares don’t have that.

His feeling is that “the answer [to the problem] is to focus on how we get demand back, not on supply. Everyone in the industry should focus on that.”