The Last Great Frontier Of Lodging?
First it was air, then hotel, then dynamic packaging (combining air and hotel together). Now the hot new online travel product is vacation rentals and timeshares - a small but growing segment that has everything to gain from aggregation and automation, and nothing to lose.
Vacation rentals and timeshares are actually two distinct segments of the market. Vacation rentals are non-hotel accommodations that offer the amenities of home - kitchen, extra bedrooms, balconies etc. They come in the shapes of villas and chalets, condos and cottages, campsites and houseboats. They are rented in daily, weekly or monthly intervals. The industry is highly fragmented - there are thousands of places to rent vacation homes, including either individual owners or management companies, often known as Property Managers (PMs).
Timeshares, on the other hand, are highly managed. Customers purchase a timeshare (a fully furnished condominium for one week per year in perpetuity) and pay membership fees to the timeshare exchange. They can trade their units or dates with others in the same exchange to enjoy different destinations or seasons.
Two companies dominate the timeshare exchange marketplace - Interval International, which plans to be acquired by USA Interactive, and Resort Condominiums International (RCI), which is owned by Cendant. RCI offers inventory from 3,800 affiliated resorts and 80,000 properties. It has three million members. Interval's Quality Vacation Exchange Network features more than 1,900 resorts in 75 countries. Its timeshare exchange has over 1.3 million members. Timeshare companies derive revenues primarily from fees paid by consumers and developers for membership, exchange, reservation services and other travel-related products. Certain properties may be sold to the public as vacation rentals when timeshare members are not using them.
There are few statistics about vacation rentals and timeshares, but some figures suggest the North American market is about $20 billion in gross travel bookings. The online segment is small, less than 5%, but is expected to grow rapidly due to new efforts by leading travel companies.
Cendant And USAI To Dominate Timeshare Space
Cendant and USAI have grand plans for selling timeshares online. By making these units assessable to the general public, both companies expect more and more travelers to choose these options over traditional lodging. Cendant now offers RCI Holiday Network timeshare properties on the newly relaunched Trip.com. Along with the 50,000 hotel properties already available on Trip.com, travelers can now choose among 60,000 vacation resort properties that would otherwise have gone unused for certain periods. RCI also recently struck a deal with LastMinuteTravel.com to sell distressed timeshare inventory on that travel site as well.
USA Interactive plans to become the newest player in the timeshare business. The travel commerce giant announced plans to acquire Interval International for US$578 million last month. USAI plans to cross sell Interval properties among its other business units, including Hotels.com and Expedia.
ResortQuest, A Leader In Vacation Rentals, Builds Online Business
A leading seller of vacation rentals is ResortQuest, which manages 20,000 condos and homes in the U.S. and Canada. The company claims to have a 5% share of the highly fragmented market - there are another 4,000 vacation rental management companies in the U.S., according to ResortQuest.
Of ResortQuest's $420 million in gross lodging revenue in 2001, about 10%, or $40 million, is online, according to CFO Mitch Collins. He added that under 2% is actually booked online, while the rest is researched online, but booked via the toll free number advertised on the Web site. Collins called condo rentals "the last great frontier of lodging."
WebAccommodate is a new player that plans to accelerate the online vacation rental market through connectivity. The company developed a real-time distribution and booking system that connects WebAccommodate vacation rentals to Web sites, GDSs and various central reservation systems.
Travelers looking for alternatives to traditional lodging will find a plethora of options online. At least two companies, Cendant and USAI, stand to profit. Watch out for more distribution deals such as the LastMinuteTravel.com/RCI announcement as vacation rentals and timeshares become one of the final travel segments to exploit the new distribution options available. As a small but growing segment, online distribution cannot only streamline sales - it can create new markets and ultimately change the way many travelers book lodging.
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