Introduction
The aim of this essay is to analyze Marriott Vacation Club International as a four-season timeshare resort. The concept of timeshare (vacation ownership) has evolved over the years to be a profitable venture for many entrepreneurs. Since 1960s, timeshare has gained popularity. Families who wanted vacation in the Alps every year bought shares from real estate investors. Rather than simply staying at the apartments, tourists purchased these resorts. This marked the beginning of timeshare resort, although it was difficult in the beginning.
Marriot timeshare was established in 1984, a period that marked a new era in vacation ownership. Marriot introduced benchmark practices, quality and services in the industry. The company was responsible for customer-focused approaches to ensure that timeshare owners had increasingly flexible schedules with regard to when and how to spend vacations. The company shaped and introduced modern vacation practices known in the industry today (Marriott Vacations Worldwide, 2014).
Definition
The term timeshare emerged in the 1960s after the WW II to reflect vacation practices. Four families would jointly purchase houses for vacation purposes. They would then have exclusive right to use the property during one of the four seasons in a year. Families, however, took different vacations every year to ensure prime use of all seasons equally.
Timeshare was based on trust. In most cases, vacation homes remained vacant most of the time because of limited vacation periods. This presented an opportunity for entrepreneurs (Kuratko, 2000) who would divide resort rooms into 1/50th ownership. They allocated two weeks for resort upgrades and repairs and collected maintenance fees from owners. This business, however, was not easy to run because it evolved slowly.
Later, the concept of timeshare spread to the US in 1970s because of large profits entrepreneurs made from selling resorts to owners for 52 weeks every year. The US model was regulated to ensure that it was a simple process for ownership transactions. The business model was based on fees from owners’ vacation payment and maintenance fees. Other companies later introduced rotation programs so that owners could experience different destinations.
One major challenge in the industry has always been cancellation of timeshare contracts (Max, 2002).
Methodology
Data for the essay were gathered from the company’s Web site, annual reports and professional insights about the industry. Consequently, rich data were captured for the study. Data for the study provided both current and future outlook of the company and the industry.
Profile of the Company
Marriott Vacation Club was established in 1984. The company celebrated its 30th anniversary in the year 2014 (Marriott Vacations Worldwide, 2014). The company was the first branded vacation ownership venture in the industry. As a result, it has offered ‘Family Vacation’ to millions of families.
Marriot Vacation Club Timeshare Ownership
According to the company, users only purchase the time they require. That is, there are no expenses associated with full-time vacation homes, which are rarely used, but attract full year payments. Marriot claims that owners are not restricted to specific places every year and therefore they can select from thousands of destinations to visit. Owners can also take vacation whenever they want. There is no specific time or restriction within the year. Moreover, several vacations are available for owners throughout the year.
Marriot offers maintenance-free resort for owners and the property is deeded for owners as their assets. The company allows owners to purchase only time they require to spend during the vacation rather than purchasing the entire ownership of the property. This model offers flexibility and luxury for owners. Owners can also choose from one bedroom, two bedroom or three bedroom villas available for the travel group.
Marriot has touted itself as the best in the industry with over 30 years of experience. Today, the company caters for over 420,000 families globally.
The company gets most of its revenues from four major sources, which include “selling vacation ownership products; managing our resorts; financing consumer purchases of vacation ownership products; and renting vacation ownership inventory” (Marriott Vacations Worldwide, 2014).
Today, Marriot operates 62 vacation villas in the US, other nine countries and regions. The company’s strategic objective is to strengthen its leadership position in the vacation ownership industry through competitive products and services. It has a large scale and a global appeal derived from Marriott and Ritz-Carlton brands. Marriot has loyal, highly satisfied customer base.
The company’s four brands include the following.
- The Marriott Vacation Club.
- Grand Residences by Marriott.
- The Ritz-Carlton Destination Club.
- The Ritz-Carlton Residences.
Products
- Points-Based Vacation Ownership Products.
- Weeks-Based Vacation Ownership Products.
Pricing
Here are a few examples of popular Vacation Club Point levels:
The most profitable segments (dollars in millions) for the fiscal year 2013.
Identification of Key Operational Issues
This section focuses on current and possible future challenges that could affect the company’s operations and profitability. Any single event covered in this section could harm the company negatively, specifically revenues, operation activities or even trading activities of common stock. The company acknowledges that it faces several risks, including others not currently known to management and owners.
There are currently weak economic situations prevailing in the company’s key markets such as the US, Europe, Asia and others. The company cannot exactly understand the duration of these uncertainties. Hence, they expose the business to unknown potential risks.
Today, there is weak consumer confidence in the vacation ownership industry coupled with limited credit support for consumers. In the past, the company has experienced weak demands because of such conditions and they are most likely to affect future operations. Marriot, however, noted some minimal improvements in demands globally, which may not continue into the future. Thus, the company could suffer financial losses because of such economic uncertainties.
Marriot has a complex relationship with Marriott International. There are several agreements that govern these activities, including Spin-Off connections. Although the company has exclusive rights to use the brand of Marriott International and Ritz-Carlton Hotel Company in vacation ownership business, any breach of these agreements could lead to loss of businesses, costly legal proceedings or even termination.
In addition, Marriot and Ritz-Carlton Hotel Company may terminate license agreements if the company’s products and services fail to meet the expected brand standards. No doubt, termination of the agreement and rights to use these two brands would harm and impair the company’s abilities to operate in any market. Moreover, subsequent claims could affect the financial position of the company.
Marriott Vacation Club International also has ambitious expansion strategies. However, if its brand partners fail to allow it to use their trademarks in relation to acquisition and new developments, the company’s ability to remain competitive could be highly impaired. Marriott Vacation Club International must obtain consents to use these brands for new developments and ventures. These partners must approve the use of their brands in proposed businesses and therefore such processes expose the company to delays in strategy implementation and lead to extra costs.
Marriott Vacation Club International currently offers it services and products under Marriot and Ritz-Carlton brands because of their strong reputation. However, if these brands deteriorate in terms of quality, then Marriot Vacation would experience adverse effects on its reputation, market share, business growth and revenue growths.
The company uses points-based product model to sell vacation villas. However, this approach increases risks of temporary inventory depletion. It must rely on trust to drive revenues. Previously, the company had used weeks-based vacation ownership with identified resorts and it had more sources of resorts. Therefore, any risks associated with depletion were minimal and could be easily diffused.
Marriott Vacation Club relies on its senior management and business associates to execute its business strategies. Therefore, if any member of the senior management team leaves the company, then Marriot would not be able to execute its business strategies as expected, and this could affect the company’s operations negatively. Moreover, inadequate supply of qualified and talented associates could also constraint the company’s ability to run smoothly in the global markets. There is a fierce competition within and outside the industry for talented employees and associates (Vaiman, Scullion, & Collings, 2012). The company cannot sustain continued associates’ recruitment, training, development and retention of sufficient numbers. Associate turnover remains a significant challenge in the industry. Such challenges are also associated with guest dissatisfaction and lack of internal controls and failures.
The company must keep pace with developments and changes in technology. Otherwise, its operations and competitive position would be impaired. Marriot Club must invest and train employees in sophisticated technologies for sales, reservation, property management, inventory management and other operational issues. Failures to acquire and refine skills in technologies and systems could adversely affect the business. Moreover, rapid changes in such technologies leave the company vulnerable.
The most significant operational threats emanate from disagreement with property owners and vacation ownership interests. These are potential sources of litigation and losses for the company. Disagreements occur from time to time with property owners, the product changes and nature of responsibilities of the company. Although the company aims to resolve such disputes expeditiously and promote positive relations, property owners and associates may not always seek for quick solutions. Failure to mitigate these risks could adversely affect the company’s operations, including loss of management contracts.
Further, management contracts expire, property owners terminate or renegotiate new terms. The major challenge, however, has been rescission (Rogers, 2013). Moreover, there are also costs associated with property refurbishment and maintenance. In some instances, however, property owners may fail to pay for these fees. These factors could affect the company’s future operations, revenue growth, share trading and profitability. In some instances, owners may terminate agreements altogether (Correa, 2007). Other critics have considered timeshare arrangements as traps for property owners (Max, 2002).
The company must also deal with fierce competition from other established timeshare resorts such as Hilton, Barnsdale Hall Hotel (the UK), Worldmark and Club Aviara among others. In addition, there are several industry regulations in different countries, which the company must observe to protect its businesses. These are mainly dynamic environmental laws, property ownership and claim issues (European Commission, 2007).
Discussion
Some of the industry observers have noted that timeshare is a booming business (Correa, 2007) while other fault timeshare models as traps (Max, 2002) and guide property owners to rescind (Rogers, 2013). However, the identified risks, as noted in the case of Marriot Club, pose major challenges to the industry sustainability, continued profitability and growth. These challenges, particularly disagreements with owners, require effective solutions.
While many potential customers wish to own vacation homes as sound, appealing alternative, the Federal Trade Commission (FTC) notes that buying a timeshare could be a solution for year-round responsibilities associated with owning a vacation home (Federal Trade Commission, 2012). The FCT warns potential investors to review terms and conditions of timeshare, particularly the “right to use” options because of critical challenges that arise when owners wish to resell their homes. The major challenge in the industry arises due to lack of owners’ education and technicalities in management contracts. Consequently, certain timeshare companies have embarked on customer education to ensure that they understand how the model works (Correa, 2007). This approach could eliminate several challenges related to rescission, litigation and management contract termination.
Competition in the industry has increased significantly, as new providers emerge. Consequently, Marriot Club must strive to offer quality products and services, provide several, unique locations, enhance brand trust, review pricing and offer other ancillary services that complement vacation timeshare services.
Many users consider vacation ownership as second homes and alternative to rentals. Hence, the industry must promote this belief to avoid contract cancellation and termination.
The model requires strategic positioning that drives profitable sales growth (Hanson, Hitt, Ireland, & Hoskisson, 2014). As the company strives for profitability through various means, the industry has attracted negative criticism because of ‘extreme’ sales techniques used to close deals (Henderson, 2013). However, Marriot has focused on leveraging its strong global brands to drive sales. The company must focus on creating new sales channels that focus on new buyers, efficient marketing, efficient spending and proper management of inventory with the aim of avoiding depletion.
The timeshare industry also requires cash flow maximization. A company must always review its sales revenues and match available inventory with sales (Seal, Garrison, & Noreen, 2009). It must reduce costs, but increase sales volumes. A good company must focus on strategic growth opportunities with careful consideration of both current and future industry conditions.
There is also the need to focus on vacation homeowners, guests and business associates. The company must improve services and guarantee satisfaction and experiences of its customers globally. Owners and guest are identified as the most cost effective means of generating revenues. Hence, it is imperative for the company to maintain high standards of engagement with this segment of clients to ensure their continued support and revenue streams.
Marriot should focus on high value assets, but dispose under developed land holdings. It must pursue growth opportunities in emerging markets in North America, Asia, Europe, Australia and Africa. It should target high-quality inventories. New compelling business opportunities exist in service provision through exchange programs, new associates, acquisition of existing ventures and other related services. These ventures would offer additional sources of revenues, but the company must review terms, strategic fit and evaluate complementary roles of new opportunities (Grant, 2005).
Conclusion
Timeshare is a booming business. However, it faces several challenges, including rescission. On this note, the company must educate timeshare vacation owners to understand terms of contracts and strive to mitigate any disputes earlier and maintain positive relations. This would perhaps eliminate several challenges witnessed in the industry. Many critics have noted that year-round fees do not just add up for owners while reselling could be extremely difficult for some owners. Moreover, there is a need to mitigate competition by focusing on new profitable, complementary opportunities.
Recommendations
- Create positive image in the industry because the industry is known for ‘extreme’ sales techniques.
- Always advise customers on terms of contracts and educate them on how the business model works.
- Observe regulations in different countries and retain its well trained associates.
- Focus on positive customer experiences, promote exchange programs, flexibility and favorable fees to avoid resell or constant donation by owners.
- Develop new revenue sources to support the current sources and embrace technology for efficiency.
- Marriot depends much on two major brands and thus it is necessary for the company to negotiate new contracts with other service providers.
References
Correa, B. (2007). A Fresh Look at the Math: Buying a Timeshare vs Staying at a Hotel. Web.
European Commission. (2007). Revision of the Timeshare Directive. Web.
Federal Trade Commission. (2012). Timeshares and Vacation Plans. Web.
Grant, R. M. (2005). Contemporary Strategy Analysis. Hoboken, New Jersey: Blackwell Pub.
Hanson, D., Hitt, M., Ireland, D., & Hoskisson, R. (2014). Strategic management: Competitiveness and globalisation (5th ed.). South Melbourne, Victoria: Cengage Learning Australia.
Henderson, L. (2013). Deceptive Timeshare, Campground and Travel Club Sales. Web.
Kuratko, D. (2000). The Entrepreneurial Decision. Indiana: Ball State University.
Marriott Vacations Worldwide. (2014). 2013 Annual Report. Web.
Max, S. (2002). The timeshare trap: Frustrated with fees, timeshare owners struggle to donate, sell or give away vacation property. Web.
Rogers, B. (2013). How do I rescind my Timeshare Purchase? Web.
Seal, W., Garrison, R., & Noreen, W. (2009). Management Accounting. New York: McGraw-Hill.
Vaiman, V., Scullion, H., & Collings, D. (2012). Talent management decision making. Management Decision, 50(5), 925-941.