Q&A With Timeshare Expert Jim Marmorstone

By Karyn Strauss, Senior Editor -- HOTELS Magazine, 3/1/2007

Jim Marmorstone is the president of Tenstar, a hospitality consulting and management re-sources firm. He has 26 years of experience in the vacation-ownership business, in both the real estate and hotel sectors. His experience includes positions with Interval International, Fairmont Heritage Place, Fairmont Residences, Wyndham Vacation Ownership and Sol Melia Vacation Club. HOTELS recently spoke with Marmorstone about the biggest trends and devel-opments he's seeing in the evolving vacation-ownership sector.

What are the hottest markets for vacation ownership today?

The place that comes to mind that is consistently coming up for RFPs is Dubai. It comes up more frequently than anywhere else. The No. 2 is still Florida—for the non-international desti-nations. The largest markets in the U.S. are the southern states and Colorado. But part of the problem impacting places like Colorado is that the developable land has been developed or you have to tear down—so finding the strategically located land at right price is a challenge.

I’m also seeing more developers talking about going south of U.S. border, and people stock pil-ing inventory and looking for strategic locations a two-hour flight from Miami.

Why do you think so many companies involved in the vacation ownership sector saw record-setting performance last year?

The one thing that I’ve found no matter what happens with residential real estate market is that shared ownership continues to grow. There’s not a lot of price volatility in the time-share/fractional market. And I don’t think we’ll see any movement downward – unlike residen-tial real estate market. The advantage is that with the rise in insurance, property taxes, land cost, etc., the shared-ownership concept makes sense to the consumer.

What is your outlook for 2007?

What has stunned me over the last 6 months is that while we’ve seen the bubble burst in the real estate market, I’ve seen accelerated growth in number of developers looking to bring frac-tional and condo hotels to the market—fractional being the dominant one, even compared to timeshare. Rising real estate costs will bode well for shared-ownership model, too.

How important is branding in timeshare product?

I’ve worked with brands and one of the things I’ve seen is that it clearly drives reduced market-ing costs – lowering the cost of customer acquisition. But countering that, the brands are very quality and standards conscious, so that offsets marketing costs with higher building costs.

What are some tips to operating a successful condo hotel?

What drives the success of them is the ability to rent the rooms. You can be very good at man-aging the hotels but you also need to have right distribution system. It also comes down to jus-tifying the pricing per night and knowing what the market will permit. The good news is hotel rates are on the rise.

Why do you think Europe is behind in adopting the timeshare model?

Historically there have been problems with marketing practices, which led to a negative per-ception of the industry. I also don’t think they’ve had the degree of support we’ve had in the U.S. and therefore didn’t have the capital to grow. In South America, too, there’s been a lack of consumer legislation, financing—there’s been no protection against defrauding of consumers. If consumer is protected the market will grow.

With everyone so bullish on the sector, do you have any words of caution?

With condo hotels it’s very important that sales staff isn’t bordering on crossing line in talking about rental pools and revenue expectations. Problems will arise for those properties that were indirectly sold as an investment and then those expectations are not realized. The individuals won’t be able to afford the product, and then they default. Hotels usually take some time to break even – three to five years. So who’s going to pay for those operations? The good news is business is good in the hotel industry. But if you reduce distributions on revenue rotations, those owners are not going to be able to afford the condos they purchased.

And for fractional I would caution operators to study the use patterns of your owners, and don’t forget that program design must fit the market. For example, if I know I get 30 days a year but those days are not defined, I have to learn to be a planner. Make sure owners know how the programs work. You need to go thoroughly explain the process and then make sure program fits the needs of buyer. We spend hours designing programs to fit use pattern of customers we’re targeting.