Slump in Timeshare Market May Pull Down Hotel/Resort Profits

Today's edition of the Wall Street Journal reports that:

The hotel industry has been reeling for the past year amid a steep decline in business and leisure travel. Now it is moving away from one of its former profit centers: time shares.

Major time-share developers, led by Wyndham Worldwide Inc., Marriott International Inc., Starwood Hotels & Resorts Inc. and others, are scaling back their time-share business as investors in time-share loans demand higher interest rates, buyers become more scarce and resales of time shares put downward pressure on prices and demand for new units.

As the Journal puts it, "giant hotel companies aren't in danger, but the decline in the time-share business will be a drag on profits for years." This has led to "curtailing spending on new resort construction, cutting staffs by up to half and imposing tougher standards for the few buyers qualifying for loans."

Hawaii has seen its share of resort/hotel conversions to timeshares in the past decade. In today's economic climate this could mean more economic pain for Hawaii's hotels with occupancy rates at record lows.

Source: A. Troianovski & K. Hudson, "Hotels Sound the Alarm on Time Shares, Pullback by Major Developers Amid a Slump Will Reshape the Business," WSJ, July 8, 2009.