How Timeshares Help Local Economy

A new report to local hoteliers found that timeshares pick off travelers who might otherwise use motels. That reignited the controversy over what the timeshare industry contributes to local tourism.

Joe Cantrell, vice president for finance at King's Creek Plantation timeshares in York County, defended the industry in a recent letter to the editor. The Gazette followed up with several questions. His responses on local data reflect only King's Creek. Industry data he provided were derived from studies done by the American Resort Developers Association International Foundation. Italics offer supplemental information for the entire community.

How many units do we have?

King's Creek currently has 110 three-bedroom units and 84 two-bedroom units. When we complete our latest phase in late 2006 or early 2007, we will have a total of 116 two-bedroom units. We plan to start our next phase of 52 units in early 2006. Our current master plan outlines a total build-out of approximately 900 units taking place over the next 15-20 years.

Another industry source put the total number of current timeshare units in greater Williamsburg at approximately 4,000. A second source projected the eventual build-out at 12,000 units, eclipsing the number of hotel and motel rooms.

How many developments?

The developers of King's Creek are local, and the resort in York County is their only timeshare resort.

In addition to King's Creek, there's Sunterra, Fairfield, Marriott Manorhouse, Williamsburg Plantation, Peppertree and Westgate.

How do we compare with other areas?

There are 1,668 timeshare resorts in 47 of the 50 states. Florida leads the way with 378. Virginia ranks 12th with 39 resorts.

Is there a saturation point?

Looking at the timeshare industry as a whole, only 3.87 million households in America owned a week of timeshare as of January. In recent years, the number of “owner” households has been increasing at about 13.5% per year. As the baby boomers retire and have more time to vacation, we think this growth rate will continue and possibly accelerate. If we look at the local market, the saturation point is directly related to the success of Williamsburg as a tourist destination. If tourists look at Williamsburg and all it has to offer and decide they want to vacation here, we believe the saturation point is far into the future.

It that happens, what's the effect?

If we reached a saturation point, we would stop building units. But it's important to note that if we did stop building units, the owners of the timeshare weeks would still vacation in Williamsburg year after year and spend money at local businesses.

Why are timeshares so popular?

There are a number of reasons, but I'll focus on three.

1. The units and the resort property have a great deal to offer. The units are spacious, well-appointed, have full kitchens, and multiple bedrooms. Our units, for example, are furnished with fireplaces, big-screen TVs, leather sofas, washer/dryers, and Sony Playstations. We make significant investments in amenities, like our new $2.8 million aquatic center with a large indoor pool, exercise room, hot tubs, saunas and steam rooms. We also have two large outdoor pools and gas grills which are scattered throughout the property.

2. One of the inherent benefits of owning a week at a resort is the ability to deposit that week in an exchange network, like Interval International, and vacation almost anywhere in the world.

3. It gives people the ability to vacation in accommodations that are very much like a second home. We think it's a great alternative to a second home since you can go many different places and it is much more affordable.

What are the typical prices?

At King's Creek the prices range from $5,900 to $29,900 per weekly interval. Prices vary based on number of bedrooms, the season the week is in, and whether an annual or every-other-year occupancy is purchased.

What do you get for that?

Our owners receive a fee simple deed to 1/52nd of a building here at the resort. Depending on what product you purchase you would receive usage at King's Creek, preferred access to a local golf course, and the ability to trade into other resorts all across the country.

How many owners are local?

King's Creek has approximately 9,600 owners. Of that, 1,256 or 13% are from the Peninsula. We have 250 owners who live in Williamsburg.

What is the default rate?

Our owners default on their loans approximately 15% of the time.

What causes it?

The most common reason for default is financial hardship, usually loss of job, health problems, etc.

How do you promote tourism?

We are very proactive in bringing people to Williamsburg and to our resort. This is how we create the opportunity to talk with people about buying a week of timeshare.

Since King's Creek opened in 1998 we have spent more than $30 million marketing the area, which resulted in more than 70,000 tours coming to Williamsburg. We accomplish this by marketing Williamsburg vacation packages over the Internet, in magazines, through direct mailers and over the phone.

For example?

Some customers purchase “mini-vacation” packages in which they come to Williamsburg for three nights and four days. The package includes hotel or resort accommodations and a variety of other benefits, such as tickets to local attractions, dinner gift certificates, shopping gift certificates, etc. These packages typically cost $300.

How does that relate to tourism?

The money we collect for these packages does not cover all of the cost of the rooms, incentives, and support staff we have. So this shortfall adds to our marketing cost. All these efforts result in tourists coming to Williamsburg who might not otherwise have decided to vacation here.

You're typical of the industry?

These are the totals from one small resort in the area. If you factor in the impact of all the timeshares in the Williamsburg area, I think you will see that the positive economic impact on our local economy is substantial.

What tourism committees are timeshares represented on?

I am not sure how the other timeshares are involved on local tourism committees. No one in our organization has been asked to participate on any committees, but we could be more proactive in seeking those opportunities out.

Why are timeshares exempt from the transient room tax?

The owners who buy weeks are deeded a piece of real estate. When they come and use their week or someone else trades in from another resort, they are not subject to the room tax. They own the unit for that week.

Any exceptions?

If an owner stays with us for a weekend getaway, or a non-owner rents a week from an owner, we collect and pay all applicable state and county room taxes in addition to the $2-per-night room tax.

How many nights do people stay?

Based on King's Creek occupancy statistics, the average stay is six nights.

How does that compare to motels?

I don't know. We have never made that comparison.

Do timeshares hurt motel occupancy?

There are a couple of important items to note here. First, the owners who exchange into our resort would not be using hotel rooms anyway, since they already own weeks of timesharing. Second, our marketing efforts bring people to this area who might not otherwise have come to Williamsburg. Many of the tourists we bring to the area end up staying in hotels while they are here. We think the biggest challenge the local tourist industry faces is making the Williamsburg area an appealing tourist destination for the long term. Our whole economy will benefit if our tourism industry is strong.

How do you help the economy?

I think timeshares are excellent for the local economy. If you look at King's Creek, we generate revenue for the county and state through real estate and personal property taxes, transient taxes and real estate recording fees. During 1998-2004, we were directly responsible for generating more than $3.3 million in taxes and fees for the county and the state.

What about the tourism economy?

King's Creek has given out more than $7 million in incentives to the tourists we brought to Williamsburg. These incentives consist of tickets to local attractions and local restaurant gift certificates. We have also purchased more than $4 million worth of room nights from local hotels.

So what's the big picture?

If we examine the economic impact of people staying at our resort, there is a substantial amount of money put into the local economy on an annual basis. According to industry information in Virginia, timeshare owners spend an average of $1,591 on food, shopping, and tourist attractions during each trip. King's Creek averages an 85% occupancy rate on an annual basis. Using these statistics at a 180-unit resort, the tourists who stay with us spend more than $12.65 million annually right here in the Williamsburg area.

How can timeshares work with others?

Having spent some time in the area growing up and having moved back in 1997, I understand how important the tourism industry is to the economy of Williamsburg. The motels, restaurants, shopping centers, tourist attractions and timeshares all depend on the success of Williamsburg as a tourist destination. I think the most important discussion we can have is the discussion about tourism in the Williamsburg area. If we can work together to bring more tourists to the area year after year, then all parts of the hospitality industry will benefit.

How do real estate taxes help tourism?

I don't think real estate tax revenue helps tourism directly. Obviously the more revenue the county collects through real estate taxes the better it is able to provide services to its residents and promote the area in general.

Is there a hidden benefit?

Timeshare resorts and their owners pay the taxes, but we don't burden the county's educational system with new students.

Who's the typical owner?

I don't think there is a typical one. Our owner base consists of large families, small families, retired couples and young couples. I guess you could say our typical owner is anyone who is committed to vacationing on a regular basis.

Why would locals buy a timeshare?

They gain access to our amenities, but I think the main reason is that it gives them the ability to put their week into exchange networks, like Interval International, so they can vacation anywhere in the United States or internationally.

How's the resale business?

At this point we are still developing at King's Creek, so we do not have a resale department.