Timeshares Put Squeeze On Hotels

For months, Orlando hoteliers have worried about a pair of seemingly conflicting facts. On one hand, they keep hearing estimates of record numbers of tourists coming to the state. On the other, their occupancy rates are falling.

Where, they ask, are all these people sleeping?

Cars? Campgrounds? The homes of friends or relatives? Timeshares?

The answer appears to be: timeshares.

In 2001, 10 percent of Orlando visitors stayed in timeshares. Last year, that number had increased to 15 percent.

That steady shift in sleeping preferences could have significant ramifications, not only for hotel-occupancy rates, but for the county's resort tax. The pool is used to pay for things such as the convention center and is being eyed for the new downtown performing-arts center and an arena for the Orlando Magic.

Because timeshares count as real estate, they generally are exempt from the tax, a 5 percent charge on short-term rentals. The exemption, however, does not apply to those units rented out like hotel rooms.

Overall collections have remained strong in recent months, but hoteliers have warned that it's only because they've been raising room prices to offset declining occupancies -- and that there are limits to that tactic.

"That has played itself out," said Ron Caimano, a longtime hotelier and general manager of the Embassy Suites hotel at Jamaican Court.

Last year, the average price for a hotel room in Central Florida surged nearly 6 percent over the previous year. And it's up 9 percent through the first three months of the year, according to Smith Travel Research, a Tennessee-based company that tracks national hotel trends.

Still, Orange County's resort-tax shepherd isn't ready to sound the alarm. Though collections took a 2.1 percent dip in March, they are still up 3.1 percent for the first six months of the fiscal year.

"I'm not going to say it's threatening the resort tax. But everything that is a change in the market, we are going to pay attention to," Comptroller Martha Haynie said. "It is such a critical revenue source."

Watching that shifting marketplace, Haynie said she'll take a look at how her auditors are deployed, perhaps to keep a closer eye on timeshare operations that are taxable.

'A lot of timeshare'

As far as hoteliers are concerned, every person who buys a timeshare is one fewer potential customer for the area's 110,000 hotel rooms. Further, those tourists are guaranteeing that their many future trips will be hotel-free.

"There's a lot of timeshare out there. And there's a bucket load more of it coming," said Caimano, who also is on the board of directors for the Central Florida Hotel & Lodging Association.

Among those leaving the ranks of hotel guests last year was Valerie Hines, 36, of Kenosha, Wis.

After years of staying in hotels in the Disney and Universal areas, Hines and her husband decided early last year to take the plunge and buy into the Disney Vacation Club.

"The fact that we went so much -- it just made sense," said Hines, who already has trekked back to Orlando half a dozen times since buying the Disney timeshare. "In the long term, we knew we'd be saving quite a bit."

The timeshare trend might be good for visitors, but hoteliers and the county's resort-tax collectors are worried.

Hotel-occupancy rates have been on the decline since August of last year and are down 7.6 percent through the first three months of this year, according to Smith Travel.

Just as timeshares are capturing a larger piece of the tourist pool, hotels are watching theirs shrink. Last year, 62 percent of visitors stayed in hotels, compared with 67 percent the previous year, according to D.K. Shifflet & Associates, a travel-industry consulting company in Falls Church, Va.

"The condos, the timeshares -- everything is an alternative to hotels," said Scott Brush, a Miami-based hotel consultant. "It's got to have some effect on the hotel business."

Long time in the making

It is a shift that has been taking shape for some time. Ironically, it has been assisted by the hotels themselves -- most of them rent lobby space to timeshare marketers, who troll for customers. Some hotel chains also see the benefit of the transition because they own some of Orlando's timeshare resorts.

From 2001 to 2005, the number of timeshare units jumped to 19,099 from 15,157, a 26 percent increase, according to the Orlando/Orange County Convention & Visitors Bureau. Hotel-room growth, on the other hand, has been fairly stagnant during the same five-year period, growing only 2 percent.

"We're starting to see the outcome of all that development that's taken place," said Kelly Repass, the bureau's research director.

Though timeshares -- typically sold in one-week increments -- are generally exempt from the resort tax, there are exceptions.

Some resorts, particularly those owned by larger hospitality companies with enormous booking engines, treat unsold units as hotel rooms, making them taxable. The same goes for individual owners who rent their timeshares to friends, family or strangers.

It is not known what percentage of resort-tax collections come from such rentals. But there is little reason to think the county is getting everything it has coming to it.

"It's difficult to track this. We have to rely on folks to be honest," said Claudia Rilea, an audit supervisor in the Orange County Comptroller's Office. "There can be so many private transactions that go on."

And there are likely to be many more in the years to come. Time sharing has come a long way from its shadier, early days, in part because of the legitimacy granted by hospitality heavyweights -- Disney, Marriott and Hilton, for example -- that have gotten into the business.

"The acceptance by the consumer marketplace is so much greater than it was even five years ago," said Ed Kinney, a vice president with Marriott Vacation Club International, which has 1,900 units in the area and 200 others under construction.

Secondhand timeshares

It isn't just the resorts themselves that are experiencing a surge in sales activity. More often, consumers are seeking out timeshares on the secondhand market -- free of the high-pressure tactics used by many resorts.

Tom Yeary has been running the Timeshare Store, an Orlando real-estate company specializing in resales, for more than a decade. In the early days, it was just Yeary and his wife. But they've added five employees through the years to keep up with the demand.

"We sell more every year," Yeary said. "I went from five days a week to seven days a week keeping the office open."

And although hoteliers and tax collectors may lament the rise of the timeshare beast, it isn't a bad development for the tourism industry as a whole. After all, the purchase of a timeshare essentially guarantees a tourist will be back time and again.

Consider Cindy Bartz, 49, of Wichita, Kan.

Before buying a timeshare five years ago, she and her husband traveled to Orlando about once every two years, staying at a variety of midrange hotels.

Now, they come at least twice a year. And all that money they used to spend on hotel rooms isn't staying in Kansas.

"We end up spending more on food, souvenirs, collectibles and that sort of thing," said Bartz, a respiratory therapist. "If anything, we spend more with our timeshare."