RESORT LAW

The Future of Legacy Resorts

An Industry Outlook: The Challenge of Mature Resorts and Responses and Exit Plans

March 2019

By W. John Funk*
for Developments magazine

The term legacy resorts is generally used to describe hundreds of “sold out” resorts that were created prior to the 1990s that are owner association operated. While a precise number is not known, they constitute a significant portion of timeshare resorts today.

The Challenges of Mature Properties

The challenges facing these resorts are well known. Many properties are small and dated compared to current offerings by newer resorts. Some are located in areas that are no longer attractive. Their owners are aging and are no longer interested in continuing ownership. Their timeshare plans are too restrictive and not sufficiently flexible to accommodate the needs of younger generations. Most have deeded ownership and are faced with the high cost of foreclosures to recapture inventory. eBay and other auction websites have countless offerings of legacy timeshare weeks at discount prices, and owners complain they can’t sell them. That leaves them open to prey by unscrupulous operators promising to relieve them of their timeshare obligations for an exorbitant price.

All sectors of a free economy go through cycles of growth to maturity. Timeshare began in the early 1970s and is now in a mature phase. In the later stages, there is generally a consolidation of companies and the elimination of those that can’t make it. Some go through the process of creative destruction in which they re-invent themselves. Others can’t find their mojo and don’t make it.

The timeshare industry is going through such a process. This is a good thing. The industry is responding to market conditions and changing timeshare to respond to consumer preferences. Consumers are looking to brands for a consistent experience. They want flexibility to match their stays to meet their time schedules, not the resorts’. They want more varied locations, including urban settings. Many don’t want to be saddled with long term ownership commitments and favor contracts having a fixed term. They want upscale accommodations and a variety of amenities on site. They’re looking for experiences.

Addressing The Challenge

Legacy resorts are addressing these challenges in a variety of ways.

Quite a few are reviewing their timeshare organizational documents to make them more relevant to the market. They are also cleaning up the title to their inventory and encouraging owners who wish to leave to tender their weeks to the resorts in exchange for a termination fee designed to offset operational expense. Some have converted to points offerings with exchange companies to give their owners greater use opportunities. Some are upgrading their resorts and becoming competitive with other offerings. Some are partnering with regional or national brands to sell them inventory so that they can rebuild their ownership base. If that is not possible, some are contracting with sales companies to revitalize sales.

Others realize that their prospects are not favorable in their current state and should consider other options. Some have successfully downsized by shedding excess property and concentrating on a limited footprint that allows them to meet their owners’ expectations on a cost effective basis. Others have merged with other resorts in the area and swelled their ownership ranks, but controlled costs by selling unwanted resort property.

A growing number have realized that their sustainability is not in the cards and that they need to shut their doors and sell the resorts. The good news from that decision is that their properties are frequently repurposed and put to good use – for senior or employee housing or new vacation choices. In some cases, after paying expenses, the net proceeds are distributed to owners. For the rest of the industry, it has the beneficial effect of removing unwanted timeshare weeks from circulation.

How the Industry Can Be Supportive

All of this suggests that the industry should not ignore the challenges facing legacy resorts, but embrace it and assist the resorts make the right choices for their owners. The marketplace is telling us that change is coming, and we need to manage it without damaging the reputation of timeshare. The industry should support these resorts in going through the process of evaluating their options and help them make the right choices. Each legacy resort needs a strategic plan to define its future that is understood and approved by its owners. ARDA has devoted time in regional meetings to provide information to legacy resorts as to how to navigate these problems.

Management companies, consultants, lawyers and other professionals who provide services to legacy resorts have the opportunity to make these issues a priority for legacy resorts. The rest of the industry needs to be supportive and provide the resources to assist legacy resorts to make the transition.

* W. John Funk is admitted in New Hampshire, Vermont, Massachusetts and Maine.

W. John Funk
You may contact
John Funk at 603-545-3607.

Related practice areas:
Resort Law
Real Estate Development

See related article:
Is Your Legacy Resort Sustainable?