Table of Contents
APPENDICES....................................................................................................................................................................... 1
Recommendations...................................................................................................................................................... 3
Recommendation- Sell
the Property or Explore Other Options Beyond Timeshares..................................... 3
Keys to Success for the
Development of a Timeshare Resort on Nevis.............................................................. 4
Introduction................................................................................................................................................................. 5
Tourism in the
Caribbean...................................................................................................................................... 5
General Trends............................................................................................................................................................ 5
Caribbean Tourism
Trends........................................................................................................................................ 6
Tourism in Nevis........................................................................................................................................................... 6
Conclusions from
Comparing American Foreign Tourists with Caribbean Travelers.................................. 7
Island Competitors...................................................................................................................................................... 8
The Timeshare Industry
– Basic Facts & Trends.................................................................................... 9
Timeshare Demographics...................................................................................................................................... 9
Worldwide Ownership.............................................................................................................................................. 10
Income and Education............................................................................................................................................. 10
Specific Caribbean
Timeshare Considerations................................................................................... 11
Pricing and Commissions........................................................................................................................................ 11
Timeshare Competition......................................................................................................................................... 12
Considerations for
Nevis.................................................................................................................................. 12
SOURCES CITED …..……………………………………………………………………………………….15
APPENDIX A: TOURIST SEASON BREAKDOWN AND NEVIS CLIMATE 17
APPENDIX B: MEANS OF TRANSPORTATION FOR CARIBBEAN TRAVELERS 20
APPENDIX C: PROFILE OF FOREIGN TOURISTS VS CARIBBEAN TRAVELERS 25
APPENDIX D: ISLAND COMPETITORS 39
APPENDIX E: TIMESHARE OWNER PROFILE, PREFERRED ATTRIBUTES/
AMENITIES AND CARIBBEAN CONSUMER EXPENDITURES 47
APPENDIX F: LOCATION OF TIMESHARE PROJECTS WORLDWIDE RESIDENCE OF OWNERS, CARIBBEAN TIMESHARE PRICES. 54
APPENDIX G: APPLICATION FORM FOR ALEIN LANDHOLDERS LICENSE 62
APPENDIX H: NEVIS REAL ESTATE AGENTS CORRESPONDED 67
APPENDIX I: USEFUL DETAILED INFORMATION ON NEVIS 71
APPENDIX J: NEVIS ACCOMODATION LISTING 76
APPENDIX K: RELEVANT BUSINESS LISTINGS FOR NEVIS 104
APPENDIX L: RCI EXCHANGE REQUIREMENTS 110
APPENDIX NOTES 114
We have
acquired extensive and thorough research on the nature of timeshares in the
Caribbean and Nevis, yet it remains difficult to make recommendations without
specific financial data. It would be
beneficial to conduct primary research to better ascertain the viability of a
timeshare on Nevis. Preliminary data,
however, suggests that a timeshare would have limited success on the island of
Nevis. Therefore, we must recommend the
sale of this property with a minimum of improvements. If, however, following additional primary research and financial
analysis it is decided to pursue this market, we have also outlined critical
factors that will increase the probability of success.
Although
being in a high growth industry, the specific characteristics of Nevis are
inconsistent with the demands of the timeshare industry. Therefore, our recommendation is the sale of
this property after a minimum of improvements.
We make this recommendation for several reasons. First, Nevis currently occupies an exclusive
market niche within the Caribbean tourism market. It has been characterized as a vacation destination for wealthy
travelers. Many current visitors go to
Nevis for the non-commercialized feel. Even during the peak season there is a
surplus of short-term accommodations, yet there is a shortage of long-term
housing. Two projects aimed at the
short-term traveler (one condo and one timeshare) on Nevis have failed
miserably. As explained by one of the
real estate agents, the long-term market is occupied by owners who can afford
to buy a vacation home and use it for one or two weeks a year. In his words, these owners do not desire to
share the island with anyone. The exclusive nature of Nevis is highly
valued.
These
attitudes are reflected in the activities, accommodations, accessibility, and
prices of Nevis. It is one of the most
expensive and secluded islands in the Caribbean. Travel is restricted by its limited airport facilities. These characteristics are inconsistent with
the characteristics of timeshare owners.
In an ARDA study about Caribbean timeshare purchasing decisions, the #2
reason for not purchasing the unit was that it was too expensive and
inconvenient. Timeshare owners (even
Caribbean owners) are not wealthy people, but rather fall into the upper-middle
income category (broadly speaking, from $50,000-100,000). In addition to expensive real estate costs,
closing costs exhibit an additional upward pressure on island real estate
prices. Upon closing the purchase of a
property, one can expect to spend an extra 20-25 percent in excess of the
purchase price due to legal fees, alien landholder's license, commissions, and
other expenses. The non-commercial
aspect gives rise to another problem.
Relative to other islands, there is lack of activities on Nevis. For example, there are no casinos allowed on
Nevis. Golf course access is limited,
with available courses being private and expensive. Finally, this property does not satisfy one of the main desires
Caribbean timeshare owners have expressed- direct beach access. If the property is not within 1 mile of the
beach, it could not even be classified as a beach resort in the RCI Exchange
listing (See Appendix L for RCI listing requirements). These aspects make a compelling argument
against further investment into this property with the intent to market it as a
timeshare. Perhaps an alternative
manner of marketing the product would be more feasible.
Although our
recommendation is to sell the property, there are critical actions that
increase the probability for success. By meeting the needs of the industry, a
timeshare on Nevis becomes a viable competitor. One of the critical factors of success within this industry is an
affiliation with an exchange company.
This timeshare must become affiliated with either RCI International or
Interval International.[1] Approximately
100% of all timeshare resorts are listed on one of these two exchange listings
(roughly 70% for RCI and 30% for Interval International). Visibility and tradability are the primary
advantages of this relationship. One of
the biggest benefits to owning a Caribbean timeshare is their high exchange
demand and variety of options for exchange.
RCI International and Interval International increase the ability to
exchange timeshares at one location for a timeshare in another location. By facilitating the exchange of these units,
this affiliation assists in the initial sale of these units
Contracting
with a major hotel chain or hospitality company is another manner of increasing
the likelihood of success. A brand name
causes consumers to perceive a level of quality associated with the
timeshare. Marketing advantages are
gained by reducing the perceived risk associated with the transaction. One of the main reasons for the growth of
timeshares has been the entrance of these well-known companies.
Pricing
considerations must be addressed as well.
With an existing surplus of short-term lodging, prices and amenities
become increasingly important competitive factors. The timeshare will be in direct competition with short-term
lodging on the island as well as the region.
Prices must reflect the desired target market and be comparable to similar
accommodations on Nevis, Anguilla, and geographical competitors (see appendix
D). Amenities is another manner of
competing with short-term visitor oriented operations. Phase III includes all possible amenities
including a golf course. For this
reason, we encourage the completion of the entire construction plan if the
decision is made against the immediate sale of the property. With no direct beach access, every possible
step must be taken in order to ensure demand for the timeshare units. Second, if access to the golf course can be
made public and affordable, this could be a major competitive advantage for the
resort on Nevis as well as an additional revenue stream. Amenities will become extremely important in
selling these units because it will affect the exchange possibilities. Amenities and location influence the consumer's
ability to exchange timeshare locations.
The ability to exchange the timeshare influences consumer demand. The initial sale of these units is dependent
upon the critical factors we have outlined.
Although we still recommend the exit from this operation, these factors
improve the probability of success.
The tourism industry is undergoing significant
changes. Major trends are shaping the
competitive environment in which hotels, timeshares, and other recreational
services operate. The Caribbean tourism
industry is no exception to the pressures of change. There is a notable difference in the “typical” consumer, the
competitive environment, and the manner of conducting business. The factors must be considered to determine
the viability of a timeshare on Nevis.
Traditionally,
travel and tourism has been a rapid growth industry. On a global level, the travel and tourism industry is expected to
grow at a real rate of 48.7 percent over the next decade, nearly doubling the
size of the current industry. (“Caribbean Travel & Tourism…, 1996) The Caribbean travel and tourism industry
also expects a growth market. Over the
next ten years, it is expected that this industry will grow 34.8 percent in
real terms. This translated into 18.87
million visitors to this region in 1998.
In addition, the cruise ship segment has shown an increase of 10.9
percent over the previous year.
Not only are there more visitors to the Caribbean,
but they are also spending more money when they arrive. Recent reports have
shown that visitors have increased their gross expenditures by 6.9
percent. A 7.7 percent increase in the
number of visitors coupled with the rise in expenditures implies a positive growth
trend in the Caribbean tourism industry (“Caribbean Tourism Performing…,”
1998).
Nevis, known as an
exclusive and expensive Caribbean destination, is no exception to this
growth. Nevis reported an increase in
tourist arrivals of more than 16 percent in 1998 (“Caribbean Tourism Performing…,”
1998). In 1997, there were 88,297 stay
over visitors compared to the 1996 figure of 84,176. In addition, there was a 19.8 percent increase in yacht and
cruise ship passenger arrivals in 1997.
Prospects for long-term and continued growth of the Nevis tourism
industry are positive. (“St.Kitts/Nevis Budget Address…,” 1999)
There are three major trends developing within the
general tourism industry. These trends
include a desire for traveler loyalty, diminishing importance of travel agents,
and the increase in children accompanying adults. Globally, there is a major consolidation of the hotel
industry. The underlying reason for
this development is the desire to capture loyalty from travelers. Hotel chains hope to maximize the availability
of their services and limit the time between stays. Many hotels have instituted loyalty programs rewarding repeat
customers in the attempt to build brand awareness. Brand awareness is a direct threat against independent
operators. Brand names possess a
conotation of quality services that reduces the consumer's perceived risks.
Another industry trend is the diminishing importance
of travel agencies. From 1993 to 1996,
the number of airline tickets sold through agents has fallen by 10
percent. The increasing cost of airline
tickets coupled with the prevalence of airline homepages and Internet tools is
largely responsible for this decline.
The shift to direct sales will change the target and content of future marketing
efforts. (“Travelers Buy More…,” 1999)
The final industry trend is the increase in travel
with children. The Travel Industry
Association of America's travel market report showed a 54 percent increase in
travel with children since 1987 (“Children Are a Travel…,” 1999). The Caribbean tourism industry has responded
forcefully. Although it was once
considered a destination for couples, it is becoming a top family vacation
destination. Several hotels and resorts
now offer specific children's programs and reduced rates. A family atmosphere and competitive
accommodations are strong assets in today's tourism industry around the world
and in Nevis. (Levine, 1997)
Unfortunately, the island of Nevis does not contain extensive activities
that are family oriented.
There are two major trends with a specific impact
upon the Caribbean tourism industry.
The first of these trends is the growing cruise ship market. The trend is to build larger ships that can
offer many of the same amenities that luxury and large hotels offer coupled
with the ability to visit several islands.
This increases competition over the tourists' lodging needs. However, it creates an additional market for
leisure services when these large ships arrive. Many islands within the Caribbean do not have ports or
transportation systems that can handle the large ships and influx of
visitors. Currently, only five islands
have the necessary port capabilities.
One of these islands is Nevis, which recently constructed a port capable
of accommodating the largest of these cruise ships. This will give Nevis the
opportunity to capture a great deal of outside business as well as returning
tourists. (Major, 1998)
The second major trend specific to Caribbean tourism
is the prevalence of gambling.
Currently, thirteen islands including St. Kitts offer gambling as an
incentive to attract tourists. Many
other nations, such as St. Lucia, are following their example. According to the Caribbean Tourism
Organization (CTO), the tourism industry on these islands is fairing
considerably better than that of other Caribbean nations. In addition, a study conducted by the
Caribbean Tourism Research and Development Centre (CTRC) states that 40% of
Canadian visitors allocate money on their trip specifically for casino gambling
(“Tourism-St.Lucia…,” 1999).
Unfortunately for developers, Nevis does not allow casinos on the
island.
A hot and tropical climate tempered by trade winds
throughout the year characterizes the general weather conditions of Nevis. The weather has a considerable affect on
tourism demand. The seasonal effects of
Caribbean travel can be divided into four categories: the peak season, the high
season, the shoulder season, and the low season. Appendix A outlines the dates associated with each travel period
(ARDA, 1999). Corresponding to the
"high season," a dry season lasts from January to April. The position of the Leeward Islands
(including Nevis) subjects the island to fierce hurricanes and tropical
storms. These weather disturbances
usually occur between August and October, which is responsible for the
decreased tourism rates during this time period (JS Online, 1999).
While the location of this island subjects it to unique weather patterns, it also affects the means of travel necessary to get to Nevis. The vast majority of travelers (92.3 percent) come to the Caribbean by airplane (World Tourism Organization, 1997). St. Kitts has recently built an airport that has the capacity to accept large planes of major airlines. Robert Llewellyn Bradshaw International airport at St. Kitts has direct flights from US, Canada and UK in addition to chartered flights from US and inter-island flights within the Caribbean. New Castle Airport at Nevis can handle only small propeller driven aircraft's. Nevis express offers air service between St. Kitts and Nevis several times a day at a cost of $20 one-way, which takes about 6 minutes. St. Kitts has a deep-water port, which is able to accommodate large cruise ships and vessels. A ferry system runs people and cars from Nevis. Ferry ride between St. Kitts and Nevis takes about 45 minutes at a cost $4. This seclusion is consistent with the exclusive Nevis tourism niche, but limits travel opportunities for some of the prime candidates for Caribbean timeshare ownership. (See Appendix B for travel and airport details for the island of Nevis)
The nationality of visitors to Nevis is diverse. North America maintains the highest
percentage of Nevis tourists followed by Caribbean travelers. However, the
percentage of European travelers have been increasing rapidly. European travelers currently account for
14.8 percent of tourists arriving in Nevis.
In 1997, the United States accounted for approximately 43 percent of the
Nevis and Saint Kitts tourism industry.
This is larger than the percentage for any continent or geographical
region other than North America, of which the United States is a part. Despite recent increases in tourism
originating in Europe and other regions, the United States has and will
continue to dominate the consumption of recreation and leisure within Nevis
(“Mediamark Research Report…,” 1997).
The tourism industry within the Caribbean and Nevis is largely driven
by foreign travel. The majority of this
foreign travel to Nevis is from the United States. It becomes important to understand the characteristics and
demographics of the American Foreign Traveler.
With this in mind, we must analyze the purpose of travel. We are largely concerned with travelers on
leisurely pursuits. Seventy-one percent
of all American foreign travelers leave the United States for the purpose of
recreation (“Mediamark Research Report…,” 1997). An additional 6.6 percent of
travelers combine the aspects of business and recreational travel. This combined segment is largely responsible
for the Caribbean and the Nevis tourism industry. In other words, we are concerned with the Americans who are both
foreign tourists and traveling to
Nevis. Information on American tourists
travelling to Nevis was not available.
By comparing and contrasting the typical American foreign tourist
against American travelers visiting small Caribbean nations such as Nevis, we
hope to be able to gain insight into the particular factors affecting the Nevis
tourism industry (see appendix C for specific demographic information).
When using the typical American foreign vacationer as a benchmark, we
notice that those going to smaller Caribbean islands are in general slightly
more affluent. The average Caribbean
island traveler is slightly older, wealthier, better educated, and has more
leisure time. Although the typical age
is still middle-aged between 25 and 49 years old, the total distribution is
skewed closer toward older travelers.
Many of the differences between these small Caribbean islands and the
typical tourist may be attributable to an aging population entering an active
retirement.
This hypothesis is corroborated by additional statistical
information. For instance, Caribbean
visitors have lower rates of full-time employment, and have higher rates of
unemployment and part-time employment.
This fact, coupled with a higher general household income level,
supports the hypothesis of an older retired traveling population. It is also supported by the fact that the
typical household has fewer children.
In addition, those households with children are typically older
children. Should this hypothesis prove
correct after further first hand research, there are several important
implications.
The general consensus is that the US population is aging. As this
population becomes older, Nevis and other small Caribbean islands are becoming
more popular relative to other destinations.
The cost, the location, or even the climate of these islands may explain
this trend. Regardless of the
explanation, it appears that an older visitor is inclined to visit these
areas. With fewer children and more leisure
time, these individuals should find an increased amount of disposable income
available to them. Relatively new US
tax and retirement laws (401Ks, IRAs, pension funds, etc.) have allowed more
financially prepared retirees to better enjoy an active retirement.
Although it is tempting to use the figures and statistics from island visitors,
it is important to note that these statistics reflect the characteristics of
all American visitors to these islands.
However, we are concerned with the statistics of American vacationers to these islands. While the majority of variation from the
typical foreign vacationer is attributable to specific characteristics of the
islands, a small portion of that variation can also be explained by including
those traveling for business and other purposes. Discrepancies of this nature are a reality when dealing with
secondary research. This fact does not
completely discredit the relevance of this information. The Nevis economy is dominated by tourism,
so the effect of business travelers is minimal.
Local geographical competitors within a 50-mile radius include the Netherlands Antilles, Montserrat, and Antigua/ Barbuda (see appendix D). Nevis, however, is an exclusive upscale tourist destination. Its tourism characteristics are differentiated from other islands, and therefore, makes geographical considerations relatively irrelevant. The island of Anguilla also occupies this exclusive tourism niche. Anguilla offers upscale tourists its famous white sand beaches and fine dining. It has remained a quaint relaxing tourist destination while many Caribbean islands have become characterized by crowds, cruise ships, tourist buses, and casinos. In 1997, 35,000 wealthy guests visited the island of Anguilla. Lodging on the island costs between $300 and $400 a night (see appendix D). Besides the world famous white beaches, Anguilla offers several other activities including sightseeing, bird watching, entertainment, shopping, and carnival/boat race festivities to occupy tourists. In addition, the government has allowed diving excursions to the wreck of a sunken Spanish galleon that sank off the coast 200 years ago. These factors have contributed to a 10.8% growth in tourist arrivals from May 1998 ("Diving to look…," 1999). Tourists are mainly from the United States; however, rising levels of tourists from the U.K. and Canada have also been reported.
The timeshare industry has been one of the most dynamic segments of the travel and tourism industry in recent years. Timeshares (a.k.a. vacation ownership or interval ownership) represent the fastest growing segments of the travel and tourism industry, overall and in the Caribbean. Total global sales are estimated at nearly $6 billion (American Resort Development Association, 1999) and the annual growth rate at 15 percent per year (Resort Value Line, Inc., 1999). According to the American Resort Development Association (hereafter referred to as ARDA), over 4 million households in 190 countries now own a timeshare at close to 5000 resorts worldwide (ARDA, 1999). The Caribbean timeshare industry alone accounts for 9.5 percent of global sales, and is growing every year (ARDA, 1999). Industry experts clearly label timesharing a growing industry, with predictions stating that it could be a $20 billion dollar industry by 2005 (Gorgan, 1998).
It has been said the timeshare industry has sparked a revolution in consumer travel. It has gone through some changes in the last couple of years, continuously improving and becoming increasingly competitive. In the past, the industry reputation has suffered, especially in the Caribbean, from unreliable salespeople and high-pressure tactics. The situation is improving as marketers improve techniques and implement more consumer friendly programs. The old days of high-pressure sales techniques are being replaced by effective and relaxed sales presentations that the consumers can enjoy (“Timeshares Thrive in…,” 1998).
One of the primary reasons for growth in the timeshare industry is the unique consumer demographics. The profile of the typical timeshare owner is that of an upper-middle-income, middle-aged, and well-educated couple (ARDA, 1999). Expanding those numbers shows a bit more detailed profile:
· 77% with incomes greater than $50,000
· Median income of $77,000
· 69% being 45 years of age or older
· 64% having at least a bachelor’s degree
An important thing to note is that these owners will be entering retirement in the coming years. This means more disposable income and free time, and less travel restrictions due to family and career obligations. As with the general tourism industry, this age group has and will continue to be huge contributors to the growth of timeshares, especially because they largely consist of baby-boomers (See Appendix E for age breakdown of timeshare owners). This group spends more on vacation travel and outdoor recreation than any previous generation (Avellanda 1996). This connection is important because according to the ARDA, this age bracket is growing at twice the rate of the overall population. Also, from 1998 to 2050, the mature portion of this market (65 and older) is predicted to grow approximately 250 percent (Garrison, 1999). These numbers have important implications in the Caribbean region because 79.7 percent of Caribbean timeshare owners live in the United States (“The Resort Timeshare…, 1994). For this reason, much of the demographic focus is on U.S. timeshare owners.
The owners of timeshares are dispersed globally, however, much of this ownership is centered in a few geographical areas. This is especially true in the Caribbean. The United States is home to the largest portion of timeshare owners. Approximately 52.4 percent of worldwide owners live in the U.S., and even these owners are concentrated in a group of specific states (ARDA, 1999). Seventy-nine point seven percent of Caribbean owners come from the United States (ARDA, 1994) (see Appendix F. For this reason, the majority of marketing resources should be directed toward finding potential owners in the United States.
Although a majority of owners come from the U.S., a significant share of owners reside elsewhere in the world. Europe and South America demand our attention because of both current ownership rates and potential for continued growth rates. Europe is second to the United States in worldwide owners with 21.3 percent. A majority of these owners (about 42 percent) come from the United Kingdom (“The Resort Timeshare…,” 1996). From 1994-1996, the percentage of owners residing in Europe grew by 42.8 percent. Approximately 4.4 percent of worldwide owners come from South America. The biggest aspect of these ownership areas is the growth rates. In the same years just mentioned, this percentage in South America grew by an incredible 336.9 percent. Even with these growth rates, there is still untapped market potential. Estimates of income eligible households without timeshares stand at 80-90 percent for both areas (“The Resort Timeshare…,” 1996). See Appendix E for an extensive worldwide breakdown of timeshare owners.
Income and education are also important indicators to acknowledge within the Caribbean timeshare market. As mentioned earlier, a majority of U.S. owners are older and part of the baby-boomer generation. People of this age generally make more money and have the freedom to spend that money. Appendix E includes details on the income breakdown of timeshare owners in the region. The median income of the Caribbean timeshare owner ($74,500) is high relative to the U.S. timeshare owner ($56,900). In addition, over 50 percent of Caribbean timeshare owners income falls into the $50,000-100,000 bracket (ARDA, 1994). This suggests that Caribbean timeshare owners are wealthier than the average timeshare owner and the average U.S. timeshare owner. The Caribbean market is an upscale market that caters to higher income consumers. A survey by the ARDA, however, revealed that the #2 reason for not purchasing a Caribbean timeshare was that travel to the unit was too expensive and inconvenient. This provides further evidence that high-income people are the primary users of Caribbean timeshares (ARDA, 1994). It is important to realize that potential customers are going to get younger as the incidence of two income households continues to increase. This will make timeshare ownership more and more feasible for individuals and couples younger than the traditional owners. It is important to note the limitation of available timeshare consumers the Caribbean, and especially Nevis, can target. The average timeshare owner is NOT wealthy, but rather falls into the upper-middle income range, which eliminates the ability many of the potential ideal customers to consider ownership on an expensive and inconvenient island like Nevis.
Education further defends these findings. Caribbean timeshare owners are generally more educated than all U.S. timeshare owners and timeshare users overall. Almost two-thirds (61.8) of all Caribbean owners have a bachelor’s degree and 29.7 percent have a graduate degree. Comparatively speaking, only 55.7 and 26.8 percent of all owners and 53.8 and 25.5 percent of all U.S. owners have these degrees (ARDA, 1994 and 1999).
Understanding the owners of Caribbean timeshares intimately is important. Other characteristics, however, are also driving the growth in this industry. The most basic consideration is the general attractiveness of the timeshare concept. Timeshare owners purchase for three main reasons: 1) High quality accommodations and service at the resorts they own and exchange; 2) The flexibility offered through the vacation exchange properties; and 3) The cost effectiveness of vacation ownership (ARDA, 1999).
Caribbean timeshares have an additional advantage. The top two reasons cited for purchasing by Caribbean owners are that they simply like the Caribbean and generally like the resort (ARDA, 1994). Another cited advantage to Caribbean ownership is the exchange opportunity with other resorts (ARDA, 1994). This is another selling point for Caribbean timeshares; the owners will always have a high exchange demand for their property from owners all over the world because the Caribbean is a popular vacationing spot. (See Appendix E for a table showing Caribbean owner reasons for purchasing and important attributes)
Flexibility is another major selling point in the timeshare concept. People like the different options timeshares provide. In addressing this, many developers have established vacation-point clubs, split weeks, multi-site clubs, and other exchange deals that make it easier for owners to trade time with other owners around the world (Morabito, 1997). Flexibility in the contracts also increases demand because the buyer does not have to purchase vacations for specific or extended periods of time. Short term stays (less than a week) and short term intervals (3-10 years) help attract potential owners that were previously uninterested or unable to afford conventional timeshares.
Finally, Appendix F contains detailed breakdowns of location of timeshare resorts within the Caribbean, amenities available (by %) of different resorts and projects throughout the Caribbean, and average maintenance fees. In addition, detailed consumer expenditure figures for owners of Caribbean timeshares are located in Appendix E.
Timeshares vary in both size and cost on a global market. However, the prices of Caribbean timeshares with respect to the rest of the industry have less variance. The average prices of timeshares in the Caribbean generally range from $8,000 to $11,000, depending on the size and the season. Detailed charts of prices by island, size, and season are located in Appendix F. These prices vary of course, depending on the amenities provided, which is a large source of competition. According to the ARDA, after pinpointing a price, locating a broker, and including both closing costs and commissions, a buyer can expect to pay between 10-30 percent above the final price of the property. This complexity in purchasing is another consideration that keeps many potential buyers away.
Competition in the timeshare industry is hard to define. The competitive landscape of the industry is global. There are several main areas in which developers in the industry compete. The first characteristic that developers compete on is preference of the buyer and amenities. Although some marketing may be done to alter these preferences, the amenities are a prerequisite to sales. The main amenities desired in the Caribbean are the beach, pools, tennis courts, golf courses, and restaurants. Overall, 96.1 percent of Caribbean timeshare have on-site swimming, 79.1 percent have a restaurant, 59.2 percent have tennis, and only 9.7 percent have direct access to a golf course (ARDA, 1994). Thus, an on-site golf course could be an enormous source of competitive advantage in the Caribbean, and especially in Nevis.
As the timeshare industry has grown, big name hotels and hospitality companies have taken notice. The credibility and reliability of these names have been one of the factors in the explosive growth of timeshares. Some of the most recognizable of these names include:
-Walt Disney Corp -Hilton -Westin -Embassy Suites
-Marriot -Hyatt -Sheraton -Ramada Suites
-Four Seasons -Sol Group -Holiday Inn -Cendant[2]
Source: Resort Value Line, Inc.
Through sheer size and financial resources, these companies were able to enter the industry and create immediate impact. They have used their timeshare resorts as compliments to their hotel lines in many cases. Residents of timeshares in close proximity to a hotel spend their money on the attached service businesses the hotel provides (restaurants, bars, clubs, and gift shops). In addition, frequent hotel customers become interested in timeshares and look at near by accommodations. People are willing to trust a timeshare purchase solely based on a name they are comfortable with and have had a positive previous experience. However, this trend makes it difficult for independent and smaller developers to compete. As a result, many of these developers will want to consider signing contracts in which they can attach one of these big names to their resort property to lend further credibility.
We have purposely left out some of the details on Nevis previously to present them as a whole in this section. The first thing to cover is the general characteristics of the island of Nevis as compared to the rest of the Caribbean. The island is not considered to be a commercial tourist spot. All indications present the image of an exclusive island that is treasured for its non-commercial feel. In phone interviews, two different real estate agents in Nevis said that people who own property in Nevis enjoy the serenity of the island. These interviews also revealed additional important information. Please see Appendix H for details on correspondence with the two real estate companies. There are currently no timeshares on the island and all indications are that residents have no desire for timeshare entrants. In addition, both sources Group 6 interviewed stated that two projects, one condominium project and one timeshare project, both of which were aimed at the short-term traveler, failed terribly. This might be explained by the relative lack of short-term travelers on the island, and the fact there are only 360 hotel rooms on the island, and 190 of those are located at the Four Seasons Resort. During the peak season there is a surplus of hotel rooms even with the small amount of rooms available. Depending on the definition of short-term, this might be explained by the fact that the average Caribbean timeshare owner stays for 8.2 days when they visit. This includes 7.5 nights in a timeshare unit, .6 nights in a hotel, and .1 nights in non-paid accommodations (ARDA, 1994). This important statistic implies that visitors spend a portion of their vacations visiting other islands. In addition, 7.5 percent of timeshare visitors spent the night at another timeshare unit in the Caribbean during their stay. This statistic exhibits the importance of being able to trade timeshare locations easily.
The lack of short-term demand on Nevis is conversely balanced by a demand for long-term accommodations (more than 1 year). Visitors who come to Nevis appear to come with the intention of staying. It appears that the tax structure of the island has an affect on long-term demand. The island has become known as a tax haven, with no personal or inheritance tax. This may contribute to the high demand for long-term housing. This leads into the buying patterns both agents conveyed in the interview. The fastest moving properties are high-quality, high-price, single family dwellings. However, a majority of properties do not move as fast. This is probably due to the closing costs associated with dealing on Nevis. With every closing comes a 6% government stamp duty, a 10% Alien Landholding License and an estimated 2% legal fee. This does not even include the average commission of 6% paid to the real estate agent. The license is crucial because any non-citizen who owns property in St. Kitts and Nevis must apply for one. Appendix G contains a copy of the application form for the Alien Landholder's License.
The price of real estate reflects the exclusiveness of this island. Fully serviced lots sell from $80,000-$250,000 depending on size and location on the island. One of the agents relayed the fact that a property similar to the one being discussed priced between $1 and $1.5 million would sit on the market for approximately 12-18 months. To receive the desired payment of $25 million would require enough improvement to raise the value of the property by roughly $23 million. For further review or correspondence, Appendix K contains a list of several real estate agents, brokers, consultants, and developers on the islands of St. Kitts and Nevis. In addition, depending on what avenue the project takes, a business might be started on Nevis, which warrants further investigation. Appendix L contains an abstract from the St. Kitts/Nevis government homepage that gives details and/or a brief outline on what is needed to start a business on Nevis.
Finally, a few last considerations need to be mentioned. Nevis is known as quiet, subdued island. The available activities fits this image. It is definitely not an island focused towards commercial tourism. For example, there are currently no casinos on the island even though several other islands have them. This is because they are NOT allowed on the island of Nevis. It seems that certain precautions have been taken to preserve the image of the island. Second, in a follow-up interview one of the agents relayed the idea that if a golf course and restaurant were attached to this new resort property and reasonably priced they might do well. Due to the lack of the affordable golf courses on the island, this could potentially become a major attraction. These facts have contributed to our recommendation of selling the property. In the event that this recommendation cannot be followed, we have also made suggestion on important areas of concentration. In final analysis, we must conclude that although the industry is very attractive, the characteristics of Nevis give us pause in the sale of timeshare contracts. We must recommend ta drastic reconsideration of this project, or the immediate sale of the property.
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[1] Additional information on RCI International can be located at http://www.rci.com and on Interval International can be located at http://www.intervalworld.com
[2] Cendant is the parent company of RCI International, the largest and most respected timeshare exchange company in the world