Business Monday

Interval Leisure Group: More than just timeshare exchange

mhalper@miamiherald.com

In this era of Uber and Airbnb, Interval Leisure Group feels like a leader.

“We were in the shared economy before the term was made up,” said Craig Nash, chairman, president and CEO of the South Miami-based leisure company.

Publicly traded since 2008, the parent company has mostly been known for Interval International, a membership service that facilitates exchanges of timeshare properties. Back in 1998, that business — which was founded in 1976 — accounted for more than 95 percent of earnings, gleaned from a combination of membership dues and exchange fees.

But when the recession dried up funding for developers, Interval Leisure Group saw an opportunity to diversify. Now boasting a total of six operating businesses and more than 230 properties and club locations managed by its companies, Interval has secured its place as an industry leader as it eyes more avenues for growth.

The company had already purchased Aston Hotels & Resorts in Hawaii in 2007. Over the several years that followed, Interval acquired several timeshare management businesses including VRI; management and exchange company Trading Places International; developer VRI Europe, in which Interval has a 75 percent interest, and Aqua Hotels & Resorts in Hawaii, which is primarily a rental business.

Just last year, Interval Leisure Group also picked up Hyatt Vacation Ownership, which includes 16 resorts, for $220 million.

Those ownership positions have allowed Interval to expand its revenue base to include fees from vacation rental services, resort management and marketing and selling ownership interests. “We had the balance sheet, the expertise and the cash flow to be able to take advantage of the opportunities in the marketplace,” Nash said. “There were a number of these acquisitions that we tried to do before the recession but were able to do during the recession because we were strong and had the cash flow.”

Howard Nusbaum, president and CEO of the American Resort Development Association, said the company’s moves in recent years have been “very smart.”

“Having a touch for management to help recycle inventory, that’s hugely important,” he said during a break at the Shared Ownership Investment Conference at the Fontainebleau Miami Beach, which Interval International puts on. “They have been thought leaders in our industry and are great partners legislatively.”

Once reviled for high-pressure tactics and occasionally questionable practices deployed by some companies, the timeshare industry has repositioned itself as a professionally managed alternative that includes some of the biggest hotel players on the planet, including Disney, Marriott and Starwood. But shared ownership resorts, as they are now called, faced resistance from vacationers who don’t want to be tied to a specific place at a specific date.

By facilitating exchanges at more than 2,900 resorts in 80-plus countries, Interval alleviated that objection, giving owners the ability to trade units outside the brand in which they initially purchased. Though online platforms like VRBO and AirBnB now connect owners and renters, Interval offers professionally managed properties without the risks or inconsistencies that can come from dealing with individual owners.

While the number of Interval International members has remained “flattish,” Nash said, at about 1.8 million with a 90 percent retention rate, some of the new acquisitions have provided greater opportunities.

“One of the key growth platforms going forward is Hyatt,” he said, adding that the company plans to build on land that it obtained as part of the acquisition. “The bottom line is going up as well, forming through these acquisitions a foundation for growth over the long term. We really look at this as a marathon.”

The parent company reported $614 million in consolidated revenue last year, up from $501 million the year before. Net income increased just slightly to $81.9 million.

Nash said the company and the industry are trying to evolve with technology after going through decades of change already. Some of the rental condos and homes in Maui, for example, distribute rooms through the HomeAway platform. And the Vacation Rentals by Owner site, VRBO.com, is a member of the national association.

“We are putting our foot into the water as things evolve,” Nash said.

But he and Nusbaum both said they don’t see vacation rentals or sites like Airbnb.com as major competitors.

“The difference is that in the case of our shared ownership, you’re buying a lifetime or a long-term commitment to vacationing,” Nash said. “And you’re buying a full-service professionally managed experience. That’s a differentiator between shared ownership and this shared economy, which is really a technology-based distribution platform.”

During the Shared Ownership Investment Conference in late September and early October, Nusbaum gave what he called a “pretty good report card” for the industry.

He said the average sales price of a unit in 2014 was $20,020, a more than 9 percent increase compared to the previous year. Sales overall increased from $7.6 billion to $7.9 billion, the fifth consecutive year of growth. And research shows that those who bought a unit in the last three years were younger, more affluent and more diverse than the average timeshare owner.

But, he said, the industry still needs to do better at getting their message to potential buyers who aren’t already familiar with the concept.

“Nobody wakes up in the morning wanting to buy a timeshare,” Nusbaum said. “Everybody wakes up every morning wanting to be on vacation. We need to do a better job of connecting the dots between how owning this product enables wanderlust.”

Paula Culberton, a 40-year-old engineer from San Diego, said owning a timeshare has motivated her family to travel more frequently.

“You’ve already paid for it; you want to get your money’s worth,” she said.

She and her husband purchased their timeshare nearby in Escondido primarily for exchange purposes or for family to stay in during visits.

She said her family has been able to exchange their unit for stays in Belize, Hawaii and San Francisco, and have a trip coming up to a suburb of Los Angeles.

But, she admitted, the process can be complex and requires planning well in advance.

“It doesn’t necessarily work if you want to be able to say, ‘I want to go to such-and-such location in seven weeks,’” she said. “There’s nothing available. It does take little bit of effort and education on the owner’s part.”

Interval Leisure Group

▪ Headquarters: South Miami

▪ Employees worldwide: Nearly 6,000

▪ Employees in South Florida: About 80

▪ Offices: 36 in 16 countries

▪ Properties managed by ILG companies: More than 230 resorts and club locations

▪ Revenues in 2014: $614 million

▪ Profits in 2014: $81.9 million

▪ Stock price: $19.74

  Comments