It's a good time to share

By Andrew Gomes
Advertiser Staff Writer

Ron and Linda Sparkman from Indiana recently had an ideal Hawai'i vacation — a largely free one — with a week of complimentary accommodations, rental car and a $50 gift certificate.

A room at the Marriott Ko Olina Beach Club offers a view of the Wai'anae Coast. Most of Marriott's Ko Olina time-share buyers are from the West Coast and Asia. About 80 O'ahu residents are also among the buyers. Gregory Yamamoto • The Honolulu Advertiser

The couple are among a rapidly growing group of tourists being lured to Hawai'i by major hotel companies that are expanding their time-share development business. Marriott sells its Ko Olina product to one of every three invited customers.

Industry officials say booming development and sales of Hawai'i time-share property is a stabilizing force in the state's unsteady hospitality market, providing visitor accommodations that operators don't worry about filling even during war.

"Once people buy their units they're going to come back to use them," said Mitchell Imanaka, Hawai'i chapter chairman of the American Resort Development Association.

Hawai'i attracts roughly 500,000 time-share visitors a year. And with a relatively small inventory of units — about 4,600, or 6.5 percent of all vacation units in the state — the Islands are one of the most sought-after time-share markets in the country behind leaders Florida, California and South Carolina, according to Imanaka.

Developers are building on the industry's dramatic expansion that started here in the mid-1990s, and have at least 2,100 time-share units in various stages of development at seven projects on O'ahu, Maui, Kaua'i and the Big Island.

The development, which includes some of the most expansive projects to date, is being driven primarily by big hotel companies trying to diversify their business.

Part of the appeal for time-share builders are huge, relatively quick investment returns, as opposed to returns spread over many years for a similar property operated as a hotel.

For instance, Starwood Hotels & Resorts expects $100 million in sales this year from the 108-unit first phase of its Westin Ka'anapali Ocean Resort Villas. Scheduled to open Sept. 1, project sales are up to $8 million to $9 million a month.

At Marriott's Ko Olina Beach Club, selling out the completed 103-unit first phase stands to bring in $179 million. It would take the company more than 15 years to make $179 million renting the same number of units at its average posted nightly rental rate of $307.

Imanaka said hotel operators make more efficient use of their capital developing time-share, potentially adding 10 percent to 15 percent to net earnings by reaping sales and management fees without ownership costs like maintenance, which is paid by time-share owners as a yearly fee.

The brisk sales pace is also translating to high occupancies, which add to management revenue through restaurant and other service sales.

At Marriott's Ko Olina Beach Club, which through last month had sold about a third of the weekly intervals in the 103 completed units, or about 1,700 sales of weekly intervals, occupancy consistently has been around 90 percent.

"That's a number that's unheard of in the true hotel industry regardless of location," said Robert Calhoun, vice president for marketing and sales in Hawai'i and Asia for Marriott Vacation Club.

Minimizing job losses

Robert Calhoun, Marriott Vacation Club regional vice president for sales and marketing, discusses time-share project plans with Ko Olina Beach Club general manager Chad Jensen, left. Gregory Yamamoto • The Honolulu Advertiser

John Mapes, an economist with the state Department of Business, Economic Development & Tourism, said at a recent real estate industry presentation that time-share visitors helped minimize job losses after Sept. 11 on Kaua'i, where the bulk of the state's time-share units exist.

"It sure showed up in our restaurants," said TS Restaurants Vice President David Allaire, who said business at the company's two Kaua'i eateries bounced back faster and more forcefully than TS restaurants on O'ahu and Maui because of time-share visitors.

For buyers, the appeal of time-share is the idea of "owning their vacation," said Calhoun, who explained that time-share weeks can be saved up, sold or traded for things like frequent-flier miles, cruises and use of time-share units around the world.

"Yes we're selling a time-share product, but our product has such flexibility," he said.

Time-share units also can be passed from generation to generation, saved up, rented out or sold. Once a time-share interval is bought, owners can stay for one week per year until they sell the time-share.

The average price for a time-share week in the United States last year was $13,900 plus an annual average maintenance fee of $382, according to the American Resort Development Association, the industry's Washington, D.C.-based trade organization. In Hawai'i developers typically are creating higher-end time-share units, from $25,000 to $50,000, by converting existing hotels or building new towers and villas.

Many consumers, however, still have a negative view of the industry, which developed a poor reputation years ago through sidewalk promoters, junk mail and telemarketers who sometimes sold a product not delivered as advertised.

According to a recent trade group survey, 13 percent of people don't know what time-share is, and only 27 percent of those who had heard of the concept had a positive opinion of it.

The large hotel companies are helping to change public perception of the business with their reputations for quality and service.

Marriott for one, has developed convincing sales practices that Calhoun said makes selling units easy. "It's a very atypical experience," he said. "It's truly an education."

'It was a good year'

Prospective buyers at the Ko Olina property are greeted in a lobby welcome center and directed to the top two floors that will serve as a preview and sales center at the 15-story complex until three future phases are complete.

A sales executive meets prospective buyers in what resembles a grand living room before leading a 90-minute museumlike tour filled with picture boards of Marriott's history, properties, partners and Ko Olina Bay Club amenities.

Rooms, priced at $34,000 for an annual week on average, are nearly identical with two bedrooms, two bathrooms, kitchen and living room with a dining table that seats eight. Half the unit, if unused, can be traded for an extra week at another one-bedroom Marriott time-share.

Most of Marriott's Ko Olina time-share buyers are from the Mainland West Coast and Asia. About 80 O'ahu residents are also among buyers, Calhoun said.

The Sparkmans said they were impressed, but decided not to buy because of the difficulty traveling to Hawai'i from southern Indiana.

At Starwood's Ka'anapali project, where time-share units average $45,000, sales have been going strong for the past year, according to Keith Vieira, vice president of operations in Hawai'i for Starwood. "Last year's goal, we actually doubled the pace," he said. "It was a good year."

A second Starwood time-share project is planned in Princeville, Kaua'i, where the company would like to start sales in the second half of this year, followed by construction in early 2004.

Marriott also is interested in expanding its Hawai'i time-share presence, which already includes projects on Maui and Kaua'i in addition to the Ko Olina property.

"We are very anxious to continue to expand on all islands," said Calhoun, who noted that Hawai'i is perfect for one of the company's newest time-share brands, The Ritz-Carlton Club, where vacation condo interests for three to five weeks a year range from $98,000 to $480,000.

Imanaka said the industry, also being developed here by Hilton Hotels and Fairfield Resorts as well as smaller operators, shows no signs of slowing.

He predicts that the number of Hawai'i time-share visitors will increase by 10 percent to 15 percent annually, possibly reaching 1 million visitors a year as soon as 2007.

"The consumer wants this product and they are willing to pay for it," Imanaka said. "In our lifetimes we will not exhaust the demand."

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.