Ricardo Montaudon
President and Executive Director for Latin America
RCI
/
Insight

Timeshares as Vacation Insurance

Wed, 02/21/2018 - 14:02

One key to creating a successful product is differentiation. However, when dealing with an intangible product, the key is to create a differentiated experience around it. RCI has made its core business the creation of a loyalty program that focuses on providing unique and different vacation experiences for each of its affiliates. “When you buy a timeshare, you are not buying real estate; you are buying vacation insurance, which is paying for vacation experiences upfront,” says Ricardo Montaudon, President and Executive Director for Latin America of RCI.

The initial experience of timeshares was concentrated on the idea of having a vacation “house” while sharing the cost of the product, its maintenance and use, says Montaudon. This meant that regardless of where you lived, you had a house in the paradisiacal location you had chosen. The model was successful at first but like any other business, to keep afloat it needed to innovate and offer new experiences to its affiliates. “Flexibility of use and the way we can structure the business have evolved hand in hand, from the initial exchange feature created by RCI to points programs. Even the all-inclusive model has given timeshares a new dimension.”

Part of what has helped RCI stay ahead in the industry has been its ability to capitalize on the experiences it offers to its affiliates. “Our business model consists of several parts. One is enrolling hotel developments. Whenever we enroll a new hotel it has to pay an affiliation fee that covers inspections and additions to the marketing materials. The other part of the strategy depends on the sales made by the hotel to members. If the member is happy, he or she will upgrade their membership and use the exchange program, paying a fee for every exchange,” explains Montaudon.

While it is easy to select destinations such as Cancun or Los Cabos, other destinations might not be as obvious. Montaudon says it is important to select a destination that has a significant inflow of visitors, so it can generate new enrollments and exchanges. The other important factor to consider is related to the legal details surrounding properties. “You can only affiliate developers and not marketers, since the latter do not have any real rights over the development and it is the developer who has the real ownership and right to sell; however, marketers are a key part of the developer for the business to be successful,” continues Montaudon.

Regardless of RCI’s strong market foundation and brand recognition, Montaudon acknowledges that technology has enabled the entrance of disruptor companies that cater to the millennial market. “Instead of being developers, they are becoming a distribution chain offering a different experience from ours,” he explains. However, Montaudon is confident RCI will remain a leader despite these new companies. “Disruptors will keep coming, but I believe that the market will continue growing and changing.”

When it comes to offering one of a kind experiences, Grupo Vidanta, RCI’s largest developer in Latin America, is taking the lead with a new project in Nuevo Vallarta. The project is expected to open in 2018 and will feature the first-ever Cirque du Soleil theme park. The idea is for people to immerse in a different world, combining entertainment and experience.

Choosing Nuevo Vallarta as a destination is no coincidence. In 2015, the city received over 2.5 million tourists and this inflow is estimated to double in the next five to 10 years. Montaudon notes that these types of projects are key to ensure a flow of tourists. “We are seeing a transformation. The beach is no longer the destination, but a complement.”

Part of the change can be credited to economic revenue generated by timeshare visitors. “It is a business with an assured regular customer. Whenever there is a natural disaster, such as hurricanes, timeshare owners are the first visitors to come back to the destination. They have an economic impact on everyone: taxi drivers, hotel bell boys and restaurant owners.”

RCI has kept up in a fast-moving world, overcoming the challenge of placing timeshares as an innovative product for vacationing. As Montaudon says, “nobody wakes up and decides to go out and buy a timeshare. It is our job to make sure people see the value of the product and of the experiences we can provide.”