From the days in the 1970s when the term “timeshare” equated to a scam for many people, annual U.S. sales of so-called vacation ownership packages have climbed to $10 billion.
And more than one-tenth of that is managed on Glastonbury Boulevard.
A 78-person division of Textron Financial, based in Glastonbury, has carved out a niche as one of the top American investors in timeshare developments and is a growing player in the world of luxury hotels and resorts.
The Resort Finance Division, as it is called, all started with golf. After parent company Textron, the global aerospace manufacturer, developed its E-Z-GO and Jacobsen brands of golf products, it got into financing golf courses, which led to resorts, which led to timeshares.
The unit now manages $1.7 billion and backs developments and redevelopments of properties in the hottest vacation markets in the U.S., Mexico, the Caribbean, and increasingly, Canada.
The division’s growth since its founding in 1990 mirrors that of the timeshare industry, which has been as hot as the noonday sun at the beach.
According to a study commissioned by the American Resort Development Association, sales of timeshares have grown by at least $300 million every year since 1995. They’ve jumped $3.5 billion in the last three years alone, going from $6.5 billion in 2003 to $10.0 billion last year.
Textron’s resort division has seen a similar growth in receivables. Last year it posted a 13 percent increase in receivables, going from $1.13 billion in 2005 to $1.29 billion 12 months later. Two years ago it began a hotel sub-unit focusing on mid-size and luxury hotels, which now makes up almost 10 percent of its investments. And by the end of last year, it posted only $223 million less in receivables than Textron’s golf finance division, from which it was spawned.
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James M. Casey, a senior vice president who has been part of the group for more than 20 years, said timeshares were one of the few investments Americans continued making after the Sept. 11 terrorist attacks. Not only did business not fall off, it continued to grow.
“After 9-11, people were afraid to get on a plane, but they still drove to the beach,” he said.
“[Business] actually increased, because people obviously had a reaction to family, and doing things, and not waiting.”
Still, investing in timeshare developments is trickier –- and riskier –- than most commercial real estate endeavors.
The unit will provide up to $100 million to help a developer acquire or build a timeshare project, generally requiring 20 to 30 percent equity. But the meat of its business is financing the sales and marketing of timeshares by offering, in many cases, $5 to $15 million in receivables financing.
Once an investment is made, it isn’t time to just wait around for checks to arrive. This isn’t a typical commercial real estate deal.
“A lot of banks won’t get into this because there’s too many moving parts. There’s too many ongoing administrative and service capabilities,” Casey said. “These loans, unlike in real estate or a regular commercial loan or even a hotel, they take a lot of monthly time to continue the services.”
The level of attention to borrowers in the resort division amazed Peter N. James, who has come on as resort division president after serving in a half dozen other roles for the company.
“The level of customer intimacy that’s required to do that successfully is far greater than anything I’ve ever seen before,” James said.
“The day after the deal closes is when the real work starts.”
That isn’t to say there aren’t risks involved. Not all the ballooning sales figures translate into profit, and the resort business tends to draw those with glamorous dreams that they cannot always afford.
In 2004 the resort unit had 53 accounts considered non-performing, which amounted to more than 4 percent of the division’s investments. That put the unit outside the failure rate preferred by the Providence-based parent, part of the giant aerospace manufacturer Textron.
Casey points out that many of the developers and property owners he works with are juggling finances, property oversight duties and customer service, all the while pushing to sell $15,000 to $20,000 timeshares as quickly as possible.
“They’re running several businesses all at once,” he said.
Though some of the results are attributable to accounting procedures, the unit posted only 31 non-performing accounts in 2005 and 16 in 2006 (for a 1.22 percent failure rate), largely by bolstering the management of clients and getting trusted partners to assume failing projects. The unit spent $6 million more on selling and administration last year than in 2005, but that seemed to pay off big-time, as revenue grew by more than twice that.
