I am a longtime owner who exchanges a week or two every year to visit new resorts. I also just learned that RCI, the biggest exchange company, bought a competitor named DAE. Will this kind of change expand or reduce my exchange options?
Great question, one that comes up whenever big corporate changes are announced in the timeshare universe. RedWeek talked to executives at both companies, as well as other executives in the industry, to evaluate these changes within the exchange market.
First, some background. The entire timeshare industry has undergone many changes since the mortgage and stock-market meltdown of 2008. Many of the major developers slowed or stopped new construction as money got tight. Others switched business models, opting for "asset light" operations where, instead of building new timeshares, they gobbled up existing timeshares, in good locations, to expand their inventory. All of the major hotel companies, meanwhile, spun off their timeshare divisions to become stand-alone companies, with Wyndham being the latest. Hilton's timeshare unit launched itself as a new public company earlier this year.
These kinds of corporate changes are a natural part of business evolution. After a downturn, strong companies tend to adapt and prosper while the less strong, in some cases, go out of business or become acquisition targets for the major brands.
RCI, the world's largest timeshare exchange company (followed closely by Interval International), is owned by the Wyndham chain. Despite having 4,300 resorts already in its arsenal of exchange inventory and 3.8 million subscribers, RCI announced in October that it had purchased DAE, which has a large foothold in Australia and the Asia-Pacific resort market along with 80,000 members.
RCI gets bigger while DAE gets stronger
RCI and DAE executives have positioned the acquisition as a friendly takeover that offers benefits to both: infrastructure and resources to DAE, and a new customer and resort base for RCI.
DAE is celebrating its 20th anniversary and, despite having a much lower marketing profile in the US, is the largest privately held exchange company. Worldwide, it is the third largest exchange company. Like RCI, DAE offers programs for owners of weeks and points.
DAE still has the earmarks of a startup that focuses on one-to-one customer contacts and proudly touts having won the industry's top-ranking in customer service for seven years in a row. It also attracts timeshare owners by undercutting its competitors on price. For example:
- DAE membership is free and there are no annual dues. Members pay $179 for a successful exchange.
- RCI charges $99 for membership and $99 a year. Exchanges cost $239.
Executives at both companies said it is way too early to evaluate how the acquisition will play out (or impact timeshare exchangers). Corporate marriages such as this typically take months to shake out as the acquiring company integrates the acquired into its network. For the time being, both companies say DAE will continue to operate under its own brand while, in the big scheme of things, it delivers a large global portfolio of new resorts to RCI's universe.
RCI and DAE, along with other exchange companies, share a vision of expanding services, including travel club-type offerings, to maintain and grow their networks. They are also actively educating customers to focus on vacation experiences --- cruises, themed tours, golf events --- that can be as fulfilling as the accommodations at a particular resort. The real and ongoing challenge for both, meanwhile, is fulfilling exchange requests so that customers can vacation when they want and, most importantly, where they want.
Fulfillment, in fact, is the biggest problem for all exchange companies --- including the big-brand developer timeshare companies that operate their own internal exchange programs (Disney, Marriott, Vistana, etc.). In decades past, customer had to "deposit and hope" they would get a good exchange. Now all companies, thanks to the Internet, are offering real-time instant bookings for resorts with availability. DAE operators go one step further to avoid the fulfillment bottleneck: if they don't have inventory for a requested exchange, they will get on the phone to find a resort that matches the customer's request. Then they'll call the customer seeking a 24-hour yes or no on accepting the exchange.
The constant search for new inventory (to fulfill exchange requests) has also led both companies to build relationships with legacy resorts that have unused inventory and suffer from double-digit delinquencies. RCI offers a long laundry list of services (including rentals, marketing and member management) to help older resorts move inventory and put heads-in-beds. It's a smart business move, industry observers say, because legacy resorts in good locations are dependent on third-party exchange companies to generate visitors who may become potential buyers. To date, RCI has forged exchange relationships with 780 legacy resorts.
Companies offer programs so owners don't waste their weeks
One RCI initiative for timeshare owners, already introduced but not widely publicized, bears watching. To help owners avoid the worst outcome --- losing a week --- RCI will take last minute deposits and provide owners with partial exchange credits. For example, RCI will accept a deposit within 14 days of check-in and provide a 45 percent exchange value. Owners who deposit 30 days prior to check-in will get 60 percent of the week's original trade-in value.
DAE has a similar program, but encourages owners to deposit unused weeks at least eight weeks prior to check-in. That gives DAE more time to market the deposited week to another owner through a getaway program.
From a consumer standpoint, the ultimate test of the RCI-DAE merger will be determined by whether it offers more, or fewer, exchange options for customers. Both companies say they are laser-focused on addressing customer needs. Time will tell.
