The American Resort Development Association (ARDA) asked the White House for help this month. The troubled United States economy is impacting the timeshare industry. According to a memo by Howard Nusbaum, President and CEO of ARDA, the timeshare industry employs almost 600,000 people and contributes over $62 billion to US economy. Unfortunately, the industry is facing a loan liquidity crisis that could ultimately negatively impact the industry and the overall US economy.
In October, 2008 ARDA requested federal assistance from the US government in the form of guaranteed loans, similar to FHA loans for mortgages. The US government would receive credit insurance to offset the risk.
Currently, even industry leaders are suffering. For example, Wyndham World (WYN) is trading under $5 a share for the first time in recent memory. If the industry failed, so could Wyndham World since almost 50% of their earnings are attributed to timeshare income. The Wyndham World properties are known as WorldMark and include more the 50 destinations.
Due to the serious financial situation, several developers have been forced to file for bankruptcy protection. According to the Denver Post, the developers of the Vail Plaza Hotel and Club have filed for chapter 11 bankruptcy protection. In addition, according to the Crittenden Resort Report, several other timeshare companies have laid-off workers or restructured their business plan in order to survive this downturn. Wyndham laid-off more than 700 staff members; while Marriott realigned its financing. No one seems to be exempt from this credit nightmare.
Ultimately, only time will tell whether this “hail Mary” pass will work. The industry is desperately in need of assistance. However, the current economic situation for the timeshare industry in the United States may not be fixable; even with government assistance. It may be time for all timeshare owners and developers to send up the white flag.