Timeshare realty market in Dubai will touch $1bn

The Middle East market is set to sell over $1 billion (Dh3.67bn) annually in vacation exchange products by 2010, according to estimates by Group RCI, the world's largest vacation exchange and rental business. The group, which has played a major role in working with the Dubai Government to set up new regulation frameworks for the timeshare industry, says that legislation has been the catalyst for growth in the region's vacation exchange market.

Group RCI's managing director for the Middle East, Nick Turner, sat down with Emirates Business to discuss timeshare plans for Dubai, the challenges facing introduction of this new industry, and what took the firm so long to tap into the emirate's booming tourism market.



What are some of the plans Group RCI has in store for Dubai, and how much are you planning to invest here?

I can't provide financials but we have three core objectives in the region. Number one is to help governments establish frameworks for legislation, which we have already done with the Dubai Government. We're also actively supporting Oman and we expect the rest of the emirates will follow Dubai's lead with the timeshare legislation.

Number two, we're working with the majority of large regional developers and hotel brands, discussing opportunities to incorporate shared ownership into their mixed-use projects, and giving them the tools and advisory services to actually start integrating in vacation ownership – which is also known as timeshare – in fractionals, and in buy-to-use-and-let real estate (having a furnished residential offering that is owned by somebody overseas and rented through a central rental pool). Number three is supporting the customer. When timeshare vacation ownership customers stay in these parts we have a good range of products available from three-star to five-star. This is a new market so it is going to take upto four years to actually see some of these new projects appear in Dubai but our responsibility does not end when the project finishes construction, that is when we look after the customer experience.

Dubai has been a major hub for tourism and holidays in the region – what took RCI so long to tap into this market, and why now?

We moved our regional head office for the Mena region from Cairo to Dubai in 2003. We took a strategic decision – we knew the majority of investment was coming into the UAE. However, the catalyst for growth has been legislation. A lot of hoteliers and developers have been interested in shared ownership during 2006 and 2007, but the majority of them wanted to see the legal requirements – how to build, how to sell, how to market. And I think you will see a very quick transformation now in the geography of the region and timeshare.

Nakheel and Emaar are looking to include timeshare into their portfolios; can you tell us more about that, as well as which other developers have come forward?

Strategically it is difficult to give a definitive answer as to which developers are looking at this. But certainly if you look at the major developers – in projects such as Dubailand, where they are setting up an LLC purely for vacation ownership, and projects that Nakheel are developing that are tourism-related – you can see shared ownership would fit very comfortably into their product offering.

The majority of major developers in the Gulf are looking at, considering, or have already started moving down and offering products for timeshare vacation ownership and fractionals. IFA is a great example, where they have already started sale with their fractional proposition on the Palm Jumeirah.

What per cent of the Dubai property market would this comprise in the next year?

We hear talk of several hundred thousand residential units being built in Dubai. I would certainly say timeshare and vacation ownership could support several thousand units in a mature market. When Dubai is driving 15 million inbound tourists a year, realistically 10-15 per cent of that inbound tourist population could be staying in some form of apartment, villa, rental or timeshare. This is a big number.

What is the potential value of the Dubai timeshare property market in five years or so?

We're looking at a $1 billion plus market potential in annual sales when this market matures in five years onwards. We have carried out some research in the big-five Middle Eastern household markets – Saudi Arabia, Kuwait, UAE, Egypt and Iran. We asked, would you be interested in buying timeshare (a vacation purchase), or a fraction, which is asset-linked? The number one destination for both, reassuringly, was Dubai. One in four respondents suggested Dubai (for timeshare), followed by Makkah, which is quite interesting from a religious travel perspective. And then there were some traditional locations in timeshare like Sharm El Sheikh. Fractionals, because they are asset-linked, showed a slight change, with more of a desire to own in places such as Abu Dhabi.

How does this compare to the global turnover for the industry?

The fractional ownership market globally is $2.8bn a year at the moment, and timeshares is about $13bn a year. You could probably draw a line and say about 60 per cent of that would be fractionals [in Dubai], as there are slightly larger opportunities for fractionals here than vacation ownership because this is seen as a luxurious, high-end lifestyle destination. Just to give you a sense of the market, the Mexican market is about $2.5bn for fractionals and timeshare combined.

What percentage of RCI's portfolio does the investment in Dubai take up?

We have more than 4,000 resorts in the world at the moment and about 60 in the Middle East, so this is a small but important future market for us. I can see by 2012 having well more than a hundred resorts and that could move very quickly to 150 resorts if regions such as Jordan, Lebanon, Syria, Bahrain and so on embrace shared ownership as well. We are looking at an important growth opportunity globally.

How much do you expect your investments here will boost the value of your portfolio?

I cannot speak globally but it certainly would transform this region. We currently have about 12,000 RCI timeshare owners in this part of the world, and we estimate that the market could be well more than 100,000 members in timeshare owners. When you start entering 2011 and 2012, there are some big projects that have signed affiliation agreements with RCI, such as Bavaria Executive Suites – they have got a potential 2,000 apartments there with 52 owners. That's almost 100,000 timeshare owners in one project alone, so this is potentially a huge market in the next five to 10 years.

The UAE penetration rate for resort timeshare ownership among all income-eligible households was estimated at around two per cent last year – where do you see this figure going?

At the end of the day, if there was no product to buy then there was very little chance of [people] owning it. I think when this product is available on the shelves then people will buy. At the moment across the Middle East, four per cent of households have timeshare or own timeshare interest. There is no reason why the UAE number could not be several per cent of the population.

Do you see any other major challenges facing the industry?

I think we are always mindful of development delays. We have been hit by development delays in this part of the world, particularly the Palm Jumeirah, which is two to three years behind, and that is a mindful concern that we have. We make sure developers realise that there is a responsibility for them to still provide accommodation if their project is delayed

How have these affected RCI's moves?

With projects like Dubailand being delayed, developers are less urgent to make decisions on final plans. With the real estate market in general I think timeshare may help prop it up. Several hundred thousand units are being built in Dubai alone. If some of those are soaked up by other forms of ownership, it may give the real estate market a soft landing. Vacation ownership provides a layered opportunity, as it is very expensive to buy in Dubai.

There have been expectations reported that Dubai will overtake Orlando, Florida, as the world's largest timeshare market. Do you see this happening and if so, by when?

The market has got all of the dynamics that Orlando had, which was a leisure destination, parks coming up, having big air traffic, airport access in and out, and so on. Dubai has all these dynamics and the prediction the industry has is that this could become the next Orlando as it pertains to tourism and development as a whole, but timeshare being a significant component, as well as fractional and home ownership and other real estate ownership. I think we are looking at about 10 years. That is what it took for Orlando – it took Disney World to arrive – so I think it will take one or two of the major events or facilities to open up that are bringing in a huge volume of tourism traffic. That will be the big accelerator.

Are you using any other cities you have had previous experience in as models for Dubai?

Las Vegas is a very similar prototype but obviously without gaming. Orlando is phototypically just like Dubai. People forget that Orlando started 15-20 years ago, not too dissimilar to Dubai.