This excerpt taken from the WYN 10-K filed Feb 27, 2009.
Vacation Exchange and Rentals Industry Overview
The estimated $44 billion global vacation exchange and rentals industry has been a growing segment of the hospitality industry. Industry providers offer products and services to both leisure travelers and vacation property owners, including owners of second homes and vacation ownership interests. The vacation exchange and rentals industry offers leisure travelers access to a range of fully-furnished vacation properties, which include privately-owned vacation homes, apartments and condominiums, vacation ownership resorts, inventory at hotels and resorts, villas, cottages, boats and yachts. Providers offer leisure travelers flexibility (subject to availability) as to time of travel and a choice of lodging options in regions to which such travelers may not typically have ease of access to such choices. For vacation property owners, affiliations with vacation exchange companies allow such owners to exchange their interests in vacation properties for vacation time at other properties or for other various products and services. Additionally, affiliation with vacation rental companies provides property owners the ability to have their properties marketed and rented, as desired and, in some instances, to transfer the responsibility of managing such properties.
The vacation exchange industry provides to owners of intervals flexibility through vacation exchanges. Companies that offer vacation exchange services include, among others RCI (our global vacation exchange business and the worlds largest vacation exchange network), Interval Leisure Group, Inc. (a third-party exchange company), and numerous smaller companies, some of which are solely internet based. In addition, some companies that develop vacation ownership resorts and market vacation ownership interests offer exchanges through internal networks of properties. To participate in a vacation exchange, an owner generally contributes intervals to an exchange companys network and then indicates the particular resort or geographic area to which the owner would like to travel, the size of the unit desired and the period during which the owner would like to vacation. The exchange company then rates the owners contributed intervals based upon a number of factors, including the location and size of the unit or units, the quality of the resort or resorts and the time period or periods during which the intervals entitle the owner to vacation. The exchange company then generally offers the owner a vacation with a comparable rating to the vacation that the owner contributed. Exchange companies generally derive revenues from owners of intervals by charging exchange fees for facilitating exchanges and through annual membership dues. In 2007, 78% of owners of intervals were members of vacation exchange companies, and approximately three-fifths of such owners exchanged their intervals through such exchange companies.
The overall trend in the vacation exchange industry has been growth in the number of members of vacation exchange companies. We believe that current economic conditions will result in slower growth in the near term, but believe that the longer term trends will support a return to stronger growth. Longer term, we believe one factor supporting growth in the vacation exchange industry will be growth in the premium and luxury segments of the vacation ownership industry through the increased sales of vacation ownership interests at high-end luxury resorts and the development of vacation ownership properties and products around the world. In 2007, there were approximately 6.2 million members industry-wide who completed approximately 3.6 million exchanges. We believe that existing trends within the vacation exchange industry reflect that timeshare vacation ownership developers are enrolling members in private label clubs, whereby the members have the option to exchange within the club or through external exchange channels. Such trends have a positive impact on the average number of members, but an opposite effect on the number of exchange transactions per average member and revenue per member.
The vacation rental industry offers vacation property owners the opportunity to rent their properties to leisure travelers for periods of time when the properties are unoccupied. The vacation rental industry is not as organized as the lodging industry in that the vacation rental industry, we believe, has no vacation rental-specific global reservation systems or brands. The global supply of vacation rental inventory is highly fragmented with much of it being made available by individual property owners. Although these owners sometimes rent their properties directly, vacation rental companies often assist in renting owners properties without the benefit of globally recognized brands or international marketing and reservation systems. Typically, vacation rental companies collect rent in advance and, after deducting the applicable commissions, remit the net amounts due to the property owners and/or property managers. In addition to commissions, vacation rental companies earn revenues from rental customers through fees that are incidental to the rental of the properties, such as fees for travel services, local transportation, on-site services and insurance or similar types of products.
We believe that as of December 31, 2008, there were approximately 1.3 million and 1.7 million vacation properties available for rental in the United States and Europe, respectively. In the United States, the vacation properties available for rental are primarily condominiums or stand-alone houses. In Europe, the vacation properties
available for rental include individual homes and apartments, campsites and vacation park bungalows. Individual owners of vacation properties in the United States and Europe may own their properties as investments and may sometimes use such properties for portions of the year.
We believe that the overall demand for vacation rentals has been growing for the following reasons: (i) the availability of lower-cost and flexible transportation options; (ii) the increased use of the Internet as a tool for facilitating vacation rental transactions; (iii) the emergence of attractive, low-cost destinations, such as Eastern Europe; and (iv) increasing awareness of vacation rental options among Americans. The demand per year for vacation rentals in Europe and the United States is approximately 48 million vacation weeks, 28 million of which are rented by leisure travelers from Europe. Demand for vacation rental properties is often regional in that leisure travelers who rent properties often live relatively close to such properties. Some leisure travelers, however, travel relatively long distances from their homes to vacation properties in domestic or international destinations. We believe that current economic conditions will result in slower growth in the near term, but believe that the longer term trends will support a return to stronger growth.
The destinations where leisure travelers from Europe, the United States, South Africa and Australia generally rent properties vary by country of origin of the leisure travelers. Leisure travelers from Europe generally rent properties in European destinations, including Spain, France, the United Kingdom, Italy and Portugal. Demand from European leisure travelers has recently been shifting beyond traditional Western Europe, based on political stability across Europe, increased accessibility of Eastern Europe and the expansion of the European Union. Demand by leisure travelers from the United States is focused on rentals in seaside destinations, such as Hawaii, Florida and the Carolinas, in ski destinations such as the Rocky Mountains, and in urban centers such as Las Vegas, Nevada; San Francisco, California; and New York City. Demand is also growing for destinations in Mexico and the Caribbean by leisure travelers from the United States.
We believe that the overall supply of vacation rental properties has grown primarily because of the increasing desire by existing owners of second homes to gain an earnings stream evidenced by homes not previously rented appearing on the market.