Fitch: Finite Upgrade Sales Benefiting U.S. Timeshare

NEW YORK--(BUSINESS WIRE)-- Positive U.S. consumer sentiment and spending trends should support 5%-7% industry sales growth next year, based on 2%-3% volume gains, 0%-2% price increases and 2%-3% growth in selling outlets, according to Fitch Ratings' new outlook report on U.S. Timeshare. The transition towards cheaper, less capital intensive inventory sources (i.e. discounted repurchases and home ownership association [HOA] defaults) will temper new supply.

However, timeshare fundamentals are benefiting from some potentially unsustainable trends. 'The high level of sales to existing customers, which exceeds 50% of total sales for some companies, is unsustainable through the cycle.' says Stephen Boyd, Director of Lodging & REITs. 'Upgrade sales to owners carry high margins and suggest a level of owner satisfaction with the product. However, there are natural limits to existing owner demand, making new owners important for long-term system health.'

Fitch also views select capital-light inventory sources as arguably unsustainable. 'Fee-for-service sales opportunities are declining as stalled developments from the last cycle are finished and sold.' Some companies have also struggled to consistently procure attractively priced third-party capital partners for new developments, making it risky to rely on this inventory source for long-range planning.

Timeshare companies continue to have healthy access to the securitization markets, although timeshare ABS deal rates have increased ahead of a potential Fed rate rise. Fitch believes timeshare companies will be able to pass through higher funding costs to borrowers.

The full report, '2016 Outlook: U.S. Timeshare,' is available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

2016 Outlook: U.S. Timeshare (Solid Fundamentals, Helped By Some Potentially Unsustainable Trends)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875284

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151211005893/en/

Fitch Ratings
Stephen Boyd, CFA, +1-212-908-9153
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
[email protected]

Source: Fitch Ratings

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