Human resource initiatives and critical decision-making

Case
Introduction
Human resource initiatives and critical decision-making is an essential component of effective leadership
practice in today’s hospitality industry. This case study presents a dilemma for hospitality industry leaders
in the Timeshare/Vacation ownership field who are faced with key strategic decisions surrounding resource
allocation and the impact on employee morale, guest satisfaction and facility maintenance. Xavier is the CEO
of Kalalau Inc. Timeshare/Vacation Resorts and he is faced with critical strategic decisions pertaining to the
on-going success of the company. His challenge is to identify key strategic formulations for the company in
the near term (3–5 years) related to managing rising costs associated with facility improvements while topline revenues are stagnant. This leadership case study aims to generate discussions and raise questions
surrounding hospitality industry leaders approach to strategic formulation and decision-making processes.
History and Evolution of Timeshare/Vacation Ownership Industry
Timeshare companies began as a niche market product offering, however, more recently big hotel brands in
the hospitality industry have established Timeshare programs and have become fierce competitors (Wyndam,
Starwood, Marriott, Hilton and Disney). Timeshare companies target a variety of different customer segments,
much like hotels they offer varying unit types and resort configurations.
It all began in the 1960’s when a German hotel manager who wanted to buy an apartment in the French
Alps, but could not afford it. He and his friends bought the apartment together and shared it in weekly
intervals (Woods, 2001). The Timeshare/Vacation Ownership product type typically offers consumers the
opportunity to purchase time slots in a resort to be used during a pre-determined time period (holiday),
rented to another consumer on holiday, or exchanged with other buyers in participating Timeshare/Vacation
Ownership marketing platforms. The two primary forms of Timeshare/Vacation Ownership are; titled or trust,
which are consumed in week long intervals, and point based, in which participants purchase points that can
apply to the use of Timeshare units.
Currently, weekly intervals are still the primary purchase units of Timeshares, whereby the owner of the
week owns that segment of time forever. However, more flexible options of purchase also exist. Alternative
Timeshare purchase units include split weeks, exchanges, and points. Split weeks allow an owner to split their
time in the unit instead of having one whole week. Exchanges allow owners to trade their time at one property
for time at another property in a different location. Points allow owners to purchase points and redeem them
at any of the company’s properties for varying costs depending on season or location (Crotts & Ragatz, 2000;
Rezak, 2002; Sparks et al., 2007; Woods, 2001).
From a demographic context, Timeshare owners are generally older than 35, have secure jobs and significant
discretionary income. Additionally, couples are more likely to own Timeshares, representing 87% of
Timeshare owners (Crotts & Ragat, 2000).
The key differentiator in Timeshare resort management and traditional hotel resort management is the guest
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Page 3 of 9 Timeshare Industry Leadership and Human Resource Implications of
Employee and Guest Satisfaction
ownership interest and subsequent nature of the Timeshare guest experience. Atypical in the Timeshare
Industry resort experience is the length of stay pattern and type of service product offered. The Timeshare
resort experience differs from a typical Hotel resort in various ways. Most Timeshare units contain full
kitchens, laundry facilities and multiple bedroom unit configurations. Since the Timeshare owner stays in
weekly intervals or longer, facilities and services are geared towards longer stays. However, since some
Timeshare products are conversions from existing hotels they may have more traditional overnight room
configurations with a bed/double bed, living space, and bathroom floor plan. In contrast to the Timeshare
owner/guest, the Resort-leisure guest stays at the facility for a shorter length of stay and rents the unit for
daily use as a secondary rental of the ownership unit.
The prevalence of the Timeshare Industry to the overall US economy is notable. According to the latest
AIF research, the 2010 economic impact of the Timeshare Industry on the U.S. Economy contributed
approximately $8.4 billion in tax revenues. Federal taxes accounted for $4.9 billion (59%), state taxes
were $1.8 billion (21%) and local taxes were $1.7 billion (20%). Resorts generated $2.9 billion in total
taxes, corporate operations generated nearly $1.4 billion, sales and marketing nearly $1.8 billion, vacation
expenditures $2.0 billion and capital spending related to new construction and renovation resulted in a total
of $269 million in taxes (ARDA, 2011).
Table 1: Hotel Resort/Timeshare Comparative
Attribute Resort Hotel Timeshare/Vacation Resort
Unit of Sale Room night Time interval/points
Length of Stay Daily-1.5 nights Weekly-7–14 days
Exchanges Note available Participation in resort exchange clubs and affiliates
around the world
Reward
Programs
Accumulation of user benefits and
service amenities, points redemption
for stays
Accumulation of user benefits and service amenities,
points redemption for stays and other vacation
products
Ownership
Interest in Unit none Deeded sale
Maintenance
Fees none Required monthly payment
Dining Multiple outlets Usually no outlets or leased outlets to third parties
Sales Process Individual/Internet, central reservations On site-Aggressive selling (comp services, tours)
Check-in Front desk-guest services Front desk-guest Services
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Page 4 of 9 Timeshare Industry Leadership and Human Resource Implications of
Employee and Guest Satisfaction
Housekeeping
Services Daily Mostly weekly; in some cases daily depending on the
Brand.
Source: Shell Vacations LLC.
The typical Timeshare resort operation and corresponding guest utilization offers hospitality leaders multiple
revenue generating opportunities. Given the heightened competition within the Timeshare/Vacation
ownership industry and economic stagnancy with the global economy, strategic planning and decision-making
takes on greater importance for hospitality industry leaders.
Background of Kalalau Timeshare/Vacation Ownership Inc.
Kalalau Timeshare/Vacation Ownership Inc. was founded in 2001 and currently owns, operates and manages
30 resorts across 8 states in the US, employing close to 2,991 employees belonging to 16 departments.
Their annual revenues exceed $45 million dollars from resort operations alone. In addition to resort revenues,
Kalalau Inc. receives income from real estate unit sales, homeowner association fees, customer loyalty
programming fees and reward points redemption in excess of $100 million.
The management structure at Kalalau Inc. consists of two primary divisions; (1) Timeshare Sales and
Marketing and (2) Resort Operations. Each of the divisions has a President reporting to the CEO and founder
Xavier. While the Timeshare real estate sales (ownership) units and points based purchases generate close
to $100 million in revenue, ongoing fees and subsequent “reloads” to existing Timeshare customers are a
secondary source of revenues. Additionally, a prime driver of revenues at Kalalau Inc. are resort operations
which generate close to $45 million dollars a year in gross sales from secondary unit rentals offered in the
open market to transient resort customers. Unique to the Timeshare/Vacation Ownership industry, owners are
able to rent their unoccupied units to the traveling public.
In this case study both divisions of Kalalau Inc. are working towards the same goal: maximizing revenues
and delivering quality services. The real estate division is focused on finding new buyers for deeded units
while also re-loading or selling additional points based consumption to existing Timeshare owners. The
Resort operations division is focused on delivering quality services and maintaining facilities, administering
homeowner association requirements to Timeshare unit owners and providing hospitality services to
secondary rental unit-transient customers utilizing those facilities.
At the heart of this case is the short-term strategic direction and decision-making process facing the leaders
of Kalalau Inc. Senior leaders and key managerial personnel are gathering for their annual strategic planning
exercises in anticipation of the forthcoming budgeting and three-year strategic outlook exercises. Xavier, the
CEO, is faced with key leadership decisions and wants a closer examination of a few key factors associated
with company performance; employee satisfaction, customer satisfaction and facilities maintenance. In order
to do so he has commissioned a few third-party survey studies to examine these factors more closely.
Figure 1: Kalalau Inc.-Employee satisfaction factors (unit of analysis based on 1–5
point Likert scale).