Marriott International Inc., operator of the multi-million dollar Ritz-Carlton hotel chain, is cutting back on its luxury timeshare investments due to ever decreasing consumer demand, and ceasing new timeshare developments. This massive reduction on luxury timeshare capitalization would result in a third quarter pre- tax impairment charge of approximately $ 760 million dollars.
Since the previous year, market demand for luxury timeshare properties has been rapidly declining. Many timeshare owners seek timeshare relief using timeshare transfer companies. Marriott business statistics show that its revenue from timeshare real estate has drastically dropped from a 25% high of the total company revenue in 2007 to a measly 5% this year. Luxury timeshare revenue comprises only a tenth of the total timeshare revenue of the company.
The pre-tax impairment charge is based on Marriott’s designated move to significantly decrease timeshare investment capital and delay current luxury timeshare projects. However, the charge is largely non-cash in nature except for a relatively lower amount of about $ 45 million, strategically subsidized from predicted revenue in the next couple of years.
Marriott alludes to the current frailty of the economy as well as the proliferation of high-end residential units in the real estate market as the reason for the deteriorating demand for luxury timeshare properties. Furthermore, the increasing patronage of timeshare resale services has also considerably lowered profits from timeshare real estate. Nonetheless, Marriott continues to anticipate substantial increase in timeshare revenues in the coming years.