A Diverse Customer Focused Web Strategy to Shift Buyer Behavior &

Increase Stakeholder Value

Assistant Vice President of E-CommerceInterval International

Adjunct ProfessorGraduate Business School

University of Miami

William J. Brown

August 2000

This Presentation Will Be Available Online

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August 2000

What We’ll Discuss Today:

• We will examine Interval’s historical approach to consumer-focused technologies

• We will look at what Interval has and is doing to shift buyer behavior

• We will examine some of Interval’s challenges and our next steps

• We will take a look at the use of the Internet in the timeshare industry

August 2000

Timeshare: A Growing Timeshare: A Growing IndustryIndustry

• Global Sales of Timeshare = $6.7 Billion– up 5.6% compounded annually since 1994– 4.99 million families own timeshare– collectively own 7.4 million intervals or

respective points-based equivalents

Source: American Resort Development Association

August 2000

Leisure Travelers Leisure Travelers Interested in Using the Interested in Using the

InternetInternetLeisure travelers who are interested in using the Internet or services such as Expedia or Travelocity to:

1999 % 2000 %

Get information and prices 57 64*

Make hotel reservations 48 52*

Make airline reservations 46 52*

Make car rental reservations 43 48*

Source: The YPB Yankelovich Partners 2000 National Leisure Travel Monitor

* Denotes statistically significant difference from prior year

August 2000

Online Distribution Online Distribution GrowthGrowth

Distribution Channel 1999 $m 2001 $m Change

Vacation/Tour/Cruise 70 750 971%

• Vacation/Tour/Cruise category is the fastest growing sector of online travel

• By comparison, Hotel Web site distribution will grow by just 218%; Airline Web sites by just 156%

Source: 2000 PhocusWright eCommerce Survey

August 2000

Interval InternationalInterval International• One of the world’s largest vacation exchange

companies– With 1,700 team members in more than 50 countries

• 1.2 million member families, comprising more than 4 million individuals

• A network of more than 1,850 affiliated vacation resorts

• Privately held– Willis Stein (Venture Firm)– Marriott, Hyatt, Carlson, Starwood hold equity positions

August 2000

Web Initiatives Built on Web Initiatives Built on Solid FoundationSolid Foundation

• Interval is a recognized leader in vacation travel services & exchange

• Interval has a scaleable organizational structure, which today manages:– 1,250,000 members, living in over 60 countries

• Interval members own approximately 1,900,000 units of timeshare, much of which is not utilized for exchange

August 2000

Interval’s Affluent, Interval’s Affluent, Web-Savvy Web-Savvy

MembershipMembership• Average household income has risen 11 percent over

the past two years, to almost $103,000• More than 33% have a household income above

$100,000, compared with just 9.3% of U.S. population

• 80% have Internet access at home or work• 70% use e-mail• On average, spends 4.2 hours each week online

Source: 1999 Simmons Proprietary Research Study

August 2000

High Propensity to High Propensity to Purchase OnlinePurchase Online

• 33% use the Internet to shop for and purchase travel services

• 32% purchased airline tickets, hotel reservations, car rentals, or last-minute or preplanned vacation packages via the Internet

• 50% said they planned to purchase merchandise online in 2000

• More than 20% would make their travel purchases online again

Source: 1999 Simmons Proprietary Research Study

August 2000

Interval’s Goals for the Web

• Provide a better user experience for our customers

• Transition business to self-service model– Reduce costs– Provide worldwide service, 24/7/365

• Create new revenue streams by building on core competencies

August 2000

Credit card order processing

Website for product/service information

Customer support via the Web

Website for corporate information (www.interval-intl.com)

Web access to order information

Inference Engine

Full Online Exchange

Core

Core

Cont

ext

Cont

ext

Measuring Interval’s Measuring Interval’s Web ProgressWeb Progress

Credit: Geoffrey MooreE-Commerce Escalator, adapted from “Living on the Internet”

August 2000

Internet Enabled Core Internet Enabled Core Business FunctionalityBusiness Functionality• Getaways

– “II-Savers”• Membership Renewals• Membership Upgrades

– Interval Preferred• Exchange Queries• Online Travel• Exchange (more on that later …)

August 2000

Existing Member Products, available through traditional call center Status of Internet Offering

Full Self-Service Vacation Exchange Under “highest-priority” development; implementation to begin 4th Quarter 2000

Air/Car/Cruise/Hotels Enabled; Amadeus/ProLogic/Vendors

Getaways Fully Enabled, plus Web-only products such as II-Savers

Insurance Partnership with YouDecide.com (CFN)

Packages (travel and/or amenities)• Air/car/ground/hotels• Amenity packages (e.g., Disney park tickets)

Under development

Membership Upgrade Package Promotional program launched March 2000

MBNA Consumer Credit Card & Rewards Program Promotional program launched June 2000

State of Convergence:State of Convergence:Offline Competencies – Online ComponentsOffline Competencies – Online Components

August 2000

Member Use Accelerating• Nearly 100,000 unique Interval members visited

IntervalWorld.com• Between content and transaction pages,

members are viewing more than 2.2 million pages each month

• Traffic growth of about 7% per month

• NOTE: IntervalWorld.com is a closed membership site exclusively for Interval members

Site TrafficSite TrafficInternet Initiatives to DateInternet Initiatives to Date

August 2000

A-99 J-99 A-99 O-99 D-99 F-00 A-00 June August

Online Getaway Sales:Online Getaway Sales:Approaching 35% of Total Getaways Approaching 35% of Total Getaways

SoldSold

19991999 20002000

To DateTo DateAugust 12August 12

August 2000

Online Renewals Online Renewals SurgingSurging

504

1,207

0

200

400

600

800

1000

1200

1400

1999 Total May-00

$63,304

$128,541

0

20000

40000

60000

80000

100000

120000

140000

1999 Total May-00

Membership renewals conducted through Membership renewals conducted through IntervalWorld.comIntervalWorld.com

August 2000

Online Member Online Member Inquiries Inquiries

(Self-Help, in-place of Call (Self-Help, in-place of Call Center)Center)

Total, self-service exchange status inquiries since inception of functionality Total, self-service exchange status inquiries since inception of functionality == 457,991457,991

200,858

65,556 78,000 85,000 86,000

0

50,000

100,000

150,000

200,000

250,000

Total 1999 Jan-00 Feb-00 Mar-00 Apr--00

Savings in opportunity costs, based on average customer Savings in opportunity costs, based on average customer service cost of $6.75 per call service cost of $6.75 per call == $3,091,439$3,091,439

August 2000

How Are We Shifting Buyer Behavior?

August 2000

• IntevalWorld.com is a Members-only Web site

• Member content available in 11 languages, with international versions launching this Fall

Clear Statement of Exclusive Value

August 2000

Internet-Only Discounts• Interval members can save up to $50 on

each Getaway (additional, last-minute resort vacation)

• II-Savers: Very limited, least expensive specials on imminent burn space

• Preferred seating for Broadway Shows• Coming soon: Discounts for online

membership renewals & upgrades

August 2000

Expanded Resort Directory & Tools

• Each resort listing will have up to 10 photographs of sample units (by size, amenities, etc.)

• Streaming video is being produced for 80 top destinations in partnership with Visual Data Corp. (we call this “ResortView”)

• Blueprints and floor plans for each property• Local maps and event schedules

August 2000

Cohesive, Unified Marketing Cohesive, Unified Marketing MessagesMessages

• Cohesive marketing message: IntervalWorld.com is fasterfaster, easier easier to useto use, and offers exclusive exclusive savingssavings

• Positioning to members that this can be a primary channel for conducting business with Interval

• Example of branding: Re-launch of member magazine as IntervalWorld MagazineIntervalWorld Magazine, to reinforce value of Web site

• Every piece of Interval collateral and document delivered to our customers reinforces Internet brand

August 2000

E-Mail Marketing E-Mail Marketing InitiativesInitiatives

• Early efforts have succeeded in creating opt-in lists of more than 100,000 Interval members

• Strategy is to significantly expand effort throughout remainder of Year 2000 and deliver diverse newsletters and communiqués

• Anticipate that these initiatives will assist in shifting buyer behavior to Web functionality and drive higher Internet revenues

Online TravelOnline Travel

Interval members may search for fares or Interval members may search for fares or purchase purchase airline ticketsairline tickets, , hotelhotel or or car rentalcar rental reservations, at Interval negotiated ratesreservations, at Interval negotiated rates

August 2000

Select Alliances Build on Select Alliances Build on DemographicsDemographics

Example:• Launching a private-label tee

times booking service for members of Interval International

• Nearly 31% of Interval members golf while on vacation

• Alliance will also create a joint membership program to market to Interval members

• Other examples include real-time worldwide weather, street directions, maps, etc.

IntervalWorld Delivers IntervalWorld Delivers Even More ValueEven More Value

• Through select affiliate programs, Interval creates compelling online-only services for our members

• Provides the platform for our members to purchase value-added products that reinforce our brands, many at negotiated discounts

• Amazon.com, Spa Finder, Schubert Theatre Group, YouDecide.com, Samsonite, and more

Internet Lead

GenerationInitiatives

August 2000

Mass Market:Mass Market:Compelling Internet Compelling Internet

OpportunitiesOpportunities• 27 million people shopped for travel online in 1999

– Double 1998’s total of 13.4 million

• Online travel shoppers now comprise more than 33% of the total online population

• These consumers spend $500 more per year than the general online user (typically spend $705 per transaction)

• More than 75% of online travel shoppers agree that brands are more important online than offline

• Online adults make an average of 3.3 online travel arrangements each year

Source: Cyber Dialogue

August 2000

Mass-Market InitiativesMass-Market InitiativesInterval Goals:• Consumer lead generation for our

partners• New distribution channels for inventory• New affinity membership programs

August 2000

Interval’s Access to Resort Interval’s Access to Resort Vacation InventoryVacation Inventory

• Developers– Estimated by AEG at 2.1 million units in 2000

• Home Owners Associations (HOA)• Existing Inventory• Unsold weekly intervals

– Interval has potential access to 217,620 unsold units, just from its existing membership base

• Non-timeshare inventory

Interval is a true inventory aggregator

August 2000

Where are Timeshare Web sites today?

Let’s take a look at the top companies by total annual sales

revenue …

August 2000

40%

87%

33%40%

27%

Source:Vacation Industry Review

January/February 2000

August 2000

A Few Conclusions• Analysis suggests that there is a gap between endorsing

the Web as an important channel and actual execution– we’re acknowledging it’s an important channel, but not fulfilling it

• I believe timeshare companies are still trying to figure out why the Web matters to them- Can’t actually sell a timeshare online – yet

• Web-site operators should do more to demonstrate value to existing owners and to the leads that they want to convert into new owners. – For example, the Web is a perfect medium for mini-vacations and

other promotions, but only a third of the resort vacation companies provided any such special offers.

August 2000

SummarySummary• The vacation ownership niche is a vibrant,

popular and growing segment of the global travel industry

• Interval has a clear strategy to:– Deliver value to our customers & partners– Shift consumer behavior from offline to online– Create new revenue streams– Leverage the Web to enter the mass-market– Launch new vertical businesses using the Internet

& Interval’s core competencies

August 2000

Still, the Opportunities are Just Being Scratched

• As Robert Shaw once said

““So far we’re only putting lipstick on the pig.”So far we’re only putting lipstick on the pig.”