Wednesday, May 03, 2006

Sunterra Annoucement

I am writing to let you know that Sunterra have today announced that they are making some significant changes to their European Operations, the summary of these changes are.

The size of the European business will be reduced and unnecessary and duplicative costs will be eliminated or reduced

New member marketing programs will be curtailed, management streamlined and infrastructure reduced

However, the high service levels to which Sunterra's existing European members have become accustomed will be unaffected.

The Company's resort management operation will continue substantially unchanged, as will its member services operation, including travel services.

The reasons for these changes are mainly the current market conditions experienced by all Timeshare companies in Europe where it has been becoming more and more expensive to recruit new members to the point where it is no longer viable to maintain the traditional methods of recruiting new members. Areas of the business that will be affected are mainly in Management, Sales and Marketing.

There will be no more freebies for prospective members once the pipeline which must be at least into the next six months has gone through, which hopefully should mean we won't be seeing all those reps traipsing people through the resorts as they have in the past.

Areas like the Travel Club, Reservations, Customer Services, Resorts and Refurbishment programs won't be affected by this downsizing of the business. So as members we shouldn't see any negative changes as nothing that affects the members is being touched.

What Sunterra are going to do is concentrate on running the resorts and being the management company, both areas of the business that they are historically good at and are profitable so there is no reason why they shouldn't do well during this quieter time.

Sadly an early casualty of the downsizing in management has meant that Dave Harris has parted company with Sunterra Europe as Managing Director. Both John Davey and I wish Dave all the luck for the future and thank him for his support on the Club Sunterra Board over the last couple of years. There are no immediate plans to replace Dave, so for the next couple of months Nick Benson will be looking after Sunterra Europe, as well as continuing in his role as CEO of Sunterra Corporation. Nick will also be presiding over the AGM being held at Southampton Football Club on the 28th of June.

I have copied below the announcement from Sunterra re the downsizing of the Sunterra Europe.

As a result of recent market conditions, as well as overall performance of its European segment, the Company has decided to make some significant changes to its European operations. The size of the European business will be reduced and unnecessary and duplicative costs will be eliminated or reduced. New member marketing programs will be curtailed, management streamlined and infrastructure reduced; however, the high service levels to which Sunterra's existing European members have become accustomed will be unaffected. The Company's resort management operation will continue substantially unchanged, as will its member services operation, including travel services.

These changes, which are expected to be fully implemented by August 2006, are expected to result in a substantial reduction in European vacation interest revenues while associated ASM costs as a percentage of vacation interval sales will be lower. The continuing club and property management businesses are expected to continue to contribute at historic levels to the profitability of the European business. The Company expects to incur a pretax charge preliminarily estimated to be approximately $12 million to $17 million in connection with these proposed changes, which are subject to certain statutory employee consultation requirements prior to their implementation.

Mr. Benson said, "We have taken these decisive steps with Sunterra Europe in the context of extremely challenging market conditions. While we would have preferred to see our revenues restored to previous levels through various marketing initiatives, this option is too costly to pursue at this time. The initiatives we are pursuing are intended to enable us to run a profitable business that generates a worthwhile return, while clearly emphasizing the commitment of Sunterra to its owners and to the continued development of our European club products and benefits. Our European members can be assured that we remain fully committed to providing them with outstanding vacation experiences."

Finally just letting you know that we are off on holiday again on Saturday for a week to visit the new Sunterra resort in Malta. Well you need a break to get over moving house don't you!

Tony Pearce
tony@sunterra-members.co.uk
Home 01204 791663
Mob 07973 342068
Skype tonypearce1950

5 comments:

Paul & Lynne said...

Tony,

I read the attached with interest. having worked in the public sector for some decades, any downsizing operation makes me 'twitch'!despite 'comforting reassurances' from the board...

I do have two specific questions:

If the sales team is to be reduced, does this mean we will still get personal service form the reps while on resort? As a subsequent, will it mean they are trying harder to sell us additional points to offset their lost commission on new sales?

Secondly, you said the 'freebies' will cease. Does this mean that the Relay Referral system will also cease? I have some credits in the system, and was hoping to make more, but it's diffficult to overcome the negative perspective that some paople still hold about anything to do with time-share, ana I have found that reliving personal experiences, plus the offer of a visit (i.e. free holiday) to be a useful double act. If the system is to end what happens to our credits, to which we will no onger be able to add.?

On a personal note I found that freebie newbies were very interesting in the main, and provided me with mnay opportuniies to extol the virtues of Sunterra (I'm not sure how many people have bought in after meeting and chatting with my wife and I while on their freebie. I will find it sad to see this new blood dry up. It does beg the question of how any company expects to exist for any length of time if it doesn't recruit new customers!!

Regards

Paul Bird

Tony Pearce said...

Hi Paul,

Your first question asks about whether we will still receive personal service from the Reps, as far as I know yes there will still be reps about but only dealing with members and members referrals which I guess partly answers your second quesion about whether Relay will still exist. I am sure that Sunterra will still be keen to get referrals from members.

The cutting back of the current marketing techniques is probably overdue to be honest, the old fashioned ways don't really work any more do they. I am sure other methods of recruiting members will be looked at, tested and if successful introduced in the future.

Nothing stands still does it.

Tony

corrieman said...

I have read with interest about the uncertain situation with sunterra and note that on the web several firms have filed Class Action Lawsuits against sunterra corp. This appears to be more serious than at first anticipated and hope that someone can explain in simple lay man's language what this exactly means. For some of us who have invested what is considered a lot of money in our eyes it could be a worrying time ahead

bryan said...

I have been a member for 10m years and no longer wish to be associated with the company. I have 6000 points which I will give to first contact.

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