By R. Scott MacGregor

The COVID-19 story may be just beginning to unfold, but now is the time for resort boards to take a sober and critical look at their business fundamentals and determine what options are in the best interest of the majority of owners whom they represent.

Timeshare resorts depend on maintenance-fee income to pay for their operations. In a perfect world, all owners pay their assessments in full and on time, and the resort hums merrily along.   For some resorts this slow-down may actually provide a unique opportunity to catch up on some deferred maintenance and other projects that typically present a challenge when the resort is in full swing.  One of our properties is taking the opportunity to expedite a roof repair while the resort is empty.

The resorts will certainly face challenges: how to replace inventory, dealing with delayed owner payments, maintaining solvency and consumer confidence.

Resorts that count on rental income will quickly find their cash balances dwindling. No math exists for cost-cutting to make up for that while maintaining fiscal and operational integrity.  Sadly, COVID-19 is poised to eviscerate the 2020 rental season.   The more resorts depend on rental fees and other non-maintenance-fee income, the less stable they become.   Once you factor in economic shocks like recessions, foul weather, or worse, a global pandemic, you need to think outside the box and evaluate all of your options.

Short-term Options

Special assessments will be the first line of action. In some states, special assessments are required when operating deficits swell. Special assessments are unpleasant enough, but worse when needed to plug a fiscal deficit while lacking the visual satisfaction of upgraded unit interiors or common areas.

The Small Business Association has disaster-relief loans.

Perhaps you can find a good development partner with whom to huddle for warmth, though such a good ending may be elusive on many levels. The strongest of the vulnerable resorts may be able to secure a working-capital loan secured by their future maintenance fees and special-assessment powers.

What about long-term?  

If your resort was financially healthy before this, you will likely recover with just a few bumps and bruises.   However, resorts that were struggling with shrinking ownership before COVID-19 may have a harder time.

Perhaps the time has come to consider restructuring options.  Keep an eye out for a more in-depth look at what restructuring means.

Scott MacGregor is senior vice president and chief operating officer of Lemonjuice Solutions. Contact him at 7041 Grand National Dr., #230, Orlando, FL 32819, phone 321-754-1033, Ext. 111, email scott.macgregor@lemonjuice.biz.