Developers are planning to introduce timeshares, a business model for holiday homes that has run into some controversy in other countries, including Thailand, to Cambodia for the first time.
Two large-scale projects are planned, including a $30 million condo development in Sihanoukville, where construction is expected to start later this year, as companies look for new ways to attract long-term investment in the country’s real estate sector.
The timeshare model first surfaced in the 1960s in Europe and grew rapidly, spreading to the U.S. and beyond, before reaching a peak in the 1980s. The most popular timeshares involved people buying the rights to use an accommodation as a holiday home for a period of time every year, usually one or two weeks, for up to 40 years.
One project seeking an early foothold in the Cambodian timeshare market is The Scarlet, a 200-unit towering block of condos planned for the popular coastal town of Sihanoukville at a cost of $30 million.
“Sihanoukville is a commercial and tourism city that presents a different picture from Phnom Penh, which motivates us to focus our attention on a different type of condo from those in the Kingdom’s capital,” said Andrew Ahn, The Scarlet’s CEO.
Mr. Ahn, who has experience in real estate investment in his native South Korea as well as Vietnam and the U.S., was involved in the De Castle Royal in Phnom Penh, a high-rise condo development in Chamkar Mon district’s Boeng Keng Kang I commune.
The Scarlet will offer two options. The first is to buy one of the condo units, which range in price from $100,000 to $500,000 for a one- to three-bedroom, for a lifetime. The owner can then choose to live in it or rent it back to the company, which will lease it out on a timeshare basis, with the owner paying a fee for this service and keeping the remainder of the rent. The second option is for individuals to buy a timeshare membership for between $8,000 and $40,000, giving them two weeks each year to use the condo for 35 years. The two-week allotment can potentially be exchanged with members of a timeshare network, including those in different countries.
Work on the 32-story building, which will include a pool, gym, club lounge and valet parking, is expected to start in the middle of the year, with completion by the end of next year, Mr. Ahn said.
Another timeshare project in the pipeline is a five-star, $3 million resort with 18 units atop Kirirom mountain in Kirirom National Park in Kompong Speu province. It will cater to high-end Cambodian clients and expatriates who plan to retire in the country. Membership will cost $20,000 for 26 days per year for 45 years, along with an annual $400 maintenance fee, said Takeshi Izuka, president of A2A Town, the Japanese company behind the development.
Mr. Ahn is convinced the timeshare model can work in Cambodia.
“Our research as well as research conducted by regional and global firms shows the surge of tourism and business activity in [Preah] Sihanouk is just the beginning,” he said. “If tourism continues to grow, our project will succeed.”
Two more projects, The Scarlet 2 and The Scarlet 3, are also already in the planning stages.
“We are targeting foreign investors who are familiar with this kind of investment, like in China,” Mr. Ahn said, adding “there is a challenge in competing with other more popular tourist cities” like Thailand’s Phuket.
Timeshare businesses entered the Thai market in the 1990s, but nearly vanished amid concerns about scams and the high-pressure sales tactics employed by some companies targeting tourists.
“However, the timeshare business has now reemerged in Thailand and business operators have been working hard to restore the credibility of the industry,” the Thai Vacation Ownership Association says on its website.
Problems remain. In 2011, Phuket set up a special task force to combat unscrupulous timeshare touts operating along Patong and Karon beaches, which had prompted the local municipality to put up signs warning tourists to beware of scams.
Mr. Ahn said that for timeshares to be successful in Cambodia, a legal framework would be needed to to protect the buyer.
“We don’t have any legal regulations to oversee the timeshare membership in Cambodia, and also the global market sector is changing all the time,” he said.
One solution, he said, would be for those who buy into the projects to be issued with a certificate from the Land Management Ministry, which his company is working to get approved.
Chou Ngeth, a senior consultant at Phnom Penh-based Emerging Markets Consulting, said the new timeshare model may be too complicated for Cambodian investors. He foresees more challenges than opportunities.
“People are not familiar with the model. Also, there will be a question of how they transparently and efficiently manage the rent. There may be few people who are willing to try, but not many want to take the risk,” he said.
(Additional reporting by Kate Ginn)