Would-be owners think twice about real estate investment, while timeshare companies are having difficulty monetizing consumer debt. Just a few months ago, even as global travel was slowing dramatically and a U.S. recession loomed, leaders in the vacation ownership industry were upbeat and optimistic that the downturn would largely miss timeshare and vacation clubs. Even fractional and branded whole ownership were thought to be somewhat insulated from the recession thanks to their appeal to more affluent consumers. HOTELS even went so far as to declare in its ill-timed October cover story that vacation ownership "defies the downturn." And then the sky fell. The global credit markets collapsed, stifling an industry that had relied so heavily on loan liquidity from timeshare mortgages sold as asset-backed securities. The market for such "consumer paper," as it is colloquially known, seized up almost completely-and for those companies entrenched in the asset-backed securities model, it matters little from a cash-flow perspective that consumer interest in timeshare remains relatively strong.
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