From last years MGRW SB2-A Cruise Timeshares
We are in the process of entering into a new innovative industry involving
the sale of timeshare opportunities on cruise ships, similar to real estate
timeshares. While timesharing of vacation real estate is a growing industry we
believe, after doing extensive research, that only one other company, Cruise
Timeshare Two, Inc., currently markets and sells timeshares on an existing
cruise vessel. We have reached an agreement in principle with the principals of
Cruise Timeshare Two, Inc. to provide us with marketing and sales broker
services, but we have not signed a formal agreement and do not intend to sign a
formal agreement until an appropriate vessel has been located and we have
obtained sufficient funding.
Industry Overview
Timesharing of real estate properties is, and has been, a successful
method of individual ownership and use of vacation properties for a designated
time period each year. An individual initially purchases the timeshare
allocation and management, operating, maintenance and other expenses are
generally divided amongst all of the timeshare purchasers of the designated real
estate who pay a related annual fee for such expenses. During the last decade
the worldwide timeshare industry has experienced significant growth and recent
average sales have increased by about 7.6% per year (source: American Resorts
Development Association).
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Cruises are the fastest growing segment of the multi-billion dollar travel
industry, fed by fresh interest, a substantial increase of new ships,
considerable advertising and increasing number of repeat customers and referral
clients. The average rate of growth in the North American cruise market for 23
years is over 8.1%, which is greater than any other leisure vacation category
(source: Cruise Line International Association). Even during poor economic
conditions and when business travel has been down cruise sales have remained
relatively strong, with approximately 85% of cruise customers reporting overall
satisfaction (source: Cruise Line International Association).
Our Solution
The cruise timeshare concept is an attempt to extend the benefits of a
timeshare vacation by uniting the best attributes of quality real estate
timeshares and better cruises. The cruise timeshare product offers consumers of
real estate timeshares with benefits that would not be available with
traditional timeshares, including:
o all inclusive vacations which include meals and other services at no
additional cost;
o the ability to avoid adverse weather on a seasonal basis; and
o the ability to enjoy different localities without the need to trade
for use of other real estate properties.
Furthermore, unlike the construction and development necessary for real
estate timeshare projects, we will be able to begin our cruise timeshare
operations after acquiring an appropriate cruise vessel and spending
approximately four months outfitting the vessel.
In addition, the cruise timeshare product offers consumers of commercial
cruise vacations benefits that would not be available with traditional
commercial cruises, including:
o the projected costs of a cruise timeshare vacation would cost less
than a comparable commercial cruise vacation;
o cruise timeshare ownership and/or use can be loaned, given away or
sold by the purchasers;
o based upon predetermined preferences, purchasers of cruise
timeshares will be able to receive their preference for food,
beverage and recreational services.
Our Strategy
We have reached an agreement in principal with Cruise Timeshare Two, Inc.
pursuant to which we intend to purchase between one and two cabin style cruise
ships per year and Cruise Timeshare Two, Inc. will market and resell the
timeshares to customers. See "Sales and Marketing" below in this section. This
arrangement provides that Cruise Timeshare Two, Inc. and us will split the
profits from the sale of timeshare units and the use of unsold cabins equally,
after we have been paid for our administrative expenses in purchasing the
relevant cruise ships. We currently plan on purchasing additional ships,
accordingly our agreement with Cruise Timeshare Two, Inc. specifies both parties
desire to purchase a ship when the first ship is nearly completely sold.
However, additional purchases are at the discretion of both parties. In
accordance with our agreement, we will purchase and operate the vessel and
Cruise Timeshare Two, Inc. will market and sell the individual time share units.
We have not yet signed a formal agreement with Cruise Timeshare Two, Inc. and do
not intend to sign a formal agreement until an appropriate vessel has been
located and we have obtained sufficient funding.
In addition to our discussions with Cruise Timeshare Two, Inc. we have
created initial trip itinerary's, have begun preliminary discussions with other
timeshare companies for bulk sales of blocks of rooms in order to obtain quicker
cash flow from operations and we are currently searching for an appropriate ship
to purchase.
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The cruise timeshares to be sold by us will consist of the right to one
seven-day cruise for two per year for a minimum period of 10 years. Due the
ability of the cruise ship to change localities depending on the weather and the
seasons there will be no "high" or "low" season, as is found with real estate
time shares and the purchase price for the timeshare will therefore be based
upon the cabin categories which will take into account the different sizes,
location on the ship and general configurations.
We have identified three different cruise vessels, suitable for
timeshares, which we are considering for purchase. These vessels have between
137 and 285 cabins, which translates into 50 seven-day timeshares or between
6,850 and 14,250 cruise timeshares available for sale per ship. We intend to
utilize the remaining two weeks of the year for maintenance purposes. The retail
price of the cruise timeshares for a minimum period of 10 years will range
between $9,000 and $19,000. However, we anticipate offering incentive discounts
to customers who purchase units in our cruise timeshare early in amounts to be
determined at management's discretion. In addition to the initial purchase
costs, we anticipate that annual maintenance fees will average between
approximately $650 and $850 per timeshare, which fees will vary depending upon
the cruise vessel acquired and the cabin category of the timeshare purchased.
The cruise timeshares will allow for the use of each cabin by two persons
during cruises along with the full use by such persons of all public areas,
services and entertainment to be provided on the cruise vessel. If timeshare
purchasers would like to use the cabin for more than two people (some cabins
have extra berths) an extra passenger fee would be charged to cover any
additional expenses related to the extra passenger(s). Timeshare purchasers
would be able to reserve the right to use their allocated yearly time period by
providing 120 days prior notice or purchasers would have the option to
accelerate their yearly time periods allocated to future years in order to
extend the seven day cruise or to obtain use of more than one cabin, if there is
availability on the cruise vessel. In addition, by using a timeshare industry
exchange program, purchasers of cruise timeshares will have the ability to trade
a seven-day cruise for 14 days or more at many real estate timeshare property
vacations.
The travel itinerary for the cruise vessel will be changed up to twice
each year and is anticipated to be within the North American and Caribbean
waters. The itineraries of the cruise vessel will be port oriented with minimal
time spent at sea in order to allow for port visits of 10 to 20 hours and
sometimes longer. This will provide timeshare purchasers with an opportunity to
enjoy more shore activities and be able to avail themselves of any local
amenities.
Sales and Marketing
There are many similarities in the demographics of purchasers of real
estate timeshares and commercial cruises, this creates a benefit for us in being
able to market and sell cruise timeshares into both of these readily defined
markets. Accordingly, our costs for sales and marketing of the cruise timeshares
will be minimized by being able to target such clearly defined markets in order
to generate prospective purchasers of this product.
Before we are prepared to provide full timeshare services, prospective
buyers will be brought to the cruise vessel for a tour and sales presentation.
These prospective buyers will be targeted based upon existing lists of potential
real estate timeshare purchasers and/or commercial cruise customers. These
existing lists or lists of timeshare and cruise purchasers and customers which
we have from (a) our own present lists that have been acquired while selling
real estate and cruise timeshares, (b) from cooperating and participating
timeshare sales organizations that have acquired list in the same manner, (c)
from timeshare exchange companies, (d) from retail and other travel entities
participating in cruise timeshare sales, (e) from list companies that sell us
specific lists, such as lists of consumers that own a timeshare and have taken a
cruise, (f) from lead generating programs such as trade shows and other
advertising and promotions, and (g) otherwise as opportunities arise. Our
present marketing capabilities, which include the experience of Cruise Timeshare
Two, Inc. from the prior sale of cruise timeshares, we believe are sufficient to
produce prospective buyers and as soon as the cruise vessel has been obtained
and is ready for use the vessel will be moved to an appropriate port in the
United States for use as a sales tool.
Once full service operations begin the cruise vessel will be utilized to
provide commercial cruises whereby cruise customers will be afforded with an
opportunity to purchase a cruise timeshare. In addition, customers of other
cruise ships and vacationing visitors at the cruise vessel's ports of call will
be given tours of the cruise vessel and will be provided with an opportunity to
purchase a cruise timeshare. Advertising and promotions will be targeted towards
special interest medias utilized by those in the vacation industry, including
direct mailings, our website and organized sales seminars.
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Competition
We believe that there is currently only one direct competitor in the
cruise timeshare industry and the principals of such competing timeshare have
agreed to market and sell the timeshares to be offered by us. However, real
estate timeshares, commercial cruises and vacation exchange companies will all
compete with our ability to sell cruise timeshares.
Vacation exchange companies, like Resorts Condominium International and
Interval International, place points on their real estate timeshares. They then
allow customers who are eligible to trade these points on some commercial
cruises so that customers can expand their vacation choices. Commercial cruises
traditionally have a higher markup for amenities than real estate timeshare
properties. By contrast, amenities and services wil be provided to our cruise
timeshare customers on a cost basis. Our customers will pay directly for these
services in the form of yearly dues so there is no incentive to make additional
profits on these services. We anticipate that our cruise timeshares will be
associated with a vacation club which will permit cruise timeshare purchasers to
exchange their cruise for use of a real estate time shares and we expect to join
a vacation club that will allow our customers to trade their cruise timeshare
weeks for use of real estate timeshare properties that participate in the same
programs. While we will not be administering any of these exchange programs or
obtain any revenues from such programs, the access of our cruise timeshare
customers to these programs adds value to cruise timeshares units we will be
offering for sale.
In addition, our crew and management services compete both with existing
and established service providers. Many of these companies have longer operating
histories, larger customer bases and significantly greater financial, marketing
and other resources than we do and may have the ability to better attract and
retain the same customers that we target. Once service providers have
established these business relationships, it could be extremely difficult to
convince them to utilize our crew and management services or replace or limit
their existing business practices. We cannot be certain that we will be able to
compete successfully against current and future competitors, and competitive
pressures faced by us could materially adversely affect our business.
Government Regulation
Federal Regulation
We do not believe that we are currently subject to federal regulation in
connection with our current operations; however, to the extent that we operate
vessels in United States territorial waters our vessels will be subject to
regulation by the United States Coast Guard. Our cruise timeshare vessel would
be subject to United States Coast Guard regulations if it enters U.S. waters and
ports. These regulations primarily relate to passenger safety. Sophlex has
extensive experience and expertise in adhering to these regulations.
State Regulation
Although real estate timeshares sales personnel must normally have a real
estate license, since a cruise timeshare does not involve real estate, it is
considered a sale of personal property, for which sales personnel are not
required to be licensed. However, we anticipate that we will generally attempt
to comply with state real estate offering requirements, although the materials
will not be reviewed by the states by complying with real estate timeshare
regulations when no State registration requirements or applicable statutes
exist. This will require us to provide a "generic" disclosure statement
(offering circular) modeled after formats used in Florida, where registration is
required. Key consumer protection issues will be adhered to the extent not
prevented because the product is a cruise ship, although not a requirement, such
as providing a "waiting period" during which time a buyer can cancel a purchase.
In addition, prior to the sale of a real estate timeshare, sellers
normally must file a registration containing a public offering statement in each
state in which it desires to sell timeshares. However, in most states this
obligation does not currently extend to the sales of cruise timeshares, since
they are considered sales of personal property. While other states are
considering the enactment of legislation governing the sale of cruise
timeshares, the only state currently requiring registrations for the sale of
cruise timeshares is Florida. While we have no obligation to, and will not, file
such a registration Cruise Timeshare Two, Inc., who will be selling the cruise
timeshare units has completed documentation necessary for a full registration of
a public offering statement in Florida, and even though not required elsewhere,
they do and will continue to provide buyers at every location with documentation
similar to that required by Florida.
