This article first appeared in Digital Edge, The Edge Malaysia Weekly on February 27, 2023 - March 5, 2023

Before Bernard Lau became a realtor and hotelier, he often travelled abroad for work, sometimes for stretches at a time. On occasions when those trips extended over a month, he always found himself wishing there were affordable and flexible timeshare options that could serve as a base from which to head out, instead of switching hotels from stop to stop. 

In 2019, an idea that could potentially disrupt timeshares — one of the hospitality industry’s most outmoded products — by leveraging blockchain and Web3 was raised during the planning stage of the first luxury hotel project by Lau and his partners, the Kunang Kunang Tent Resort on the easternmost tip of Java in Indonesia. Lau was ecstatic.

A timeshare is a form of fractional ownership of vacation property that has existed since the 1960s, in which multiple purchasers have exclusive use of such property for a period of time. It can be applied to many types of properties and even exclusive modes of transport such as private jets and luxury yachts. 

Conventionally, a timeshare is a lifetime commitment. According to Forbes Advisor, one prepays or finances a lump sum up front plus an annual maintenance fee.

The costs vary widely, depending on one’s contract and ownership type. In the US, where timeshares are most popular, the average cost of stay for a one-week timeshare was US$22,942 in 2019, excluding annual maintenance fees and any other expenses, stated the American Resort Development Association. Hospitality groups such as Marriott, Wyndham, Holiday Inn and Disney are among the most renowned timeshare operators.

With Kunang Kunang, Lau and his team wanted to experiment allowing individuals to buy “time they need” at a specific place instead of committing to inflexible arrangements like timeshares of old, says Lau, co-founder of Hong Kong-based Gravity Property Holdings. Gravity Property is the real estate consultancy that manages Gravity Resorts, a boutique resort agency that has a presence in Indonesia, Thailand and Japan.

By the second half of 2021, Lau — together with blockchain company LABS Group — had launched the world’s first-ever community-owned project, where stays at Kunang Kunang were fractionalised into Rewarding Timeshare Non-Fungible Tokens (RTS-NFTs).

Located in a verdant forest in the mountainous region of Banyuwangi — home to some of Indonesia’s incredible volcanoes and craters — Kunang Kunang was the ideal vacation spot to begin the pilot project, says Lau, given that the luxury resort is only a 30-minute flight or a three-hour car ride out of Bali, one of the world’s most popular holiday destinations.

Instead of competing for hotel bookings, he chose to convert the glamping getaway into timeshare units but via contracts with codes written into blockchain. 

Further, with more than 200 accommodations ranging from cosy inns offering basic services to palatial all-inclusive resorts in the area to compete with, Lau knew the only thing that would set Kunang Kunang apart would be technology adoption and harnessing changing customer profiles.

LABS Group had fractionalised the entire resort into 365 RTS-NFTs, which were sold and snatched up over the course of 13 days starting July 15, 2021, while the resort was being constructed. The tokens are linked to “staying rights” at the resort. These can be swapped with other owners, or for a number of other benefits such as limousine pickup services, complimentary access to the resort’s spa and meals. So far, two buyers have claimed their tokens since the resort began operations in April 2022.

Traditionally, timeshare products were often promoted by sales associates who approached customers directly. But these are impractical due to the high marketing costs involved.

Also, hard selling tactics such as direct approaches no longer suit the current generation of travellers who comprise mostly millennials and Gen Z. These groups prefer to plan and book their own trips at their convenience, says Lau.

“Timeshare is an old industry that has not been disrupted. Many big [hospitality] brands do it because they have the capacity and portfolio [of properties],” he explains. “There are a lot of negative points to [traditional] timeshares, such as high marketing costs [sales agent fees], bad service [brokers or intermediaries] and high management fees, all of which can be negated using NFTs [and blockchain].

He continues, “Timeshare adds value to hotels, allowing them to create additional revenue from their existing rooms.”

Being able to add value distinguishes hotels grappling with low margins in a highly competitive space. It is an experience Lau knows only too well.

Before joining the hospitality industry, he ran a real estate business in Shanghai with his wife. The duo scouted properties in the city, especially historical buildings around the French Concession, to be refurbished and leased out.

In 2015, Lau was managing a portfolio of nearly 40 properties when he received a surprising call from his Indonesian friend, Meike Nazeki. Meike had inherited from his father a piece of land in Uluwatu, Bali, on which he wanted to build a hotel.

Although neither had experience in building and running a resort, they promptly began working on the project. They started with two villas overlooking Uluwatu’s cliffs, which eventually expanded to five villas by 2018 and later consolidated under Gravity Resorts.

In 2019, Lau decided to sell his real estate business in Shanghai and focus on running the suite of vacation homes — including those in Shanghai, Bangkok, Thailand and Japan, which are also parked under Gravity Resorts. His initial plans were to relocate with his family to Bali, but the Covid-19 pandemic threw a spanner in the works and he returned to Kuala Lumpur instead.

The emergence of tech disruptors such as Airbnb, Booking.com and Expedia has impacted the timeshare industry, offering a wide range of properties for short-term stays that appeals to those who may be averse to long-term ownership commitments.

Despite the home-sharing economy’s aggressive growth, timeshares continue to exist as Airbnb accommodations still mostly comprise residential houses. Many can’t compete with the full suite of services brand-name timeshare resorts offer, which include room service and facilities like gyms and pools, Lau reckons.

“Again, it’s a preference. At Airbnbs, cleaning fees are charged separately. I’ve rented a unit for US$200 and the host charged US$100 for cleaning fees,” he says.

In a white paper published by Reuters Events, Mike Flaskey, former CEO of US-based Diamond Resorts (a firm with a network of more than 379 vacation destinations in 35 countries), said sales of timeshares have grown significantly over the years, with millennial membership outpacing that of other groups with an average growth of 25% year on year in the last five years until 2020.

“This growth seems to mirror other industry trends, as millennials invest more in their vacations compared to any other demographic. It is said that 33% are now willing to spend US$5,000 or more on a vacation!” said Flaskey in the interview.

Lau believes the upswing in timeshares has to correspond with the rise of digital nomads. “[Work and travel] trends are changing with the rise of more digital nomads. By some estimates, there are 35 million digital nomads worldwide, with the number expected to hit 100 million by 2030. More people are travelling after Covid-19, with an increasing number working remotely, with the ability to work from anywhere.”

A faction of these categories of remote workers want the level of service provided in hotels without the usual exorbitant fees.

Lau shares that during a work trip to Singapore in October last year, which coincided with the 2022 Grand Prix there, he had to pay overpriced hotel rates and needed to change rooms every two nights throughout his one-week stay in the city state.

“When I speak to digital nomads such as content creators, who travel frequently, the options available to them [if they want a hassle-free stay] are either hotels or rentals. [These options] are usually signed annually as monthly leases and are very expensive. So, they are looking for something in between,” he adds.

“One of the perks of staying in a hotel is that everything is covered. You don’t have to worry about fixing light bulbs or tidying up. In Dubai, people are buying hotel rooms instead of apartments. This is a change we have observed.”

With the RTS scheme, people have the flexibility of buying time slots at hotels around the world.

“When you use it [the token], you use it based on the number of nights you bought. When you don’t [use it], you get benefits from hotel operation income,” he says.

“To say that timeshares are only for resorts and vacation retreats is erroneous. It can be used in any way when the need arises.”

But before putting his ideas into action, Lau first needed a Web3 expert. That was when he came to know Yuen Wong, chairman of LABS Group, a Hong Kong-based crowdfunding service company that specialises in real estate market investments using blockchain.

“I messaged them and offered Kunang Kunang Tent Resort as one of their pilot projects, and they agreed,” says Lau.

There are multiple use cases of blockchain available, but LABS Group proposed utilising NFTs to divide the ownership of the resort over 365 days, hence the creation of 365 NFTs that were up for grabs. Lau later joined LABS Group as its CEO.

He also lucked out in convincing Gravity Resorts’ pool of investors to take up the Kunang Kunang NFT project. “The questions [they asked] were more about the dynamics of how to redeem nights, bookings and distribution of profits.”

Seeing the keen interest in the Kunang Kunang NFTs, the NoMo SoHo Hotel in New York also debuted the usage of NFTs to reserve rooms. 

Although the launch of the RTS-NFTs sparked great interest, the experiment came with a slew of challenges and revealed many shortcomings.

“We started Kunang Kunang just as a proof of concept in 2021. But as we tested it out only on that one property, the concept wasn’t scalable. And we didn’t have a platform to actually manage the NFTs, bookings and rewards. We had to do everything manually as all we had was a crypto account to manage the NFTs,” Lau recalls.

These issues, however, presented the opportunity to develop “a vacation club” using blockchain and expand it to allow other hospitality operators to consider converting a certain portion of their rooms into timeshares.

The timeshare marketplace dubbed “Staynex” gives users the benefits of having the income stability of real estate and ability to liquidate their membership anytime.

Current holders of Kunang Kunang RTS-NFTs will board Staynex once it is launched and stand to benefit from even more perks, says Lau.

“With traditional timeshare, or any form of membership-related business such as a golf or equestrian club, when you buy a membership and want to sell it, you have to go through agents or brokers and the process takes time.

“But when a timeshare is an NFT embedded in a blockchain, everyone is immediately interconnected to each other on Web3. So, whenever you want to sell your NFT, all you have to do is list it on the marketplace and determine the price. The interested party clicks on the NFT and the transaction happens almost instantaneously, which cuts down on the intermediary fees. There is no need for agents to put out adverts and constantly check whether the timeshare is sold. This is one of the huge advantages of blockchain,” Lau points out.

What makes Staynex unique is that NFT holders will reap rewards from the timeshare units even if the units aren’t utilised.

“Traditionally, timeshares were sold for fixed weeks. If you bought week No 25, you could only check into the hotel on that week. The concept evolved over time and hotel chains like Hyatt and Marriott started introducing points that can be redeemed for stays at certain times, rather than fixed weeks,” he says.

“With Staynex, we have simplified the process where one NFT represents a one-night stay. So, anytime you want to travel, just log on to the website, click on the NFT that you bought and a calendar will pop up showing the availability of rooms. You can then make your reservation straightaway.

“The NFT holder will be in direct contact with the hotel. It’s sort of like co-sharing and co-owning the room but on our platform, it’s referred to as a ‘membership’.

“Moreover, users aren’t forced to use up their NFTs. One of the disadvantages of timeshares is the ‘use it or lose it’ issue, where you’re forced to use the property or risk losing your vacation rights for the year.”

With Staynex, timeshares are treated like real estate. 

“If you buy a house to live in, it is technically yours. But if you rent it out, you derive an income. So, if you have 30 nights reserved, you can stay in the hotel for 30 nights. But if you don’t claim it, or only use a portion, the hotel still sells the rooms and you get a share of the operation income just by holding on to the NFT.

“We came up with this idea because we wanted to have all the benefits of being able to have the income for the stability of real estate and to be able to liquidate their membership anytime,” Lau reiterates.

Rooms are not the only services that can be converted into timeshares. They can also be extended to usage of hotel facilities, which will provide operators the opportunity to maximise their ancillary revenue.

“[Hotel owners] can explore other revenue models. For example, if you have a group of digital nomads [staying in the hotel], you could probably temporarily convert part of your hotel into a co-working space, or themed rooms for avid gamers,” he says.

Once operational, Staynex will take a 10% cut for every NFT sale transacted on the platform. For every subsale transaction, the property will receive a 2% kickback as management fees. “This is the lowest fee in the timeshare market at the moment,” Lau claims.

Set to be launched around the second quarter of 2023, Staynex is being developed by Blocklime Technologies Sdn Bhd together with LABS Group.

LABS Group has also partnered with Arsenal FC as the football club’s official hotel and resort membership partner in Asia and Europe.

“Apart from access to rooms from a network of resorts and hotels around the world that will be available at discounted prices for a set period, over a number of years, select NFT holders will get exclusive tickets to watch Arsenal FC matches at the Emirates Stadium, enjoy fan meets, memorabilia and a uniquely designed Arsenal NFT,” says Lau.

Participating hotels will gain exposure through co-marketing campaigns and the club’s 100 million followers, he adds.

“For example, Anantara in Phuket will be listing three nights on Staynex, and we are going to embed it in an NFT. This NFT contains one match ticket to an Arsenal match. Currently, we have about 60 hotels on board,” says Lau.

So far, LABS Group has spent more than US$500,000 (RM2.2 million) to build the hotel marketplace ecosystem.

Hotel operators are open to the idea of listing on Staynex as tokenised timeshares will help them pay forward for “void nights”, an industry term for unoccupied hotel rooms. 

According to the Malaysian Association of Hotel Owners, the average occupancy rate of hotels across the country stood at 35% to 40% as at July last year. With the NFT membership programme offered by Staynex, the unoccupied rooms could be “paid forward” instead of remaining vacant, which is especially useful for boutique hotels, says Lau.

Although the hype surrounding NFTs is fading, those with utility provide more value to users — a trend that looks set to continue, he believes. However, as the use cases of NFTs are still in their infancy, wide-scale adoption will take some time. 

“Instead of looking for instant financial gains, it would be better to create a product that is needed and uses blockchain technology and NFTs in a way that can improve people’s lives and businesses,” he says.

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