NEW YORK -- Carnival Corp. signed a letter of intent to acquire
Fairfield Communities Inc., an Orlando time-share operator with 28
resorts in North
America and six under development, with plans to extend the
Carnival brand to Fairfield's land-based vacation properties.
Fairfield offers its time-share owners a variety of resort-based
vacations, including Carnival cruises and other cruise lines,
through a system where customers accumulate points through
time-share vacation stays. Those points can be redeemed for future
vacations.
Fairfield is the largest purchaser of Carnival cruises among
"vacation ownership" companies, said company officials, and cruises
represent the fastest-growing points-exchange request in
Fairfield's system.
According to Fairfield, 72% of its customers have expressed
interest in cruising and 52% have already cruised. Micky Arison,
Carnival's chairman, said the acquisition would give the
Miami-based giant access to more than 278,000 households and
640,000 potential cruisers. "The wide-ranging opportunities
presented by this transaction should allow us to capitalize on the
tremendous brand, marketing and sales channels that exist between
the two companies," he said.
Arison added, "We spend a fortune on marketing past passengers.
[Fairfield's] customers come back to them every single year for
their vacations and that's a huge plus for us."
Howard Frank, Carnival's vice chairman, said Fairfield's direct
cruise business with Carnival was expected to double this year even
before [the acquisition] announcement, but still represents only a
small fraction of Carnival's overall sales.
While Carnival's business with Fairfield and other time-share
companies is "another form of distribution," according to Frank, he
said travel agents should not view time-share distribution as a
threat.
Cruise retailers "are not even going to feel it," he said.
Jim Berk, Fairfield's president and chief executive officer,
said Fairfield owners have a high discretionary income and average
31 vacation days each year. He added that the deal would allow
Fairfield to align its operations with a recognized vacation
brand.
Frank likened the deal to similar arrangements between
time-share companies and recognized land-based resort brands like
Marriott, Ritz-Carlton and Hyatt.
"We see the need to take the brands we've developed and leverage
them into other areas of the vacation business," said Frank. "Major
hotel companies are owning time-shares. Like us, they also view it
as a logical extension of their brands that creates customer for
life."
Frank said the parties also will explore strategies for
cross-marketing Carnival products to Fairfield owners and extending
Carnival's brand to some of Fairfield's land-based properties.
Berk said Fairfield is one of the strongest companies in the
time-share industry but has lacked brand identity. "The vacation
ownership companies that will enjoy the greatest success in the
future will do so as part of a large, well-branded company as we
are now seeing with Marriott, Four Seasons and Disney," he
said.
The proposed transaction is an all-stock deal, with Fairfield
shareholders receiving 0.3164 share of Carnival stock for each
share of Fairfield stock. The total deal is valued at $775 million,
and under terms of the agreement Fairfield would become a wholly
owned subsidiary of Carnival.
The deal is subject to due diligence and regulatory approvals
and is expected to be completed by June, according to Carnival
officials.