Thursday, March 31, 2016

Timeshare Secondary Marketing Musings

Please take the time to read this lengthy, but important Guest Blog that raises some important questions about the secondary market in timeshare.

Consider this scenario...

Not long ago, I was stopped at a red light in my four year old, four-door sedan, when a sporty convertible pulled up alongside me, and stopped for the light. Envious, I imagined myself at the wheel of the convertible, and as I pulled away on the green, I began to plot. "As an empty nester,” I rationalized, "there's no reason I can't have a new convertible. My wife has an SUV, why do I need four doors?"

I promptly drove over to the dealership where I had bought my sedan four years ago, and got a decent trade-in offer towards a new convertible.

Not completely satisfied with the price offer, I stopped at another dealer who bought cars outright without a trade-in and learned about the Kelley Blue Book, which has been publishing the value of all vehicles since 1926. Utilizing my new expertise, I advertised my sedan online and in the local paper, and sold it to a private buyer for an even better price than I had been quoted at the dealership.
While driving off in my sporty new convertible I began to think about my fully paid for three-bedroom "lockout" timeshare interest my wife and I had owned for years. Now that just the two of us vacationed together, I thought that we could downsize into a one-bedroom unit, which would save some money on maintenance fees, and, using the trade-in value of the timeshare, maybe even allow me to make some money.

What a shock I received at the resort. Not only couldn't I do a like for like trade of my three-bedroom lockout for a smaller unit, they said I would be lucky to get a $5,000 trade in allowance on a $23,000 one bedroom unit. When I told them to just cash me out of the existing timeshare, they told me they didn't take units back. When I asked them how I could walk away from my unit, they referred me to an outside non-affiliated "reseller" who wanted an upfront fee to help me sell my unit.
When I did my due diligence and checked this company out, I learned it was not even owned or operated by licensed real estate brokers, but former timeshare salesmen. Thinking that my timeshare was deeded real estate, I then searched for a licensed real estate broker who handled timeshares and who would only charge me a commission upon the sale of the timeshare (as in all real estate transactions). I quickly learned that no "MLS" (centralized listing program) exists for timeshares, as exists with homes, and also discovered that only a handful of licensed real estate brokers in the entire country deal in timeshares. I finally located one who was out of state who told me he'd try to sell my unit - but after his commission, I'd be lucky to break even!

How, I asked myself, did I have no problem getting about 55% of the purchase price of my four year old car back, but can't get anything for a three-bedroom, paid-off timeshare that had been recently remodeled?

So what’s the difference between a used car and a used timeshare? Value. 

Although my illustration is fictional, the facts presented herein are accurate. The purpose of this illustration is to analyze how a continuously maintained large timeshare unit in a nice resort did not retain its "value" when a four year old sedan with over 50,000 miles on it could be easily resold in the secondary vehicle market with a recovery of over half of its original cost. Although the car and the timeshare are not comparable in all respects, there are some valid points of comparison;
  • The two products cost about the same
  • They are both consumer "discretionary income" products (the vehicle being less so, as “basic transportation” may be considered a little more of a necessity)
One would, all things being equal, anticipate a moderate to healthy aftermarket value for each. Why then the cavernous disparity in value between the two? There are relatively healthy secondary markets for many consumer products and next to none for timeshares.

The principal reason that I've been able to discover that accounts for this major disparity, is the difference in behavior of the product manufacturers and original distributors as compared to the conduct of many, if not most, timeshare developers. To go back to our vehicle comparison, nearly every new car dealership you'll encounter has, immediately adjacent to its new car showroom and lot, a used car facility of comparable quality and presentation. Independent used car-only dealerships have close relationships with vehicle auction houses as well as other used car lots. Comparable side channel relationships also exist in the boat and camper industries.

Compare that if you will, to the timeshare industry's tightfisted control of their markets, where no viable secondary market is permitted to exist, let alone thrive or prosper, and you begin to understand the complexity of the issue.

How anti-resale is the timeshare industry?

To obtain the facts to support this argument, I had only to go directly to the source, the presented statements of the timeshare developers themselves.

Specifically, each and every one of the timeshare developers who file documents with the Securities and Exchange Commission to support their public filing requirements have included language in each of their filings that specifically addresses the secondary resale market as a threat to their bottom line. I'm not in any manner exaggerating or embellishing the characterization of these statements. To borrow a direct quote from Bluegreen’s SEC filing, "The resale market for VOIs [vacation ownership interest] could adversely affect our business" is the title line to a paragraph within their filing.

Similar incendiary, anti-secondary market language is found throughout the filings for Marriott, Wyndham, Starwood, and Diamond. (We can supply the relevant SEC web pages upon request). It is amply clear that these named developers, in their own words and in their own public filings, all express open antagonism to the very existence of a secondary timeshare resale market!
In summary, these developer resort SEC filings conclusively establish that even simply stepping out of the resale channel and permitting other market forces to come in to help stabilize the resale timeshare marketplace without interference from the developers is not an option to be considered, clearly because of the perceived threat to their bottom line.

What are the long term effect of this stifled resale market?

Is the resort development industry’s reasoning justified? After all, if a reseller is selling the identical product at a price that is considerably below what the developer is charging, that actually isn't good for the developer's bottom line, correct?

If at first blush the position seems justifiable, it is nothing if not terribly short sighted.
Starving the resale market may initially be good for the bottom line but at what long term cost? For example, what about the developer’s loyal timeshare buyer's longer term economic health? At some point, that loyal owner is going to be facing an issue probably not even contemplated during the initial timeshare acquisition process. That buyer will, over some period of time, some sooner than others, get laid off or lose their job, get divorced or otherwise lose their spouse, become sickly or disabled, or die. What happens next in the absence of a structured secondary resale market?
What if that triggering event happens sooner rather than later and there is still a significant mortgage balance due to the developer? What if, balance or not, the developer refuses to take back the interest, leaving ongoing and rising maintenance fees running? Legally that owner remains personally liable for those fees, despite the fact that they purchased the timeshare at full retail cost and supported the resort as long as they could afford to. What position does the resort take when confronted with that issue?

How about the fact that the resort personnel often will then recommend the services of a so called “resale company” who will, more often than not, require an upfront fee to "list" the interest on a website where no one can accurately determine who will see it?

Do we now add to our list of developer sins a complete absence of appropriate social (if not legal) responsibility to our accusation of shortsightedness? Whether or not the industry will admit even just standing by passively and knowingly allowing its commissioned salesmen to infuse value into the purchase, there can be no denying that the assumption purchasers instinctively make at time of purchase is that being a real estate based product, their interest will, over time, tend to hold its value, if not outright increase!

Timeshare industry, your position is not only short sighted and socially irresponsible, it's not sustainable! Those of us who occupy the timeshare sector of the economy alongside of the developers are keenly aware that the industry itself, through ARDA, its trade organization, knows that the industry must make consumer friendly changes to its marketing practices to ensure its long term survival, but somehow this tiny shrill voice gets swept aside and lost as industry profits and sales continue to rise. “Hey, nothing's broken, so what’s the hurry trying to fix this?”

A strong resale market will strengthen the industry

I would argue that there is no better time than now to make the important and essential changes that might, in the short term, slow down profitability, but in the long term, turn the timeshare industry into a more socially responsible and far more sustainable industry for decades to come.
Instead of shunning the secondary market, embrace it; invest some of your profits into stabilizing the resale market. Take the lesson the auto, boat and camper industries learned long ago, that a healthy resale market is essential to the entire industry, that from beginning to end there must be a continuous flow, a circle of economic life, if you will.

If you can't set up a used timeshare lot across the street from your project, at least sponsor knowledgeable licensed real estate brokers well offsite so as not to compete directly with your retail operations. Sure, you'll lose some initial business to these brokers, but by indirectly supporting them, you'll make timeshare interests affordable to the folks who really can't afford to buy retail, but can perhaps afford to repurchase the interest of your newly divorced initial purchaser (something that you arguably owed the poor guy anyway). More importantly perhaps, you will be able to support the continuing financial health of the resort via the annual maintenance payments now to be made by the new owner, and ever crucial to the future of the resort you built and developed.

Timeshare developers should take a hard look at themselves and their industry. Take pride, not just profit, from making family vacations an affordable part of the American lifestyle by opening up that opportunity to even more folks.
- Michael D. Finn, Esq.

As always, your comments are appreciated.

Thursday, March 24, 2016

Be a Porsche, Not a Kia

If you buy a timeshare from the developer, or have bought one in the past 10 years, chances are you will NOT save money on future least not for 20 years.

There, I said it.

Combine a purchase price of $20,000 finance charges upwards of $15%, with annual fees of nearly $900, annual exchange/usage fees of $300 and you're NOT saving money over the average hotel room rate of $125.

And yet, consumers are hammered day after day with delusions of jetting off to some exotic locale using their timeshare and saving money on top of it.  Most people who are lured into a timeshare sales pitch are not going to Fiji or Australia or even Hawaii anytime soon.  Its quite simple to get a decent hotel room for a week in Orlando or Branson or other locations for less than $1,200.  And that doesn't take into account the purchase price.

I believe that's a good portion of the reason why so many people, owners and non-owners alike, disparage timeshare.  it doesn't fulfill the promise of saving money that was drilled into their heads at time of purchase.

There is a remarkably simple way to stop this. 

Stop marketing the product to people who make less than $60,000 a year and stop with the money saving routine.

I don't think Porsche sells many cars to people who make less than $60,000 a year and they don't compare the cost of buying and owning a Porsche to that of a Kia.

Be a Porsche, not a Kia.

One more thing...the Porsche shouldn't come with two free attraction tickets.  It cheapens the pitch,

Friday, March 18, 2016

Every Friday

Every Friday I receive a Google alert with the timeshare related news that happened during the week.

Every Friday I hope that there's some good news about timeshare.

Every Friday I'm disappointed.

Every Friday I post the most topical and interesting stories on Facebook.

This Friday I'm putting the links in this post...I just can't deal with so many negative Facebook posts in one day.

And the biggest news story of the week:


My Final Thoughts on the Celebration World Resort/Festiva Matter

4 years ago, I published a Guest Post on this blog from someone who was an owner at the resort formerly known as Celebration Word Resort in Kissimmee, Florida which had been taken over by Festiva.

The owner noticed certain "discrepancies", i.e. while his annual allotment of RCI points had been over 200,000, he suddenly found himself with only 30,0000.  More owners found the blog and wrote in.  Still more owners.  All with similar issues.

A Class Action lawsuit was eventually filed.  And dragged on.  And dragged on.  In the midst of this, nasty personal attacks were made against myself, claiming that I was feeding information to Festiva, which I wasn't.  More nasty allegations were made against the law firm handling the Class Action suit, riling up consumers to the point where some of them didn't believe the firm actually existed.  It does.

I understand consumer frustration.  I do not however, understand consumers lashing out at the very people that are there to help, namely me and the law firm.  And let me be direct here...I am not employed by the law firm.  I have never been employed by the law firm.  And I have never asked for, nor received a penny for my work on this matter...four years worth of e-mails, blogs and investigation.

Anyway, a settlement has been reached and affected owners have been contacted as to what their options are.

I am not an attorney.  I can not and will not give advice to anyone regarding the "best" option for them to take.  I can not attend the upcoming annual meeting of the resort in anyone's stead, as it would cause a lot of unnecessary distraction.

Although this situation is incredibly sad and an example of some horrendously bad practices in timeshare, I remain optimistic that this is the exception rather than the rule.

There are important lessons to be learned by everyone involved and affected.  And although no jail time or fines resulted, I remain confident that cosmic karma will pay a visit to those people who acted out of greed and disrespect.

Wednesday, March 9, 2016

New Scam Alert

Through my work with the National Timeshare Owners Association, I've been made aware of a resale scam using the name of TATOC.  TATOC is recognized as the authoritative voice of timeshare owners in the United Kingdom and partners with the TATOC Consumer Helpline and is not involved in the sale, rental or transfer of any timeshare and does not ever ask for money from timeshare owners.
Additionally, the resale scam in question used the name of Resort Equity Marketing in Altamonte Springs, Florida and involved the wiring of several thousand dollars to a third party under the promise that those funds would be recouped by the “sale” of the timeshare.
The entire process looked to be legitimate, including the use of a Report of International Transportation of Currency or Monetary Instruments form from the US Government and a Cross Boarder Currency or Monetary Instruments Report from the Canadian Government.
Would you pay someone up front to sell your car?

Friday, March 4, 2016

Important Notice Regarding CWR/Festiva/RCI Class Action Lawsuit

This is the latest information that I have:

The class notice was mailed on February 29th and affected owners should all receive something in the mail shortly.

Everything You Need to Know About Timeshare Sales Presentations

1)  They're sales presentations with the sole purpose of selling you a (or more) timeshare.

2)  Doesn't matter what they're called, i.e. "Owners Updates", "Vacation Survey", "Informative Resort Overview", etc....they're sales presentations.  Refer to #1.

3)  Unless you accepted the "gift" in terms of a discounted stay, cash, tickets or anything else, you are not required to attend whatever they're calling it.  If you do accept the stuff, then don't act surprised or get belligerent when you find out that the salesperson is asking you to buy something,  Refer to #1.

4)  There's no excuse for you if you haven't done a modicum of research into the timeshare before attending a sales presentation.  Google is your friend.

5)  If it sounds to good to be true it is.

6)  Stay away from the words "free", "perfect", "always" and "never."  Free and perfect don't exist and always and never are exceedingly long periods of time.

7)  If you do buy something at a sales presentation, understand your rescission rights.  And don't cry if you didn't read the paperwork until 30 days afterwards.

8)  Lastly and most importantly...if 4 months after you purchase, you get around to figuring out that you  a)  can't afford the monthly payments, b)  can't afford the annual fees, c)  have no idea how to make reservations and/or d)  come to the realization that despite what the salesperson said owning a timeshare might NOT be cheaper than renting a hotel don't go crying to blogs, forums, etc. screaming SCAM.  Make no mistake, there are scams out there.  And blogs, forums, law enforcement, etc. will all listen and help when possible.  Don't confuse scam with you not doing your due diligence.