A 9 Hour Cautionary Tale

Last week, I had dinner with a couple that bought a timeshare from me 22 (!) years ago. I’ve written about the fact that they’re very happy with it and with me, who sold them a great product that they understand and use. 

The resort was recently acquired by Capital Resorts. And although it wasn’t required, the resort staff persuaded this couple to attend an update where they’d learn all about Capital. Of course, it’s not an update, it’s a sales pitch. These people purchased something to the tune of $14,000 whereby they gave up what they owned and converted it into Capital points. It’s important to note here that the process took over 5 hours. Keep that in mind. 

They told me this over dinner and confessed that they had some questions and misgivings. I volunteered to go to the resort with them in a few days and ask some questions of my own. I volunteered for two reasons; first to make certain that these people were doing what was best for them and second because unlike some people with a grandiose view of themselves, I don’t proclaim to know everything about timeshare. I figured I’d learn something about Capital. 

So they have an appointment with the sales manager for between 12:00 noon and 1:00. I show up at the resort at noon and I’m told that the manager has moved the meeting to 1:30. Already a bad sign. 1:30 comes and goes. He’s still not available. At this point, the couple have been discussing their misgivings and confusion for several days and have determined that they should cancel. I should add at this point that this was their decision. I was merely asking questions and the more questions I asked, the more it became apparent that things just weren’t making sense.  

The husband gets up at this point and tells someone that they want to cancel the purchase. Miracle of miracles, the sales manager becomes available to talk. He proceeds to the computer set up in the middle of a noisy sales center to try to show my friends how they’d be guaranteed accommodations at many resorts if they make their reservations 4 months out. Luckily, my friends know that the only way timeshare reservations are guaranteed is if you own a fixed week, fixed unit. 

Things still aren’t making much sense to my friends and the sales manager can’t pull up anything in Hawaii to demonstrate the guarantee he’s talking about. It gets worse. He a) admits that he’s not working on an actual reservation site, but a “test” one and b) complains about the poor wi-fi saying that Capital is going to put $40 million into upgrades at the resort. Again, thankfully my friends understood that a large part of that $40 million would come from increased maintenance fees. Frankly, anyone with a brain would read in between the lines of that statement. 

It’s now 2:45. Sensing he’s not making any headway here, the manager asks my friends, who just gave him a credit card for $14,000 several days ago, for their email address, promising them he’d email them screen shots of Hawaii availability the next day. Screen shots!  My friends casually mention to him that he promised them his personal cell phone number so that he could help them with everything. Incredulously, he still doesn’t provide it, instead saying it will be in the promised email. 

I ask some questions and am given some fishy at best answers. The most basic question I asked was to see the comparison/conversion chart between the RCI point structure and the Capital Resorts point structure. He throws out a number, to the best of my recollection it was 10,000 RCI Points translated to 47,500 Capital points, but that no chart existed. Really?  So are the numbers simply pulled out of thin air?  

It’s now 3:20. We’ve been there for 3 hours and 20 minutes and have more questions than before. I need to sit down, so the 3 of us walk to the lobby. Soon, we’re talking with someone from the contracts department who gives us completely different numbers for the RCI/Capital conversion. He also mentions that it’s possible to merely convert the current ownership into Capital points without purchasing any additional points. Something that was not mentioned by the sales manager. 

So now we have a myriad of options but still no clear answers. The contracts person tells us we’re free to come back anytime in the next few days after 4:00 pm to sign paperwork. 

It’s now 4:00. We’ve been there for 4 hours. Add that to the 5 hours my friends were there purchasing the conversion and we’re at a mind numbing 9 hours!

9 hours!  9 hours with no clear understanding and no verifiable information. 

No timeshare sales pitch should go on for 9 hours. 

There are several lessons to be learned here:

1. A timeshare sales pitch is no place to get educated about anything. 
2. Consumers might want to consider holding off on converting anything for a year. This acquisition of the resort by Capital was only a few weeks old and it was obvious that not everything was going as smoothly as it should. 
3. Resort personnel should be on the same page. Consumers should not be given different information and different options by different people. 
4. If you don’t understand what they’re pitching after 2 hours, 7 more hours isn’t going to make it better. 
5. I’m not volunteering to go to any more informational meetings!

An Alternative To The “24 Cooling Off Period” Chatter

There’s been lots of chatter online about a survey that was conducted that showed, shocker, that consumers favored a 24 hour cooling off period when purchasing a timeshare. 

A cooling off period differs from a rescission period. In a nutshell, a rescission period gives the consumer a mandated time period to cancel/rescind the purchase and get all their money back. In the US, rescission periods vary from 3 to 10 days depending on jurisdiction. A cooling off period would entail no money being paid until 24 hours after the initial sales pitch and presumably, the consumer being given all the documents related to the sale prior to signing any of them. 

Now, let’s be serious here. I’m all for transparency. I’m also all for consumers getting some education regarding timeshares.  However, the chances of this getting a hearing in any state’s legislature, much less passing, is nil. 

So, what should be done? Buckle up…it involves two major paradigm shifts. 

Paradigm Shift Number 1

Change the sales presentation to 120 minutes over 2 days. First day is the realm of the salesperson. The usual discovery, uncovering of a vacation problem, and the presentation of the solution, I.e. whatever they’re selling. Documents, including the document that ARDA and I co-wrote last year, https://www.arda-roc.org/important-information-for-buying-timeshareare  presented and given to the consumer to review. No bribes, I mean gifts given. 

The following day, the consumer returns with the documents and asks all the questions they need in order to make a decision. The sale is either made or not. The documents are either filled in or returned. The bribes are collected. 

Paradigm Shift Number 2

The consumer comes in armed with at minimum my list of 19 Questions You Must Ask Before Purchasing A Timeshare (available for $18.99) and doesn’t make a decision until/unless they receive answers to those questions. 

I’ve heard every reason why this won’t work, but think about it…the timeshare industry has taught the consumer to believe that the current sales paradigm is normal. It isn’t of course outside of timeshareland. 

Frankly, I have more faith that one or more developers will change their current antiquated sales paradigm than I do that consumers will change their behavior. Years of telling consumers to absolutely, unequivocally not do business with any company or individual that initiates contact only to have hundreds if not thousands of them cry foul when it becomes clear that they thought they’d be the exception, only to be the victim of a scammer that you guessed it, initiated contact. 

Disney Vacation Club operates in a similar manner to what I’ve suggested here. They actively encourage consumers to not purchase right there and then. In 20 years of doing thus, I’ve heard ZERO complaints against them. 

This can be done. Who is going to step up to the plate?

Is The End Game Is Afoot?

Today we have a Guest Post from attorney Michael Finn where he discusses the lack of a secondary market and puts forth his opinion as to why…the end game has already been planned for. 

As a reminder, this is a Guest Post. I welcome respectful, intelligent discourse so let me know if you have something to share. I do not and will not tolerate abusive or insulting language, advertising or solicitations. 

Nearly Nonexistent Timeshare Secondary Market

From an overall healthy economic market standpoint, the importance of a robust secondary resale market simply cannot be overstated. Arguably it’s a keyeconomic foundation upon which the overall marketstructure that nearly all durable consumer-basedproducts are built upon.

Examples of durable consumer-based products are everywhere, including the all important housing market, but perhaps the best example of a new product and used product standing together in the marketplace, and often in the same physical location, is the vehicle market, cars, trucks, and recreational vehicles including boats and motorcycles with some products on display practically side by side. 

In all of these markets, its clear that these higher cost durable products are designed and built to accommodate successive owners over time. Typically, the original owners will trade in, trade up, or re-sellthese longer-lived products, utilizing the residual resale value to partially fund their next purchase.

For the most part, secondary markets are easy to access, with perhaps the best example being the used car lot often immediately adjoining the new car lot. Some durable goods such as recreation vehicles are known to have a relatively steep depreciation curve, while others like residential homes can, and often do actually appreciate in value. In every instance andtaking all durable consumer goods into consideration (with our one notable exception) every durable consumer good referenced can, when the initial purchaser is ready to move on, be resold for some residual amount via their existing secondary market. Again, not only are these secondary markets typicallyquite easy to locate, but additionally most durable products residual value can be easily determined with minimal market research, so there are rarely many surprises when it becomes that time to sell.

Shifting gears now to our elephant in the room, the clear question becomes, exactly how and why did timeshare interest resales become the major and glaring exception to the nearly universal economic secondary market rule? There are a couple reasons for this anomaly, but first, be aware that there is a small secondary market for some timeshares, and further notethat there are a small number of existing licensed real estate brokers who do involve themselves in the re-sale of timeshares, mostly those located in extremely desirable vacation areas such as Hawaii or otherdesirable tropical paradise with limited resort availability, or perhaps within the immediate area of a ski resort. However, these exceptions exclude by far most timeshare interests. 

Additionally, the resale values of even these narrow exceptions are a small fraction of the retail prices being obtained by the timeshare developers who can exert nearly total market control and thereby dominance over their entire resort complexes and their amenities.

As to the ‘why’, the answer is purely a question of economics. A resale market creates sales competition for the developer with asking prices far lower than what the developer wants to sell its interests for. Since there is no distinction between a timeshare interestoffered by the developer or its current owner, as every unit is maintained uniformly throughout the resort, the only thing that differentiates between a developer’s unit and an owner’s, is the asking price! Since the non-developer re-sale market is economically depressed, the owner’s asking price is but a small fraction of the developers asking price. An owner may be hoping forless than $2,500 for their interest, but for the same unit the developer will command $25,000! Clearly, it is in the developer’s economic short term best interest to suppress any owner-based aftermarket! The developer can further exert control by restricting the resort amenities that the existing owner can transfer to a new owner upon the sale of their unit, and/or by the developer requiring a ‘right of first refusal’ before an outside sale is permitted to occur. Since the developer retains control over the actual physical resort entity, it can exert significant overall control, as each interestmust exist and function within the overall resort setting!

Although the developer initially benefits economically by actively suppressing the owner’s ability to transfer their ownership, arguably this is a short-sightedapproach to the entire marketability and economic sustainability of the timeshare market.

Perhaps however, the developers are willing to sacrifice the long-term sustainability of a healthy vacation product marketplace for their excessive short-term profits, and the knowledge that ultimately when the owners are squeezed out of their interests, the developer will simply inherit the ownership of the entire resort, which can then be offered to the public as vacation rental units like any comparable hotel based chain resort. Once the existing timeshare owners are forced out, the resort can shed its timeshare skin, and live again as a profitable addition to a resort hotel chain. A rebirth perhaps in the making without the costs of financing a new business model.

 

Respectfully submitted,

 

Michael D. Finn, Esq,

 

michaeldfinn@ finnlawgroup.com