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

Saying What You Want To Hear

Every salesperson, well every good salesperson, learns early on to tailor their pitch to each unique individual. 

While I continue to be amazed at the throngs of unsatisfied timeshare owners falling victim to an ever increasing group of shady, if not downright scammy, self-proclaimed exit companies; I have to give those outfits credit for their ability to sell. 

The vast majority of owners who are looking for a way out had no business buying a timeshare to begin with. They didn’t understand the intricacies of what they were presented with, couldn’t afford what they purchased, were caught up in the ether of the moment, or just plain didn’t understand that the contract favors the developer. Many were lied to. Again, the salesperson tailors the pitch to the customer. 

Now, after several years, the beleaguered consumer wants out. Most of the time, they’re embarrassed to admit they made a mistake. They say they don’t want to make another mistake. But here’s where the scammy exit companies make their millions. They tell the owner that the developer is evil. They put all the blame on the developer. They promise easy, quick, money back guarantee and anything else that gives the owner a sense of relief. 

The truth is that they’re in the same business as the timeshare salesperson. They’re there to put your mind at ease, tell you what you want to hear and sell you something. Anything. 

The best defense is of course a good offense. If you know what questions to ask before buying, you’re much less likely to fall prey to a well trained salesperson. 

What questions should you be asking?  I have a list of 19. It’s yours for $18.99. Your choice. $18.99 or $20,000 to get a timeshare you probably shouldn’t purchase and another $5,000 thrown out to get rid of it. 

Do Better

There’s an article that’s coming out shortly entitled “How To Create A Travel Experience That Keeps People Coming Back For More.”  It got me thinking that timeshare resorts, more often than not, create travel experiences that hinder people from coming back. Almost as if they’ve forgotten that they are in the hospitality industry. 

Here are 5 ways that timeshare resorts make things miserable for travelers:

1. Insisting that owners, exchangers and renters get their parking pass or other such necessity at the woefully misnamed ‘concierge desk’ which is manned by people whose sole purpose is to get the traveler into a sales pitch during their stay. 
2. If those tactics don’t work, routinely calling, texting, emailing and even knocking on the door to harangue the traveler into attending the sales pitch.  
3. Bad mouthing or in some cases actively insulting consumers who choose to not purchase or purchase more at the conclusion of the sales pitch. 
4. Not being respectful of the travelers’ time during the sales pitch. Even though the minimum required time is in writing, a 90 or 120 minute sales pitch oftentimes turns into a half day of high pressure. 
5. Not allowing the traveler to think about making the purchase, instead insisting that the decision be made now. There’s only one major developer that doesn’t have this insulting and frankly, crazy requirement. 

So, developers-If any of this sounds familiar, change it now. You have a tremendous opportunity to not only do better, but to set yourself apart from other developers who routinely forget they’re in the hospitality industry. 

Do better. 

Another Warning For Timeshare Owners

I certainly hope some of you frustrated timeshare owners are taking the time to read this. 

It’s come to my attention that there’s a Facebook group that’s ostensibly about so-called timeshare cancellation. From what I can ascertain, it’s run by, no surprise, a self-proclaimed timeshare exit company.  They’re not using their name however, but individuals are answering inquiries asking owners to DM/PM them.

While this is troubling enough…if you’re going to run one of these pages, at least have the faith in your company to use the company name, there’s something that’s even more worrisome.

It’s timeshare owners themselves.  The sheer number of people chiming in claiming to have ‘the answer’ is troubling, but nothing in comparison to the misinformation being amplified. 

I can not stress this enough…before you entrust the very serious and very complicated matter of exiting your timeshare, PLEASE do your due diligence.  At the very least, contact your developer but NOT the sales department.  Talk to Owner Services or whatever that department is called at your resort.  Even if they don’t offer a reasonable exit strategy, and most of them don’t, they’ll be able to answer a question.  Check online reviews. E-mail me if you want with a quick question.

If you need a reminder as to why you shouldn’t blindly trust an unknown person with such a serious matter…chances are that’s EXACTLY how you got into your timeshare mess to begin with.

Stay safe.  Stay informed.  And stay tuned…big news for you and The Timeshare Crusader will be announced soon!  

2021 Recap

 I’d like to say that things greatly improved in timeshareland this year. But they didn’t. Again. 

So, here’s my list of the Top 5 Timeshare Related Stories of 2021:

1. Exit Companies 
2. Mergers and Acquisitions 
3. Same Old Sales Practices 
4. Still A Dearth of Exit Options 
5. A Giant First Step 

Exit Companies 

Exit companies are not going anywhere. Despite the AGs of several states filing lawsuits against any number of these scam outfits, consumers throw them millions each year. Timeshare Exit Team and Timeshare Termination Team were two of the biggest names. The former pulled their advertising from Dave Ramsey and incurred the wrath of the Washington’s AG. The latter abruptly shut their doors in July leaving thousands of owners up the creek. No doubt 2022 will bring more actions against these two outfits. Despite the media coverage that I and media outlets give these stories, serving as a strong warning against paying these firms a dime, they continue to proliferate. 

Mergers and Acquisitions 

The biggest acquisition news of the year was Hilton Grand Vacations’ of Diamond Resorts. Full details have not been worked out, much less released despite the unscrupulous timeshare sales staff pitching everything under the sun in an attempt to scare and up sell existing owners. Welk Resorts was acquired by Marriott, marking the end of a well known and fairly successful independent developer. I predict more M&A activity in 2022. This is not good news for consumers as it means fewer choices and less chance of a timeshare developer to really break out and do something wonderful. 

Same Old Sales Practices 

Day in and day out, I receive emails and read posts on social media sites about 4 hour sales pitches, credit checks being run without consent and timeshares being pitched as investments. Add to that the fact that owners can’t access their information online until significantly after their rescission period has ended, thereby creating tens, even hundreds of thousands of owners dealing with the harsh reality that the truth isn’t quite what the salesperson said. I’ve said it before and I’ll say it again…since there’s nothing overtly illegal about these disgusting tactics, educating consumers and stopping them from attending these pitches is the only way to stop them. 

Still A Dearth Of Exit Options

The industry could, if it wanted to, put an end of the entire exit industry. Instead, only a handful of developers offer beleaguered owners a way out. The entire secondary market continues to be suppressed by the developers. It continues to baffle me why any self respecting developer would allow their product that was sold for $20,000 yesterday to be ‘worth’ less than $2,000 today. Or why every single developer doesn’t offer an exit strategy that isn’t an insult. 

A Giant First Step

I conclude this year end post with an item that may be a little egotistical, but one that’s important nevertheless. ARDA, the trade association for the timeshare industry took a monumental positive step earlier this year by partnering with me to create this document https://www.arda-roc.org/important-information-for-buying-timeshare  As far as I know, it’s the first time they’ve ever worked with someone outside their enclave and the first time they’ve ever addressed the oral representation clause that relegates all but the most egregious consumer claims directly to the garbage. There’s a melancholy coda to this story…since that important document was released, ARDA has not taken the opportunity to continue this relationship by working with me on any number of issues despite the fact I’ve suggested a number of consumer facing projects. I continue hold out hope. 

Lastly, there will be some exciting news to announce within a few days. Stay tuned. 

The Case Of The Mysterious $1,000 Bribe

Last week, a Diamond Resorts owner reported that she was offered $1,000 off of her annual maintenance fees if she and her husband attended a 60 minute update regarding Hilton’s recent acquisition of Diamond. 

You know where this is going, don’t you?

Let’s start with the fact that timeshare salespeople know about as much as I do about the details of the Hilton/Diamond deal. Meaning nothing. Nothing has been publicly announced. Timeshare salespeople have absolutely no inside information. 

Now let’s ask if this owner got this offer of $1,000 off their annual maintenance fees in writing. I know you’ll be as stunned as I am to find out that nothing was in writing. By stunned I mean of course about as stunned to find out that the sun rose this morning. 

At the end of the update, which of course was nothing more than a sales pitch revolving around the ‘fact’ that these owners would be at a lower level once Hilton fully took over-which could be alleviated by buying thousands of dollars worth of more points today-no one including the Quality Control person and the VIP Lounge person had any idea about this $1,000 offer. I don’t know about you, but I can’t stop laughing/crying at the titles of those people. Quality Control?  VIP Lounge?  Just another example of how nefarious companies use these titles to give off the air of importance to their customers when in reality, there’s no quality control and no one is a VIP. 

Let me say that the person who offered this offer that doesn’t exist should be fired. Immediately. 

But again, some of the burden falls on the consumer. This person is an owner and already has experience with this timeshare developer promising things that never materialize. And yet, they took the hefty and quite unrealistic bribe without demanding it in writing. 

While the owner in question refused to purchase additional points, they should never have attended the pitch at all. 

The problem of course, as with so many timeshare related issues, is that no actual laws are being broken to my knowledge. Lies are being told, but the only recourse seems to be shining a light on them. Which is exactly the point of this post. 

A Broken Paradigm…But Which One?

Over the weekend, I read the regular litany of complaints about high pressure timeshare sales tactics. 

Yawn. 

Don’t get me wrong…the high pressure, the misinformation, the nonsense of the ‘today only price’, the running of credit without prior approval…I’ve heard every single one of them. And it needs to stop. 

But does it really need to stop?  It’s obviously working for the developers or else they’d stop it. For all the bitching and complaining by consumers, reporters and consumer advocates; it’s still working. 

For every consumer that stands up at the end of the mandated 120 minutes, there are at least 7 that stay for who knows how long. For every consumer that does their advance homework and knows that the $20,000 timeshare the salesperson is hawking is available for $1,000 or less on the resale market. For every one person that understands the resale market, there are at least 10 that think that $20,000 is a good deal because the salesperson originally said it was $45,000. For every consumer that understands that the resort update is a sales pitch and not required, there are at least 12 that go along with the pitch the ‘concierge’ gives them. 

You’d be hard pressed to come across anybody who either hasn’t heard about these antiquated practices or personally encountered them. 

And yet every single day, timeshare sales centers around the country are filled with consumers sitting across little round tables listening to the same tired pitches. And for the past 20 or so years since I stumbled into this industry, an average of 10% of those consumers purchase something. 

So is the timeshare paradigm broken?  Not even close, buster. Not even close. You know what is broken?  The customers’ paradigm. Change that and I guarantee you the developers will change immediately.