Is there a future for the timeshare industry?
Timeshare has had a good run. A great run even. Timeshare ownership was a radical departure from a monopolised travel industry, a young upstart upsetting established traditions. It gave people high quality, pride of ownership and a sense of exclusivity, although at what some might call a substantial cost.
Since those early days the rest of the travel industry has powered forward with advances like consumer generated review systems and competitive price-comparison booking sites. Has the timeshare industry done enough to keep consumers interested in its "joining fee and annual maintenance" revenue model? Is the current pandemic a herald for the end times?
The Timeshare Consumer Association (TCA) asked three internationally respected timeshare experts if and how they see the timeshare business model evolving to keep pace with the rest of the travel industry. We asked them whether they believe there is still a future for timeshare, and if so what they believe that future looks like.
Timeshare started (depending on who you ask) around 60 years ago with a ski resort called Super Devoluy in the French Alps. The slogan was: ´No need to rent the room. Buy the hotel, it´s cheaper.´
The TCA was unable to find any published research regarding those first owners and whether they really did find it ´cheaper to buy the hotel.´ From the success of the industry in the intervening years, perhaps they did.
There are studies proclaiming the vast majority (85% plus) of modern timeshare owners to be happy with their purchase. However these findings, notably, are largely commissioned by organisations like ARDA or the RDO, which exist to promote the interests of the timeshare industry.
Timeshare Consumer Association interviewed three experts for their impressions of what the future holds for the industry. A former sales director for a worldwide top ten timeshare company, the head of the leading timeshare reclaims law firm, and finally the director of the world´s most influential timeshare consumer organisation.
This is what they told us:
1. Jim Ley, former Sales Director for Diamond Resorts - the world´s 8th largest timeshare company.
Moved on. Jim Ley
"I left the timeshare business a few years ago when Diamond closed down its European sales operations," Jim tells us. "Even before it closed down, we could see the writing on the wall.
"Timeshare and private membership clubs had their heyday before the information age and rise of the internet. Holidaymakers, disappointed with hotel stays not measuring up with to the promises of the brochure adverts would pay us a premium to stay in a better class of resort. It was more expensive than regular package tours, but they guaranteed themselves a higher quality of accommodation. They were removing the risk of a disappointing holiday.
"The trouble is the resorts are no longer exclusive. A member who paid tens of thousands of pounds and committed to a steep annual fee can now see his resort listed on the likes of Booking.com, often for less than the cost of his maintenance.
"The resort doesn´t want empty weeks so they use alternative booking sites to sell the unused inventory. This fills a revenue hole in the short term, but it irks the member who paid for an exclusivity they no longer have.
"Non-owners can still stay in the same resorts, but without any initial investments or commitment to annual fees. If something unexpected happens and they can't go on holiday, they don´t have to, and unlike timeshare owners they don´t have to pay.
"We are seeing this discrepancy right now with owners being charged their annual maintenance fee by resorts that are closed due to the pandemic.
"The other factor is the quality guarantee when they travel elsewhere. Members paid a lot of money to guarantee high quality and reduce the risk of the accommodation not being as nice as it was in the brochure. But now, with TripAdvisor and other review sites, it's very easy to see if the resort will be to your liking. Unbiased, user generated information is the most reliable of all.
"The traditional selling points of timeshare membership no longer represent value as the rest of the accommodation industry evolves and improves.
"To have any kind of future, the timeshare business would need a top to bottom, fundamental re-think and obviously Diamond didn´t have the confidence they could do it in Europe.
"Without a complete re-think, I don´t see the industry surviving, beyond maintaining the existing resorts. Certainly new ones are unlikely to be built.
"Personally I believe the idea of private memberships has run its course, but you never know. Timeshare has fought off all kinds of challenges in its 60 year history and maybe we shouldn´t count them out yet."
2. Patricia Criado Navas - Head of M1 Legal, the Spanish law firm leading the compensation fight for claims against illegally sold timeshare
Patricia Criado Navas: Legal champion.
"My perspective on this is a legal one, but I believe the laws governing timeshare sales are the biggest single factor in determining the future of the business.
"Timeshare in Spain used to be like the Wild West. Developers ignored the law, nobody paid tax, sales methods were brutal and tourists were harassed unbearably by OPCs (touts) every time they left their apartment.
"These activities were tolerated without proper regulations from local authorities, arguably because of the money timeshare companies bought to the local economy. Even so, everyone knew something had to be done, because it was affecting the international reputation of the Spanish tourist industry.
"Little by little, the business was reined in. The workers were regulated and made to pay tax. Codes of conduct were established and the succession of European Timeshare Directives laid down the most stringent laws applied to any type of property sale in Europe. The days of wild excess were over.
"Timeshare is no longer an easy place to make money. In 1999 a major change in the law meant that resorts could no longer take deposits on the day, or even in the mandated 14 day ´cooling off period´ that followed.
"Timeshare sales work by putting customers in an emotional frame of mind. They love the resort and swept up in the moment, spend money they can´t really afford, often regretting the decision later. The 14 day cooling off period/no deposit law was to protect people from making these rash choices.
"For timeshare companies the legal changes were a disaster. They saw a choice between going out of business, or ignoring the law. Nearly all of the resorts chose the latter, and because of this practically every timeshare contract written in Europe from 1999 onwards is illegal in some way. This means that people who bought in that period are often able to claim compensation. M1 Legal is currently processing around £29 million in claims on behalf of mis-sold Spanish timeshares.
"Many of the big names in timeshare saw the restrictive legislation as an impossible hurdle, and moved on to other businesses, some legal, some not. The industry has definitely been drained of entrepreneurs and big investors, which makes me believe it will gradually come to a natural end.
"One notable example is the story of Danny Lubert and partners, the power players behind major developments in Tenerife such as Palm Beach Club and Beverly Hills Club. They exited the timeshare business in Spain when they felt the environment became too restrictive and set up a new venture in Dubai.
"Timeshare soon became heavily regulated over in the UAE too and Lubert et al switched to selling real estate, which had comparatively few restrictions. They use a lot of the methodology that served them so well in the timeshare business, to sell a product more valuable by a factor of 20. Their company, The First Group, is a huge success.
"The future I see for timeshare is bleak, because there are far less restrictive ways for entrepreneurial types to get rich.
"Without big thinkers, risk takers and go getters, the industry will stagnate and die."
3. Keith Dewhurst, Director of the Timeshare Consumer Association - the world´s leading authority on timeshare consumer affairs
Experienced. Keith Dewhurst
“The TCA has been operating for 23 years and we have a lot of data regarding the different issues that have concerned timeshare owners during that time. It used to be the intense marketing and sales. The touts on the street harassing people on their holiday, and the high pressure, sign-on-the-day sales.” says Keith.
"Some people had been ripped off by unscrupulous resorts who sold more inventory than they had, before disappearing into the night, leaving owners with nothing. In those days timeshare operations were often run by gangsters and used for laundering money. Luckily this is rarely the case any more and timeshare sales are heavily regulated."
"I equate the Spanish timeshare business to Las Vegas gambling business being originally being run by the mafia," interjects Daniel Keating, Keith´s media officer, "but then the city was cleaned up, the criminals driven out, and now its a safer, sanitised version of its former self.
Keith continues: "The one complaint we didn´t use to hear much in the old days was that people were unhappy about owning timeshare. Owners believed they had a superior product and had paid more to have better holidays. Sadly that is changing.
"The majority of communication we receive now is from owners asking how to sell or even relinquish their membership commitments for nothing, and swap back to regular booking methods," Keith says. "They can no longer justify the initial outlay and ongoing financial commitment."
"Timeshare was never about an investment, but many members tell us they could stomach a joining fee more easily if it was linked to a realistically priced, genuine share in property. Currently most of the initial fee is a fat profit for the timeshare resort, it doesn´t give the member serious property rights, and there is a big loss on investment even when the ownership is linked to the current types of "fractional" arrangements.
"In the past this loss was justified as ´an investment in your happiness´ in the same way that buying a movie ticket is an investment only in your enjoyment.
"There are timeshare companies which have made tentative moves in what I believe is the right direction.
"The one week ownership can already be linked to 52nd share of the apartment. It should be possible to develop on this concept so that the purchase price becomes a viable investment in property. This approach could potentially revive the industry´s flagging sales.
"There are resorts that do a version of this but they currently charge upwards of £19,000 for a week, valuing a one bedroom apartment at close to a million pounds. This would need to come down to a realistic price, with a realistic annual maintenance cost.
"To augment the ownership, perhaps owners should have complete control, eg an AGM where they could make their own decisions instead of abide by an unelected management committee. They should even have the power to replace the current management committee by majority vote.
"Members would never make money in the short or medium term as the property would be have be sold enough above market value for the timeshare company to make an acceptable profit, but in the long term most property tends to rise in value and eventually the owners would benefit from this.
"Based on the feedback we get every day here at the TCA, I believe this to be the only path to saving the future for an increasingly outmoded way of holidaying."
Timeshare Consumer Association. Contact us on: T: +44 2036704588 or +44 2035193808 (ask for Daniel), E: firstname.lastname@example.org (Address to Daniel).
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TCA provides a central resource of consumer information on timeshare matters for the media and other organisations – We work towards encouraging responsible, honest, timeshare operators. We also publicly expose negative consumer practices and organisations which operate in a manner detrimental to timeshare buyers and owners.
An important part of our mission is to lobby UK and European Governments and regulatory bodies for improved consumer protection in the timeshare environment and collect information on frauds and mis-selling, for action by enforcement authorities.
We are staffed by former and current timeshare owners, as well as former timeshare industry staff. We know our way around the timeshare business
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