No not a lyric from Peter, Paul and Mary – Where have all the flowers gone but a reference to the draconian way timeshare developers treat their long term owners. Many people who own timeshare and have done so for a long period will either have, or will in the future experience problems when they simply wish to get out of their ownership contract. The straightforward question is why?
The simple answer to this may well be one word, greed. Timeshare developers are not just satisfied with taking thousands to buy an ownership but they look forward to taking thousands more over the years of a long term contract in maintenance fees. As an example, you purchase a timeshare today for £10,000 and the maintenance fee is £1,000 per annum. Taking a rise of 5% per annum, in 10 years time you will have paid £13,206 in total maintenance fees, that’s 132% more than you paid to get in. Now you can see why developers don’t make it easy to get out.
Exiting, a perennial problem
Many owners have loyally paid maintenance fees year on year so have made the developer considerable sums but that’s just not good enough, they still won’t let you go. One of the reasons often cited by developers is that of inventory problems. Put simply, if they let too many owners surrender their ownership then their weeks or points become part of the resort inventory and have to be sold again. Until such time as this occurs the resort/developer has to pay the annual maintenance fee that would have been paid by the owner and that’s not good for profit.
It’s interesting to note that in the Marriott Vacations Worldwide annual report 2020 this very point is mentioned and we quote:
“Through the use of our points-based products, we are able to more closely match inventory investment with sales pace, thereby generating strong cash flows over time. Limiting the amount of completed inventory on hand and pursuing capital efficient vacation ownership inventory arrangements enable us to reduce the maintenance fees that we pay on unsold inventory and improve returns on invested capital and liquidity. In addition, we reacquire previously sold vacation ownership interests at lower costs than would be required to develop new inventory which increases margins on our sales of vacation ownership interests.”
From this we seem to gather that Marriott make money, certainly through their points based product so if you own Marriott points you are doing them a favour by exiting your ownership, or so it would seem. Mention of acquisition of interests at lower costs is made, from our research Marriott is the one of a few developers to introduce a buyback and take-back program for long-time owners, but unless you have points at a desirable home resort and don’t really care how much you get back for it, because it will be far from the new sale value, then it may work for you.
Complex problem, easy solution
In the States there is a concerted war against third party exit companies spearheaded by Diamond Resorts who reportedly have around 40 active cases. What have these exit companies done to incur the wrath of the mighty Diamond, well they had the audacity to attempt to help owners exit their ownership when Diamond refused. Most lawsuits are for false advertising under the Lanham Act, together with tortuous interference. Given the financial resources of the Diamond legal team no doubt there will be 40 less exit companies in the near future.
The only reason that getting rid of a timeshare is seemingly complex is because developers make it so. If, as Marriott’s state, if there is money to be made in developers allowing exits then why do so many fight tooth and nail to hang onto disgruntled owners? Timeshare exit companies only exist because owners have hit a brick wall. Think of all the money Diamond could save in legal bills if they simply let owners exit when they want. That being the case there would be no need for third party exit companies, two birds killed with one stone.
We smelled the coffee and woke up
It’s all very well that TCA offer suggested solutions to the timeshare industry to not only make their life easier but also add a much needed layer of customer satisfaction for owners who have decided they just want out. Unfortunately we appeal to an industry that on the whole has deaf ears. Marriott are lucky in as much as they have a quality product, not so with many other small resorts or developers who struggle to sell existing inventory. The latter being the case these resorts and developers effectively cast off their problems to existing owners, is that fair? We think not.
So are we preaching utopia? Probably, will it ever change? This is where we smelled the coffee and woke up; it was a nice dream but only a dream.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk