ARE YOU AN NQ?

Staff Writer, The Timeshare Beat

July 22, 1999
A recent article in the Florida Journal (The Wall Street Journal) by Rafer Guzman dealt with the practice of timeshare resorts in Orlando which qualify or disqualify a prospect for gifts according to their country of origin. Westgate Resorts, owned by Central Florida Investments, Inc., for example, is not currently handing out gifts to people from Colombia, Israel or Italy. The Palms Resort & Country Club, which is owned by Tempus Resorts International Inc., Orlando, doesn't want any single people from Brazil or anyone from Portugal. And Cypress Pointe Resort, part of Orlando-based Sunterra Corp., includes Israel, Pakistan, Turkey and "India (as well as individuals from India residing in the U.S.)" in their "Not accepted" list of countries.

This is not a new practice, nor is it peculiar to Orlando. It has been the norm in the industry practically since its inception and is not limited to a person's country of origin. "NQs" (Non Qualified people) have traditionally included people who are too young, too old, unmarried, handicapped, the wrong gender, and current timeshare owners-- who are felt to be too knowledgable to sell to. Some nationalities, historically, just don't tend to buy timeshares, and global factors, such as devalued currencies, will make people from a certain country undesirable for a time. In many areas Canadians are considered taboo, mostly because of the unfavorable exchange rate but also because they are considered to be very "thrifty" and hard to sell.

Last year there was a report about the filing of a law suit by nine current and two former employees of Poipu Resort Partners LP on the island of Kauai. The suit alleged violations of civil rights, discrimination matters and loss of income and was filed by a group (mostly OPCs-- or Off Premises Contacts) who among other things maintained that their ability to make a living was impaired because the resort limited who they could invite to a presentation. They were asking for $44,000,000 in damages.

The Hawaii Civil Rights Commission in Honolulu prosecuted the three timeshare companies, and the issue was settled out of court in December with two of the resorts paying a total of $19,000, and the third company settling for an undisclosed amount. All three companies agreed to adopt a nondiscriminatory policy in their marketing practices and post the policies in their workplaces, but you can bet that some tacit agreement among timeshare companies and OPCs in Hawaii as to who "qualifies" is still in place.

The reasoning behind this discriminatory practice from the developers' and marketers' point of view is that when certain types or groups of people show a history of not buying, it does not make economical sense to hand out expensive premiums to them or to waste the time and talent of the sales people trying to sell to them.

The handing out of premiums is one of the main marketing costs involved in keeping the developers' prices high. In Orlando and Hawaii, especially, it is very expensive to get people to tour any given resort. Developers are in a constant battle to reduce their marketing costs, which traditionally run from 40% to 60% depending on location, and refusing to hand out $50 tickets free or for a discounted $12.50, or giving away a $150 submarine ride, to people who are very unlikely to buy seems to make good economical sense to them.

As Mr. Siegel of Westgate Resorts said, "...when you're spending the kind of money that you have to spend to get people to tour your resorts, and giving out these expensive gifts, then you have to be selective. Or go out of business."

For timeshare companies, it's a cumbersome and costly method of generating sales, but until developers can find an alternate, and less expensive, means of tour generation their marketing costs are unlikely to go down, and OPCs will remain the main source of generating prospects.

"You have to make an awful lot of contacts in order to get visitors to attend a sales presentation," says Steven Miner, an independent researcher in Salem, Ore., who studies the timeshare industry. "And just by the way you do that, a large number of people are going to attend only for the gift."

According to the Florida Journal story, "Resort managers say they have to keep a close eye. 'The cost of OPC marketing is accelerating,' says Westgate Resort's Mr. Siegel, 'and it's getting to the point where it's just barely cost-effective. The attractions keep raising their prices on tickets, the locations keep raising the rent, the OPCs keep wanting more money."