The Timeshare Beat: Jerry Sikes; With Regard to Being Eliminated

Regarding Mr. Silverman:

The BUSINESSWEEK ONLINE, Cover Story on February 28, 2000 by Amy Barrett contained the following:

“Until two years ago, Henry Silverman was a Wall Street darling, the savvy dealmaker who built HFS into a giant franchiser of such brands as real estate brokerage Century 21, hotels like Ramada and Howard Johnson, and the Avis rent-a-car system. Silverman earned a reputation for delivering stellar earnings and stock price gains through a steady stream of acquisitions.

The CUC merger was to have been Silverman's masterstroke. He saw CUC; a direct-marketing outfit that sold memberships in discount buying clubs such as Shoppers Advantage and Travelers Advantage, as the perfect partner. The idea was to feed the names of all the customers HFS channeled through its hotels and real estate brokerages into the CUC direct-marketing machine. CUC would then sell them memberships in its discount-buying clubs and, eventually, financial services such as insurance.

On their own, HFS's businesses would have generated 10% to 15% in annual earnings growth, analysts had predicted. That was decent, but certainly not the 20%-plus growth rate Wall Street had come to expect from Silverman. He knew if he could continue to deliver higher growth from a bigger company, he would be rewarded with an even richer price-earnings ratio.”

Mr. Henry J. Silverman is the President, Chairman and CEO of Cendant Corp and at last count personally owns over 40 million shares of its stock. One of those deals Mr. Silverman made while at HFC (Hospitality Franchise Systems, Inc.) was the 1996 acquiring of RCI (Resort Condominiums International) just one year prior to the HFC and CUC International merger to become Cendant Corp.

If Mr. Silverman envisions the elimination of ‘The weekly-interval model for timeshare’ one would assume that he had already accomplished two of his goals. The first would be the feeding of over 2 ½ million RCI members into those parts of the CUC direct marketing machine that remains under the Cendant banner and the second would be the creation of some form of a ‘points-based timeshare usage’ system that Cendant fully controlled.

To that end, RCI launched GPN in April of 2000 and then in December of that same year RCI Points combined and standardized both Global Points Network and Club Resorts International, RCI's existing points-based exchange systems, to provide exchanges that are more flexible than the traditional week-for-a-week exchange service.

According to RCI statistics from 1999 there were 3,605 affiliated resorts and 2,670,173 members none of whom were GPN or RCI Points related. The following press release by Cendant Corp indicates the growth of RCI Points in just over 28 months.

Parsippany, NJ 04-15-2002 -- Resort Condominiums International, LLC (RCI) celebrated the achievement of two major milestones for RCI Points, surpassing 150,000 members and 400 resorts for the fastest growing exchange network in the world. In keeping with RCI’s commitment to improve RCI Points, RCI today unveiled a variety of enhancements to the world’s only global points-based exchange program.

"These milestones are a testament to the popularity of our RCI Points concept and the continuing consumer preference for the greatest possible flexibility in vacationing," said Ken May, president and CEO, RCI. "These improvements build on RCI’s 28-year history of industry leadership, and further establish the unparalleled benchmark for innovation and excellence in timeshare services. We take great pride in evolving and improving this program so that it exceeds member and developer expectations for years to come."

During this same period Cendant Corp acquired Trendwest, Fairfield and Equivest/Peppertree, which then added 110 resorts to the fold. Demonstrating that one way to add resorts and members was to purchase them.

So what’s happening to all those millions of RCI members and thousands of weekly interval resorts? According to another of the Cendant Corp press releases dated April 17, 2002:

PARSIPPANY, NJ -- Resort Condominiums International LLC (RCI) Monday announced a series of enhancements to RCI Weeks, the company’s core exchange business. “These improvements demonstrate our commitment to RCI Weeks and increase the value of this program for both our affiliates and their owners,” said Ken May, president and CEO, RCI. “RCI Weeks has been the cornerstone of our business for nearly 30 years, and we are proud to be able to enhance our core business with new member programs, better access to travel partners, greater convenience for booking exchanges, and the best possible customer service.” The highlight of the new enhancements to timeshare’s first-ever exchange program is in the care and handling of new members.
“We believe that we can improve the exchange process for new members by reaching out to them as soon as possible following their timeshare purchase,” said David Roe, executive vice president and general manager, RCI Membership Business. “Our objective is to establish a long-lasting relationship with new RCI members early on, one that will continue throughout their first year of membership and beyond. This will be best accomplished by educating new RCI members on what it takes to be successful with the RCI exchange process.”

I believe that this statement truly demonstrates that RCI planned elimination of the ‘weekly-interval model’ and the plan is already in place. My recent ‘With regard to Reality’ contained the following:

‘One of the recent trade journals featured a Question & Answer format article about the conversion process from owning the traditional timeshare week to becoming a points participant. The following are direct quotes from that article.’

Q - “What is the key to success at conversions?”

A -“We ask current owners questions to update their information on our database and give them a quick survey about their usage. Then, we transition into a conservation that educates them about points. We come across as consultants rather than salespeople.”

Q – “How do you overcome objections?”

A - “That’s where we come in as consultants – by giving them suggestions on how best to use the exchange system and what type of products they should own to fit their lifestyle.” “Most people say they’re not using their week now because of a lack of flexibility. That leads nicely into explaining how points is the solution to that problem.”

You ‘re all aware how this kind of scam works. President, Chairman and CEO states the corporate (Cendant) intent, the President and CEO of the subsidiary (RCI) puts a different spin on it with plausible denial and the site sales manager/salesperson implements the strategy.

FINAL THOUGHT … In two parts:

[1] If the Cendant Corp strategy of eliminating the weekly-interval model has a foundation based on the quality of the product then someone from senior management should be able to solve the following riddle;

Each of the Timeshare Products depicted below are located in areas with very high demand for inbound exchanges, contain two-bedrooms, two-baths, full kitchens facilities that sleep 6 and exceed 1000 sq. feet in size. Both are currently rated as all ‘red’ and have maintained the Gold Crown status for several years. One of these products is a weekly-interval model and targeted for elimination, the other is located in a points-based usage facility and is the product of the future. Please select the one that must be “keep from being admitted, included, or considered” according to Mr. Silverman.

“A”

“B”

[2] At what point (no pun intended) will those associated with RCI as an affiliate RCI Weeks Resort or one of millions maintaining a membership via an ‘weekly-interval model’ determine that it is in their best interest to remove themselves from the RCI cage they are in and avoid extinction by seeking out another exchange benefit provider that will take them off the endangered species list?