“There is a certain relief in change, even though it be
from bad to worse.”
- Washington Irvin - (Tales of a Traveler)
“Simple, clear purpose and principles give rise to complex
and intelligent behavior.
Complex rules and regulations give rise to simple and stupid behavior.”
- Dee Hock -
Some say change is inarguable, that it is today's reality, yet it was once said that ‘the
more things change the more they remain the same’. In Diminishing Returns
I indicated that many understood the game (exchanging), or thought they did, however without them being told
or having prior knowledge, someone may have changed the rules. This effort will be an attempt to shed light upon
what occurred or evolved so that they may gain some usable knowledge about the new game and make some determinations
of ‘if’ or ‘how’ they will continue playing.
When most products are purchased they come with some kind of warranty or guarantee. In the early days of the
timeshare industry the words warranty or guarantee were sparsely used. About the only guarantee was that if you
purchased a deeded interval interest in a fixed week you would always have use of that interval. While ‘my
salesman told me’ is an often used statement in our industry, generally speaking the written documentation
of a timeshare purchase avoided any actual warranty or guarantee.
One of the emphases during the selling or closing presentations was a discussion of the benefits of ownership
at the specific resort under consideration. These discussions often included the terms ‘rental’, ‘appreciation’,
‘resale’ and ‘exchange’. Most often the salesperson skated very close to the edge of a declaration of fact
in respect to these ‘benefits’, however they were well trained in using words that allowed you (the prospect) to
hear what you wanted to hear. Some examples of that art were...
“The resort operates a rental program. Many owners choose to put their interest up for rent in those years when
they are not going to use or exchange. - When you purchase an interval here you receive a deeded interest just
like when you purchased your home, I am sure that you expected the home to appreciate over time. - Because the
developer here is engaged in selling the remaining inventory he has not yet established a resale program. - The
resort is affiliated with XXX exchange firm and the developer will give you an initial membership in that exchange
firm. For a small exchange fee you have the opportunity to exchange your interval for other similar resorts all
over the world. Just look at all the other resorts displayed in this catalog.”
You could have read anything you wanted to in those statements. Therein lies the art.
In those early days a timeshare sales presentation was usually made in the sales center at the resort and most
purchasers considered that everything sold to them was done so by the resort. If they made a purchase that included
initial membership in an exchange firm, they considered that to be part of the package that was sold to them. The
forgotten fact in these transactions was that membership in the exchange firm was actually between the individual
timeshare interval interest owner and that exchange firm. The developer (resort) gave the purchaser the initial
membership and thereafter that member had to pay the membership fee if they wanted to remain a member. Because
this membership was initially free, the consumer almost never read the fine print in the membership agreement and
continued to assume what ‘the salesperson told them’ was all they needed to know. They did not actually understand
what the rules were and no one went out of their way to explain them.
Yes, they had a general idea about ‘like for like’, ‘exchange fees’ and the ‘book full of resorts’
so that seemed simple enough for them not to initially worry about the exchange benefit. Even today this simple
concept is still being touted. A recent search on the web with the heading ‘Timeshare Exchange’ produced the following...
- Information For Exchanging Your Timeshare
Trading your timeshare for comparable timeshares is a wonderful way to travel and see the world!
Just because you own a timeshare, doesn’t mean that you have to keep going to the same place over and over
again. In fact, one of the greatest benefits of owning a timeshare is that you can trade your vacation time for
stays at other resorts throughout the world! 80% of timeshare purchasers buy with this intention! Whether
you’re a long-term planner or a last moment procrastinator, trading your timeshare for other comparable timeshares
is a wonderful way to travel and see the world!
The concept of timeshare exchange is easily summed up as “like for like”. Basically, the type of timeshare
you own will determine the type of timeshare you’ll receive. So, when you make your exchange request, keep in mind
that if you own a two bedroom you will get a two bedroom.
Another site produced the following...
Exchanging Timeshare
Q: HOW DO I MAKE EXCHANGES?
A: Exchange works like a bank account:
1. DEPOSIT your vacation time---this is known
as space banking your time. This may be done from 2 years to 14 days before its start date.
2. REQUEST your exchange week/s at a comparable
resort for the vacation time that you
deposited.
3. RECEIVE a confirmed exchange.
4. GO!
Q: CAN I ONLY MAKE AN EXCHANGE IF SOMEONE ELSE USES THE WEEK THAT I OWN?
A: No. The moment that you place your week into the space bank pool, you immediately become eligible for
a timeshare exchange, and can go ahead and make your request. As long as you space bank your week as early as possible,
you should have no difficulty in obtaining an exchange to your liking. All exchanges are made based on availability.
Last year, XXX satisfied over 98% of requests.
Little wonder that confusion still exists and with that confusion came dissatisfaction in those who historically
were able to achieve a satisfactory exchange.
In those days all you needed was to understand these simple rules.
1] You needed to own or hold a leasehold interest in a timeshare week. 2] You needed to be in
good standing with your resort (Not in default on fee payments). 3] You needed to maintain a membership
with the exchange firm that your resort was affiliated with. 4] You needed to decide the general destination
you wanted to visit and the time period you could go. 5] You needed to identify 2 or 3 resorts in that destination
which fit your needs and 2 or 3 dates you could travel in. 6] The accommodations and those time periods
should be compatible to your owned interval interest (Like for Like). 7] You needed to submit those options
(requests) to your exchange firm as early as you could, a year or more in advance if possible. 8] Depending
upon the exchange firm you were dealing with, you may have to bank your owned interval at the time of the exchange
request.
If you followed these simple rules over 50% of the time you were offered several options within 24 hours. If
not, the exchange agent would continue the search until they were able to find one that met your needs.
The reason it was so simple in those days is because ‘value’ was easily defined. The ‘worth’ of
a two-bedroom / two bath / full kitchen / sleep six unit was the same no matter where the resort it was a part
of was located. High season in any destination was regarded to be equal to high season in any other destination.
Likewise, shoulder and low seasons were readily apparent. Everyone understood the ‘value’ of an early request/deposit
and understood that destinations where everyone wanted to go were more valuable than remote locations few wanted
to visit. In other words ‘value’ was crystal clear and easily discerned.
It was evident that the exchange benefit was essential to industry growth and all segments of the business profited
when that growth occurred. In the game of ‘my salesman told me’ it was easy to see/touch the sticks, bricks
and pizzazz of the resort where the sales center was and easy to see all the pretty pictures in the exchange 'wish
book'. However, actually getting there was still imaginary. It was critical to the industry that the exchange
benefit became a reality and in order for that to happen the skeptical consumer demanded a tremendous amount of
service. It was simply not good business to have dissatisfied timeshare owners/members, thus agents of the exchange
firms worked very hard to make the benefit work and keep their members satisfied.
For several years this system worked and the industry prospered. This was so because of equality. We were always
dealing in weeks - seven day increments, a two-bedroom was always a two-bedroom, a red week was a red week, a full
kitchen was a full kitchen, near the beach was not on the beach, value was in the quality of product and service
not in the repute. Value was ‘tangible’.
Change began when ‘value’ went from ‘tangible’ to ‘intangible’. As the industry grew, competition
for developer affiliation with one or the other of the exchange firms intensified. One would assume that deals
were made. In order for these deals to work without absolute rebellion in the ranks of those already affiliated,
subtle differences had to occur. I think that it was George Orwell who once said: “All animals are created
equal, but some are more equal than others.” If a major new developer, with the capacity to create several
resorts entered the market, each of the exchange firms scrambled for that affiliation. Exchange firms suddenly
became more concerned with new product development that insured initial membership growth than the old methods
of assured satisfied exchanges for existing members.
As a result the clarity of ‘like-for-like’ began to blur and the equality between demand and supply began to
dissipate. A first class resort in an isolated but desirable location that had very few weeks deposited in its
red season, had a value far exceeding a readily accessible first class resort in an extremely popular destination
that had many weeks available in its red season. The desire to be one of the few getting into the resort on the
Washington Seashore was more important than the aspiration to visit one of the several resorts near
the major amusement park. The peak of season at the ski resort in Vail or Aspen, CO. had more value
that the peak of season on the beach at Ocean City, MD. Magically the two-bedroom / two-bath - sleep 6 ocean
view condo in a brand name resort had more appeal than another two-bedroom / two-bath - sleep 6 ocean view condo
˝ mile up the beach that did not have a ‘brand’ name. It didn’t matter that the independent resort
was newer with larger units and next door to the local casino. When the owners/members of the ‘branded’ resort
sought an exchange via the exchange firm, the world was at their front door. When the owner/member at the other
resort asked the exchange firm agent why their options were more limited the response generally took the form of:
‘I don’t know, let me look into it’ and no direct answer was ever forthcoming.
Final Thought
I am not so sure that the rules have changed all that much. It may well be that they have just been blurred
somewhat so that they can be unevenly applied. While not all that important (when applied by RCI exchange
agents to determine value) the RCI Gold Crown status is a very desirable marketing tool as is the comparable
Interval International 5-Star designation. A quick look at the RCI web page discloses that they currently
have 3700 affiliated resorts worldwide. Of those 3700, only 773 have received the prestigious Gold Crown
status. That’s just barely 21%. RCI’s parent company (Cendant) also owns Fairfield that is composed
of 46 resorts (including some associated resorts) according to the Fairfield web page. Of those 46 resorts, 21
hold the Gold Crown status for a 46% ratio or an increase of 120% above the norm. Now I’m not saying that some
of those Fairfield resorts are not worthy of the designation, however I am implying that the rules may have
been unevenly applied. Following that logic none of you would be surprised to find that of the 552 RCI Points
resorts, 37% carry the Gold Crown designation. Now that’s only a 74% increase above the norm. I am sure that Cendant
and RCI feel that their motives are good, however didn’t Ayn Rand say something like: “Every major
horror of history was committed in the name of a benign motive”.
Next week we will expand on the supply/demand theory and how it is affecting exchangeability.
Part 1: Diminishing
Returns Part 3: A Theory
Part 4: Circumstances
