The Timeshare Beat: Jerry Sikes; With Regard to Conjecture

On several occasions over the last few months I have run across the following conjecture about Timeshare or Vacation Ownership plan resales: 'Consumer protection, which is in place for the primary developer sales, is not in place in the secondary market.' It is my assumption that the reference is to those laws, statutes and ordinances formulated at the local, state and federal levels that are intended to protect the consumer from disreputable developers and those who do their bidding. I am not all that sure that this is something to brag about. The overwhelming number of these laws, statutes and ordinances are designed to insure that what is being told the consumer, in order to induce them to give up a great deal of their money, has some semblance to the truth. These laws are all designed to protect the buyer from the seller. Clearly there are some laws and statutes that deal with the secondary market, however, the overwhelming number of these laws and statutes are the direct opposite and are designed to protect the seller and not the buyer. Primarily they protect the seller from those disreputable listing agency that deceive the seller in order to get them to pay a fee just to place their timeshare or vacation ownership interest into the secondary market. Unfortunate both these types of protection are necessary because of the preponderance of those in our industry (in the primary as well as secondary markets) that practice deceit.

Consistently Industry Research indicates that over 80% of all those who actually own a timeshare or vacation ownership plan are satisfied with their involvement in the concept. These are what we fondly call 'Timeshare Smart' individuals who understand the concept and know how to obtain maximum benefits from that ownership. They are accustomed to paying their annual maintenance fee and are actively involved in the product that they own to insure its continued value. They understand that the 'exchange game' is not as simple as it was presented by their salesman or in the exchange firm's propaganda. They understand rental programs, day use and bonus-time. They recognize the value of the concept and understand that upward to 65% of the initial price of primary developer sales are 'non realty components' such as sales & marketing costs. These aren't consumers that are in need of protection. The most recent studies indicate that almost 50% of the timeshare or vacation ownership sales that occur in the secondary market are made to those who already own a timeshare or vacation ownership plan. They understand that when purchasing additional plans within the secondary market they avoid paying the developer for these 'non realty components'.

One leading advocate of the timeshare or vacation ownership industry that recently made a statement similar to the subject comment about consumer protection and the secondary market concluded: "This means that a consumer must do his/her homework prior to buying a resale." It is my position that if we (as a industry) encouraged all prospective purchasers of a timeshare or vacation ownership plan to do their homework prior to buying (not just those considering a purchase in the secondary market) we would not need to be nearly as concerned with consumer protection.

It is unfortunate that our industry is caught up in a 'Catch 22" situation that the media loves to expose to the public. This media spotlight on our bad practices is the one which gives our industry its major problem, the resulting low esteem the general public has for our industry and many who practice their trade within it. That 'Catch 22" goes something like: Someone in our industry successfully practices deceit in order to profit, the consumer cries foul, that deceit is publicized, congress - state legislators - county supervisors and or city officials take up the cry and institute laws - statutes and/or ordinances to protect the consumer, someone in our industry successfully finds a loophole or conceives a new questionable business practice, the consumer protests, it gets publicized, government acts, our industry scrambles and so on and so on... It is indeed unfortunate that our industry association; The American Resort Development Association (ARDA) is placed in the position to constantly defend the acts of its membership.

John Burlingame of Hyatt Vacation Ownership, Inc., and the current ARDA Chairman stated the following in his First Word column in the April issue of Developments: "At the birth of our industry, its future success was threatened by unethical behavior due to misrepresentation. The result was regulation, with states creating their own regulatory framework to deal with problems, both real and potential. Many of these regulations are needed and were embraced by the industry, while some have made doing business more difficult and costly. While we try to work to mitigate the negative impact of regulations that don't truly protect the public and are unworkable as well as too costly, we must continue to embrace those regulations that keep our industry safe. Even more important, we must embrace ARDA's Code of Ethics as a foundation for our industry."

John went on to write: "Many in our industry do not feel that we are doing enough to enforce our ethics. That perception is probably a result of the fact that we have not advertised or summarized the number of complaints that have come before the ethics committee or their resolutions."

That leading advocate of our industry (paragraph 3) indicated that someone considering purchasing a timeshare or vacation ownership plan in the secondary market should do his or her homework. As a student, when I was stumped by my homework, I would go to the library because it was the one place that contained the resources that would provide me some assistance. Unfortunately there is no timeshare library the consumer can go to for assistance with that aforementioned homework.

FINAL THOUGHT

As indicated, the majority of laws, statutes and ordinances currently on the books related to the timeshare or vacation ownership industry are to protect the buyer from the seller. The seller being the developer and/or those doing his/her bidding and the sale being the original conveyance. And, that most of these laws came about because of the crying of foul by buyers who believed they had been wronged by timeshare or vacation ownership entities. It was also indicated that no such outcry has come from those consumers who purchased their timeshare in the secondary market. And, that consequently there were few, if any such laws on the books with respect to that secondary market.

There are concerns about the secondary market however, those concerns center around those in the resale industry that seek to profit from (using John Burlingame's words about the history of our industry) unethical behavior due to misrepresentation. In the absence of those laws ARDA has included in its Ethics Code Substantive Revision dated March 2004, Ethical Guidelines for Resales. This position is supported by ARDA's own Resale Tips, Resale Check List and procedures for Selecting a Resale Company. http://www.arda.org/consumer/resale/resale.htm#select

Again, it should be noted, that these efforts are designed to protect the seller of a timeshare in the secondary market from those in our industry who would seek to take advantage. Nothing is truly being done to assist the buyer in the secondary market or assisting him/her in doing that 'homework' indicated necessary by the subject conjecture, just as nothing is truly being done to assist the buyer in the primary market in doing their "homework'.

It is my belief that we have before us an unprecedented opportunity to effect significant change in our industry and turn those conjectures into public relations triumphs. Those opportunities begin with the proposed changes in ARDA's Code of Ethics and the new enforcement considerations that were given by the Ethics Committee at the Fall Leadership Conference. Those same changes are scheduled for additional consideration at the upcoming Conference in Las Vegas. These opportunities continue by publicizing / exposing offenders, both within ARDA and of Non-Members, who invade our markets.

Just think of the media reactions if we announced an ARDA sponsored Phone Hot Line and/or an Internet Web site where everyone considering the purchase of a timeshare or vacation ownership plan (in either the primary or secondary market) could obtain the names of those firms who persist in conducting their business in an unethical manner. I am sure that those owners of a timeshare plan who contribute to the ARDA ROC fund would find partial sponsorship of such an effort just as an effective use of their contributions as some of the ones currently receiving backing. I am also positive that many of those well placed in ARDA who persistently practice their trade on the very edge of the Ethics Code will be in no rush to make those changes.

A timeshare or vacation ownership industry that persist in providing safe harbor to those who would befoul that industry is not unlike those Middle Eastern Societies currently providing safe harbor to Osama bin Laden and his al-Qaida terrorist network. If we are truly intent in cleaning up our industry by self-policing it in accordance with the ARDA Code of Ethics, we must go after the largest among our members that deliberately violate that code just as effectively as we would go after the smallest or even the nonmember. And, we must tell everyone who they are. Anything else is simply more conjecture, more BS.