Why the Timeshare Industry Can’t Shake its ‘Hard-Sell’ Reputation
Most of us who follow the ebbs and flows of the timeshare industry, and observe the events that continue to impact its ongoing attempts at evolution, are aware that a portion of the still much-needed change involves battling the image that has stubbornly attached itself to the timeshare industry. Public perception remains a significant issue, which continues to plague the industry even today.
Put simply, the industry’s image is besmirched with a stigma that there still remains to this day a hard-sell process in place. There is a belief that this process may well lead to a glossing over of certain important, material deal points that can make a difference between the sale being made to a potential buyer or not; and if the sale is made under those circumstances, the impact or long-term consequences to the buyer.
Indeed, after being involved with the timeshare vacation product professionally over several years, I’ve come to believe that a timeshare interest can be, for the right category of vacationer, an ongoing positive experience, at least over a certain limited duration of time.
In actuality, the timeshare product itself can be – and to many people is – a decent vacation product with many positive attributes, such as providing a spacious resort-like setting with amenities beyond a typical hotel experience, in a family vacation-orientated environment.
However, based upon the number of clients we have assisted in terminating their timeshare interest over the years, it’s equally clear that in many instances the timeshare vacation product is not for everyone, particularly a significant segment of current owners who, for various reasons, are simply not well suited to be a timeshare owner.
It beggars the question: How does this happen with the frequency that it does?
Apparently, a significant segment of timeshare purchasers were not educated sufficiently at the point of purchase, and therefore did not fully comprehend or appreciate what they were acquiring, and/or have a complete understanding of the cost-to-value of their product, to them, as consumers.
The Timeshare Sales Process
To those readers who have yet to experience a typical timeshare sales presentation and sales process, nor the mounds of paperwork created thereby, suffice to summarize the overall experience by indicating that the one-on-one sales presentation with your assigned salesperson is usually a 3-5 hour process, long on salesmanship but short of actual relevant factual or financial content regarding the purchase.
Thereafter follows a closing, attended by a completely different cast of individuals (none of whom were present during the earlier sales presentation process), which is long on paperwork containing tons of relevant facts, but not easily accessible in part due to the woefully short, essentially nonexistent, scheduled document review time.
Then the process commences of initialing and signing various disclosures, document receipt acknowledgments, and the actual sales contract replete with a bristling addendum. A dizzying experience, for sure, which lasts, in most cases, about an hour. However, the estimated necessary amount of time to obtain even a minimal comprehension of what it actually is that you’re signing and initialing – including proper allotted time for review, discussion and explanation of the purchase and sale documents – would quite literally extend the closing period to at least equal the length of time expended by the sales agent with the purchaser for the sales presentation.
(Interestingly enough, the salesman is typically excluded entirely from the closing process, presumably by developer design!)
The Role of the Commissioned Salesperson
The initial salesperson, the individual who spends the most one on one time with the purchasers, is nearly always compensated via a pure commission basis, meaning if no sale is made, no money is earned.
Although commission-based sales are not in and of themselves an inherently “bad” business practice necessarily, it’s evident that the salesperson, being self-motivated (many commissioned timeshare salespersons are not resort employees, but are in fact independent contractors) is going to be sorely tempted during the three to five hours he or she spends with a sales prospect to take that time to develop a strong sense of what is and what isn’t important to the consumer. And if human nature is any guide, the salesperson will take care to emphasize all of the product attributes that appeal to the prospect, and deemphasize or accidentally omit inconvenient realities that don’t jibe with the prospect’s hopes, dreams, or expectations!
Clearly, the oral misrepresentations contained within the hardball presentation continue over the years, because it’s a tactic that is extremely successful in putting numbers on the board. As anyone familiar with corporate culture may tell you, an effective strategy to boost the bottom line will often prevail over more socially and perhaps morally conscious alternatives.
After the Purchase
So what happens after the sales process, if the new purchaser determines that his or her acquisition is not what was represented or simply changes their mind and, as a result, wants to undo the purchase?
If the purchaser misses their 5-10 day (depending on the state) rescission period, the road to termination gets a whole lot longer and bumpier. Consumer protection laws only go so far in protecting a timeshare buyer who didn’t completely understand the details of what they purchased. Realistically, any consumer-orientated statutory protections beyond the rescission period are essentially non-existent.
Since the rescission period is quite short, the purchaser will not have had any opportunities to try out their membership prior to the expiration of the 5-10 day rescission period. They must solely rely upon the two consumer protection statutes contained within the timeshare act: the rescission period as referenced, and statutorily required disclosures about the financial aspects of the product as contained within a document provided at the time of purchase called a Public Offering Statement. If a purchaser fails to carefully review this document, they will have no notification or warning about the actual financial circumstances that they’ve contractually agreed to.
By way of example, the factor that seems to contribute the most to a timeshare owner’s dissatisfaction is the seemingly ever-growing annual maintenance fee. The second most significant object of dissatisfaction reported is the difficulty in booking their units at the time and location of their choosing. Even very astute new owners who do carefully review their Public Offering Statement disclosure package still may not fully comprehend the reservation rules, as they are usually subject to change without prior notification. Beyond that, reservations are always “subject to availability.” What may not be well understood about what “availability” actually means is that those others competing for the same space and time as you may well include non-owner members of the public. Said another way? You may not just be competing with fellow owners, but also compounding the difficulty of booking by allowing members of the public arguably better access to reservations than timeshare owners like yourself are permitted.
So perhaps in circling back to the core premise of this article, the question should be that assuming that commissioned salespersons are financially motivated to feather their own nests, what are the possible consequences to the consumer? Is there much real damage done? This is clearly the core issue. Given human nature and that many salespersons, particularly those purely commissioned, will probably embellish their product, is there actually irreparable harm being done in the timeshare sector by these alleged sales practices? The answer is absolutely yes!
Because of the unique factors to this industry that converge, these sales tactics are often harmful, permanent, irreparable, and quite literally life-changing.
Knowledgeable salespersons are aware that once the prospective purchaser signs a purchase contract, it will contain a clause wherein the consumer acknowledges that he or she did not rely on any oral representation to induce them to purchase. This universal clause is typically well buried within the purchase contract. It is therefore inevitable that a commission-based salesperson, in personal financial need to close a sale, will be sorely tempted to take advantage of this clause, so much so that I characterize it as “the salesman’s license to lie clause.”
Combine this factor with the fact that, unlike most expensive durable consumer purchases, absolutely zero due-diligence or research can be accomplished by the consumer. Prior to their purchase and for some extended amount of time thereafter, buyers won’t even have access to their purchase to test it out, until well after the expiration of their rescission period – too late to undo their purchase!
Add further the fact that timeshare acquisitions essentially lose whatever resale value they may have had immediately after the expiration of the rescission period. This means that if the owner becomes disenchanted with their purchase after the expiration of the rescission period, there is essentially no developer-provided way out of the contract, and no helpful consumer protection law to assist.
Put another way: If you can’t sell your interest for anywhere near what you still owe for it and the developer won’t let you out of your contract, what alternatives do you now have?
Lastly, consider the fact that typically annual maintenance fees rise annually at a rate well beyond inflation, and that a purchaser is legally bound to pay those fees as long as they retain ownership. Arguably these fees can easily surpass the cost of a comparable weekly vacation package, over a relatively short time. In other words, going online as a member of the public and booking a comparable vacation at a comparable resort can literally be easier and less expensive than the timeshare owner’s annual maintenance fee obligation. Never mind accounting for the timeshare interest’s upfront purchase costs!
In conclusion, it quickly becomes very evident the tremendous amount of permanent financial damage that can be done by a financially motivated salesperson.
So why, you may ask, does this practice continue? Why can’t the timeshare developers hire and train salaried sales professionals to educate consumers as to the exact nature of the product they sell?
Michael D. Finn, Esq.
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