Complex world of timeshare market
By Chang Se-moon
Timeshare refers to an apartment, condo, or house that you buy with other people so that you can each use it for a particular number of days every year. In reality, timeshare had been quite popular at resort communities, although we now hear problems associated with timeshare arrangements.
According to a story that I received from the U.S. Federal Trade Commission late in May, Timeshare Resales, a Florida company, called timeshare owners, and promised to sell their properties. Timeshare Resales "often said it had a buyer in mind and that the sale would occur quickly. Once the timeshare owner agreed, the company would charge an up-front fee, usually $500 to $2,500."
According to the FTC, "the company did not sell the property quickly ― or even at all. Often, it would ask for additional fees and refuse to grant refunds." The company is no longer allowed by the FTC to "collect any more payments for their timeshare services."
On May 20 to 22, there was an annual conference of the Timeshare Board Members Association in Orlando, Florida. I was invited as a guest of a board member. This is what I learned.
The term timeshare has a damaged reputation. There is no easy exit strategy, meaning that it is hard to walk away from timeshare. There is a proliferation of exit companies of varying reputations.
There is the problem of how to treat animals that owners want to bring. Some tenants may try to cheat by claiming that their pets are service animals. The least the resort can do is to spell out its clear policies on how to treat service animals as well as pets.
There is a high rate of delinquency in paying maintenance fees. According to the Withum Benchmarking Study of 2016, bad debt accounted for up to 20.4 percent of total revenue for 30 resorts included in the study.
Resorts need periodic reserve studies to avoid special assessments. For many 40- to 50-year old structures, even reserve studies tend to miss needed repairs hiding behind the walls. For new structures, timeshare owners do not want to pay for reserve studies, let alone make annual contributions to reserve funds, since repairs will be a problem after they are gone. Repairs of aging structures then become the problem of current owners.
Risk management is an issue often faced by timeshare associations. Board members may transfer risk by buying insurance, accept the risk by handling it when something bad happens, or avoid risk by not undertaking a particular business or action. For instance, the risk of bicycle-related injury can be transferred by buying insurance, paying for the claim if and when it happens, or banning use of bicycles altogether.
Technology is an important aspect of modern resorts. Websites have to be updated. Advertising on social media is important. Online booking should be made available. Resorts should be able to accept credit cards online. Availability of units or intervals should be updated often and accurately. Communication via email after the booking needs to be made. Local leisure opportunities near the resort should be introduced. Wi-Fi should be made available to guests.
Resorts need to send periodic newsletters to all timeshare owners and visitors, possibly via email, to make them feel that they belong.
Interior design can be improved by digital printing, which will not only improve the visual environment, but can be employed for marketing purposes as well. Pillow covers, for instance, can show pictures of selected resort facilities available to visitors.
Resorts need to know the preferences of millennials who are the increasing majority of timeshare tenants. A SWOT analysis may be beneficial for resorts to develop strategies uniquely beneficial to their individual places.
Resorts need to develop uniform policies on tax on transient tenants that is becominges increasingly popular among revenue-hungry state and local governments.
In fund management, by maintaining staggered deposits, resorts may be able to increase interest earnings. Staggered deposits mean that rather than depositing, say, $1 million as one account, split the amount into four at $250,000 each and have accounts that mature every three months.
Collecting delinquent maintenance fees is a difficult issue. Delinquent timeshare owners should be given all the options of making payment such as credit card, debit card, checks via mailing, and post-dated payment. They also need to be told that if payment is not made by a certain date, collection will be turned over to a collection agency.
When a collection agency is hired, resorts should ensure that the agency is reputable and follows the Fair Debt Collection Practices Act. Resorts are not immune to illegal ways of collecting debt even by an outside agency. Personal data must be safeguarded even after the payment.
Resorts should participate in local chambers of commerce; maintain registration papers to include marketing information; consider stocking on-site store of daily needs such as detergents or washing items; carry out periodic survey of guests; and identify advantages that are likely unique to the particular resort.
Chang Se-moon (email@example.com) is the director of the Gulf Coast Center for Impact Studies.