Timeshares In Turmoil Due to COVID-19 as Owners Seek Answers
With grim statistics rising daily – death counts, family tragedies and unemployment filings – timeshare travel has all but stopped as the world copes with COVID-19. There are bigger issues, such as when families can safely go back to work and school, attend ball games, religious services and travel.
However, as many states start lifting stay-home orders and small businesses struggle to reopen, one thing is already certain: the timeshare world will never return to normalcy. While owners seek answers about cancellations, exits and future travel, industry leaders concede that developers will have to create new products, and services, to give consumers a reason to buy timeshare post-COVID-19.
There are 10 million US households with one or more timeshares, stuck in a traditional business model that tied them to contracts and maintenance fees for life. With that in mind, here is a snapshot of the timeshare universe, circa May 2020. As with all things timeshare, it’s a mix of good, bad and unbelievable.
Timeshare Snapshot May 2020
#1: The timeshare world, along with almost every segment of the travel industry, is in freefall. Amid widespread travel restrictions, resorts shuttered North American sales centers and closed properties to comply with stay-at-home orders and social distancing guidelines. A few have stayed open – but they are mere ghost towns of their pre-virus selves: no pools, spas, housekeeping, BBQs, kids club, resort activities, golf, common meeting areas or restaurant service. They’re also operating with limited staff, as resorts are laying off non-essential workers. Many resorts plan to reopen, tentatively, around June 1, but that date depends on flattening the curve of the COVID-19 pandemic.
#2: Major developers and legacy resorts are offering no-penalty, free cancellations on existing reservations through the end of June. While they differ by companies, these policies will be extended month by month, as long as the health-and-travel shutdowns continue. Some companies are processing cancellations automatically while others still require owners to call or cancel online. When will owners be able to re-use those reservations? No one knows. Major brand-name developers are hoping for a summer travel surge, but that is based on wishful thinking, not science.
#3: Timeshare resale and rental sites have also been hit like a hammer with cancellations and requests for refunds. Brokers who’ve already pocketed rental commissions now have to provide refunds or see their reputations plummet on social media. Individual owners who rent their properties to offset maintenance fees face the same financial squeeze from last-minute cancellations.
#4: Social media sites are exploding with damning comments about poor communications and cancellation policies from major developers. No company has escaped the backlash, which has been exacerbated by the interminable waiting times customers have to endure to reach a live person in owner services.
#5: Thinking of going to Hawaii once the travel restrictions are lifted? Great idea but be prepared for a mandatory 14-day quarantine period upon your arrival in the islands. Mandatory quarantines for out-of-state visitors are also being considered by other states, so plan ahead.
Disney Offers Long Term Options for Owners
With the exception of Disney Vacation Club, none of the major timeshare companies have offered owners comprehensive forward-looking plans for using their timeshares in 2020 or 2021. To our knowledge, no company has offered refunds on maintenance fees. No company has offered free getaway weeks for cancelled trips, or discounts on future maintenance fees. None have offered to expand their exit programs so that owners who need to get out, can get out.
Disney is the major exception, and for good reason. In addition to selling timeshares, the company also must protect the good name and reputations of all other Disney products, including the resort hotels and theme parks in Florida and California. Disney has long been considered the most consumer-friendly timeshare company on the planet – and it is reinforcing that reputation by providing creative options for owners during the COVID-19 crisis. For example, Disney recently notified owners that expiring points would be extended for a full year and that members might receive a credit in mid-December “for unused monies” from their HOA budgets. With operating costs reduced by resort shutdowns and employee furloughs, all HOA’S should see a virus-induced savings this calendar year. You can read the fully Disney statement here.
Disney Takes the High Road While Diamond Hunkers Down
While Disney sets the standard for owner relations during a crisis, Diamond Resorts, among other hard-sell timeshare companies, continues to look out for itself more than its owners.
No surprise, the marketing departments at brand-name timeshare companies continue to peddle getaway packages for travelers at a time when no one is traveling. Diamond, however, is the only company that is actively using the COVID-19 virus as a reason for existing owners to refinance their timeshare mortgages. There’s only one catch: you’ve got to buy at least 2,500 points, at $9.74 per point, to qualify for the mortgage refi. Doing the math, that means an owner would have to buy nearly $25,000 in new points to qualify for a lower mortgage interest rate. Great bargain for Diamond, but not for owners in a financial bind.
Diamond is pitching the refi/upgrade program under an email headline that declares, “We’re here for you.” The company promises to offer “financial relief when you need it” during the COVID-19 pandemic.
“While you may not be checking into one of our properties today, we have not stopped working to enhance your membership experience,” the email says. “To that end, we’ve identified ways to provide financial relief to members through refinancing options. Speak to a vacation counselor today to see if you qualify.”
The email was sent to existing Diamond owners with timeshare mortgages, which typically run for 10-year terms at 15% percent or more annual interest rates. For a typical 2020 buyer, a $25,000 upgrade purchase could turn into a $50,000 mortgage debt over the term of the loan.
Given the context of a global health and financial crisis, the pitch sounds reasonable, similar to the kind of refi offers that banks routinely send customers. But the true intent of the pitch resides in the fine print at the bottom of the email.
“This advertising material is being used for the purpose of soliciting timeshare sales.” Minimum purchase, 2,500 points at a price point of $9.74 per point. Overall minimum purchase price: $24,350.
We called Diamond owner services to ask how a $25,000 purchase of new timeshare points would provide “financial relief” to customers. They did not respond.
Diamond has a well-earned reputation of being a being a hard-sell timeshare company that is expert at selling timeshare upgrades to existing customers, many of whom are elderly. So, it is really no surprise that it would try to create a sales advantage out of COVID-19.
Diamond Offers Rooms to First Responders as Resorts Struggle
In a very charitable move that severely contrasts with its “all-sales, all-the-time” corporate personality, Diamond announced in April that it would provide free rooms to first responders and medical personnel in critical coronavirus cities. As of April 20, the company reported booking 7,250 rooms for the frontline fighters against the virus. Good work. Diamond and other timeshare companies could build on this positive program by considering the following options for consumers.
- Extend all 2020 usage options for five years so owners don’t lose their travel benefits. Forgive all cancellation penalties, as well, for 2020.
- Also forgive 2021 maintenance fees for all owners who cannot travel in 2020.
- Better yet, refund 2020 maintenance fees for owners who cannot travel.
- Provide no-cost exit programs for owners who cannot afford to continue their memberships and contracts.
- Send a $1,000 gift card to all families whose travel was cancelled by COVID-19.
- Timeshare CEO’s should donate their 2020 salaries to a compensation fund for employees, or guests, who contract the virus.
- Companies should also pledge that they will NOT impose special assessments on owners to cover declines in new timeshare sales.
It’s a time of struggle for every member of the timeshare ecosystem, from owners to HOAS, to resorts, employees and even developers. There are already signs, however, that the industry will have to embrace pro-consumer policies to emerge, intact, from the COVID-19 crisis.
One example? Calls to Timeshare Exit Team have surged as owners feel their once-prized timeshare is now a family liability. Too expensive, potentially unsafe and, as always, difficult to reserve. Unfortunately, solicitations from scammer exit companies also appear to be increasing as they seek to exploit owners who are desperate to dump their timeshare.
Another driver of change? Public timeshare companies, such as Wyndham and Marriott, among others, are reeling from falling stock prices as a result of the COVID-19 crash. Stock and industry analysts say companies will have to reinvent themselves – with new business models and products, such as short-term leases and automatic exit programs – to shore up their stocks and stay profitable in the future. Others, including top-level industry executives, say the current economic meltdown will simply accelerate the industry’s long-known little secret – that it has an unsustainable business model that was destined to collapse four or five years down the road, if not right now.
Every crisis spurs change, even in the slow-moving timeshare industry
The lessons-learned from the 2008 mortgage meltdown offer clues as to how companies will respond to the COVID-19 crisis. The timeshare industry reached its all-time high of retail sales 11 years ago, then the market collapsed along with the economy. It has taken all 11 of those years since for the industry to slowly climb back, finally hitting $10 billion in sales for a new all-time high in 2019. During that decade of slow recovery, many smaller timeshare companies went out of business or sold themselves to bigger companies. Consolidation became an industry byword, with bigger companies gobbling up smaller resorts around the globe. Independent legacy resorts, meanwhile, faced solvency issues as owners dropped out, maintenance fees rose and new buyers shunned the timeshare model. In many locales, older HOA boards hired major developers to manage their assets and maybe increase rentals and resales.
This same cycle of renewal is expected to resurface whenever the current crisis subsides – with at least two major differences. There will be fewer older travelers, who are the bulk of timeshare ownership today, and even fewer timeshare buyers, since Millennials don’t appear to like the lifelong commitment of timeshare ownership. One likely outcome foreshadowed by the 2008 meltdown: companies will offer tantalizing travel packages to get new and existing owners back into the timeshare trap.
The crunch time for all rank-and-file owners, and the industry, will come to a head in the fall, when owners receive their 2021 bills for maintenance fees.
Bottom line: family and financial circumstances will dictate answers to all of these questions, just as they do today. So, for the meantime, shelter in place and appreciate your loved ones, now more than ever. Perhaps that will become the lasting legacy of COVID-19.