For more than 25 years, Mary Ann Gutierrez, 77, has spent several weeks a year at on the southern shore of Lake Tahoe, Calif., often playing host to her children and grandchildren at one of two timeshare units she owns.
When she checked into one of the properties last year, she was stopped at the front desk. A $100 gift card would be hers if she attended a presentation by Diamond Resorts International, the company that owns the resort. But first, she had to fill out some papers and supply her credit card information.
The gift card came with a cost, as Ms Gutierrez soon learned. For five hours, she said, Diamond representatives pushed her to give up both of her timeshare deeds, including one at the nearby Tahoe Beach & Ski Club, a resort that Diamond does not own. With the upgrade and membership in Diamond’s ownership points system, they said, she would keep her maintenance costs low and could use her points at other resorts in the company’s network. It would cost just $30,000 upfront, they said.
Even when representatives suggested her maintenance fees would rise if she didn’t switch, Ms Gutierrez kept declining, saying that the cost was too high. Undeterred, the Diamond representatives suggested that she ask her children to pay for the upgrade. She continued to say no and, at last, they let her go.
The feeling turned to shock, however, when a Diamond representative handed her a record of avoided charge in the amount of $4,840 on her credit card. The representatives had been so certain that she would agree to the offer that they had charged her card for the down payment — even though she had not given approval.
After crashing in the financial collapse, timeshare sales are rising again, and with the high-pressure sales practices such as those Ms Gutierrez described. Perhaps acknowledging these problems, some in the industry have cautioned in recent months that regulators from the Consumer Financial Protection Bureau could increase their oversight. New rules would affect all operators, including big players like Diamond, Interval Leisure Group, Marriott Vacations Worldwide and Wyndham Worldwide. But tighter regulation might have an especially big impact on Diamond because its business is devoted solely to timeshare sales and management.
Interviews with timeshare owners, lawyers and other specialists in the arena, moreover, suggest that Diamond’s sales practices can be especially forceful.
Jeff Weir is a Diamond timeshare owner and journalist who writes about the industry for RedWeek, an online timeshare site, and regularly attends sales presentations to keep tabs on tactics employed by timeshare companies.
“In my experience, Diamond is much more ambitious, aggressive and downright nasty in their sales presentations compared to Marriott and Westin,” he said in an interview. “Diamond just has an amazing reputation for being tough on people.”
David F. Palmer, Diamond’s chief executive, sees its sales methods in a very different light. In an interview, Mr Palmer described how Diamond tries to bring fun to its customer interactions, both before an initial sale and once a member buys in. “The industry didn’t quite realize that you have to engage and create intimacy and pervasiveness with somebody that you don’t really know,” he said. “Our lifetime subscription model creates a series of systems where you can track that engagement and make sure you are constantly providing a series of experiences that exceed their expectations over many, many years.”
Neither Mr Palmer nor the company’s spokeswoman would discuss Ms Gutierrez’s experience. But on the topic of high-pressure sales tactics, Mr Palmer said, “I have belligerently zero tolerance for anyone who goes off script.”
Diamond has had great success in the industry. In less than 10 years, the company’s revenue reached $845 million last year, more than double the 2010 figure. Its average timeshare transaction price was $21,700 last year, up from $12,510 in 2012.
But while Diamond’s growth has benefited its executives — Mr Palmer received a total of $19 million in compensation in the most recent two years for which figures are available — the company’s business practices seem to have alienated some customers.
In lawsuits and in interviews, customers complain not only of high-pressure sales but also of sky-high maintenance fees and frustration at procedures that block club members from taking vacations where and when they want. Perhaps most distressing to owners is the fact that once you buy into a timeshare it is almost impossible to get out.
Larry Vicks, a retired engineer in upstate New York, is a disgruntled Diamond resort member who read the transcript of a Diamond conference call with Wall Street analysts and investors. “It made me laugh how they are making boatloads of money,” he said in an interview. “The reason I’m laughing is that it’s all at my expense.”
‘We Love to Say Yes’
About nine million households in the United States own timeshares, and sales have increased about 25 percent since 2010. In a typical timeshare deal, a buyer pays for an interval at a resort condominium, maybe one or two weeks a year, and agrees to pay homeowners’ association dues covering maintenance and taxes on the property. Some buyers pay upfront, while others finance their purchases often through the company selling the units.
In the early years of timeshares, owners received deeds specifying their ownership. Now, the industry has moved to a system where buyers receive a certain number of points they can use for time and amenities, rather than a deed.
Many timeshare buyers say they like being assured time at a resort they enjoy without the hassle of owning a second home. Using their points for a vacation at a different location managed by their timeshare company is another potential benefit.
Diamond, which was created in 2007 by Stephen J. Cloobeck, a veteran of the vacation ownership industry, has its headquarters in Las Vegas. The company operates 99 resorts worldwide and has associations with an additional 255 resorts and four cruise itineraries that it says its members can use. The company’s tagline: “We Love to Say Yes.”
But two lawsuits filed against Diamond suggest a less solicitous attitude, one that reflects the experience of Ms Gutierrez in Lake Tahoe. One case was filed in October 2014 in California. In it, 11 timeshare owners said they had agreed to pay to upgrade their membership in the Diamond resorts. After the upgrade, the lawsuit says, the members were unable to use the resorts they had hoped to and their maintenance fees rose even though Diamond’s representatives had told them they would fall.
A Florida lawsuit filed in March 2015 said that Diamond tried to pressure the plaintiffs to upgrade to what amounted to “programs to fleece more and more money out of the plaintiffs.”
The two suits seek cancellation of the contracts, money back and unspecified damages.
Diamond declined to comment on the California case; it said that the litigants in the Florida suit “never made a purchase from Diamond” but were owners in a resort company it had purchased without assuming such liabilities.
Not all of Diamond’s customers are unhappy, of course. Six members whose names were supplied by Diamond were all complimentary.
Walter Hunter, a retired chemist who lives in Fort Collins, Colo., is one. A member of the homeowners’ association board at Daytona Beach Regency, a Diamond resort in Florida, Mr Hunter, 94, said in an interview that he was happy with the company’s management. With Diamond, “we’ve been more pleased, the resort is better managed,” he said. Although he acknowledged that maintenance costs rose significantly after Diamond came in, he said, “We are convinced that they are doing a good job.”
A Potential Liability
Owners of timeshares in desirable resorts with unusual attributes, like a private beach, can often sell their ownership interests on the secondary market. But in areas glutted with condos for sale or rent, selling a timeshare can be almost impossible. In these cases, timeshare ownership can become an almost perpetual liability.
A recent search on eBay, for example, showed more than 700 timeshare listings for sale. Many, from Pennsylvania to Hawaii to Florida, can be purchased for $1. In its financial filings, Diamond acknowledges that “generally, members of the clubs do not have the right to terminate their membership.”
Rubén Peña’s experience is a case in point. An engineering consultant with Pro Data Inc. in Jersey City, Mr Peña has never been inside the Las Vegas timeshare he bought 15 years ago. After spending roughly $42,000 to buy and maintain the property over those years, Mr Peña stopped paying his loan, which had an original interest rate approaching 17 percent, and maintenance fees. He bought the timeshare from a company called Pacific Monarch Resorts, which went bankrupt. Diamond now owns and manages the resort.
“I wanted to deed back the property to Diamond and get my equity of about $27,000 out,” Mr Peña said in an interview. “But I got no response whatsoever.”
Before he stopped paying his loan in 2014, Mr Peña was being charged $3,262 a year in interest, taxes and maintenance fees for his ownership interest in the timeshare. Expedia.com offers a week at the property for, at most, a little over $2,000.
Diamond declined to comment on Mr Peña. But the company said that one reason it doesn’t buy back members’ stakes is that it would create accounting problems related to how Diamond had booked the revenue.
Posted on: 15th May 2017