Time-Share Companies Working to Keep Image Intact : Real estate: Despite Glen Ivy’s troubles, and memories of past hard-sell tactics, the resorts are maintaining respectability. The entry of Disney, Marriott and Hilton has helped.
In making a sales presentation, representatives of Glen Ivy Financial Group--the nation’s largest operator of time-share resorts--first reminded the prospective buyers of the firm’s slogan: “We’re Good Company.”
Today, few customers or industry colleagues probably agree.
That’s because 11 days ago, an army of state and local investigators raided the company’s Corona headquarters, confiscating records to be used in a state grand jury investigation of alleged fraud and overselling of units.
Although no charges have been filed and Glen Ivy denies any wrongdoing, the action was a bitter reminder of the time-share industry’s seamy past. Not long ago, it was known largely for sleazy come-ons, high-pressure sales and fast-buck operators.
“We are having to work a little harder to provide better recognition for our industry” in the wake of the Glen Ivy raid, said Thomas C. Franks, president of the American Resort and Residential Assn., a Washington-based trade group.
“We don’t want our reputation to be what it was a few years back.”
In fact, the time-share industry has come along well to respectability. This is largely because of stronger state regulation and the recent entrance of such highly regarded operators as Walt Disney Co., Marriott Corp. and Hilton Corp.
Despite the Glen Ivy case--whatever its outcome--industry officials say it is unlikely to derail the steady improvement in the image of time-share resorts, which began in the French Alps in the 1960s and spread to U.S. resort areas during the 1970s condominium boom.
As the name implies, time shares offer frequent travelers the right to stay in a vacation property for one to two weeks, either at a specific location or at hundreds of other affiliated properties. Usually, a purchaser pays $10,000 to $30,000 for a deed granting them a fractional equity interest in a unit, plus yearly maintenance fees of $75 to $500.
The time-share industry has expanded rapidly from sales of $490 million in 1980 to $3 billion in worldwide sales last year. There are now more than 2,400 time-share resorts in 67 countries.
American Resort predicts that purchases of time shares will reach $30 billion during the next 12 years as the same baby boomers who ignited the 1980s housing boom reach 45 to 54 years old--the prime ages for buying time shares and second homes.
Still, to reach such lofty goals, experts say time-share operators must overcome an image problem. Many Americans still perceive the industry as one that coddles con artists who engage in high-pressure sales and shady promotional practices, experts say.
The industry must also overcome resistance from tightfisted lenders, reluctant to finance what some consider risky projects. The operators must also provide unique vacation packages that will continue to attract more buyers.
“Back in the 1970s and early 1980s, time share was hard-sell stuff,” said William E. Sanborn, enforcement supervisor for the Florida Bureau of Time Share, a state that is home to more than 20% of the time-share market. (California is second with about 11%.)
Although sleazy sales practices have abated, Sanborn said, “we still have our work cut out for use as far as regulating the industry. What’s different today is that we are addressing the managerial aspects of time shares.” He said complaints that some properties aren’t properly maintained by time share operators have surfaced.
Steve Reinstein, a senior vice president at Los Angeles-based Summa Corp., said he remains wary of the time-share industry because of the bitter memories of the high-pressure sales tactics he encountered in the mid-1980s, when he visited a resort in Puerto Vallarta, Mexico.
“After they showed us a film (on the resort) they took us off into rooms and really put on the pressure,” Reinstein said. He recalls that when he balked at buying a time share and protested the sales tactics, the salespeople asked, “Why don’t you want to buy? Aren’t you enjoying your vacation?”
But stepped-up government regulation and the entry of resort heavyweights--such as Disney, Hilton and Marriott--are changing the old, unsavory way of doing business.
“There have been some horrendous abuses, no question,” said Mark Pacala, senior vice president and general manager of Disney Vacation Club, which in October began selling 57 units of its first time-share project in Orlando.
“But time sharing is an additional way to provide vacation opportunities for consumers. We’ve studied the market for a long time and found that most people who purchase time shares generally have a positive experience.”
Robert W. Miller, executive vice president and general manager of Marriott Ownership Resorts, agreed. “The industry has had some not-so-good publicity,” he said. “But (for us), the Marriott name overcomes any concerns consumers may have.”
Miller said Marriott, which has signed 40,000 vacationers for its 12 time-share properties, plans to double its size in the next three years.
As the resort giants launch their aggressive expansion plans, however, some are concerned that lapses in quality control could soon bring the industry a new round of criticism from vacationers disappointed with their accommodations.
Steven S. Miner, research director for the Ragatz Associates research firm in Eugene, Ore., said Marriott last year ended its affiliation with the industry’s largest time-share exchange company, Resort Condominium International of Indianapolis, because of complaints about some RCI properties.
“Big operators like Disney and Marriott are taking increasingly strict measures to make sure of the quality of their affiliates,” he said. “They want to avoid any damage to their reputations.”
Marriott officials could not be reached for comment on RCI. But a spokeswoman for RCI, which earlier this year acquired Disney as an affiliate partner, denied that Marriott’s departure was sparked by concern about quality.
“It was an amicable separation,” RCI spokeswoman Deborah Coons said. “They were headed in a direction that we were not. I don’t believe it was quality so much as wanting to do business a different way.”
Added Disney’s Pacala: “You do have to be careful. But we have surveyed their (RCI) property and we are confident the top 5% of their properties will be of a level to satisfy our members. Time share is a powerful concept. It’s simply gotten a bad rap from the way it’s sold.” In part, the enthusiasm for time shares by major resort operators stems from the doldrums engulfing the hotel industry, as well as another of time share’s main competitors: the second-home market.
The recession, overbuilding and a 1986 tax law that made it tougher to write off rental losses have made second homes difficult to sell. Prices are down as much as 20% in vacation haunts around the country. Hotels have also been hard hit by the recession and a glut of rooms, leaving scores of operators across the nation facing bankruptcy and foreclosure.
So time shares, which in many cases provide some real estate tax write-offs for buyers, are being touted as a more convenient and affordable alternative to hotels or second homes. “If consumers have any interest at all in a second home, (time shares) are the only option that makes financial sense unless they are very wealthy,” said Miner, whose research firm has studied the second-home and time-share markets.
Top Vacation Time-Share Players
Glen Ivy Financial Group is the nation’s largest time-share resort company, according to 1990 sales figures.
Company/Headquarters: Glen Ivy Financial/Corona. No. of owners: 52,700. 1990 sales: $101 million.
Company/Headquarters: Fairfield Communities/Little Rock, Ark. No. of owners: 95,000. 1990 sales: $75 million.
Company/Headquarters: Marriott Ownership Resorts/Lakeland, Fla. No. of owners: 40,000. 1990 sales: $70 million.
Company/Headquarters: Grupo Costamex/Mexico City. No. of owners: 17,000. 1990 sales: $55 million.
Company/Headquarters: Westgate Villas/Orlando, Fla. No. of owners: 20,000. 1990 sales: $50 million.
Source: Resort Development magazine.