Time-Sharing Puts Disney Magic to Test : Development: Company has done well in Florida, but Newport Beach project must transform industry image.

When Walt Disney Co. jumped into the time-share business two years ago, it entered an industry suffering from a serious credibility problem after widespread accusations of fraud and unscrupulous sales tactics.

But that foray into the time-share market in December, 1991, included a repackaging strategy by Disney officials aimed at sprucing up the shabby image of time-sharing. That strategy--which included a conspicuous absence of the very word time-share from the colorful brochures touting the Disney Vacation Club near Orlando, Fla.--appears to have worked.

“They have definitely put the Disney touch to time-sharing,” said David Matheson, a spokesman for the American Resort and Residential Development Assn., a time-share trade group in Washington. “They are really top notch.”

Some observers, however, speculate whether even Disney, which said Monday it will build a time-share development near Newport Beach, has the ability to burnish the tarnished image of the industry.

Disney is not the only high-profile national corporation to get into time-sharing in recent years. Marriott Corp., Hilton Hotels Corp. and International Telephone & Telegraph Corp. have also invested in time-share resorts.

But there continue to be abuses, despite the recent entry in the market of publicly traded companies with reputations to protect, said Ralph E. Stone, a lawyer in the Federal Trade Commission’s San Francisco office. “Although they add credibility, I’m not sure they solve any real problems” that the industry faces, Stone said Tuesday.

As long as some companies engage in hard-sell tactics and offer unrealistic promotions, Stone said, the industry will continue to suffer from a lack of credibility.

The pall over the industry wasn’t always so dark, and companies that offered lifetime ownership in vacation properties made millions of dollars trading on dreams of spending lazy weeks at beach or ski resorts.

Glen Ivy Corp., a Corona-based time-share operator, was one of the most lucrative operations. In its heyday, the Glen Ivy time-share group drew thousands of prospective customers to its ritzy Newport Beach conference rooms each week, dazzling the would-be vacationers with slick video presentations, fast-talking sales representatives and promises of free dinners, televisions, cars and other prizes.

But after becoming embroiled in accusations that the company was guilty of defrauding thousands of owners by overselling time-share weeks and pressuring customers with one-time-only offers, the company folded last year.

Glen Ivy is not alone. In October, California Riviera Vacations in Laguna Hills agreed to pay $100,000 in civil penalties to settle charges that it lured customers with deceptive advertising. The company agreed to pay the settlement but admitted no wrongdoing.

The state attorney general’s office is still investigating that company, according to a source familiar with the case.

And as recently as Monday, the FTC sued a Fountain Valley firm for allegedly defrauding as many as 20,000 time-share owners by falsely promising to match them up with prospective buyers of their vacation-resort stakes.

Stone said that pressures from the resale market will feed further abuses as supply vastly exceeds demand. Though there are an estimated 500,000 units on the resale market now, he said, only about 6,000 units--new and previously owned--are purchased each year.

Those units, most of which are being sold at highly discounted prices, compete with new time-share properties--including Disney’s, Stone said. Some companies are forced, therefore, to increase the use of high-pressure sales promotions.

“It can be a hell of a problem,” Stone said.

Michael Burns, vice president of sales and business development for Disney Vacation Development Inc., said that the company’s 410-unit time-share complex at its Epcot Center theme park outside Orlando is half sold after 27 months of operation.

But the company is more than pleased with the progress, he said, considering that Disney does not use promotions such as giving free dinners or other prizes in exchange for a sales pitch.

Instead, the resort hands out information about the time-share complex at its amusement parks and hotels, including Disneyland and the Disneyland Hotel. Prospective customers are encouraged to take videos and brochures home with them and call sales representatives at their leisure, Burns said.

Customers also have 30 days to cancel the purchase, Burns said.

“We knew we had to be 180 degrees different,” he said. “It seems to be working very well.”

Disney Vacation Development is also planning resorts in Vero Beach, Fla., and Hilton Head, S.C., as well as the 650-unit Disney Vacation Club between Newport Beach and Laguna Beach.

The Orange County complex is expected to open by early 1997. Time-share units are expected to start at $12,390, making them among the most affordable in the nation.

Burns, a longtime time-share executive for Hilton and other large companies, said that it is not Disney’s job to set new standards for the industry.

He said that he and other time-share executives deplore the tactics of some less-reputable operators and hope that, with the inclusion of large hotel chains in the business, the industry will begin to police itself better.

Time-Shares: What You Should Know

* Time-share resorts in the United States: 890; 249 with space available

* 1993 U.S. sales: $1.5 billion

* 1994 projection: $2 billion

* 1993 sales worldwide: $4 billion

* Other popular locations: Mexico, coastal areas of Western Europe and Greece

BEFORE YOU BUY

* Check out the developer: American Resort Development Assn. can provide a list of members who adhere to its standards. Its booklet “Resort and Urban Timesharing: A Consumer’s Guide” is available to the public. Information: (202) 371-6700; or write ARDA, Suite 510, 1220 L St. N.W., Washington, D.C. 20005.

* How is property managed? Find out what services are provided; ask to see owners’ association budget. Are there adequate reserves for repairs or major replacement work? Does the rate of increase for annual maintenance fees exceed inflation?

* Get references: Ask developer or management company for names of current time-share owners and question them

about the property. They may be able to tell you about the exchange power of the location and season you want to buy.

* Visit the resort: Try to spend some time at or near the resort in question. Visit the competitors, too. If this is impossible, get photographs.

* Beware of high-pressure sales: The big players like Disney and Marriott have a laid-back approach to sales. But some companies try to lure buyers with heavy-handed sales pitches and prizes. Better Business Bureau or local consumer offices can say whether complaints have been lodged against a particular company.

* Read sales contracts carefully: Make sure you get in writing whatever promises are made by salespeople. Are you buying a lease interest that expires after a few years? Will you have vacation exchange privileges within a network? Will the developer provide financing? Find out how long you have to back out after signing a contract.

* Consider resales: You are more likely to cut a better deal with owners than developers, sometimes for just a fraction of the original price. Time-share resale brokers are listed in the Yellow Pages. TimeSharing Today, a quarterly publication, has classified ads that list units for sale. Write to TimeSharing Today, 26 Franklin St., Tenafly, N.J., 07670.

Sources: American Resort Development Assn., Associated Press

Researched by JANICE L. JONES / Los Angeles Times