Nearly 440,000 transactions
and $10.5 billion in total industry sales in 2022, a
30% rise in prices in just five years. That's the
timeshare industry. It was really a post
pandemic winning sector. It was not incentives or
lower prices by any means. It was consumers staying at
home and consumers having more money and willing to
spend it. Nearly 10 million US
households own a timeshare, but despite a massive
industry and rapid growth in recent years, it all comes
with a lot of controversy. They're not held accountable
for what they tell you prior to closing, so they can
boldface, lie to you, and do whatever they have to do to
make the sale. And who cares if they hurt
you? Websites like Timeshare
Users Group and Adweek.com list timeshares for resale,
many of them for free. But few consumers know
about them, and companies rely on that lack of
awareness. The actual reality is, is
that timeshare depreciates between 90 and 100% the
moment you sign that piece of paper. And if that were
true and common knowledge, or the salesman presented
that in the sales presentation, not a single
person would buy another timeshare. This is Sheila Wagner. She took her first vacation
in Pigeon Forge, Tennessee, in May of 2020. During her trip, she was
invited to a timeshare presentation with Capital
Vacations, one of the largest privately owned
timeshare companies in the US. We love the place we were
staying and it was 2020, so we were told that they were
offering a deal where they would give you double the
amount of points for signing up. For $31,000 in $1,700 in
annual maintenance fees, Sheila got 300,000 annual
timeshare points. Traditionally, timeshares
have been sold as fixed or floating weeks. Today, it's
mostly a point system. The industry has made it
very, very clear that today's consumer wants
flexibility, wants the ability to go different
locations each and every year. And the point model
that almost all major developers have adopted
reflects that. Shortly after going back
home, Sheila tried to book a trip and soon realized the
destinations that she had hoped for weren't an
option. After many calls with
Capital Vacations, she was told she had to upgrade for
another $42,000 to be able to use her points in the
way that she wanted. She says Capital vacations
even promised to buy back her points to cover the
cost of the upgrade if she put it on her credit card. She later found out that
wasn't true and had to resort to other measures to
pay off her new loan. Interest rate being 15%. As you can imagine, that's
huge. So the only thing I could
do was borrow money from my 401 K my retirement to pay
off the $42,000 loan. Her maintenance fees have
now surpassed $5,000, well above the national average
of nearly 1200. I even told capital, if I
won the lottery, the first thing I would do is buy
their company and fire all of them. I could retire if
I had my money back from this, but I can't retire
right now because of this situation that I'm in. Capital Vacations manages
170 of the roughly 1500 timeshare resorts
nationwide. Nearly half of the just over 200,000 units
in the United States are in Florida, Hawaii and
California. Some of the biggest hotel
brands, like Marriott and Hilton, have been in the
timeshare business since the 80s and 90s. The timeshare piece of the
business, it was smaller. Uh, it was arguably less
profitable, more capital intensive, and had a lower
growth rate than the hotel business that we know
today. So in 2011, Marriott
International spun off its timeshare business, and in
2017, Hilton and Wyndham followed suit. Basically, the hotel brand
company said, we are the franchisor. We own the
brands. Let's let someone else, in
this case, the timeshare companies, grow our brand
on our behalf, and they pay us a license fee or a
royalty fee to do so. In 2021, Wyndham
Destinations acquired Travel and Leisure, which is now
its parent company. This is just one of the
many consolidations that's occurred over the past
decade. Wyndham is going to make
about $90 million from TNL, and that's about 13% of
Wyndham's adjusted earnings profile as a combined
company. Hilton. The license fee
that HGV pays is going to be about $140 million. Uh, all variable, and
that's about 4.5% of Hilton's earnings. The largest privately owned
timeshare company, Westgate Resorts, has an annual
revenue of $1.5 billion. The 2012 documentary Queen
of Versailles spotlighted Jackie Siegel, the wife of
David Siegel, founder of Westgate Resorts. And a 43 year old mother of
eight. Who lives in a 90,000 square
foot home in Florida modeled after the Palace of
Versailles. I got the private jet
experience here in my living room so I can enjoy my
caviar first class. According to a study out of
the University of Central Florida, 85% of timeshare
owners regret their purchase, but getting out
of one is not easy. Even when paying off a
loan, the owner is perpetually accountable for
an ever increasing maintenance fee. The Better
Business Bureau has received over 3000 complaints for
Hilton Grand Vacations, Wyndham Destinations and
Marriott Vacations Worldwide. Typically, a mortgage
company will say, sure, if you pay off the loan, then
you can get out of the timeshare. But the
timeshare company sometimes are also the lending
entities, so they own the mortgage, and that gives
them more flexibility to find a way for you to
curtail your exit and pay off the mortgage, or not
all at the same time. When the housing crisis hit
in 2008, Americans owning timeshares felt the
pressure. In a 2009 quarter one earnings call, Marriott
said it had $28 million worth of contract
cancellations. Industry-wide, owners
defaulting on payments more than doubled from 2007 to
2009. This pressure gave rise to
the timeshare exit industry . LLCs formed, allowing
owners to transfer their unwanted timeshare deeds
over for a few thousand dollars. But many of these
exit companies that formed at the height of the
financial crisis turned out to be empty shell
companies. The resorts didn't catch
wind of this until maintenance. They realized
they were sending 2000 maintenance fee bills to
the same address in Delaware, and no one's
answering the phone. So that really just rocked
the industry, that they've closed that loophole
because it just got just got absurd. And it just
absolutely crippled some of these companies. With
thousands and thousands of defaulted ownerships. Timeshare exit companies are
still found all over the internet. But nowadays,
Rogers says that the strategy of these exit
companies is often just telling owners to default
on payments. And the owner is overjoyed. Oh my goodness, I finally
got out of my timeshare. This company did exactly
what they told me they were going to do and getting me
out of my timeshare, not realizing that all they did
was stop paying and roll the dice. The US Department of Justice
has made efforts to curb exit company scams like
this in November of 2022, or this in Washington state. Between 2015 and 2021,
Personal finance author and radio host David Ramsey
allegedly received more than $30 million to promote
Timeshare Exit Team, a company later known as
Reed Hein and Associates. I've been recommending these
guys for the past three years, and I am so
confident that they can get you out of your timeshare. Reed Hein and Associates
shut down in 2021. In April of 2023, Ramsey
was sued by his listeners and the case is still
ongoing. The major timeshare industry
itself did not address this problem early enough to
create responsible exit programs for their
customers. This is Tom and Kelly
Schriver. They bought two timeshares
in Tennessee. One in May of 2022 and one
in October of 2023 that they soon wanted to get out of. When contacting a timeshare
broker, they were told that their points were worth a
fraction of what they paid. The rescission period where
you can cancel a timeshare is dependent on state laws
or outlined in the contract itself. The Shriver's
contract with Wyndham was ten days. They took out
about $34,000 worth of loans between the two contracts. The only solution that
Wyndham's exit program offered was I had to pay my
timeshare off. I had to pay $15,500 to
them and then whatever else, other fees they charge for
us to exit out of it. There are generally three
ways to exit a timeshare. The first, either give it
away or sell it on resale websites like Timeshare
Users Group and Redweek.com. Timeshares are often listed
for free, as owners are looking to unburden
themselves from the maintenance fees. No situation where buying a
new timeshare from the resort is the best choice
for you. It became common knowledge
that the resale market existed, and not only that,
but the resale depreciation is almost 100% in so many
cases. Uh, the industry would
just, I won't say would collapse, but it would
certainly fundamentally change overnight. The FTC warns of timeshare
resale scams, where owners are contacted by a company
offering to sell their timeshare. They collect an
upfront fee and then disappear. The second
option for exiting is a deed back program, where certain
timeshare companies will work with you to take it
back. I'll use Disney as the gold
standard because that's what I think it is. They're so
brand conscious. Hilton is the same,
Marriott is the same. They they want to get rid
of the the clutter on the internet reduces their
brand value. And the older legacy resorts
have a different set of economic problems where if
they let if they let you out of a timeshare, I'm going
to have to pay more to to offset your loss of income. If you have paid off the
loan and only owe maintenance fees, a final
option could be defaulting on payments. But this comes
with risks like foreclosure. And I know sometimes
timeshare companies will talk about, well, if you do
that, we'll we'll we'll send a letter ruining your
credit. And that sounds like a good scare tactic. It works with a lot of
older couples because they grew up in a depression era
where they were they didn't have credit. So when they
got it, they want to keep it. Very, very rare and almost
unheard of for a timeshare, whether deeded or not, to
come after an owner for unpaid maintenance fees. You know, it's a coin flip,
whether they'll report it to the credit agencies, if
you're defaulting on a loan, that's a much different
matter. And the person coming after you for the
loan is the lender. The Shrivers said that they
were ready to default on their Wyndham loan
entirely. I've even thrown around the
idea of bankruptcy. But the thing is, is this
is the it's the principle of the whole thing. Uh, I'm
not giving them money because of the way they
went about what they did. That's when they decided to
contact the attorney General's office in October
of 2023, as a last ditch effort. About two months
later. Wyndham. I sent them an
email to confirm the cancellation of their
contract, releasing them of all financial obligations. Hilton Grand Vacations,
Marriott Vacations Worldwide, Wyndham
Destinations and Capital Vacations declined or did
not respond to CNBC's request for a comment or an
interview. If you do decide on
attending a timeshare presentation, the FTC
recommends researching the company before going into
it and asking the salesperson why today is
the only day they can offer you that deal. Understand
your ability to cancel the contract and read through
the paperwork on your own before committing. It's hard enough to make
your living now with the cost of everything and and
just, you know, pay paycheck to paycheck and living in
this world right now, let alone having, you know,
people like that take advantage of you.
