June 18, 2021
By Ron Roberts, Sage Marketing/Legacy Solutions International, LLC
https://legacysolutionsinternational.com/
In this week’s TIMESHARE TALKS, Ron Roberts of Legacy Solutions International, LLC adds his decades of timeshare experience to our growing list of resources. Legacy (old) resorts face serious challenges. Our interview with Ron talks about the ten biggest mistakes made by timeshare Homeowner Associations.
Ron’s Timeshare Talks interview
https://www.youtube.com/watch?v=fZ5FmhEtiG8
Over the last 50 years, the timeshare industry in America has matured into something more complicated, dynamic, and in some cases, unforgiving. After a resort has been sold out, the management and every-day running of the project is typically turned over to a Homeowners Association. Sometimes a subcontracted management company performs daily onsite processes. In the absence of an experienced management company, and sometimes in conjunction with the resort manager, serious tactical, business, and operational mistakes are made that jeopardize the stability, future, and “quiet enjoyment” promised by the original developer and their agents.
This article, previously published in Resort Trades, seeks to identify, discuss, analyze, and correct what we could call the “mortal sins” of HOA officers, board members, and volunteers who, with best intentions, strive to provide an enjoyable and trouble free vacation ownership.
Experience
The underlying culprit in most of the issues that strike at a resort’s survival is the lack of a skill-set necessary to foresee issues, solve problems, and operate the resort in a manner that provides resort stability in order to ensure the resort’s future. An uncertain future jeopardizes the owner’s quiet enjoyment and guaranteed use. Homeowner boards are staffed with people of diverse backgrounds and experience. Some HOA boards may lack the correct mix of skills and experience necessary to fully carry out duties to protect the resort’s long-term stability. A retired school teacher, mortgage broker, or construction manager, for example, while adept in their prospective fields, may not provide the combined experience necessary for the reality of today’s timeshare industry.
We ask quite a bit of our volunteer HOA board members. Volunteering is a vestige of the individual, hoping to make a small difference in someone’s life. It’s a process that is necessary, commendable, and human. If we think long enough about volunteerism, its inherent flaw is that there is always a limit imposed on such service. No one can be expected to perform indefinitely at required standards without pay. The reality or “disconnect” is that resorts often require more time than a volunteer can contribute.
Diminishing Revenues
Ageing resorts and owner bases lose owners due to a myriad of issues. Resorts that sold out dozens of years ago invariably face owners who die, stop vacationing, or lose interest. In a surprising number of cases, the owner may have simply forgotten the great reasons why they initially purchased their timeshare. They feel their ownership has become a burden.
HOA boards seem to have a short memory when it comes to the previous year’s revenue. A resort can chalk up hundreds of thousands of dollars a year in missing revenues – losses that increase each year and threaten the resort’s future.
Available Solutions
The solution involves turning an owner-base over to a younger demographic, but achieving board approval for this easysolution is somehow excruciatingly difficult.
Resale Programs
The obvious solution is a Resale Program. Warning signs abound well before an owner stops paying maintenance fees. Calls to the resort increase from owners asking about selling, renting, or surrendering their unit. Resistance to helping owners or providing a resale program exacerbates the problem. Some believe they already have a program. Others maintain that a “resale program would be the last thing we would do!” Such reticence is short-sighted, remiss, and negligent. Sending your owners to the internet to “find a buyer” is NOT a solution! I have heard many reasons why Homeowners Associations do not want a Resale Program. None are valid.
A well-developed Resale Program can bring delinquencies to a minimum and turn the owner base over to that younger and more enthusiastic owner base. This is critical in order to eliminate abandonment issues.
Rental Programs
Approximately half of all associations do not offer a rental program. This missed opportunity leads to substantial revenue shortfalls, and is also negligent in its application! Owners of fixed weeks must vacation the SAME week each year, a predicament far too often overlooked. When that week gets interrupted by unforeseen circumstances, the owner has no alternative but to rent or let it go empty. Most owners do not have access to legitimate rental mechanisms. This foments serious opposition towards next year’s maintenance fees! However, there are available a number of legitimate timeshare rental companies that do a good job with owner and resort owned inventory, including handling entire blocks of inventory.
Delinquency Remediation
The collection of delinquent maintenance fees is mishandled 99% of the time! Strategies are often ineffective and conducted in a way convenient for the resort. A late fee “reminder” may be sent. There is often no one in-house to “handle” late fees, so the owner is sent to a collections company. The standoff begins! The relationship with the owner deteriorates morphing into a combative owner – and a perpetual delinquency. Instead of a fun-filled resort experience, ownership becomes a source of frustration for both the owner and resort personnel. This is one of the reasons for timeshare’s bad press. Delinquency progresses toward “full abandonment” and in most states, a long, expensive judicial process to get deeds and titles back.
Proper remediation is the opposite of combative. It is helpful and demonstrates cooperation, compassion, and flexibility. At the first sign of a late maintenance fee, the in-house salesperson calls the owner to invite them in, offers to rent the week to take care of the fee, and inquires as to whether the issue is a temporary problem like job loss or a more permanent problem like chronic illness. Remediation can take a number of forms – rental, resale, take-back with a fee, or outright forgiveness.
In some situations, owners may be brought into good standing by application of a package of benefits which costs the resort little or nothing such as “Bonus Days”, “Instant Resort Rental”, “Country Club Benefits”, “Free Instant Getaways”, or reminding the owner why they originally purchased. Such efforts are less expensive and return much to the resort over time. Delinquencies will substantially diminish thus avoiding crushing, long-term revenue losses!
Points vs. Weeks
Many resorts that have been sold out for 25, 30 years or more still operate within a “weeks” configuration. Such older legacy resort arrangements and structures obscure vast differentials in demand, location, seasonality, amenities, and demand variables. The exchange company’s algorithms for completing exchange requests and fulfilling the “exchange promise” has been substantially tested, to say the least. The exchange companies have devised a cleaner, fairer, and much less frustrating exchange process by converting to points. There is little doubt that points-based resorts enjoy less frustration in the exchange process, less maintenance fee fallout, and more substantial owner contentment. Many weeks-based resorts with dwindling owner-bases and diminishing exchange success continue to resist conversion to points – at their peril!
Fixed vs Float
The operative word is flexibility. As with a rental program, owner occupancy, satisfaction, and fallout can be avoided if the resort has a mechanism to float previously “fixed” weeks into a system that allows owners to take their pick of weeks within a certain predetermined period, rather than being forced to use the same week each year. This may require a change in the documents, but would greatly enhance owner satisfaction levels and reduce delinquencies. In those resorts where floating weeks were introduced, owner satisfaction increased and owner occupancy increased by a good margin.
Deed vs. Trust
It seemed like a good idea at the time. Deeded weeks seemed safer for the consumer and provided a sense of ownership. Developers saw good consumer sentiment. However, deeded week foreclosures can be an expensive and time consuming judicial process. Getting back deeded week titles and putting them into a trust allows subsequent sales to be a “Beneficial Interest in a Trust” to avoid excessive transfer costs. Many older resorts strain to re-acquire titles at great cost and time, but still continue to issue new deeds.
Reticence – The Resort Killer
The penalty for treading water is failure and an increase in bankrupt resorts, not to mention the unenviable and personal stark responsibility for taking away future vacation experiences for hundreds, if not thousands of owners who relied on your wisdom to do the right thing. Flexibility, bold moves, and avoiding reticence can overcome any issue when action is applied. If we are to address these new concerns, great care should be taken to accurately observe, understand, and take the proper course of action to ameliorate looming problems. While some Homeowner Associations have management companies to help guide some of their actions as the original managers moved on, others operate on their own.
Homeowner Associations must take the initiative to make the correct calls and take bold action – for the owners’ sake as well as their own.
Related articles:
Keith Trowbridge is known as the Father of Timeshare. He describes the problems faced by Legacy (Old) Resorts.
March 4, 2019 https://resorttrades.com/8615-2/
After more than 50 years of watching trends in the timeshare, fractional, and interval ownership industry, it has become very clear that there are pressing issues that demand to be addressed for many “legacy” properties. Older resorts face serious cash deficits in America today as HOA’s and resort managers see revenues dwindling, revenues which are sorely needed to run their hospitality operations and keep aging resorts viable.
Widespread financial losses are due to rising delinquencies, older owners foregoing use of their units due to illness, incapacitation, and passing, and lack of resales, all which result in standing inventory. HOA’s must either sell inventory or rent it quickly to avoid substantial operational deficits. Unpopular special assessments drive a downward spiral of discontent and instability.
Original developers were reluctant to start “re-sale programs” for fear of competing with that developer’s unsold inventory. Unfortunately, HOA’s have carried on this unholy tradition and they continue to exacerbate their cash flow problems by holding on to inventory that could be sold.
Whether caused by intent, design, or adverse result, legacy resorts (and the problems thus generated), must implement mechanisms to remove unwanted inventory, aggressively rent unsold inventory, and seek to generate revenues or cut costs wherever necessary.
It is amazing, but true, that many HOA’s and resort general managers are completely unaware that “revenue generation programs” are available! Positive steps can be readily taken to address the financial pressures of mounting property maintenance and higher operational costs, offset delinquencies, and counter a diminishing owner-base.
Related article: TOWB is About Transparency in Timeshare
https://tarda.org/blog/41-experts/196-why-wouldnt-my-resort-take-my-unit-back