In 1946 Fred Pontin, Billy Butlin and the Warner brothers enlarged their holiday camps to cater for the pent up demand in the UK for holidays following the end of the Second World War. These entrepreneurs wholeheartedly believed there would be an expansion of holidaying, and they were right.
Their holiday camp operations formed the model for the modern package holiday industry, it rapidly expanded as flying became less expensive, more available and holidaymakers were becoming more daring, swopping Margate for Malaga and Cleethorpes for the Canaries.
It was into this mass market that holiday timeshare arrived in 1963. Initially timeshare commenced in Switzerland, but after scrutiny the model was quickly taken up in the US and arrived back in Europe (Scotland) in 1975. Within 5 years timeshare resorts were exploding onto the scene in all major holiday destinations throughout Europe with Spain leading the way.
Timeshare was a very different product from package holidays. In short it offered something that package holidays didn’t –top quality, self-catering accommodation in accessible places, idyllic surroundings and added security in that it was always yours. The concept was novel and not fully understood by consumers so initial sales were sluggish.
By the early 1980’s massive building programmes were under way in the Canaries and Costa del Sol which needed aggressive selling techniques, imported from the US, to fill the weeks available.
By the mid 1980’s, with sales rocketing, timeshare demonstrated it had the potential to be a major player in the holiday business. But the level of complaints of miss-selling had rocketed and reached epidemic proportions, resulting in an Office of Fair Trading investigation and report in 1990.
At this stage it took the government 8 years just to react to the epidemic of mis-selling, false imprisonment of consumers and criminal selling. That said this report formed the basis of the Timeshare Act 1992, but did little to stem the complaints. The selling party was not stopped and the staple of aggression, mis-selling and fear continued until the government had another bash at helping the consumer.
A tougher law was introduced throughout Europe in 1998 which, whilst having only a marginal effect on complaints, it did begin to reduce the number of aggressive sales being made. Consumers now had a cooling off period and a ban on the taking of an up-front payment. That said it was ignored by some sellers and the ruse of mis-selling continued.
The problems of the industry were further compounded by the increasing availability of rental property, especially through the Internet, of equal or even better quality properties than timeshare but at similar or lower price.
By the mid 2000’s the industry was beginning to turn pear shaped – the potential of being a leading light in the holiday world was now looking dim. Timeshare had failed to keep up with the competition and its anti-consumer practices were becoming apparent to all. The media had a field-day exposing consumer ill treatment, poor practises and downright distress.
Reducing sales volumes coupled with an increasing number of owners “walking away” resulted in a decline in the number of timeshare owners in Europe.
This ownership decline accelerated and today only one third the number of owners are willingly paying their annual fees, compared to the peak year of 2000. If this decline continues for another 5 – 8 years there will be hardy any timeshare industry left in Europe !
This is a normal backlash of consumers who get locked into contracts by shady means.
An industry that could have become a major force in the holiday sector is now on the edge of self extinction and the industry caused it. They could not stem the exodus and since the year 2000 it has been bouncing from pillar to post from one disaster to another. If you consider the RDO and/or the OTE have had 14 years to make a lasting course correction and you look at the disaster around us then you have to adjudicate that the masters in charge are either unwilling or incapable of putting matter right!
It says everything when a barrister is in charge of the RDO. As the main issue facing them over the last ten years is stopping the tidal wave of litigation and group actions.
This report identifies the reasons why the industry fails to achieve its full potential and points a finger at those responsible.
HOW TIMESHARE WORKS
The starting point is the idea of sharing! I great social and human concept if there ever was one.
Sharing the cost of owning a holiday apartment appeals to the very sole. The concept of only buying the time period that you want with the ability to exchange your time period with that of another owner somewhere else in the world has to be a winning product.
Then it got so hellishly complex! ! !
Behind every timeshare is a vault of complications with respect to ownership, titles, trusts, blind trusts, secret trusts and off shore companies. The entire system is utterly messy in respect to jurisdictions and legal arenas. In some cases you research issues and apply them and come right back to the beginning again. It’s called an orbital arrangement. One has to consider that either these business men were the Mensa elite or the complication exists to confuse. They say the simplest of terms are the best and the complexes are designed to conceal. Therefore is the industry a designed subterfuge of concealment.
Let’s look into what is sold
Fixed week system
In the beginning (as the bible says) timeshare ownership was in a specific week. Each week was numbered from 1 to 52 starting in January so, for example, week 52 was generally Christmas or New Year week.
Owners liked this system because they knew exactly when their holidays would fall and those with young families could be sure of getting their accommodation during a school holiday period if they owned such a week.
Those owners who wanted a change, either of the time of year or geographic region were able to swop their own week for another week using one of the exchange companies.
Consumers regarded the fixed week system as being in their interest. But traders thought otherwise because of the difficulty of selling the accommodation in the off-season weeks. A 70% sell-out was considered about as high as they could achieve, so a “floating” week system was progressively introduced and by the industry.
Before I move on to the next system, consumers should give the above paragraph just consideration as if the retained weeks held by the developer were unsold and were unsellable they were worthless, yet the developer attach equal voting rights to them. The second issue is that if the developer retains 30% of the dead weeks and has a beneficial interest in the voting, do they have a corresponding maintenance liability to maintain the weeks they own. Considering this you may appreciate why the developer cajoles the club committees to change the systems and constitutions. The committees have a lot to answer for here.
Floating week system
In the floating system, weeks are put into three seasonal bands – High, Medium and Low.
This enabled sales people to persuade consumers that the purchase of a High season week would guarantee access in school holidays, despite “High” covering a wider time band that just the main school holiday periods. Worse still, purchasers of Low season weeks were told that it was easy to transfer into High season, which was almost entirely false. The verbal falsehood and the misrepresentation starts and is designed to introduce a false precept to obtain a monitory gain from the consumers.
A number of resorts also operate a floating apartment as well as a floating week system both of which are unpopular with owners because of the uncertainty of their period of use and the position of the apartment they will be allocated. Having been shown a nice sea view but end up overlooking the bin store !
A floating week system often resulted in a 100% sell out. The developer gets rid of all his weeks for top prices and when the real deal become clear, the trouble begins. Don fret as the traders have yet another scheme to make them even more money – the points clubs.
Points Clubs
Points clubs did away with ‘weeks’ ownership and replaced them with a booking ‘currency’ points.
Currency is a very strange thing to the un-savvy, some consumers attract the same degree of greatness to point as the salesman and an acceptance of understanding what a point is. So I ask you (before reading on), what is a ‘point’ as it does not exist. It’s a bad notion
You are not given coins worth 10 points, 100 points or 1000 points. You go to Marks and Spencer and they award you with a voucher if you give then your trusty ten pound note, so I ask again what is a ‘point’?
A point is best described as a closed electronic currency which can only be used in a single enterprise (closed loop system).
Consumers were sold a number of points and led to believe that the number of points they bought guaranteed them access to the accommodation and time period that they wanted.
This is entirely wrong as a concept and the points awarded only entitle you to spend them on available products. If you keep choosing products which are not available you have your points either reduced or removed forever, this now moving the currency into the realms of a temporary currency whereby if you don’t spend, you lose it all.
The claim was that the more points they buy, the greater the choice of places, time periods and number of weeks to use that were available. That is wrong, the more you have the more and faster you have to spend them.
The floating week concept become a falsehood when you add into the mix that even if you have points you have not spent, they are destroyed or erased and you are required to pay for more points the second after they have been destroyed and year, after year, after year
The points system soon became complicated with “half points for booking within 60 days of travel” and “banking points for next year” etc. – all variations which gave the appearance of being beneficial to owners but proved otherwise when tried out. Have you ever asked can I pay my maintenance fees with the points I have not spent? If the answer is no then you are expected to buy into a currency which the seller will not except for anything other than timeshare.
The number of points necessary to book a week of use in accommodation is generally a function of the size of the apartment and the time of year. But over time traders have made changes to the points allocations, often resulting in owners having their points effectively devalued or forced to buy more points just to keep the availability they originally bought. There is a strong suspicion that at least one major points club sold more than 100% of the accommodation, relying on “no-shows” to ensure that owners were not turned away !
All floating systems (including points) enable the developer to skim off the best weeks for their own purposes.
Owners complain that the weeks they are offered, either for their own use or for banking with an exchange organisation, were in the less popular seasonal periods.
Points border on the most bazaar product you can have and practically has no resale value.
But with the overall decline of “timeshare” two new products were invented. These add more lush delights into the mix and is intended to side swipe incoming legislation so the ruse can continue to the consumers.
Holiday Clubs
This is probably the ultimate evolution of timeshare and certainly the most pernicious.
When the rogues saw the ease with which timeshare sales people could extract large payments on the promise of “top quality holidays in the future” they set up “Holiday Clubs” with grandiose claims of holidays “anywhere in the world, at any time of year and at massive discounts”. Unfortunately for consumers the claims were very seldom true and almost all holiday clubs were completely bogus, failing to have a booking system or arrangements with holiday providers for discounts.
Holiday clubs have been the preserve of some of the major fraudsters in the industry. Although not providing any rights over tangible property (as most timeshare does) holiday clubs are now regulated by the European timeshare laws.
Fractional Ownership and Destination Clubs (aka Private Residence Clubs)
Fractional Ownership is essentially a “re-branding” of timeshare and first appeared, in the US in the early years of this century and gradually spread worldwide but take-up in Europe was, and still is, very sluggish.
In the absence of any agreed (or legal) definition, fractional ownership appears to offer: –
Ownership in holiday accommodation on a shared time basis (exactly like timeshare)
In up-market accommodation (claimed to be superior to that of previous timeshare). For a fixed period of ownership often 25 years or so. With a number of weeks of use per year. – 6 weeks being a 1/8th fraction etc. With a “guarantee” that the assets (accommodation) will be sold at the end of the ownership period with the proceeds of sale being distributed according to the fractional share owned.
There is suspicion that some so called “fractional” schemes are yet another ‘investment’ fraud. And a number of fractional schemes are now marketed on a “Buy to Let” basis, which raises serious doubts about their financial viability – see “Investment Frauds:
Being promoted by known rogues in the timeshare industry
With woolly worded contracts that any competent lawyer would advise against involvement
The “investment” prices are many times greater than the fractional value of the original property as a whole – buyers are paying up to 8 times over the odds – which does not augment well for any capital refund, let alone profit, at the end of the ownership period.
Promises of a distribution at the end of the ownership period are being made by off-shore or limited liability companies that may have disappeared before pay day or who arrange a private sale at an artificially low price to a friendly company.
Some traders are offering loans at interest rates to make the purchase which would totally negate any potential profit that might accrue. Rise and Fall of Timeshare in Europe
So you the consumer have put your trust in the timeshare man and buy into everything he advises you to buy and ‘hey ho’ you are back to timeshare with a massive debt, a lot of added worry and now locked in to tighter and tighter contracts.
The orbital merry go round for some, but hellish for you.
What gets me to the core is when it is pointed out to some consumers they still, they actually still, believe the salesmen who makes the profit over independent advice lines.
Look over the cycle and see which part of the cycle of timeshare you are in as you will be offered the next either now or in the future.
HOW TIMESHARE WORKS
A typical example of a dodgy fractional scheme is “Dames de la Mer” (a trading name of Shakespeare Classic Line Ltd) who market fractional ownership in yachts in Turkey selling 206 x one week “fractions” for around £8,000 each. The boats originally cost c. £220,000 delivering a potential gross profit of £1.4 million to the seller. After 35 years the 206 owners are promised a share of the sale proceeds which are unlikely to reach £500 per owner.
The number of ‘honest’ fractional resorts in the EU is in the low double digits. With most resorts containing very few units of accommodation – 5 to 20 is a common range – the number of fractional owners hardly exceeds 2,000.
A natural resale market has yet to evolve and with very low levels of sales it is unlikely to happen in the foreseeable future, especially as developers are expected to continue to build to meet demand, leaving existing owners with no outlet. Exactly what happened with timeshare Destination Clubs (also called Private Residence Clubs), they have much in common with Holiday Clubs where the “member” pays a capital sum for access to a number of resorts (generally of a high quality) worldwide. The member has no rights of ownership in any specific accommodation as they would do with timeshare or fractional ownership.
But, unlike Holiday Clubs, all the Destination Clubs currently in Europe do appear to provide the service they promise.
Fractional Ownership and Destination Clubs are regulated by the current EU Timeshare law
Timeshare uncovered part 2 to follow soon
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk