Ask RedWeek / June, 2014

What is the timeshare industry doing to fix the secondary market?

Timeshare industry leaders have talked for years about fixing the secondary market, but the problems persist. So what are the major industry players doing NOW, in 2014, about the secondary market?

The short answer: ARDA's CEO predicts the industry will fix problems in the secondary timeshare market within 10 years, but acknowledges major changes must be made to help aging legacy resorts. The good news for owners who want to sell their timeshares: help may be on the way.

The long answer is this: The timeshare resale market, buffeted by declining demand, increasing inventory and crafty criminals who prey on owners, has a new ally: the major timeshare developers who sold families all those weeks in the first place.

The American Resort Development Association (ARDA), the industry's lobbying arm in Washington, has launched a series of initiatives to help owners (and resorts) unload timeshares that have little or no value on the open market. If their efforts succeed, the days of the $1 timeshare resale will end, the market will shrink and prices will go up.

But that's down the road --- perhaps a decade. For now, while traditional timeshare marketers continue to focus on retail sales, the secondary market continues to grow.

"The developer community is not without some dirt under their nails in this. We've created a business model that needs recycling," said Howard C. Nusbaum, ARDA's president and CEO. "We want to help the secondary market. For self-perpetuity, it's insane not to have a healthy secondary market."

Nusbaum, in a wide-ranging series of interviews with, predicted that most of the major problems afflicting the resale market --- including a glut of low- or no-value timeshares, hundreds of "legacy" resorts that are nearing the end of their economic lives and headed for a bulldozer, and sophisticated fraud schemes targeting owners who are desperate to sell --- will be resolved within the next decade.

Why? New legislation gives law enforcement agencies more teeth to prosecute fraud cases. Practical self-help programs and quality management companies are emerging to help sold-out and undercapitalized resorts. Educational outreach efforts to owners are multiplying and broad-based. But most of all, according to Nusbaum, the long-term outlook is improving because the largest timeshare companies are developing programs that offer exit strategies for their owners.

"This is a legacy problem," Nusbaum said. "People buying a timeshare today are buying it from multisite clubs that have management forever and sales teams forever, so the ability to recycle inventory will not be a problem in the future."

Nusbaum is a natural optimist. And, as head of a national trade group whose members have weathered several years of tough sales, he's a protagonist as well. The timeshare glass is not half-full, it's three-quarters full.

"The problem is getting better managed at the top of the funnel, and we're finding some solutions at the bottom. What we're going to have left are the dead cats," he said.

The US timeshare market includes 1,550 or so resorts (100 dead cats went away last year). Approximately one third fit into the "legacy" category, a polite description for older sold-out, deeded-week resorts that have quietly slipped into disrepair or the brink of insolvency as their owner base reached retirement and beyond. The original developers are long gone, and the resorts are managed by dutiful owners or management companies whose primary goal is to minimize maintenance fees. The legacy resorts in high-value locations are still successful. Others, located in medium-value locations primarily along the East Coast, are verifiable dead cats with no prospect of being purchased and renovated by a company such as Diamond Resorts International, which is very acquisitive. No surprise, then, that the owners at these resorts are unable to sell their timeshare on the secondary market and, worse, willing to walk away from their maintenance fees. Some of these resorts have default rates of 20 percent or more. They are bleeding red ink.

Timeshare resale listings for the so-called dead cats make up a large, but undetermined, share of the overall resale market. ARDA is conducting a census of the resale market, but otherwise refuses to put a number around it. But their outcomes, because of economic market forces, are already determined: in time, they'll disappear.

As a result, ARDA and its brand-name members are focusing their 2014 efforts on programs for the survivors of the great timeshare shakeout of the last half-decade. Their programs are widespread, multi-faceted, and address many owner issues.

Why should owners care? Because ARDA's most influential members --- companies such as Marriott, Hilton, Disney, Wyndham, and others --- have the clout and capability to create solutions for their owners. They also have a well-connected trade association that now devotes a significant amount of resources to owner issues through ARDA-ROC (Resort Owner Coalition), which boasts 1.5 million dues-paying owners.

* After a watershed year of legislative successes in 2013, the organization is launching a consumer protection task force with the Federal Trade Commission, state attorneys general and the US Postal Service, to crack down on fraudulent resale schemes. That effort, announced in April at ARDA's national convention, should benefit owners who are besieged by unsolicited and usually scary sales pitches from companies that offer to "relieve" them of their timeshare deeds and maintenance fees. These outfits are called relief or transfer companies but they're a headache for the industry. They typically charge thousands of dollars for their relief services, then transfer the deeds to asset-less corporations, otherwise known as Viking Ships, that have no intention of paying future maintenance fees. Those unpaid bills, in turn, land on the backs of other owners who are still in good standing with their resort. A financial disaster for everyone but the relief company, which usually changes its name and website as often as necessary to avoid prosecution. Chances are extremely high, if you are reading this article, that you've been contacted by one -- if not several -- of these companies.

* "If you take a deed and you are not making a promise to continue to pay that maintenance fee until you sell it to someone you know has both the ability and willingness to pay it, you are doing something fraudulent," Nusbaum said. "I have not found a transfer company that's willing to make that commitment. I know certain players that are dumping 300, 400, or 500 interests a month into Viking Ships, and that's killing the homeowner associations."

Major Caveat: Some transfer companies are legitimate.

* ARDA and other owner-affiliated groups are also working to streamline arcane laws that prevent homeowner associations from dealing efficiently with defaults and foreclosures. In many states, the HOAs must have 80 percent, 90 percent or more approval from owners to change their bylaws to "wind down" a resort or initiate resale and rental programs, which would increase cash flow to the resort. Owners at these resorts typically list their units for sale on and ebay, but rarely sell them. Many try to give their units back to the HOA, but the associations don't want them, either, because they can't afford to absorb the maintenance fees and don't want to pass the costs along to other owners.
"Bulldozing is a solution if the CC & R's allow it," Nusbaum said. "But in some cases you may need 100 percent approval, so you've got to amend the documents."

* In a related effort, ARDA is hosting best practices workshops for HOAs that don't have the resources or expertise to manage their own resale and rental programs. Many of these sold-out resorts are declining in value, because of location, and losing revenue as owners decline to pay maintenance fees. Rental and resale programs, or trade-out agreements with travel clubs, seem to present the only way to reverse the downward spiral of increasing costs and decreasing revenues at legacy resorts. In late July, ARDA expects to publish an HOA Resale Guide that outlines the best options available to resorts, management companies and owners.

* ARDA's board, representing all of the major brand-name timeshare companies, has beefed up its code of ethics to crack down on members who transfer timeshare deeds to asset-less companies. The new rules also prohibit members from denigrating the industry. This may sound self-serving, but it makes sense, politically. The more that ARDA reaches out to legislators and regulators for help on economic and consumer protection issues, the more that ARDA's own members will come under scrutiny from the regulators. This month, for example, board members are meeting with law enforcement agencies and representatives from the US Senate to discuss anti-fraud and legacy HOA issues. To make their messages stick with regulators, ARDA members must demonstrate that they are initiating programs to address problems in the secondary market.

* Most brand-name timeshare companies, such as Marriott and Wyndham, are quietly sponsoring or experimenting with resale and buy-back programs that give members a respectful exit strategy from a lifetime of ever-increasing maintenance fees. Marriott, for example, will either buy back a unit at a steep discount, or list it for sale to other owners. When the unit sells, Marriott will take a 40 percent commission for brokering the deal. On the open resale market, meanwhile, Marriott and many other big-brand chains will buy back low-priced intervals at high-value resorts to keep the market from getting saturated.

All this activity is a far cry from when major companies talked about problems in the secondary market --- problems that were foreseeable and inevitable because of the aging base of original buyers --- but didn't do much else. Now the focus has shifted to activism as more and more retail timeshare sellers recognize, in the aftermath of a multi-year slump in timeshare sales, that their financial health is tied inexorably to the sustainability of the overall market, which includes a bigger and growing slice of resales.

"Our industry is 35 to 45 years old. Thirty years ago you sold to someone who is 50. Today they're 80 and their travel needs have changed, their lifestyle has changed. They need to quit using a product they love. But it's not like an old TV where you just throw it away. It comes with maintenance fees, so you need to recycle it," Nusbaum said.

The irony is, the vast majority of people who buy on the secondary market are timeshare owners who understand the product."

Have you had any experience with Marriott or Hilton buy-back programs? Let us know in this Ask RedWeek discussion forum.

About the author

This answer was provided by RedWeek contributor, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of

Comments (1)

    Avatar for Jeanne S.
    Jeanne S.
    Aug 17, 2017

    We are getting the hard sell at a resort in Cabo to not only buy, but to also sell them our old fixed week timeshare in the Caribbean. The deal is attractive and get us out of a declining resort; but the price they are willing to pay us seems almost "too good to be true". They are citing changes with ARDA that is going to drive up maintenance fees and essentially bring the age of time shares as we know it to an end. Is there any truth to that? Is this a total scam? How can they and why would they pay high prices to acquire older time shares? Don't want to pass up a great deal but also do not want to do anything stupid.