Timeshare information shows system failure

It all depends on how you look at it. Whether you’re looking from an industry perspective or a consumer perspective, the timeshare industry can look very different depending on your point of view.

Reading Diamond Resorts’ second quarter financial report, it’s clear that their IPO last month is having an impact on the way they present their message. From an industry perspective, that’s a very rosy picture with all the leading indicators. Total revenue, sales, tours generated, and price are all up, which is a consistent theme among big-brand timeshare developers this reporting season.

The growth numbers are impressive, but they must be viewed in light of recent acquisitions this year. Still, a 43 percent increase in total revenue is more than just pocket change at a time when the global economy is faltering.

Long live tourism! And the discretionary spending that brings.

But from a consumer perspective, there are standard critical points that need to be checked and have been a point of emphasis for years in this industry.

Diamond reported that its median transaction price increased nearly 30 percent to just over $16,000. Good news for the developer, bad news for the consumer. His reasoning? Due to larger point package sales and increased sales to new customers rather than existing owners.

So let me see if I’m clear on this. Their sales increased because owners need to buy more points (whose Monopoly currency value is arbitrarily determined by the developer) and because they can get away with new customers who don’t know the difference as existing owners.

Nice… for the developer. For the consumer, not so much.

But this does not mean that the product is not worth it. The value of any product is determined by those who are willing to pay for it, and to be fair, its average price is about $4,000 less than the overall average price for an industry-wide range. But there are better ways to shop than this.

Especially when you look at your sales and marketing expenses, the amount of overhead that went into generating that sale in the first place. Diamond says it’s 50.7 percent of the full price, and they applauded because it’s down from 57 percent at this time last year. Which means that out of that $16,000 price, $8,000 will pay for expenses, which is your money.

Owners often wonder why timeshare prices on the resale market seem low, but this is the main reason. Think in terms of car sales: New car purchases cover marketing and commissions, and used cars fetch significantly less on the resale market. Same with timeshare.

Again, this isn’t a knock on the developer, it’s just that there’s a better way to buy timeshares than through the developer. And that’s online through sites like buyatimeshare.com. I saw a Diamond Resorts Cypress Pointe Grande Villas in Orlando right now for $7,000, but people need to know the option exists and many don’t know until they are already exposed to the product.

The good news for consumers is that Diamond only closes about 13 percent of its tour customers, which means 87 percent leave the resort without buying on the spot. Research backed by the American Resort Development Association shows not only that 32 percent of all timeshare sales are through the resale channel (up from 17 percent in 2010), but that the number of people who attend sales presentations has decreased. This would indicate that those shoppers, once they have toured, are looking for purchase channels other than through the “just for today” atmosphere created at the resort.

Again, the more awareness created about the savings by buying timeshare on the resale market, the better.