2014-11-23

Anatomy of a timeshare sale

Dear readers, the things I do on your behalf. Herewith my notes from participating in a recent timeshare sales session which was the condition of a fairly well discounted holiday which my partner and I recently enjoyed.

The vacation property itself was very pretty - manicured lawns, artfully trimmed flowering bushes and a background of blue skies and the sound of crashing waves. The sales office itself was tucked away in a corner of the imposing main clubhouse, presumably because once you’re an owner you don’t like to be reminded of how and where they got you. It was a reasonably high traffic operation, several other couples there waiting or coming through - note that there were no singles, only couples. I'd guess they’re maximising their chances of finding a weak spot and then leveraging it to pressure the other party. Divide and conquer FTW!

The waiting room had the usual free beverages to enjoy for the few minutes we were waiting. Coffee was from a press-top urn and was awful. Normally I'm OK with urn coffee in a pinch, but my goodness this stuff was dreadful; I had to fall back to Lipton tea. This was scheduled to be a 2 hour session so my tolerance for coffee absence would be tested to its limit.

I'll call our sales rep "Nick", who was audibly a New Yorker. He led us down to his office and the presentation started after a few minutes of soft soap "how was your vacation so far? what have you enjoyed?" which was fairly obviously an intelligence-gathering exercise.

Nick started the sell emphasising that this was not a high pressure sales session. He then described the "price integrity" of his company, that they never discounted or negotiated on price (yeah, sure, you betcha snookums) and referenced back to how much we'd enjoyed the holiday so far to stimulate the guilt gland. He then noted the extra financial incentives if we bought right now, today, with a yes/no decision at the end of the session. What was that about "no high pressure sales", Nick? He outlined our aim today which was to decide whether our future vacations would be better with or without TIMESHARECO ownership, which was studiously neutral so far. At the end of the session we would be meeting with the company inventory manager for details on prices, incentives etc.

About 10-15 minutes in and Nick took a break to "get some water". Presumably this was to check with his boss on his boss's read on the situation so far. I didn't think to check for a video or audio monitor in the office; nothing was obvious, and I'm guessing that there wasn't any eavesdropping going on. Certainly nothing subsequently made me suspect that.

Nick started the next session reviewing our past holidays and latched on to our holiday last year as similar to the kind of thing he was selling. He asked us to name our "dream" 3-5 money-no-object vacations which we did. He picked out quality as a factor in our holidays and started talking numbers on room prices, picking a $200/night base price.

We learned after casual conversation from me that he had retired from a job as a retirement plan sales manager, but had come back into the timeshare sales game after a couple of years. In light of the later discussions, this made a lot of sense. He likened the scheme he was selling as a "401(k)" (money purchase pension scheme) for holidays - invest money and get a steady yield of vacations.

During the meeting he took very short but effective notes on a single sheet of paper, only a few words per concept; around now he read back to us a summary of what he'd noted, and pretty much nailed everything. I was very impressed at his technical skill. I also approved of the strategic placing of his office with a genuinely lovely garden and waterfall view - he sat with his back to it, so it clearly wasn't intended for his benefit. I bet the room views aren't like that (except for the show rooms.)

Now we come on to the numbers. He was trying to sell on the basis of 7 days stay, $200/night, over 20 years - that if we did this with his company then it would be cheaper than renting a hotel room each year. He presented a table showing cost of hotel rooms in brackets - but quoting in non-constant dollars. The chart spanned 40 years - so starting from the mid-1970 when 11% annual inflation was the average - but actually only 7% over past 10 years (I did the math). Later, checking the US inflation calculator it's clear that 1974-1984 is by far the steepest inflation decade of the past 40 year - 110% compared to 42% (1984-1994), 27% (1994-2004) or 25% (2004-2014).

I innocently asked him "but aren't wages inflating too, so shouldn't this be expressed in constant dollars or at least expressed in terms of purchasing power? And aren't hotel prices determined by supply/demand - what you can persuade people to pay, not what your costs are, so heavily influenced by wages?" at which point he pretended confusion. I also asked why he was looking at a 40 year basis when we were talking about a future span of 20 years, which met with a similar response.

Now it makes sense why he used to sell retirement plans... he's essentially selling a financial plan. He's saying that if we give TIMESHARECO about 20 grand then they can invest it in property and meet the cost of our stays over the next 20 years while presumably turning a small profit including his commission. And yet, they can't persuade the major financial establishments to make the same investments and profit directly. I wonder why?

Now the "here's all the places you can stay!" list. About 70 locations in 10 countries - not a massive amount, but they have "affiliates" in 100 countries with over 5000 resorts you can stay at. Minimum of 3 nights per stay, no max, which seems reasonable. With your purchase of the plan you get X points per year to spend on properties, and can transfer points between years. It costs $100 to carry forward non-spent points, but $0 to borrow them from future years - cheaper to take a loan than save up. What's wrong with this picture? It means that they want the additional money they get from you actually staying, of which more later.

We toured through photo sets of properties in countries we might visit, though only TIMESHARECO properties not affiliates - which was a nice sleight of hand. Apparently TIMESHARECO "reviews" the quality of the affiliates to ensure they're up to scratch. I'm sure you're as reassured as I was. It's a first-come first-served model for all properties. Nick claimed that there was a low probability of all affiliate properties being full in an area even in busy time e.g. spring break but didn't address TIMESHARECO numbers directly. So they almost certainly have a problem with availability during this times. Affiliates charges $200 per booking which is a nice little earner and pushes you towards fewer, longer holidays in affiliates.

He gave us a brochure for the affiliate program: RCI. According to their SSL cert information they are Wyndham Worldwide Corporation based in Parsippany, New Jersey. Their stock is up about 15% y/y so clearly the timeshare business is doing well out of the boom.

Nick took another break, this time more extended than the previous one, presumably to allow replanning of his sales approach. I couldn't help but notice that he didn't offer us a refill of our beverages.

He mentioned in passing that there was also a maintenance fee which covers insurance for the property, in response to an earlier question I had about "what if the property we buy rights to burns down?" We fenced for a few minutes, then 70 mins after the start of the discussion he gave up, said that we didn't have to tour the property if we didn't want to - we didn't - and handed over the bonus gifts that we were due to receive at the end of the property. He did try a last gasp attempt with vacation offer similar to what we had already enjoyed, with another timeshare presentation linked in. I'm sure that if we'd taken this up then we'd have been lined up with their Top Gun negotiator. But we said no thanks, and left.

Overall a fascinating view into the world of timeshare sales. I didn't feel in any danger of buying at any point, but I give Nick his due that he tried very hard and used most of the tricks in the book without resorting to what I'd regard as "high pressure" sales. Perhaps the fact that I was taking notes alarmed him a little; he emphasised at the start that he'd give us all the items discussed in writing, but of course with us leaving before closing this didn't happen (if it would have happened). Credit to him that he recognised when he was beaten and didn't waste our time or his beyond that point. It also turned out to be remarkably easy to elicit information about him and divert him off course for a few minutes. Presumably this was because he thought that he was making a social connection and common ground.

The offer itself of course was completely overpriced - I checked out the secondary market in TIMESHARECO properties and they were a) heavily discounted, around 60% of face value and b) not selling, though of course these are related and just give you a ballpark idea of the market clearing price. The annual maintenance cost was around $1300 - i.e. the same as 6 nights of hotel stays at $200/night. If you buy in the primary market, you are a total mug or you have lots of money, the holiday model fits you and you don't mind paying a healthy excess for the convenience.

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