As an attorney (and former CPA) whose law practice has focused nearly exclusively upon the timeshare industry for almost six years, one issue in particular continues to perplex and confound me. What is it exactly that compels people to continue to buy timeshare interests? This discretionary and rather costly consumer product involves purchasing, with today's dollars, future vacation possibilities. You may think that this fact alone might make potential buyers hesitate, given all of the present day demands on our existing discretionary budgets. Aren't we supposed to fund future getaways with the means available to us when the desire and ability to take a vacation is nearly upon us? Clearly in this internet age there are lots of vacation options and travel packages to choose from on the multitude of internet travel sites and resources accessible to us. We can book our chosen location, airline, and car reservations at the same time with the click of a mouse.
Why then the continuing popularity of a product that becomes an annual and uncontrollable cost upon purchase, regardless of how often you end up using it in the future?
Further, a timeshare purchase represents delayed gratification in the sense that you don't, immediately upon purchase, commence your timeshare vacation in your chosen resort. It requires a future booking through an as-yet-untried reservation system – one that you've contractually obliged yourself to use for all future bookings and whose dates are subject to availability! Compare this roll of the dice reservation option with booking a vacation via Expedia or Hotels.com!
Contrast this, if you will, with most large discretionary consumer purchases. Examples include a car, boat, camper, home, or any major transaction wherein you immediately assume possession of the product upon purchase. You've probably been planning to acquire this kind of product for a while. You've done your research, compared brands and prices, and generally proceeded in a deliberate manner after completing some amount of due diligence to narrow down your selection.
In contrast – and quite uniquely – timeshares are typically marketed as a same-day purchase. Yes: From the introduction of the product to the perpetual ownership and future, conditional use of said product all in the very same day! What's even more interesting from a psychological viewpoint is that most timeshare purchasers have no inclination or sense of a need or want of a timeshare interest the very day they invariably make their purchase! Put another way? Almost no one wakes up in the morning having any inclination or desire to own a timeshare by the end of that day. Arguably then, timeshares are the ‘mac daddy’ of the impulse buy! How in the world then does this - can this – even happen?
To try to satisfy my own curiosity, I began reflecting upon who my timeshare relief clients have been over the past half dozen or so years. I’ve categorized them in terms of client occupation, income level, and other assorted demographics, with the results revealing quite a varied mixture of folks. Nearly all occupations are represented, from doctors, lawyers, teachers, college professors, and engineers to stay-at-home parents, students, and retirees. Income levels also ran the gamut, ranging from quite comfortable to struggling to make ends meet. Additionally, ages ranged from newlyweds in their early twenties to folks in their upper eighties. So, what conclusions can we draw from this hodgepodge of timeshare purchasers?
What we do know is that all purchased one or more timeshare interests, and that all were apparently unable to divest themselves of their now-unwanted interests without the professional assistance of an attorney who specializes in helping clients extricate from these interests. How about the length of time the interest is held after purchase? Is that a factor? Alas, that factor seems to be all over the map as well, with some clients still within their rescission period (those we don’t ordinarily take on as clients, we simply tell them how they can promptly send a rescission letter without need of attorney involvement), and others who have owned their timeshare for perhaps a couple of years but became frustrated in attempting to use their purchase. Still others have owned for twenty or more years and simply sought a way to end their annual maintenance fees, as perhaps they no longer could continue to utilize their interest, perhaps due to complications due to health or aging.
In other words, we have clients who realized very quickly that the purchase was not in their financial best interest (perhaps they felt victimized if they concluded that they didn’t purchase what was represented) and some who came to that realization a bit further down the road, perhaps after multiple attempts to utilize the availability-based reservation system to obtain desired dates or locations met with failure. Lastly, we include the clients who retained their interests over quite some time and perhaps even utilized them for nearly that entire period of time in a satisfactory manner. Conclusions? Our clients are composed a wide array of folks seeking legal assistance for a wide array of reasons. No clear fact pattern emerges.
Let’s next address the circumstances under which many folks made their timeshare purchase for some clues as to their purchase motives. Many clients have reported factual circumstances to me, like the following examples:
- They were contacted at home via telephone solicitation and invited to participate in a vacation experience, usually a long weekend at a resort at a drastically reduced cost. Once at the resort, they were required to attend a “seminar,” which was in fact an extended pitch to buy a timeshare.
- They were on vacation with time on their hands, in a relaxed state of mind, and were approached by someone (affectionately referred to in the trade as a “body snatcher”) who induced them to attend a “seminar” by offering something for virtually nothing. For example, a vacationer may be offered a free dinner, amusement park tickets, or reduced fare on a cruise, all for simply attending a 90-minute presentation (withholding at this point what the presentation will actually consist of, or that the so-called presentation could last far more than 90 minutes).
- Exposure to a “sample” resort (incidentally, not necessarily the one the purchasers ended up owning) via a tour observing nice amenitie, typically including extra bedroom facilities for family-based vacations – pools, slides, game rooms, attractive grounds, proximity to amusement parks, ski resorts, beaches, etc.
- During the tour, interacting constantly with commission-based timeshare sales staff over a three to five hour (or longer) period. These salespersons are typically independent contractors, not resort employees, although they are well schooled by management in the psychological aspects of making a successful sale. Since their earnings are dependent on making the sale, they’re quite motivated to learn and practice effective sales techniques.
- The sales staff is well supported by resort management who supply sales aides and extensive sales training. Sales success is rewarded by providing those salespersons with the better tours, and more opportunities to sell. Statistically, if the more effective salespeople continue to meet their sales quotas, they are among the highest compensated salespeople in any industry.
Although effective sales tactics are certainly utilized in many non-timeshare industry situations (in fact it’s fair to assume that many sectors of commerce embrace them), the timeshare industry has developed techniques that are, in many respects, unique to their product. It’s at this juncture that we must find and denote the line between aggressive, but fair and honest, sales practices, and those that are clearly deceptive and fraudulent. It’s also fair to consider psychological factors, like the nonverbal tactics commonly utilized in the timeshare industry. For instance, keeping a prospect in tow for three to five hours, then turning them over to a closer – a person perhaps even more skilled than the salesperson in terms of psychological tricks of the trade – constitutes a nonverbal psychological tactic arguably comparable to the ‘dripping water’ torture (although, indeed, an acknowledged milder version).
Further, it doesn’t help that the sales staff is well acquainted with a contractual clause in the purchase contract that, when executed by the buyers, negates all oral representations made prior to and during the presentation, making only the written contract provision representations legally binding on the resort. My affectionate term for this universal in all timeshare sales contract provision is the notorious “salesman’s license-to-lie clause.” Although perhaps not a direct psychological ploy, it’s clearly evidence of a “stacked deck” in favor of the developer.
My research to compile this article includes not only the stories of hundreds of my clients, but also interviews with both former and current timeshare salespersons, as well as court testimony from reported cases involving the timeshare industry. However, it’s well beyond this article's scope to enumerate or categorize them all, or even a significant portion of them; rather, the few quotes I include are boiled down to convey the essence of the nature of the psychological ploys most commonly utilized.
“We use emotionally charged stories designed to make customers feel, rather than think! We use words like ‘love’ ‘fear’ and ‘hope’. We appeal to our customers’ desire to get something for nothing by offering ‘today only’ deals, like a short term price drop or newly-acquired foreclosure.”
Combined with the orally-based and nonverbal types of psychological tools utilized, it must be noted that the sales contracts themselves are, of course, pre-written, fill-in-the-blank affairs that were developed and refined over time by fine legal minds turned to the sole purpose of devising clauses that solely benefit the seller/developer. Since the law favors the printed word over oral testimony, which is often contradicted by the sales agent, buyers are at a significant disadvantage in a court of law when confronted with a signed purchase contract with language contradicting much of what the purchaser thought he or she was buying.
My own personal “rogues’ gallery” category contains many written examples, such as the referenced “salesman’s license-to-lie” clause. Among verbal ploys, however, the most nefarious is the one that is clearly designed to infuse value into a product notoriously short of actual resale value. By consistently attempting to equate timeshare ownership with real estate ownership in its sales presentations, the industry hopes to cash in on the assumption that most consumers make about real estate – that it typically maintains its value. Therefore, purchasing a real estate product is a safe investment because, if it turns out you’ve made a mistake, you can always sell it and recover most, if not all, of the purchase price. This notion is, to me, the most insidious tool of psychological manipulation utilized by the timeshare industry for two reasons. First, there is little to no real estate component in the timeshare products being sold today; and secondly, regardless of whether or not there is even a tiny piece of real estate attached to the product you can buy today, it is nearly worthless in terms of resale value!
We know that the timeshare industry didn’t invent overly aggressive sales tactics, and that most of us understand and live with deceptive advertising and marketing in other aspects of our daily lives as consumers. We also know we need to be cautious when exposed to claims about products that seem too good to be true. Who amongst us hasn’t been sorely tempted, or maybe even taken the hit, and plunked down 30-50 bucks for a bottle of diet pills or muscle-building powders? We even poke fun at ourselves for falling for the “scam.” On some level, we know that if losing weight was that easy, we’d be a much thinner nation of consumers.
So, on what scale can we then determine the damage caused by the use of sophisticated psychological sales techniques? Is the timeshare industry any worse for engaging in these methods than the overly aggressive used car salesman?
To answer that question, we need to assess relative harm. Clearly, if we blow the cost of a restaurant meal on some worthless diet pills, we can easily measure the comparative financial damage done, and it’s not too substantial. The used car salesman who got a little carried away with his presentation may still have sold us a decent car for a fair price. And, so long as he didn’t knowingly conceal something that makes the car worth less than the purchase price, there’s not much overall harm done. However, if the “little white lies” of an overzealous timeshare salesperson result in you acquiring a timeshare interest for tens of thousands of dollars, along with a contract-based annual maintenance fee obligation that will last the rest of your life if you’re unable to re-market your interest, clearly the harm done is nothing short of disastrous! The same sales techniques that only cost you a good dinner, can, in the timeshare world, cost you a lot more, and for some folks it has led to financial ruin, destroyed credit, and even bankruptcy.
When you consider the factors presented here, acquiring a future-use product with an increasing annual contractual commitment cost, and minimal resale value, when other viable vacation options are on the table, my initial question remains: “What compels people to continue to buy timeshare interests?”
Maybe it’s the psychological exploitation built into the “mac daddy” of all impulse buys?!
Michael D Finn, Esq.