What We're Reading - "Are Timeshare Stocks A Ticking Time Bomb?'

What We're Reading - "Are Timeshare Stocks A Ticking Time Bomb" (Source: pexels.com - used as royalty free image)

It’s hard to deny that the timeshare industry, dominated by a few major resort developers, can be highly profitable for investors. But one stock market expert has a warning: “The 'timeshare industry'… is a ticking time bomb ready to explode.”

That dire prediction comes from an article, “Are Timeshare Stocks A Ticking Time Bomb?,” published recently on investment research and news site Seeking Alpha.

Why the bleak outlook on the future of the timeshare marketplace? The writer of the article cites a few factors well-known to anyone with experience in and around the industry – most of which we’ve touched on in our own learning center. These key factors include:

Customer dissatisfaction

As the writer notes, citing ARDA’s own statistics: “83% owner satisfaction = 17% owner dissatisfaction, with 9.1 million US owners that means 1,547,000 dissatisfied owners ­ that's a lot of unhappy customers however you run the numbers.”

High rates of timeshare-related scams and fraud

The author also notes the prevalence of criminal activity and fraud on the fringes of the timeshare industry, particularly the timeshare resale scam, which we’ve discussed in some depth before. As the article notes, complaints abound about alleged timeshare resale and rental companies, and the persistence and success of this scam speaks to a fundamental truth about the industry (emphasis added):

… if no one wanted out of their timeshare contract, they wouldn't listen to the criminal’s story. That is the foundation of our argument, there's a lot of unhappy people, just waiting for the opportunity to get out ­ and these unfortunate crimes are one of several proofs that attest to this: they want out and don't know how. So when they get a call from Vinnie LaSharky offering them a too good to be true bail­out offer for only $2500, they take it.”

The lack of value associated with timeshares and the meager aftermarket that has been allowed to exist has created a deeply anti-consumer environment. How much longer can the timeshare industry go on “eating its young,” as Michael Finn once put it, before it collapses?

High pressure sales tactics

Timeshare sales presentations have acquired a reputation for being high-pressure situations that leave consumers feeling pressed and trapped into making a same-day transaction. As the Seeking Alpha contributor notes:

“Timeshare sales stories such as the shaking, scared old grandparents are not just 'stories,' these things happen all the time. That's not a profit stream ­ that's a liability, a ticking time bomb waiting to blow up… If timeshare companies rely on sales tactics like the 'hostage' technique, they're in for a big surprise next quarter.”

An outdated model

Finally, the stock market expert notes something that many timeshare experts understand, even if they are sometimes loathe to say it: In an age of reliable vacation rentals and airfare-lowering apps, the timeshare model can feel downright archaic. The author puts it bluntly, saying:

“There are so many interesting new methods of travel 2.0 out there, why lock yourself into a particular 'resort' for one week, with all the rules and complications associated with it?”

Particularly when, as this author goes on to note, that resort is little more than an expensive vacation, and not a valuable real estate investment? Not a valuable commodity, but rather an “obligation” that could well negatively affect your financial standing and credit before being passed on to further burden your heirs?

While we generally don’t look at the industry from the perspective of a stock broker or investor, it is interesting to take in that view with articles like this – particularly when they highlight that knocks against the timeshare industry and its major actors aren’t just superficial complaints, but signs that something is fundamentally rotten, down to the core.

For more, we encourage you to read the full post at Seeking Alpha. To talk timeshares, don’t hesitate to reach out to our team!

Led by Attorney Michael D. Finn with 45 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don't hesitate to drop us a line with any questions or concerns.


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