How did the Timeshare industry start?

Published on May 14, 2015 by in Uncategorized

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We asked our “editorial screeners” if it was ok to start our book with a question about cake since it seemingly had nothing to do with timeshare – they said “No.” We forgot to listen. So why do we care so much about delicious gourmet cake? Is it because we find counting calories is about as depressing as uncovering why we were all scammed by this industry? No, not really. It’s just the truth on how this industry in America started (and we like cake too).

It has been passed down through the years that this industry was created far, far away in the French Alps. While America was having “an awakening” in the early 60’s – one man was struggling to sell year round accommodations at his Alpine ski resort. He was finding that people were a tad too intuitive to pay the money he was asking for, since they’d only be using the accommodations a small part of the year. The people he was selling to used words like “too expensive” and “go jump in a lake.” Well it really wasn’t feasible to jump in the lake at the ski resort due to frigid conditions, and it wasn’t appealing to lower his prices because that would obviously cut into his extreme profits.

While pondering his dilemma at the local coffee shop at the foot of the mountain, he noticed something bewildering. This coffee shop offered some of the most expensive and overpriced gourmet cake in the entire town, yet people bought it. As a matter of fact, the same people who turned down his year round condominium purchases would come down the mountain to the coffee shop to have a slice of their cake. He could only assume that his clients got hungry after spending 90 minutes telling his sales representatives “Are you kidding me? That’s way too expensive.” So why were these same people who just said “no” to year round condominium purchases gladly overpaying for their “gourmet” cake?

The developer had a keen eye on what was happening. He noticed that rarely would someone buy the cake as a whole. However, since it was also offered by the slice – people were willing to pay more to only get a piece that they felt they could eat in one sitting, even if it was wildly more expensive per slice than buying the cake as a whole.

This is where the idea was born. And using the same concept as the local coffee shop selling gourmet cake, these companies started making extreme profits selling “slices” of property.

Unfortunately, the amount of money a timeshare sales representative can make in a day coupled with the amount of money a manager and director can make almost certainly leads to an environment where the truth is greatly exaggerated because greed takes over. More often than not, the sales representative you shook hands with the day was encouraged to stretch the truth. All this was allowed so the resort developers could pursue rock star riches.

Let’s do the math of a typical resort:

Typical Resort

Individual Condo Units Per Resort: 500 units

Weeks For Sale Per Unit: 52 weeks

500 * 52 = 26,000 Weeks For Sale total

Average sales price per week: $12,900

26,000 * $12,900= $335,400,000  total developer receipts.

All this money before the resort even collects a dime in finance interest rates, late fees, and maintenance fees.

So what does this mean to you? Well, take a moment and ask yourself – does that resort you just bought into seem like a 335 million dollar resort? How about even a 100 million dollar resort?  Chances are, not even close.

Now think about all the interest charges they make (the average rate is an additional 15% on top of all the above costs).

And don’t forge to take that 26,000 weeks and times it by the average maintenance fee and then you have another 20 million in annual inbound revenue to just maintain the resort.  Does your resort seem like they spend $20 Million dollars a year to keep your unit nice and clean? Not even close.

Some say the two most lucrative businesses in America are running a credit card company and owning a timeshare resort. From millions to billions…and all from people just like me and you.  In short, this is why timeshares are EXTREMELY overpriced, and these companies make EXTREME profits.

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