April 13, 2012 — During the recent 2012 ARDA (American Resort Development Association) convention in Las Vegas there was a lot of chatter about the resale market, the problems associated with owners defaulting on all that inventory and the impact it is having on sales, developers and HOAs.
All that conjecture ultimately led me to ponder one simple question. As an industry, since the late 1960’s when the first OPC introduced the first prospect to that first sales rep who sold that first slice of ‘Paradise’, how many ‘weeks’ have we sold over the past 40 + years?
As I began seeking an answer I started pouring through previously published information and industry periodicals that I have from entities such as the old Perspective, RCI, II, ARDA and Ragatz Associates publications that reported annual sales volume over the years.
I’ve often questioned the data but with no other resources to rely upon I used the information and though I’m missing some of those issues I stuck as close as I could to their numbers in order to at least get a grasp as to how many ‘intervals’ have been sold (based purely on reported sales volume).
Using that information along with my highly sophisticated and personalized formula (use your own if you prefer), including adjusting the sales price (over the years) to an average of $9,000 per ‘deal’ and a net average closing ratio of 16%, etc., I discovered the following.
The numbers indicate that as an industry, beginning just with 1987 and through the first quarter of 2012 (aka: just the last 25 1/4 years), we have ‘toured’ 81,944,450 prospects which resulted in the selling of 13,111,112 ‘owners’ (weeks) that produced a average VPG of $1,440 and an industry collective total sales volume of (+ -) $118 Billion.
I’ll be the first to admit that as much as I like math and crunching numbers I’m not a trained or certified statistics type person, and being dyslexic, too, there are times I get the ‘numbers’ wrong; but that really isn’t the point here.
What is important is like the character “Sam Sharpe” (played by Richard Dreyfuss) asserted wearing his white suit in the 1991 movie “Once Around” as he was addressing the new sales reps during their poolside orientation at the Pelican Resort in St. Maarten: “I’ve sold a lot of shares”. As an industry we’ve sold a lot of ‘shares’.
Now if you think my numbers are fuzzy or I’m using some voodoo mathematical formula then, as I suggested, use your own numbers and then add this little factoid into the equation and see where it leads your thoughts.
According to the RCI website (as of this writing): “Today, RCI has approximately 3.8 million members worldwide”; and on the II website they state that: “Interval offers high-quality products and benefits to resort clients and approximately 2 million families who are enrolled in various membership programs.”
Hence, the assertion of just the two big exchange companies in 2012 claiming 5.8 Million members (‘weeks’) which, when deducted from the results of my calculations (13.1 Million ‘weeks’ sold), we find a ‘gap’ of around 7,300,000 missing ‘weeks’ that may have been sold. Not to mention all those ‘weeks’ that were purchased during the preceding 20 years from the 1960’s through the end of 1986.
One thing may be perfectly clear. The two big exchange companies basically report a ‘member’ satisfaction ratio in the 85% neighborhood. As such, with 15% not being happy campers and then, say, adding another 15% of current ‘owners’ whose lifestyles’ will change (divorced, health, loss of income, etc.) or who shouldn’t have been sold in the first place, then upwards of 30% of their ‘members’ might need to rid themselves of their ‘weeks’.
That could mean, as developers continue selling ‘retail’, that around 1.74 Million current owners (‘weeks’) may want/need to resell their ‘time’ over say the next 60 months. Or they may just opt, for whatever reason(s), to default on their paid-off TS’s (or ‘notes’) and stop paying maintenance fees, special assessments, exchange fees, etc.
I’m of the opinion that there have been and will continue to be millions of unwanted ‘weeks’ lingering out ‘there’ and we may only be seeing the tip of the proverbial iceberg reflecting yet another one of our industry’s closely held and dark little dirty secrets.
And on that note I might as well add that I’m also of the opinion that many timeshare developers are likely hoping many of these TS properties, specifically the older ‘sold-out’ functionally and economically obsolete ‘resorts’ somehow just fail, disappear and/or legally ‘go away’!
Extrapolate on your own from here and good luck to all because the ‘weeks’ tsunami is well on its way and is so massive it may very well be a 1,000 foot tidal wave that ultimately devastates most of what was once a very bright shining vacation city upon a hill, so to speak.
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©2012 Inside The Gate