November 4, 2016 — As we all know there is a long standing procedure among reps in the timeshare industry to share with their sales guests that it is not a bad idea for them to pay for their vacations with today’s dollars because by doing so they prevent inflation from eroding their future purchasing power. But there may be a more effective way to elucidate those vacation expenses such as calling them exactly what they are — an indisputable forthcoming financial liability.
So Here’s The Scoop: Because ITG (and my column) is also read by the general public, to make my case regarding that liability I need to cover the basic timeshare math 101-A. Those of us in ‘the biz’ know the drill only too well, so please indulge my quick run-down. Just keep in mind, the following example is for CLOSERS and is only to be used during those ‘special’ closing challenges. The crème de la crème, Master Closers, know of what I speak when I use the word ‘special’.
“John and Mary; would you agree with me that if you are going to take a two-week vacation every year and visit places like San Diego, San Francisco, New York, Key West, the Hawaiian Islands, New Orleans, Las Vegas, British Columbia, the Caribbean and other destinations then you’ll have to rent and pay for your accommodations?
“That’s right folks, and would you also agree that in many places just throughout N. America a decent hotel room for two adults, excluding taxes and other add-ons, that your starting point to rent a suitable hotel room will be, on the low end, around $125.00 per night and that just in that price range your rent for a two week vacation for that hotel room will cost you $1,750.00?
“Great, and lastly, folks, if you could freeze that rate and if you then could vacation anytime you wanted and anywhere in the world over the next decade or two and took just 20 two-week vacations would you also agree that your rental cost for just those basic hotel rooms, excluding taxes, etc. will cost you about $35,000.00?”
Of course Mary and John may also know, and seasoned closers will always point it out anyway, they can’t freeze their hotel room rates and using this example, over the next 20 years and based on a modest average annual hotel room increase (aka: inflation) rate of 5% then those hotel rooms (aka: accommodations) for two adults will cost the loving couple, excluding taxes, etc. about $65,500.00!
Once the Jones’ acknowledge that they understand that little reality it is time for the closer to start comparing apples to apples. In other words, compare the ‘suites’ Mary and John previewed today to the costs of renting similar vacation accommodations on the open-market.
The best way I know to do that is to first ask them what they think the nightly or weekly rental rate is for a (e.g.) deluxe, beautifully appointed, 1,200 square foot two-bedroom fully furnished ocean-front condominium on the beach with all the bells and whistles in one or more of the aforementioned regions.
Sidebar 1: Whatever amount they suggest, including the old ‘…gee, we don’t know…’ will tell the closer a lot more about the sales guest and if they are clueless – well, it’s time to roll up those sleeves further, pull the ‘close’ back a notch or two, and do a little probing because without doing so the next step will be a losing proposition if the closer continues to illustrate the cost of renting the types of accommodations outlined herein.
So, if John and Mary rented accommodations as described (apples to apples) this year their starting point, depending on the region, will be around $300 per night. So renting over the next 20 years, using the same 5% annual rental rate increase of hotels/motels, their future rental debt will be, excluding taxes, etc. about $156,965.00!
Now, back to John and Mary for a moment; right after they are confronted with that $157-K debt is the time, in a friendly and light-hearted way, to pop the big question.
“So, how would you folks like to handle that today (LOL)?”
Immediately followed by (e.g.) “All kidding aside, John, Mary, would you both agree that if I can factually demonstrate how millions of budget conscious vacationers just like you folks significantly reduced their future vacationing debt then my doing so would be a good thing? Something you might even appreciate and maybe even see the value and the reasoning why millions of vacationers enthusiastically choose to save a lot of money?”
As I mentioned, doing this is the function of the closer and one way to continue is to be bluntly honest and in the closer’s own words and style lay all the cards out on the table.
When doing this, at the appropriate time and for illustration purposes, it is best to have a prepared visual aid to demonstrate reducing their future debt.
As an example: A $20,000 two-week TS plan with a 10% down payment and the balance financed over 60 months @ 14% interest will cost about $27,167.
An annual maintenance fee (AMF) each year of (e.g.) $800 per week and increasing at 5% (just like the hotel) over 20 years will run around $59,796.
And let’s say they exchange each year (RCI/II ‘average’); those fees (using the same 5% annual increase) will tally up to about $14,950.
Lastly, I hope, let’s average the RCI/II annual dues; for simplicity’s sake we’ll use $75 per year and the same 5% annual increase, bringing that to $2,800.
And the grand total for the own/member – spread over 20 years will be – $104,713.
Hmmm, rent $157-K or own/member for $105-K; what to do, what to do?
2nd Sidebar: For the record I left out any closing costs and as I have written previously I firmly believe the exchange fees some companies charge to make what amounts to a computerized reservation is excessive, obscene and despicable, to put it mildly.
I’ve also written the same applies to what some developers charge for annual maintenance fees, and don’t get me started on special assessments or those excessively high all-inclusive fees some TS resorts charge their owners/members and timeshare exchangers.
While I’m at it, generally speaking, as an industry, instead of our chuck steak chop-and-slop approach to our ‘main dish’ if we actually marketed and sold owning a slice of paradise like a fine restaurant does with a tuxedo-sporting maitre’d and an exotic chef who delicately prepares an aged, 15-year, cote de boeuf (steak) dinner that cost a few THOUSAND dollars accompanied with a bottle of a Château Margaux 2009 (for an astronomical sum), as an industry we’d be in a whole better place. That I Can Tell You!
Those issues aside, the bottom line is that depending on the home-resort and the vacation plan costs, etc. – becoming a TS owner/member does reduce the cost of renting like-to-like vacation accommodations at some of the finest and most beautiful resorts located in some of the most sought after destinations in the world.
Lastly, the example presented reduces their future debt by about 33% and John and Mary might be able to think of one or two things they could do with a savings of about $52,000 — especially since they would have been “spending the money anyway”.
Good Luck Out There