s the Newer “Right to Use” Product the Industry’s Savior, or the Devil in Disguise?
The newest timeshare product sounds pretty good, but there’s an obvious question that might quickly be raised by anyone who thinks about it for a moment or two: Why does an annual maintenance fee obligation continue to be part of the product if the purchaser is now deemed a “member,” and is therefore presumably no longer an “owner,” meaning that he or she, arguably, no longer “owns” anything to maintain?
Collectively, all of the major multi-site timeshare developers have, over the past dozen years or so, switched their key sales product away from a deeded real estate interest into what is euphemistically called a “right to use” product (or RTU).
The advantages of an RTU, the developers claim, is that an “owner” (assuming the concept of ownership still applies) will now have far more flexibility when planning their vacation stay. Since the larger sized developers who have embraced the RTU model typically have several resort locations, often extending across several states, the argument is that the “owner” will have more options to vary both the location and the timing of their vacation stay.
Indeed, if true, the added flexibility should be a wonderful addition to ownership; after all, providing flexibility and more options for leisure vacation time resolves a common complaint of deeded ownership, and that can only improve the product and the experience, correct?
Not quite so fast! Conceptually, it looks good on paper, as they say. However, we need to dig a little deeper to analyze and compare both products: That is, the deeded interest, now more and more a product sleeping with the dinosaurs, and its replacement, the so called “right to use” (RTU) or membership interest.
Let’s commence by examining a common factor that has survived the transition from deeded ownership to RTU, the annual maintenance fee. It occurs to me that, back in the day, when you owned a deeded interest (and a good amount of these interests still do exist, largely in the smaller, individually operated resorts), the concept of providing maintenance payments made all the sense in the world given that you actually owned a portion of a piece of real estate. Of course you needed to pay your proportionate share for upkeep and resort operations. No further discussion required.
Many timeshare owners today still recall the moment in time when they were persuaded to relinquish their deeded timeshare interest in exchange for the “new and improved” RTU product. At first blush, it didn’t seem so bad; you still had an ‘interest” and a place to vacation, and, arguably, far more freedom to vary your resort vacation time and location. So what’s so bad about that?
Well, two things are “so bad about that:” maintenance fees and availability.
As referenced above, maintenance fees make perfect sense when you, as an owner of a portion of a piece of real estate, contribute your fair share to the upkeep of your property. Contrast this, if you will, with a situation whereby you are no longer an “owner,” but now merely a “member”.
In the latter situation, which individual resort unit are you contractually bound to maintain? The developer more than likely will attempt to sidestep this issue by assigning you a “home resort,” which would perhaps be acceptable if you actually had the ability to easily book your home resort at your convenience. Unfortunately, you have no more pronounced ability to book at your “home resort” than anywhere else within the resort’s domain, and, as we’ll soon see, your ability to book in any of your resort locations is subject to some rather significant restrictions!
So is the “home resort” concept merely an illusion? A way to bridge the leap from one real estate based product to one non-real estate product whereby you are a non-equity “member” of a resort club? If so, is that such a terrible thing? Suggested answer: Yes, if you are still saddled with annual maintenance fees that seem to rise significantly each year. It’s also a “yes” if your “home resort” requires capital expenditures that are not covered in the maintenance fee budget, and you get hit with that additional assessment as well.
Perhaps it is evident why the resort industry has carried the concept of annual maintenance fees into its new nonequity club based “points” basis, but from the consumer’s standpoint, paying annual maintenance fees that are entirely unrelated to that member’s ability to utilize his or her interest just doesn’t make good economic sense.
Consider a different model where the member pays based upon usage, so if the member uses one week per year, they pay a usage fee perhaps comparable to the annual maintenance fee. In fairness to the developer, a second usage fee should be charged to the member who chooses to vacation a second week, perhaps consecutively, or even at a totally different time of year and/or location. Similarly if the member, for whatever reason, needs to skip a certain year and, as long as someone else fills the space and pays a usage fee, the member is not unfairly hit with a usage fee for that year (although a nominal annual ‘membership fee’ would still be appropriate). Indeed, it seems vastly more fair and equitable to both parties to have the necessary operating fees paid on an “as used” basis.
The other significant issue – or perhaps more accurately, the impediment – to positive owner/member experiences with the so-called new and improved timeshare interest that has become an issue only with the advent of the newer RTU product, is the issue of “availability.” With the real estate-based original timeshare owned product, availability was rarely an issue since you knew when your week was and you simply showed up at your unit at your predesignated time to start your vacation. You didn’t have to book or reserve anything.
However, in these newer RTU days, your purchase contract clearly references a contained provision requiring you to agree that your reservation is subject to your agreement to solely and exclusively use the resort’s reservation system, and, further, that the reservations you are attempting to make are “subject to availability.” Now at first blush, that sounds logical enough. How can you reserve something that someone else has already booked?
It makes sense until you ask yourself the next question; who got in the door before you? If it’s a fellow member who has made a comparable purchase contribution like you did, well OK then! But what about a member of the general public who found the resort and booked through a travel site like Expedia or Travelocity? How then might you feel about being denied a reservation? But wait, surely the resort has to prioritize owners/members? Maybe… maybe not. In fact, maybe the opposite is true? Perhaps to maximize their bottom line, the resort prioritizes non-members? Perhaps a non-member is prioritized because once in the door, they may be drawn into a sales presentation, and become an owner/member themselves?
Clearly there is a certain irony to this possible outcome. Stated another way, arguably the more one spends with the resort to join, the lesser becomes their booking priority, and thereby the lesser their ability to utilize the facilities they have invested into?
Although the issue of who gets priority booking may be in question, and may well vary based upon a particular resort policy, it is fair to say that the priority booking rules are far from transparent. We at Finn Law Group have yet to be able to determine who receives booking priority in spite of our ongoing attempts to do so. This apparent lack of transparency leads us to conclude that there is a fair to a strong possibility that the owner/member is, at the very least, in strong competition with non-owners/members for the identical booking reservation. Indeed, the words “subject to availability” take on an entirely different potential meaning or outcome when you factor in the probability that the level of priority may well be determined by who is less invested in the property.
It seems only fair for the resorts to be forthcoming and to further define availability by clearly delineating the competing groups and their respective priority positions. Otherwise, the words “subject to availability” could literally mean just about anything, including the possibility that to book your resort as a paid member means you better plan on often reserving your vacation over a year out! Let us continue to hope that the member’s “right to use” does not become the resort developers’ “right to abuse!”
Perhaps the better approach might be to eliminate the club membership together with the attendant maintenance fees and availability issues, and create instead a resort chain comparable with other resort chains, where your nominal annual membership dues buys you a higher level of priority booking status than the general public’s, and then you pay as you go, thus providing the additional funds necessary to sustain resort operations?
Of course, the only problem with that is, how would the industry recoup the profits made currently with owners who dutifully continue to pay their annual maintenance fees regardless of how often they actually get to stay in their resort?
Michael D. Finn, Esq.
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