The time-share pitch; Are vacation sellers throwing you a curve?
On a vacation stroll along the streets of Honolulu, Margaret T. saw a bargain she couldn't pass up: a $29.95 boat cruise and dinner - all for $10. The only requirement, explained the woman at the booth, was that she listen to a sales presentation on time-sharing condominiums.
''I thought it would be a way to spend some time while I waited for my daughter,'' explains Mrs. T. A car came to her hotel at the appointed time and whisked her to the back entrance of a condominium complex. But instead of a group presentation, as she had assumed, she was assigned to a salesman of her own. After showing her a sample unit, he ''wanted my signature then and there'' to buy one. ''I think it was $9,000 to stay for two weeks'' every year, she says.
After a while another salesman joined them and ''stepped up'' the sales pressure. Eventually, Mrs. T. was able to convince them she was not going to buy and grabbed her ''bargain'' tickets. She was so glad to leave that when no car was offered to return her, ''I just walked about a mile back to the hotel.''
Stories like these are not uncommon. Although high-pressure selling is nothing new, there is evidence it is mounting this summer in the vacation time-sharing industry (owned or leased rights to stay at a resort for a certain period of time every year) as the lingering recession keeps Americans cautious about major purchases. Alan Schlaifer, who tracks the industry for the Federal Trade Commission, says the FTC is receiving a ''growing number of inquiries'' about the practices of time-sharing developers. Victor Parra, a spokesman for the National Timesharing Council, adds that sales in the industry ''have softened'' and that ''the economy is dictating a more aggressive (marketing) strategy.'' He points out that at many time-sharing projects sales must keep pace because ''cash flow is extremely important.''
But while some consumers may only be angered by the sometimes transparent selling schemes, others are being pressured into signing up - investing thousands of dollars in a project they knew nothing about just a few hours before.
In New York State, where the attorney general's office is conducting an investigation of time sharing, Assistant Attorney General Robert J. Buckner believes many direct-mail offers to visit time-sharing operations ''may well be deceptive to consumers.''
''Rarely do they tell you what you'll be subjected to - usually a high-pressure sales presentation lasting several hours,'' says Mr. Buckner. His office is also concerned that false or misleading information regarding prizes is being used as a come-on. Some offers, he says, make it appear that the consumer has won a contest when he is only entered in a contest. Other presentations ''deceive people as to the chance of winning a major prize. The odds of winning a valuable prize like a $10,000 sports car or a Hawaiian vacation are sometimes as much as 500 million to one.
''The actual items given away are usually worth much less'' than the other items described, he says. In one marketing scheme, a mailing indicated the recepient had won a ''diamond pendant'' if he would agree to tour a time-sharing property. The pendant turned out to be ''a speck of a diamond worth $1.50,'' said Mr. Buckner. In another case, an ''AM-FM multiplex stereo'' was a headset radio worth $9.
Legislation now has passed in New York that would tighten laws regarding direct-mail solicitations. The bill, if signed by the governor, would force marketing companies ''to tell the exact prize that the recipient had won and how much it was worth,'' said Mr. Buckner. ''They also would have to reveal what was being sold (time sharing) and tell how large an investment is involved.''
In Massachusetts, Louise Ritchie of the state attorney general's office says most complaints regarding time sharing come from those who have signed contracts thinking that the state provides an automatic three-day period to reject the contract (known as ''recision rights''). This protection does cover contracts with door-to-door salesmen and others who sell on the street, she says. But a time-sharing property is the developer's ''place of business'' and no such rights are guaranteed to the buyer unless specifically included in the contract.
This fact is particularly upsetting, Ms. Ritchie says, to those who signed only to escape the sales pressure (''When I say high pressure, I mean very high pressure,'' she adds). ''We suggest people check with their attorney'' before making a purchase.'' she says. ''Also, ask for financial disclosures and bank references.''
The National Timesharing Council (NTC), which says it represents 60-70 percent of the industry, also urges prospective buyers to research the time-sharing concept and the developer. It is promoting a model state law that would give buyers a recision period of at least three days and provide other consumer safeguards. So far, only eight states have passed laws specifically governing time sharing.
Born in housing-tight Europe in the 1960s, the time-sharing concept didn't take hold in the United States until the mid-1970s. This year the NTC estimates sales will hit $1.5 billion. Time-sharing buyers receive either outright title or lease rights to accommodations, usually in resort areas. Once a buyer has purchased a unit, he pays only a yearly maintenance fee and can vacation ''free'' during the designated time period, usually one or two weeks.
For developers, time sharing has a clear appeal: high profits. Condominiums built in resort areas at a cost of $75,000 might sell to a single owner for $100 ,000 to $125,000. But if 50 weeks are sold at an average of $5,000 per week through time sharing, the price per unit becomes $250,000.
Developers are quick to point out that they incur unusually high marketing costs. Each unit must be sold to as many as 50 different buyers instead of just one. The costs of finding and signing buyers can easily range to 40 percent or more of the sales price of a unit, according to sources inside and outside the industry.
The risks were dramatically pointed out last month when Captran Resorts International - the largest time-sharing developer in North America with 35 projects - filed for protection from creditors under Chapter 11 of the federal bankruptcy laws. Chairman Keith Trowbridge, acknowledged as ''Mr. Timesharing'' and author of a recent book on the subject, says the company will continue to sell units while it reorganizes and that the move will have ''no effect on any of our owners.''
He says sales are down 50 percent from last year and that ''more high-pressure tactics are used in a down market.'' Selling an optional item like time sharing, he says, ''takes persuasion. No one is coming in and ringing our cash register.''
Developer Donald Altshuler, a principal owner of The Ponds at Foxhollow in Lenox, Mass., blames the industry's black eye on occasional abuses by marketing companies hired to quickly sell out units. He says he has cut his marketing costs from 40 percent to 32 percent since taking over his own marketing.
Mr. Altshuler says time sharing, although an ''infant industry,'' already is ''going away from the car salesmen or land salesmen'' image. As the concept becomes better known, he says, customer education will move ''out of the hands of salesmen.''
But government must be educated too, he says. ''New York State is putting a hold on time sharing because the attorney general just doesn't understand it. He's going on TV talking about one or two bad projects and a lot of hearsay.''
Time sharing, he says, has a place in real estate. ''Sure, everyone would like a vacation home all to themselves. But most people can't afford a $160,000 to $200,000 home. Time sharing is not for everybody. But for people who can plan their vacations ahead, it's ideal. Buyers like it. A huge percentage come back and buy more.''