Wednesday, October 25, 2017

Stayin' Alive: High Drama at Two Lake Tahoe Resorts During Timeshare Election Season

Most people know that fall and football go together.  But only a handful know that fall is also election season at timeshare resorts across the country, where very few people vote and, in all likelihood, even fewer care about the outcomes.  All owners generally care about is #1 reservations and #2 maintenance fees.  HOA board member elections probably rank way down there, like #41.

Not this fall.  While thousands of timeshare owners worry about their vacations and resorts in hurricane-ravaged areas of the country, others are paying attention to all the home-grown issues at their own resort.

In fact, from California to Kauai, Idaho to Orlando, RedWeek keeps hearing from timeshare owners who are getting more involved in the governance of their resorts.  At a handful, owners are starting to organize themselves to take greater control of management issues.  At others, owners are simply getting rid of board members who have overstayed their welcome --- and failed to fulfill their fiduciary duties to make the best decisions on behalf of all owners.

In this spotlight on legacy resorts, we will focus on two aging but desirable timeshares where owners banded together, in dramatic fashion, to prevent their resort from being taken over, or at least controlled by, major timeshare companies. 

Both happen to occupy prime real estate around Lake Tahoe, which is a hotbed of timeshare resorts, old and new. Marriott, Diamond, Wyndham, Hyatt, and Welk have major presences and appear to be looking for more.  It's also a smorgasbord of older independent resorts facing major renovations, rising defaults, plus rental and resale issues that not only threaten their economic existence, but make them ripe takeover targets for well-financed timeshare companies or investor groups.  Some of these aging resorts, according to real estate folks in the area, will eventually fall into the hands of new developers who will invest and re-purpose the timeshare into a modern hotel or other business that is more profitable than a struggling timeshare.

The rest of this blog is about two Tahoe resorts caught in the middle of this struggle.  Simply put, they are just trying to stay alive.

PART I: Tahoe Beach and Ski Club Owners Re-elect Board Member Who Cast Key Vote Against Diamond's Potential Takeover, But Tensions Remain

SOUTH LAKE TAHOE, CA --- Sedric Ketchum, the swing vote on a divided board that decided to reject Diamond Resort's takeover moves three years ago, won re-election to another term in September, but it wasn't easy.  Recovering from serious surgery, Ketchum barely made it through the obligatory candidate forum, then retired to his room at Tahoe Beach and Ski Club as soon as the votes were cast.


Sedric Ketchum won re-election to Tahoe Beach and Ski Club Board despite a no-confidence vote from Diamond Resorts.

He won re-election handily, despite a defection from one of his fellow board members and a decision by Diamond, which owns 23 percent of all timeshares at the beachfront timeshare, to vote for no one.  Right up until the vote was announced, no one knew what Diamond planned.  The company wanted to dump Ketchum, but couldn't find a suitable candidate to back, so it sat on its votes.
Tahoe Beach and Ski Board President Al Fong urges owners to stay vigilant against Diamond.

Not exactly a vote of confidence for Ketchum, who was key to the board's rejection of Diamond's perceived takeover bid in 2014.  Diamond played cat-and-mouse with the owners in 2017, just as it did in 2016 (when it was also declined to announce its intentions). 

In months leading up to the vote, Diamond asked first-year board member Bill Costa to find a replacement for Ketchum, but his recruitment efforts fell short.  (Most owners had no knowledge of Costa's activities, and they also seemed to like Ketchum, so why vote against him?)  During the past year, Costa also worked on his own to broker a deal between TBSC and Diamond to settle litigation that Diamond initiated in 2015. So it was not much of a surprise that Costa also worked with Diamond on a possible alternative to Ketchum.

We interviewed Ketchum and Costa about their split.  It seems to be more personal than professional, so we'll leave it at that.  We also interviewed other owners who were brought into the schism, including one owner who was recruited to oppose Ketchum, but they seemed puzzled about it as well.

Ultimately, the tensions within the board did not matter. With more than 175 owners huddled together under a beachfront revival tent on a cold, blue sky day, Ketchum collected 1,985 votes, including 39 voted by the board (Costa abstained).  Diamond had 1,750 votes, but kept them in the corporation's pocket for another day.  No Diamond representative even showed up to address the crowd --- a far cry from a year ago, when a Diamond VP rankled the audience with a tone-deaf explanation of the benefits of Diamond's presence and points-and-trust program.

"Never take your ownership for granted," warned a somber but jubilant Board President Al Fong after the vote. "Diamond is a sleeping giant.  They are waiting for you to fall asleep."

Diamond started buying foreclosed TBSC units at auction several years ago as part of its bid to increase its presence in South Lake Tahoe, where it already operates several timeshares, including the majestic Lake Tahoe Vacation Resort, which is right next door to Tahoe Beach and Ski Club.  Diamond was well on the way to becoming the dominant majority owner of TBSC when the board, awakening like a slumbering giant , refused to accept Diamond's purchase of several hundred intervals in December 2014.  That HOA action triggered threatening letters from Diamond, and eventually a lawsuit --- which continues to this day.

Since then, the TBSC-Diamond story has devolved into an "us-against-them" fight where owners rallied to elect board members, in three straight years, who are dedicated to keeping Diamond at bay.  The anti-Diamond board members ran annual grassroots campaigns, with beachfront owner-update meetings on Mondays and Thursdays, to energize owners about the perceived threat that Diamond, one of the largest and most acquisitive timeshare companies in the world, posed to their traditional legacy resort.  So far, they've succeeded in warding off the giant.

Barring a major change in direction, next year's HOA election will put two more anti-Diamond board members onto the same hot seat that Ketchum just occupied.  President Fong and Treasurer Jake Bercu, Diamond's most vocal critics, will face re-election while promoting the dividends of maintaining the independence of Tahoe Beach and Ski Club.  No matter what else happens, they already know that at least 23 percent of the owners --- Diamond --- will vote against them.

Diamond is not the only major timeshare company seeking a larger footprint in Lake Tahoe.  Wyndham, the largest timeshare company in the world, is also seeking a bigger stake.  But its plans for a smooth transition --- takeover or otherwise --- just ran into an owner revolt at the Olympic Village Inn.

'PART II: Gang of Four' Owners at Olympic Village Inn Fire Longtime HOA Board Members who Hired Wyndham to Run Resort in 2016
  • Rebels promise to review Wyndham's contract and end foreclosure agreement
SQUAW VALLEY, CA --- A ballot box rebellion at Olympic Village Inn (OVI), a bucolic Alpine resort in North Lake Tahoe, triggered a palace revolt in October that resulted in the ouster of four HOA board members who agreed, one year ago, to turn the resort's management and all defaulted units over to the Wyndham timeshare conglomerate.


Standing Room Only at annual board election for Olympic Village Inn in Squaw Valley. 
Gang of Four rebels routed incumbents who hired Wyndham to manage resort.
In a record turnout on a spectacular fall-colors October Saturday, the so-called "Gang of Four," led by a hard-nosed and proudly profane prosecutor named Bob Bone, dumped four longtime board members who, despite having their own misgivings about contracting with Wyndham, turned the keys to the resort over to Wyndham's management company in 2016.  Bone and his co-conspirators, all of whom proudly own the Gang of Four appellation that was hung on them by a hostile board member, immediately fired Board President Alan Traenkner --- Wyndham's primary champion --- and board counselor Joan Wright.  They also agreed to dismiss a legal fight, launched by Bone months ago when he was just a fledgling activist, to force the HOA to disclose owner rosters (including emails) to members for campaign purposes.

Elected in a landslide, the new majority at the seven-member HOA is composed of Bone, who replaces Traenkner as president, and fellow activists Julie Feldman, Sandy Farrow and Greg Rankin.  They replace former board members Connie Gast, Ron Spiller, Wayne Hooper and Mike Harper (who also opposed Wyndham's hiring but ran afoul of Bone months ago).  Holdover board member and CFO Brad Hartman also opposed Wyndham's contract, so he could be considered a potential "Gang of Five" member in the future. The other holdover, Larry Grace, faces the same fate as Traenkner --- obscurity at the end of the HOA bench.  In many ways, the election represents a generational pivot as well as a policy change.  In with the new, out with the older.



New Board President Bob Bone (top) led a multimedia campaign to oust four longtime board members. 
Bone's first move was to fire former Board President and Wyndham advocate Alan Traenkner (bottom)

When the results were announced, the 200 OVI members who shoe-horned into an overfull hotel conference room erupted in applause and shouts --- as if their favorite football team had just scored a touchdown.   A record 58 percent of all OVI members voted (in the industry, 20 percent would be normal, 30 percent a milestone). Bone got 2,017 votes, followed by Rankin, 1,997, Farrow, 1,992, and Feldman, 1,818.   The incumbents received 139 to 149 votes each, plus 436 votes cast for each incumbent by Wyndham.

Afterwards, the defeated incumbents --- all longtime board members --- exited muttering while Traenkner took stock, shaken if not stricken by his landslide loss in an election that was a total referendum on his move to hire Wyndham.  Then with a wave, he was gone.

"I'm not the Gang of Four," Traenkner said, his face flushed. "My job is to make the transition as smooth as possible. We represent the whole association.  That's important for people to know."

Several Wyndham executives attended the SRO meeting, wearing casual business outfits and frowns.  They said afterwards that they would work with the new board to resolve all issues of concern.  But their furrowed brows told the story: Wyndham's experiment with OVI was going south.

Moral of this Election is: Don't Mess with Bonus Time --- or Bob Bone)

Olympic Village Inn, set in an elbow pasture at the base of Squaw Valley's majestic ski area, is probably one of the last places one would expect to morph into a launching pad for timeshare-owner activism.  The resort came to fame decades ago as the US host of world-class skiers and other Winter Olympians in 1960.  While the Lake Tahoe resort area grew, OVI stayed the same: laid-back and serene, it was a tiny 90-unit timeshare getaway with 3,300 owners and 4,590 intervals that catered to skiing families from the Bay Area. OVI was stable for years; its financials were OK, maintenance fees stayed low ($800)  and default rates (from owners) hovered in the single digits.  But then things changed.

In April 2015, Traenkner and the OVI board hit a wall: the resort's longtime general manager (who had taken care of everything for 32 years, according to Traenkner) announced he would retire in July 2016.  That triggered a search for replacement that forced the board to look outside its local circle of associates.  Traenkner attended Timeshare Board Members Association meetings to meet and interview management companies.

Traenkner and other board members talked to several companies, then picked Wyndham, which offered a management deal that no other company came close to matching: Wyndham would spend $1.25 million on renovations, pay $10 for 253 HOA-owned units (and pay all of the maintenance fees for those units), launch a rental and resale program, and fold OVI into Wyndham's global reservation system.  In addition to the management contract, Wyndham, a timeshare giant with worldwide experience managing 200 resorts, offered to take responsibility for all future OVI units that go into default (thereby guaranteeing those maintenance fee payments as well).  No surprise, the board said YES.  As a result, Wyndham took over in August 2016.

Traenkner said recently that he thought he was doing OVI members a great service by hiring Wyndham.  Unfortunately for him and his fellow board members, it all went awry.


Olympic Village Inn on a perfect summer day at base of Squaw Valley ski area.

At first glance, this sweetheart deal appeared to take care of all OVI problems: Wyndham would run all resort operations, pay up all late dues, plus guarantee payment of maintenance fees on all future defaulted units.  In return for its oversight, Wyndham would gradually acquire an increasing share of the intervals at OVI --- and, potentially, gain voting control oF the board.  As of this writing, according to Traenkner, Wyndham owns 436 intervals, or approximately 10 percent of OVI. (Wyndham executives say the company has no plans to take over the board or the resort.  At other comparable legacy resorts around the world, Wyndham has used its ownership stake to install corporate execs on the HOA board to protect the company's investment.)

The deal might have worked out famously, in fact, if Wyndham had delivered a gold-medal performance during the transition period.  Instead, it stumbled, repeatedly.  Wyndham installed a new GM with no timeshare experience who, for various reasons, irritated owners and board members, including Traenkner, Wyndham's champion.  Over the next year, Wyndham installed three additional GM's or interim GM's. The company also fired most of the housekeeping staffers because they were not legal residents.  Wyndham's reservation team also took over, which surprised owners who knew nothing about the changes. Owners used to calling OVI at Squaw Valley suddenly found themselves talking to Wyndham operators back East.

While Wyndham had some (predictable) hiccups implementing changes, the OVI board overlooked a key issue, and it turned into a fatal mistake: The board failed to tell owners about Wyndham until after the deal was done.  Bone, for example, knew nothing about Wyndham's presence until November 2016, when he tried to use his "bonus time" privileges to reserve rooms at a discount so he could bring his ski-oriented family to the resort on winter weekends.  Instead of securing an easy last-minute weekend reservation, Bone discovered, from a Wyndham operator, that the bonus time rules had changed.

That innocuous first contact with Wyndham's presence at OVI started a chain reaction that, over months, led to the revolt that deposed four OVI board members, including three who approved of the Wyndham deal.  Here's how it all fell apart.  Bone, a very outspoken lawyer from Santa Rosa, complained to Traenkner and other board members about the bonus time changes, then started digging into other things that were shifting at OVI --- including the unannounced staffing changes that left the housekeeping team in shambles.  Bone, contentious by nature, also had conflicts with the new GM and other Wyndham corporate executives.  Over time, an exasperated Bone mounted a very public campaign against the board based on what he perceived as the board's negligence and Wyndham's negative presence at the resort.  His efforts not only stirred up other owners, but helped persuade the board to abort the HOA-default foreclosure agreement in March.  In June, Bone successfully sued the board in small claims court to secure the membership roster so he could communicate his displeasure about the board and Wyndham with other owners.  Instead of turning over the rosters, the board fought the lawsuit.

The campaign got personal in a hurry.  Bone called out Traenkner on many occasions and offended other board members as well.  He accused the board of election fraud and sent a stream of combative emails demanding documents and explanations of board policy.  At the same time, Bone's "gang" launched a phone bank to contact owners and created a "SaveOVI.org"website where they posted information about the board's actions, attacked Wyndham's motives and generated support from owners.  The outreach campaign was critical, because Traenkner and the incumbent board never responded in kind.  (In fact, after the vote, Traenkner lamented that he never mounted much of a campaign and, worse, conceded having no insight about why owners voted against him.)

"Thanks to this board, the resort is falling apart," said the hyperbolic Bone, an owner since 2012 who primarily uses his timeshare for bonus time. "Wyndham is trying to run the resort into the ground for the sake of consuming it.  But I don't really view Wyndham as an evil empire.  I'm more concerned about HOA boards that are filled with individuals who don't read documents when they are charged with the responsibility of protecting a public trust."

Greg Rankin, a Gang of Four member and original sales manager at OVI, said he decided to run because "the board made a terrible mistake in selecting Wyndham.  And, despite overwhelming evidence over the past year,...they refuse to admit and acknowledge their mistake.  The board's unwillingness to provide meaningful oversight of Wyndham...has result in rapid deterioration of the property and a significant decline in both the level of service and overall quality of experience our owners have enjoyed over three decades."

Traenkner, interviewed several times about the transition over the past year, is understandably defensive about hiring Wyndham. "They put money into the association to help with remodeling, so we were able to reduce dues from $840 to $800," he said. "And their rental program has been good."  Still, he admitted having numerous "startup issues" with Wyndham that created consternation on the board and within the membership.

Wyndham Very Experienced Running Resorts, but Stumbled at Olympic Village Inn

We interviewed two senior vice presidents at Wyndham about the controversy.  They conceded making some mistakes during the transition, but otherwise defended their contract and intentions at OVI.  They said Wyndham, which now owns an estimated 10 percent of the intervals OVI (436 intervals) has no plan to take over the board or the resort.  In separate interviews over many months, Traenkner and other board members also voiced dissatisfaction with Wyndham's first GM and other aspects of Wyndham's transition, but otherwise defended their decision to bring in a major company that, in their eyes, would ensure the longterm financial stability of OVI.

Consultants familiar with the timeshare industry say there are many ailing legacy resorts in the US that probably need a Wyndham or similarly equipped timeshare-and-management company to advise boards and run resorts.  But OVI, they said, did not need Wyndham, because its financials were in generally good shape (thanks to the work of the former GM, who appeared to handle everything.)  What OVI needed, these consultants said, was a robust rental and resales program to monetize units that were going into default due to the resort's aging owner base.

In a post-election moment of calm, Bone said: "We ran on a simple pledge of transparency and openness.  We also pledged that we would immediately engage in oversight of the new General Manager Wyndham Resort Development Corporation.  We promised our fellow members that we  would not do what the prior Board did by entering contracts in secret Board meetings where there are no meeting minutes in violation of the resort governing documents and the law."

Bone, who contended all along that OVI didn't need Wyndham, plans to make Wyndham's management team prove their value --- or pack their bags.  The company's management contract comes up for renewal in 2019, unless Bone and company take moves to shred it in the meantime.  The 2019 year is also when Bone and the Gang of Four will stand for re-election --- and face the same kind of referendum that ended Traenkner's reign as president in October.
                                                                            -------

NB: this is not an unusual story; most if not all major developers are collecting deeded-week inventory from legacy resorts, frequently at zero-dollar prices, to replenish inventory for their trust associations, which then re-sell the legacy inventory as points, instead of weeks, for a retail price average of $20,000 or more per week.  For the major developers, this is smart business, and it also relieves the financial pressure on legacy resorts, such as OVI, that are losing 100 or more owners per year, every year.  Wyndham's timeshare business, which will be spun off into a stand-alone public company in 2018, reported $2 billion in sales for 2016.  It has 900,000 owners and owns or operates 221 timeshare resorts in the US, Canada and the Caribbean.  OVI, while extremely important to owners, is just a twinkle in the constellation of Wyndham's timeshare universe.

What IS unusual about this story is the unprecedented activism of owners at Olympic Village Inn, rank and file timeshare owners who banded together to initiate changes at their resort.  We'll report on the outcomes of their efforts in future installments of  'Staying' Alive.'


Monday, September 11, 2017

Call Your Company or Resort for Hurricane Updates and Reservation Cancellations

The horrendous hurricanes in Texas and Florida have taken a huge toll in human life and billions of damages in property losses across several Southern states and the Caribbean.  To help timeshare owners assess what is going on, RedWeek contacted several companies for updates on their resorts and how to handle cancellations, etc.   While the situations are continuing to unfold, here is a quick handle for timeshare owners to monitor the hurricanes and their aftermath.

1. Call your home resort or timeshare company, owner services, to get updates on damages, reservations, and cancellations.  Many independent resorts update their Facebook pages with their status faster than they can update their websites, so be sure to check. Most reputable companies are bending over backwards to help travelers rearrange their schedules or, in some cases, get refunds if applicable.  We also encourage owners to post their own messages, in the forums on your resort's page on RedWeek, to help inform other owners.

2. Call your preferred airlines as well to determine their policies.  All airlines have posted updates about Harvey and Irma on their websites, usually referring people to hotlines for real-time information.

3. The devastation at many Caribbean resorts will probably require many months for reconstruction and resumption of anything close to "normal" vacationing.  Owners on St. Martin resorts, for example, may be unable to use their intervals for months, if not years.  Here are some examples of what companies are communicating to timeshare travelers.

4. The Vistana timeshare company (formerly Starwood) sent members an email urging owners at Florida's Vistana Beach Club, Sheraton PGA Vacation Resort, Sheraton Vistana Resort, Sheraton Vistana Villages and Sheraton Broadway Plantation to seek updates on vistana.com.  Vistana's crisis hotline reported that the Westin St. John on the US Virgin Islands would suspend all near-term incoming reservations until further notice --- since the airport and all local ports are damaged and closed.

5. Marriott Vacation Club's owner services department offers a crisis hotline that is updated every morning at 9 a.m. EST. The Sept. 11 update said Marriott's Frenchman's Cove resort in St. Thomas was closed until further notice while damages are being assessed for "heavy" landscape losses and water intrusion. Marriott also reported no injuries or loss of life at the resort, and said the resort would reopen "as soon as possible." Marriott posted a more positive outlook for the St. Kitt's Beach Club, which is also closed. The resort suffered "no significant damage" and reported that guests are safe.  Marriott also urged travelers to contact their travel insurance companies and exchange companies, if applicable, to find out their options.

TimeSharing Today, the industry's only independent site (other than RedWeek) for national timeshare news,  just released a number of hurricane-related stories that are worth review.

Please post your hurricane-related stories here.





Wednesday, August 16, 2017

MAJOR NEWS: New York Attorney General Settles Case Against Manhattan Club and Promises $6.5 Million Restitution to Owners

AUGUST 16, 2017 --- MANHATTAN.  After more than three years of investigation and litigation, the New York Attorney General's Office today announced the settlement of the Big Apple's most notorious timeshare case.

The AG announced that hundreds of owners at The Manhattan Club will share in a $6.5 million settlement approved by the long-troubled operators of the swank timeshare near Central Park.  While details of the settlement are still to emerge, it is clear that this is not only a victory for the AG, but for thousands of TMC owners who paid top dollar for timeshares that, over time, they could not easily use.  As part of the settlement, the operators of TMC agreed to sell the club to a new company that, presumably, will restore some order and confidence for club members.  RedWeek talked to attorneys who represent owners and will share their comments as more details emerge.  For the meantime, please see the complete announcement from the AG's office.

A.G. Schneiderman Announces $6.5 Million Settlement With Midtown Manhattan Timeshare That Scammed Purchasers

The Manhattan Club, Timeshare In Midtown Manhattan, Will Pay Restitution To Hundreds Of Purchasers That Were Misled About Their Ability To Reserve Rooms And Resell Shares
Settlement Is The Largest In Recent History Of The AG’s Real Estate Finance Bureau
Schneiderman Reminds New York Residents To Be Wary Of High-Pressure Sales Traps Utilized By Some Timeshare Companies
NEW YORK – Attorney General Eric T. Schneiderman today announced a $6.5 million settlemnt with the owners and operators of the Manhattan Club, a timeshare building in Midtown Manhattan, over the sponsor’s repeated false promises to potential and current share owners.
The settlement is the largest in recent history for the Attorney General’s Real Estate Finance Bureau. Under the terms of the settlement, the operators of the Manhattan Club, at 200 West 56th Street, acknowledge that they repeatedly misled shareowners about the club’s reservation process, their ability to sell back their shares, and the details of the club’s state-approved offering plan.
“The owners of the Manhattan Club lured thousands of timeshare buyers with false promises and shady sales tactics that violated New York law,” said Attorney General Schneiderman. “While timeshares can be legitimate enterprises, scams like this one are common. To avoid becoming a victim, always be wary of high pressure sales tactics.”
The club bills itself as a “unique” “residence-style boutique hotel” that blends “a vacation ownership retreat with a luxury suite hotel” and that offers “a hard-to-find haven in the midst of this active city.” The website appeals to people who “frequently visit New York City to enjoy Broadway theatre, fine dining and shopping, [and] classical performances.”
The owners and operators in this case are T. Park Central LLC, O. Park Central LLC, Park Central Management, LLC, Ian Bruce Eichner, Leslie H. Eichner, Stuart P. Eichner, Scott L. Lager, Hospitality Advisors, LLC, New York Urban Ownership Management, LLC, and Manhattan Club Marketing Group LLC.
In addition to the $6.5 million restitution to eligible timeshare owners, the settlement requires:
  • The owners and operators to be barred from the timeshare industry
  • The owners and operators will sell their stakes to a third-party purchaser and relinquish management control
  • Remove all sponsor-appointed current officers and directors from their positions as members of the Board of the Timeshare Association.
Eligible timeshare owners will be contacted by a Claims Administrator at a later date about disbursement of the restitution.
The Office of the Attorney General (OAG) began investigating the Manhattan Club in 2014 after receiving repeated complaints from shareowners who paid tens of thousands of dollars to become Manhattan Club “owners,” but were unable to make reservations due to a claimed lack of available rooms by the hotel’s operators. At the same time, rooms in the Manhattan Club were being rented over the internet to the general public, in violation of the timeshare’s offering plan.
In Spring 2014, OAG sent undercover investigators to record the Manhattan Club’s “Vacation Ownership Experience” sales presentation. Investigators found evidence indicating that the Manhattan Club’s sales tactics amounted to a bait-and-switch scheme.
Prospective purchasers were baited by a relentless sales pitch that included a number of misleading promises, including that ownership in the Manhattan Club is “better than money in the bank.” Prospective buyers were also told that the club does not rent rooms to the general public, that reservations were easy to make, and that few restrictions apply to reservations by owners.
But these promises were false. For example, contrary to the club’s explicit promises in its offering plan, room availability to owners was greatly limited because rooms were being rented out to the general public. That means that all reservations are subject to availability and owners, in some cases, were unable to use any of the time they purchased. Further, the owners’ annual common charges jumped approximately 200% in the last ten years – to about $2,000 per ownership interest per year for the smaller units – on top of the upfront purchase costs that ranged from just under $10,000 to over $40,000 per ownership interest. Some frustrated owners have sold their ownership interests back for a mere $1, just to escape the burdens of paying these charges.
In July 2014, pursuant to General Business Law section 354, a provision of New York’s Martin Act that confers broad powers on the Attorney General to investigate and halt fraud, a Manhattan Supreme Court justice barred the Manhattan Club from selling timeshare interests, preventing them from withdrawing money from certain bank accounts, and stopping them from foreclosing on Manhattan Club purchasers during the pendency of the investigation.
For information about how to protect yourself from timeshare, home improvement and vacation scams, click here for the Attorney General’s brochure “Don’t Get Burned: Attorney General’s Guide To Protecting New Yorkers From Summer Scams.”
This case was handled by Louis M. Solomon, Chief of Enforcement in the Real Estate Finance Bureau, with assistance from Assistant Attorneys General Nicholas Minella and Kimberly Ver Ploeg in the Real Estate Finance Bureau, as well as Matthew Woodruff, Senior Enforcement Counsel, Assistant Attorney General Tanya Trakht, and paralegals Natalya Fadeyeva and Pascual Noble in the Investor Protection Bureau with notable contribution by Jonathan Werberg, Senior Data Scientist, Research & Analytics. This case was investigated by former Supervising Investigators Luis Carter and Michael Ward, Supervising Investigator Sylvia Rivera, Investigators Karon Richardson, Elsa Rojas and Former Sr. Investigator Richard Friedman, under the direction of Deputy Chief John McManus and Chief Dominick Zarrella of the Investigations Bureau. Former Assistant Attorneys General Serwat Farooq and Elissa Rossi also assisted on the case. The Real Estate Finance Bureau is led by Bureau Chief Brent Meltzer and overseen by Executive Deputy Attorney General for Economic Justice Manisha M. Sheth.

Wednesday, July 05, 2017

US Timeshare Industry Posts 7th Straight Year of Sales Growth


Last month, in our Ask Redweek forum, we posted an article about positive trends in the resale market.  For the first half of 2017, resale closings tracked by RedWeek rose 46 percent compared to 2016.  As a follow-up to our feature on resales, we’ll now give you a snapshot of industry-wide stats just released by the American Resort Development Association (ARDA), the industry’s trade association and lobbying arm in Washington.

The Recession in Retail Sales is Officially Over

In a strong rebound from the Great Recession of 2008, the US timeshare industry continued to show steady sales growth in 2016, making it the seventh consecutive year of expansion for an industry that is still undergoing major changes, including mergers and consolidations, while adapting to new competitors who are using alternative business models to lure timeshare travelers to their programs.

In a report released June 29, ARDA said that sales volume increased 7 percent in 2016 while rental revenues rose 5 percent.  Overall sales increased from $8.6 billion in 2015 to $9.2 billion in 2016.  Rental income rose from $1.8 billion in 2015 to $1.9 billion last year.  Average timeshare occupancy was 79 percent, which compares very favorably to a 65.5 percent heads-in-beds rate for hotels.

“Seven straight years of growth is a testament to the strength of the vacation product we offer,” said Howard Nusbaum, ARDA’s president and CEO.  “Timeshare offers more space and privacy, tremendous use-value over time, and over 5,300 resorts worldwide to choose from.”

According to ARDA’s resort-count, there were 1,558 US timeshare resorts in 2016 (for 206,080 units). A whopping 70 percent of those units offered two bedrooms.  The average unit size, moreover, exceeded 1,000 square feet.  Florida continues to have the most timeshares, by a lot, while beach resorts command the most popularity.  Inland resorts, such as Colorado, still claim the highest occupancy rates.

ARDA’s survey of member companies also showed how timeshare and other hospitality companies are adapting to the explosion of new technologies to serve customers. At least 35 percent of all resorts now offer mobile applications (primarily cell phone) to owners for reservations, check-ins, concierge services and onsite communications.

Time for Everyone, Owners and Resorts, to Adopt Tech Solutions

The rush to go-mobile and embrace high-tech communications is no accident.  All brand-name timeshare companies are adopting customer-friendly tech programs as fast as possible --- not only to assist customers, but to offset competition from start-up travel clubs and reservation companies that offer products never envisioned by the old-school timeshare companies.  Fast-growing travel agencies such as VRBO, AirBnB and others are the vanguard of a new travel industry that seeks to offer more travel options, more adventures, more cruises, instant reservations and, most importantly, more treasured experiences for consumers.  That latter idea, special experiences, used to be the preferred domain of timeshare operators at sales presentations.  No longer.

At recent industry conferences, CEO’s of the biggest brand-name timeshare developer companies debated the impact of these new players in travel.  The newbies include those who offer one-night-at-a-time, sleep-on-a-couch-in-Manhattan stays to entities that offer extended travel excursions to Europe, Africa and China. But there was no agreement among the majors on how to adapt timeshare-in-perpetuity models to millennium-aged travelers who reject long-term commitments and seek shorter, immediate reservations.

One thing all execs conceded, readily.  They are hiring millennial-aged marketers (ages 25-40, roughly) as fast as possible to catch up with a travel generation that appears, already, to be way beyond the traditional lifetime contract timeshare era.  They are also refocusing sales presentations on the benefits of vacation experiences, rather than vacation cost-savings, to appeal to the potential next generation of timeshare buyers.  They are also confident, perhaps as a wish fulfillment, that millennial travelers will eventually switch to timeshares when their lifestyles dictate that a two-bedroom, two-bath, full kitchen condo is much better than a one-bedroom hotel studio for four.


ARDA’s PR and marketing teams recognized this probable shift a couple years ago.  That’s when they started promoting industry-wide statistics which showed that timeshare owners have more sex on vacations than “regular” travelers who stay in hotels.  Tough if not impossible to argue with that.

Monday, March 27, 2017

Timeshare Industry's Biggest Annual Convention Underway in The Big Easy

By Jeff Weir, RedWeek.com's Chief Correspondent

Welcome to the Big Easy!

Not sure how many people own timeshares in Louisiana, nor how many timeshare owners live in Louisiana, but RedWeek can guarantee you that several thousand timeshare people --- developers, CEOs, staffers, realtors, resale companies, lawyers, litigators and title experts, PR consultants, escrow agents, HOA managers, regulators, financial planners, software developers and the salt of the earth of timeshare --- sales people! --- are all gathered here in New Orleans for ARDA World, the annual "ain't life grand?" timeshare convention hosted by the American Resort Development Association.  ARDA's very capable folks spend most of their time lobbying lawmakers and regulators to make the world a safer place for timeshares (and, frequently, consumers), but once a week, every year, they take time to reconvene the faithful and celebrate the industry.  And on the last night of the convention, they give awards to dozens of people who have distinguished themselves over the past year.  We'd call the hardware "ARDA-OSCARS".

That's this week in New Orleans.  Let the Timeshare Mardi Gras begin.  The real one came and passed in February.

The event is happening at a huge Hyatt right next door to the Louisiana Superdome.  Every single staffer we've talked has first-person stories, they swear, about surviving Katrina's downtown flooding.  Area looks great now.  All rebuilt.  No water.

The "ain't life grand?" quote is from the award-winning 1967 movie, Bonnie and Clyde.  Clyde (Warren Beatty) uttered those fateful words before he and his bank-robbing girlfriend (Faye Dunaway), were gunned down by a battalion of cops in the Deep South in the 1930's.  Not sure what the exact parallels are to timeshare, since the industry's overall economy is improving, sales are up 6 percent and owner approval ratings still hover at 83 percent.  But this is pretty close to the Deep South, and it is New Orleans, which is a city very well-known as a place where anything is possible.

This four-day ARDA marathon, running early to late every day, will provide timeshare executives (and wannabes) with about two weeks of information on all timeshare subjects, including how to reinvent sales to capture new customers, to closing down a legacy resort that is running on fumes (and delinquencies).  There will be some keynote presentations from business celebrities expert at motivating next-gen sales people, meet-and-greet networking events for the passing of business cards, as well as several after-hours entertainments for people on expense accounts.  But the meat of the event is seminar after seminar on real business issues, such as: the fundamentals of timeshare, re-imagining the sales process, state and federal legislative and regulatory issues, ARDA-ROC's agenda for owners/consumers, managing HOA boards, using technology to reach new travelers, etc.

These are real subjects that would spark the synapses of many timeshare owners, if they were here. But they are not, which underscores a curious irony.  ARDA hosts a fancy convention annually for members of the development community, which seems to hold all of the money, profit and cards in timeshare. BUT NO ONE, not NOBODY, hosts an annual educational convention for the 10 million or so timeshare owners in the United States --- and these are the people who paid all the money to the developers in the first place.  Moreover, rank and file owners are, in general, the very people who need the most education about what they own, how to use it and, some day, how to get rid of it.  Failing that last option, they also need to know what their legal remedies are if things go bad.

These are the kinds of issues, and services, that RedWeek attempts to address every day for owners who want to rent or sell their timeshares.  Since ~60 percent of our 2.3 million+ subscribers are NOT timeshare owners, we're also intent on providing usable information that potential owners can use to do research on resorts, rentals, resales, and reputable news information about the industry.

That's what THIS blog is all about. And that's also why we are here, holed up in New Orleans for a few days, avoiding the melodious temptations of Bourbon Street so we can arm owners with useful information.

We do have one piece of maybe useful news for folks who have read our prior posts about Diamond Resorts.  Ex-senior VP Frank Goeckel, most recently mentioned in this space as Missing in Action from Diamond Resorts, is back in action at ARDA.  While others kept speculating about Frank, we just found him at a hotel restaurant, dining with friends.  Fit as a fiddle, far as we could tell.

Now, if you know of any good timeshares to check out in New Orleans, let us know!

Your comments appreciated.  We'll be back with more updates soon...


Wednesday, February 08, 2017

The Diamond Chronicles, Part 2: Controversial Sales Tactics Raise Their Head, Again


By Jeff Weir, RedWeek's Chief Correspondent


Just when you might have thought things were finally settling down at Diamond Resorts, all hell broke loose all over again as 2016 morphed into the New Year. Here's an update on what's been happening with Diamond since our first installment of the Diamond Chronicles last September.  There are three major developments, and they're all related, so we'll present them in chronological order.  They cover a span of 37 days.


#1:ARIZONA AG ACCEPTS $800,000 FINE FROM DIAMOND TO SETTLE INVESTIGATION OF ALLEGED CONSUMER FRAUD VIOLATIONS


Two days before Christmas, Arizona Attorney General Mark Brnovich announced the settlement of a long-running investigation into Diamond's business practices.  Without admitting wrongdoing (a common phrase in legal settlements), Diamond agreed to pay an $800,000 fine to settle the case, including $650,000 that will be made available as restitution to eligible Diamond owners, and $150,000 in court costs to cover the AG's expenses.  Diamond also agreed to offer a "relinquishment" program that allows qualifying owners to return their timeshares to Diamond with no further financial obligations.

But that's just the beginning of the story.  As with all things Diamond, the devil is in the details of the AG's case.  Here are the highpoints, or lowpoints, as publicly announced by the Arizona AG.

The investigation was prompted by hundreds of consumer complaints about deceptive sales practices, oral misrepresentations, and false statements made during sales presentations.  The complaints covered Diamond employees' statements about annual increases in maintenance fees, the availability of resale and buy-back programs, the timeshare resale market, owners' ability to rent their intervals, and member discounts on other travel options (including using points to pay maintenance fees).

The settlement was outlined in a legal document known as an "Assurance of Discontinuance."  In lay terms, it sets forth actions that Diamond agrees to abide by to comply with Arizona law and avoid future crackdowns from Arizona regulators.

Here are key snippets (among dozens) from the settlement agreement:


  • "The Arizona Attorney General's Office alleged that Diamond employees' actions and statements violated the Arizona Consumer Fraud Act."
  • "Diamond denies that it has violated the ACFA and enters into this [settlement] solely for the purposes of efficient resolution of the matter."
  • "At times, certain vacation counselors told some consumers that increases to maintenance fees are minimal, when the DRUSC (Diamond’s U.S. Collection) Association is permitted to increase maintenance fees up to 25 percent per year.”
  • "Some consumers alleged that Diamond failed to honor their requests to cancel the purchase and security agreement within seven calendar days following its execution."
  • "Some consumers claimed they felt rushed to sign the purchase documents before carefully reviewing them, and that they signed purchase documents with Diamond because they felt it was the only way to extricate themselves from what they perceived as a high-pressure sales situation."
  • "Certain vacation counselors represented to some consumers, directly or indirectly, that consumers could sell their membership if, at any time, they decided that they no longer wanted their membership.  However, some consumers have been unable to sell their membership on the secondary market.  Certain other consumers have been unable to give their membership away…"
  • "At times, certain vacation counselors represented to some consumers that Diamond would buy back their membership within the first two years after purchase if the consumer became dissatisfied, but the purchase documents disclosed that Diamond does not offer a buy-back program."
  • “The state believes that some of the actions and statements by certain Diamond employees, including vacation counselors, sales managers, and quality assurance officers, constitute deception, deceptive or unfair business practices, fraud, false pretenses, false promises, misrepresentations, or concealment, suppression or omission of material facts in violation of the ACFA."

You get the idea.  Many of these types of allegations have dogged Diamond since its inception in 2007, when it bought Sunterra's bankrupt timeshare business. Now under new ownership and new management (by former Starwood executives), Diamond has been trying to put as much distance between itself and the former regime as possible, but leftover issues, such as the Arizona case, keep undermining Diamond’s bid to rebrand the company as a kinder, gentler version of its old self.

If you're interested in reading more, go here for the full account of the AG's case.

As part of the Arizona settlement, Diamond agreed to change or enhance its sales, training, and other business practices to ensure compliance with the ACFA.  It also agreed to adopt a host of measures to improve disclosures to potential buyers during sales presentations.  In essence, most of the measures amount to assurances that Diamond sales personnel will not make oral promises to buyers that deviate from the language of the purchase contracts.  Diamond also promised to have quality assurance officers interview potential buyers prior to signing any contracts to make sure they are aware of the details. Finally, Diamond promised to investigate any complaints of future misconduct within 30 days while launching a Secret Shopper program to monitor its employees' performance.

The restitution-and-relinquishment programs are a new wrinkle in timeshare conflict regulation that will be closely watched nationwide.  The Arizona relinquishment program will be available to Diamond buyers who purchased timeshares after 2011 and before Jan. 22, 2017.  To be eligible, buyers will also have to file a complaint with the Arizona AG's office within 120 days AFTER an Arizona court formally approves the settlement (this will happen in late April or early May).  The relinquishment remedy process is very detailed, so potential participants are advised to consult the Arizona AG for complete filing details.  The restitution program, meanwhile, will be administered by the AG's office for owners who have filed complaints with the agency.  There is no information, at this early stage, about the amount or volume of restitution payments the state will distribute.

FYI, Diamond plans to roll out a national relinquishment (deed-back) program, called Transitions, later this year.  It has been in the works for months and is already being quietly tested, according to Diamond’s public relations firm.


#2: DIAMOND ANNOUNCES A NATIONAL 'CONSUMER SERVICE' PROGRAM PROMOTING ETHICAL SALES PRACTICES, TRANSPARENCY, ACCOUNTABILITY


On Jan. 23rd --- exactly 30 days after the Arizona settlement was announced ---Diamond publicly introduced a brand new nationwide ethics program, called Clarity, that would govern future sales practices and provide protections for new and existing Diamond customers.  The Diamond press release announcing Clarity included self-serving statements about Diamond's commitment to customers (“we already excel in customer satisfaction, but we are constantly looking for ways to do even better”) and promised future sales experiences that would provide transparency, accountability, and quality assurances for customers.

While not triggered by the Arizona legal settlement, the Clarity program is a natural follow on, since it covers much of the same issues --- but from the company's point of view.  It also represents an industry first, since no other company has publicly issued anything close to the ethical promises included in Clarity.

“Diamond’s Clarity consists of a series of operational procedures and enhancements, new training and compliance procedures and protocols, and other consumer-friendly changes to the sales process,” Diamond said.  These enhancements will be memorialized in a single document that will be given to potential buyers at the beginning of every sales presentation.

The changes are part of what Diamond calls its new "Promise" to customers.  Promise includes four operational programs that may be noticeable at sales presentations.

Diamond will increase training of all sales personnel, including quarterly training exercises, to ensure compliance with sales procedures. Finally, the company will place Consumer Engagement Observers at sales presentations to monitor interactions and provide feedback "to achieve constant improvement."

Michael Flaskey, Diamond's chief operating officer, said Clarity was "revolutionary in its simplicity" and further proof that Diamond is "doubling down on our promise to put our members first.  With the launch of Diamond Clarity, we are continuing to improve industry best practices."

The American Resort Development Association (ARDA), the industry's lobbying arm and promoter of industry best practices, praised Diamond for evaluating its sales practices and attempting to enhance the customer experience for members and potential buyers.

Diamond hired a Los Angeles-based public relations firm to promote Clarity's commitment to ethical practices. But, in one of its first actions, the firm rejected RedWeek's request to interview Flaskey.  (The mere fact that Diamond is now using an outside PR firm to deal with the news media, however, is a remarkable change for a company that, during the past two years, has been highly inaccessible and defensive when contacted by RedWeek representatives.)

In addition to the press release, Diamond emailed information about Clarity to existing owners (including this reporter).  The email reads, in part, "As part of this initiative we will strengthen our existing sales policies and procedures and challenge our competitors to adopt similar policies in an effort to raise industry sales standards across the board."

Here's an example of Diamond’s promise to members who attend future sales presentations: "We will provide clear, concise and consistent information at our presentations so that you can easily decide whether committing to vacation is the right decision for you and your family.  You will receive a summary of maintenance fees charged to members of the Collection associations for each loyalty level over the past five years."


On its website, Diamond also promised to fully inform buyers about resale restrictions, using points to pay for travel or maintenance fees, and banking or borrowing points.

As with any major corporate change, Diamond's Clarity program proceed will succeed or fail based upon its execution and, most importantly, its acceptance by Diamond's sales teams.  Given Diamond's reputation as one of the most aggressive timeshare sales companies in the business --- and its recent legal issues in Arizona --- the internal adoption issues may prove very challenging.

#3: $1 BILLION CLASS-ACTION LAWSUIT FILED AGAINST DIAMOND ALLEGING ELDERLY ABUSE, FRAUD AND FALSE PROMISES TO BUYERS.


On Jan. 29, a mere six days after Diamond rolled out Clarity, an Arizona couple did what a lot of Diamond owners on RedWeek’s forums have long advocated.  Ilona and Lester Thomas Harding, on behalf of themselves and other Diamond owners, filed a $1 billion class-action lawsuit in Nevada’s U.S. District Court, alleging elder abuse among a raft of deceptive sales practices.

The 55-page complaint outlines a litany of supposed malpractices committed by Diamond’s sales people when they upsold the Hardings --- not once, not twice, but five times over three years --- to buy points they could never use.

Their tale starts on Jan. 29, 2013, in Scottsdale, when the Hardings agreed to attend a Diamond dinner that was advertised as a 90-minute update session for people who owned Monarch timeshares.  According to the lawsuit, "at or around midnight, after six grueling hours, Diamond was finally able to wear down the Hardings and convince them that they needed to purchase a DRI membership --- Vacations for Life --- to a couple in their 70s."

Diamond sales reps told the Hardings that “their Monarch membership would eventually become useless.” They trusted the agents, then agreed to buy 10,500 Club points in Diamond’s U.S. Collection.  They received a credit of $22,812 for surrendering their Monarch membership, but still paid $7,895 out of pocket, plus $319 in closing costs.  Their first-year maintenance fees were $1,700.

Shortly after becoming full-fledged members of Diamond’s Club, the Hardings discovered what many other timeshare owners (at any club) have also encountered: they could not get reservations at resorts they wanted in California and Washington.

Despite that disappointment, the Hardings agreed seven months later to attend a second Diamond sales presentation while traveling on DRI points in Orlando.   At the August 2013 presentation, Diamond sales reps encouraged them to buy a "Silver Sampler Package" that included some free nights in Hawaii.  “Even though the Hardings repeatedly told the DRI sales agents that they were not interested in upgrading, DRI’s sales agents were relentless,” the complaint says.

Several hour later, “the Hardings succumbed to the cumulative sales pressure.”  They paid $15,905 to upgrade their membership and get those free Hawaii nights.

In May 2014, the Hardings flew to Hawaii to take advantage of their free lodgings.  Upon arrival, they learned that, in order to use the rooms, they would have to attend another mandatory sales update or pay full price for the rooms.

The Hawaii sales agents encouraged the Hardings to get out of the U.S. Collection and upgrade their membership to the Hawaii Collection so they could become "Silver-level" members of Diamond’s travel club.  After many hours, "the Hardings broke down" and capitulated.  They traded in their U.S. membership and"“paid DRI an additional $10,222 for the purported privilege of joining the Hawaii Collection."  As a result of the upgrade, their maintenance fees rose to $2,257.

After heading home, the Hardings discovered, again, that they could not book rooms at their favored resorts in California and Washington.  The upgrade did not translate into reservations.

A mere three months later, in August 2014, while traveling in Palm Springs, the Hardings attended another supposedly mandatory owner update because they were not Diamond "Gold-level" members.  There, DRI sales agents "convinced the Hardings that they had made a big mistake by joining the Hawaii Collection" because the Hawaii properties had much higher maintenance fees than the U.S. Collection and "was notorious for making special assessments on its members." According to the lawsuit, "DRI then offered the Hardings an opportunity to get out of the Hawaii Collection by once again upgrading their membership and rejoining the U.S. Collection at an even higher and more expensive level than they were at previously."

Despite their prior experiences, the Hardings trusted the sales agents, who represented themselves as licensed real estate brokers "who had a duty to tell the truth and disclose all material facts that a consumer would deem important."

The outcome?  The Hardings paid $13,905 to upgrade back to the U.S. Collection.

More than a year later, in December 2015, the Hardings agreed to attend one final sales presentation while staying at Diamond’s Polo Towers in Las Vegas. Nevada.  Sales agents offered them a 15,000-point bonus if they upgraded to a full Gold status membership.  One benefit of becoming a Gold member, they were told, is that they would never have to attend another sales presentation.  After seven hours of allegedly intense pressure, the Hardings agreed to buy the upgrade --- even though they didn’t have the cash to buy it.  Diamond offered to finance the purchase.  Diamond gave them a $36,120 mortgage (at 12.27 percent interest) and a Barclay credit card to charge the down payment of $5,970.  In addition to agreeing to pay $524 per month, over 10 years, for the mortgage, the Hardings saw their maintenance fees increase one more time --- to $5,173.

All told, the Hardings paid Diamond $75,000 for upgrades at five presentations over three years and also surrendered their Monarch membership to Diamond (valued by Diamond at $22,812).  But they still couldn't get their preferred reservations.

In January 2016, the Hardings, who live off social security payments and modest savings, ran into a financial wall.  They paid their 2016 maintenance fees, but then tried to sell their timeshare points.  They contacted "surrender" companies that wanted to charge them thousands of additional dollars.  Over time, they discovered that there was no viable resale market for their DRI membership.  They also found out, after corresponding with Diamond, that they couldn't even give it away.

“The Hardings finally realized that they had been scammed by DRI,” the lawsuit says.

Months later, after contacting an attorney, the Hardings sent a formal demand letter to DRI on Oct. 11, 2016 to opt-out of the otherwise automatic arbitration provision in their contract.  They also demanded a 100 percent refund of all their payments to DRI.  Diamond never responded to the demand letter.

The class-action lawsuit claims that Diamond used similar coercive sales tactics to pressure thousands of vulnerable older customers (defined as over 60) to buy Diamond memberships without fully disclosing the risks of ownership, such as the potential inability to make reservations.  The Harding's decision to "opt-out" of arbitration is crucial to their legal case, because the arbitration clause bans class-actions and private attorney general actions to resolve contract disputes with Diamond.

Predictably, because of the newness of the lawsuit, Diamond offered no substantive comments about it.  The company's PR representative said, "Diamond Resorts is still looking into the facts surrounding the lawsuit.  Therefore, it has no comment at this time."

Robert Tarics, one of the Harding’s attorneys, was equally circumspect.

"We are very proud to represent the Hardings and look forward to having our day in court," Tarics said.  "We’ll answer any questions once the case is over.  However, in general, we hope this case will reform and clean up some of the abuses that exist generally in the timeshare industry."

The Hardings, meanwhile, are trying to make ends meet in Arizona while their potentially landmark case heads to some preliminary hearings on the arbitration clause and the certification of the class.  As a result of their experience with Diamond, Tom Harding, 74, has had to forsake retirement and go back to work part-time as an electrical inspector.  Mrs. Harding, 76, remains retired from her former work as a licensed substance abuse counselor.

The Harding case, like other class-actions filed before it, faces many legal obstacles, including Diamond's proven penchant for litigation (see our stories on Tahoe Beach and Ski Club for one example of Diamond’s legal muscle). 

However, most timeshare cases like this never get near a courtroom.  Confidential out-of-court timeshare settlements are much more commonplace.  The last timeshare case to go to court, in November 2016, ended with a California jury awarding $20 million in punitive damages to a former Wyndham sales rep who got fired after she blew the whistle on sales tactics she found objectionable.  Less than two weeks later, and one-day after the New York Times ran a long story on the case, Wyndham’s longtime CEO was fired.




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RedWeek.com will keep owners posted on all developments in future installments of the Diamond Chronicles.

Thursday, October 13, 2016

Tahoe Beach and Ski Club Owners Solidify Control of Board Opposed to Diamond's Potential Takeover of Resort

SOUTH LAKE TAHOE, CA --- Legacy week owners at Tahoe Beach and Ski Club strengthened their grip on the HOA board in September by electing two longtime owners to succeed directors who had perceived ties to Diamond Resorts, the giant timeshare chain that owns 22 percent of the resort’s intervals.

The showdown vote on Sept. 24 drew more than 300 owners, a turn-away crowd for an annual
The crowd gathered for the annual meeting

membership meeting, with many owners expecting an election-day charge from Diamond representatives to place one or two of their own preferred write-in candidates on the ballot.  Instead, Diamond stayed on the sidelines, casting its 1,700-plus voting bloc for legacy owners Bill Costa and Kathleen Montgomery, both of whom promised to keep the resort independent and responsive to the vacation needs of longtime deeded-week owners.  Their election creates a 5-0 Board majority opposed to Diamond's bid to gain a voting majority (by gobbling up as many TBSC timeshares as possible).

Last year, when Diamond ran one of its own corporate representatives for the board, senior vice president Frank Goeckel, the resort erected a big white tent to house the proceedings and overflow crowd of 200 owners.  This year, they brought in an even bigger tent based upon RSVPs that indicated 350 owners would attend.

Goeckel showed up, as expected, but sat just outside the tent, giving himself a few feet of space from the overwhelmingly anti-Diamond owners in attendance (as well as an easy exit path, if needed). 

The proceedings were anxious but generally dignified compared to the rancorous name-calling meeting in 2015. Board President Al Fong and Treasurer Jake Bercu gave impassioned speeches about the need to vote and maintain the independence of the resort (from any corporate buyer). They also bashed Diamond, repeatedly, for past attempts to gain control of the HOA by buying up TBSC intervals. Fong called Diamond a “Trojan Horse” waiting to take over the TBSC beach. Fong and Bercu described Goeckel as a “bully” who tries to intimidate the TBSC board and owners.  

“He (Goeckel) is trying to lull you owners to sleep,” Fong told the faithful owners in the tent.  “Diamond is the Trojan Horse because they have 1,700 votes to use against you.”

Goeckel made no move to participate in any of it, until, after the vote affirming Costa’s and Montgomery’s election to three-year terms, Board President Fong handed him a microphone to answer a simple question: what are Diamond’s intentions for Tahoe Beach and Ski Club?

Goeckel delivered a 10-minute tutorial about Diamond’s point-based trust system of vacation ownership, then, in response to impatient groans from the audience, conceded that Diamond intends to keep collecting TBSC inventory.  In so many words, he said, it’s good business, because Diamond needs to add real inventory to its timeshare trusts in order to sell more points in Diamond’s travel club.

“Our interest here is no different than it’s always been,” Goeckel said.  “If we don’t contribute more weeks to the trust, we will eventually sell ourselves out at some time.”

While sitting out this year’s election contest, Goeckel made no promises about his participation next year.  Regardless, he’s expected to remain a fixture at the resort because he is Diamond’s designated watchdog to keep an eye on the TBSC Board and other Diamond-related timeshares in the area.

Makes sense.  Diamond’s ownership stake at TBSC represents $1 million in annual maintenance fees, monies that are contributing to the resort’s current positive financial health.

Putting the TBSC vote into Perspective


Three years ago, Diamond owned 10 percent of TBSC’s timeshares.  Then it bought another 10 percent from Vacation Internationale, a travel-resort company.  It also acquired intervals at local foreclosure tax auctions, gradually upping its stake to 22 percent. Those purchases were a red-flag to the TBSC board, which had been warned by financial advisers to avoid an “over-concentration of risk” in having one owner responsible for so much of the HOA’s maintenance fees.  That risk now resides with Diamond.

Board President, Al Fong
Rank-and-file TBSC owners, according to what Fong said at the annual meeting, have opposed Diamond’s bid to gain majority voting control of the HOA board for very personal reasons: they don’t want to lose their reservation rights at their home resort and, more importantly, they don’t want to be dictated to, or managed, by Diamond.  Thirdly, they don’t want to be pressured by Diamond to relinquish their weeks or buy into Diamond’s very aggressive sales machine.

FYI, Diamond owns a very nice, and much larger, resort right next door. Diamond’s Lake Tahoe Vacation Resort is one of the best in its network, but it has no private beachfront.  The Tahoe Beach and Ski Club, in contrast, has a spectacular, private 400-foot Lake Tahoe beachfront that is the envy of many Tahoe resorts.  TBSC also has many longtime deeded-week owners who have bought multiple weeks to maintain their ability to enjoy the resort during the primetime summer weeks.  They fear those privileges will all go away if Diamond somehow gains control of their board.

Diamond’s Lawsuit Against Board goes to Mediation Oct. 20th


Another relevant detail: Diamond is currently suing three members of the TBSC board for refusing to recognize Diamond’s purchase of 245.5 Association-owned timeshare intervals in December 2014.  Diamond is NOT suing the other two members of the then-board because they supported Diamond’s purchase.  Those two board members, FYI, Shannon Krutz and Steve Williams, were replaced by Costa and Montgomery at the Sept. 24 election.

The TBSC board rejected Diamond’s bloc purchase because it was not authorized, in advance, by the board.  The board majority learned later, after the fact, that the purchase purportedly had been validated by Krutz, who had an affiliation with the club’s former management company, VRI, that brokered the sale.

VRI’s contract renewal with TBSC was terminated prior to the disputed transaction.  Krutz has not appeared onsite at TBSC for months (in all likelihood, because she is a key part of the Diamond vs. TBSC litigation).  A judge presiding over that lawsuit has already opined that the transaction will not be upheld, and that Diamond would lose at trial.

The case goes to mediation on Oct. 20.  Mediation works if both parties agree to abide by the outcome.  It’s a precursor to a trial on the merits.

So it continues to be a tangled web at TBSC, which represents, in the bigger picture, a legacy resort’s attempt to stave off a threatened takeover by a giant timeshare company.  Diamond has never said, publicly, that it intends to acquire a controlling interest in TBSC.  But it is an acquisitive company that continues to add inventory to its network.  In the past year, for example, Diamond bought Gold Key Resorts (with six resorts) and Intrawest Resort Club (nine resorts).  That’s the business model.

One Final Threat Before the Vote


Two hours before the Sept. 24 board election, Goeckel informed the HOA board that Diamond would
Mary Ann Gutierrez, owner activist
dispute the election results if the Board did not retract votes attributed to association-owned inventory (not including the 245.5 that relate to Diamond’s 2015 lawsuit).  The board declined to retract the votes.

Final tally: Costa and Montgomery, the board's preferred candidates, won unanimous seats on the board with more than 3,900 votes apiece. If you deduct Diamond’s 1,700-plus voting bloc from the total, the approximate tally was: 


  • Costa 2200
  • Montgomery 2200
  • Diamond 1700

Next year, board member Sedric Ketchum is up for re-election.  When he won his first term, his margin of victory was 23 votes, with Diamond throwing all of its voting power against him.  Stay tuned.

After the vote, RedWeek asked Goeckel if he had any comments about the proceedings.

“I have absolutely nothing to say to you.  You are not authorized….”

Not sure what the “authorized” comment meant, but if we find out, we’ll inform you.

Goeckel and Diamond’s public relations department did not respond to email requests for additional comment after the election.  That is their standard operating procedure.

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This post was written by Jeff Weir, RedWeek’s chief correspondent.  He is also a Diamond timeshare owner.