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.




Thursday, September 22, 2016

The Diamond Chronicles: Life in the Fast Lane, Timeshare Version

By Jeff Weir
Chief Correspondent for RedWeek.com

This is the first of what may be several columns on the changes afoot at Diamond Resorts International, which was just bought out by a huge Wall Street investment firm, Apollo Global Management, for $2.2 billion.  The merger’s effect on owners is to-be-determined, which is why we are going to report on the Diamond Chronicles.

Here is the Back Story


Throughout 2016, Diamond has made a lot of headlines, including a very damaging one on Jan. 22, when the New York Times (following articles published by RedWeek.com, TimeSharing Today and other organizations) published a critical news story about Diamond’s alleged use of high-pressure sales tactics to sign up new or repeat buyers.  Predictably, Diamond executives denounced the article.  Diamond investors didn’t like it either, as reflected by a large dip in stock price.  To stop the bleeding on Wall Street, Diamond issued a letter to investors Jan. 25 that said, in part, that the New York Times article “does not accurately reflect who we are as a company nor how we operate our business.”  Diamond did not challenge any specifics in the article or demand a correction or retraction. 

The second big thing that made Diamond newsworthy, all year long, was its overall stock performance, which had floated far below its timeshare competitors for many months.   So on Feb. 24, while under public pressure from major investors for stronger returns, Diamond’s board of directors announced that it had created a board-level committee to explore all “strategic alternatives” to maximize shareholder value.  That announcement, in effect, meant that Diamond was putting itself up for sale --- and Wall Street loved it, pushing Diamond’s stock up from $19.11 per share on Feb. 24 to $23.21 per share on Feb. 25.  Four months later, on June 29, Apollo announced that it would buy Diamond for $30.25 per share.  That offer amounted to a 26% premium over Diamond’s then-current share price.  The merger was consummated Sept. 2.  That’s the day that Diamond went dark, transformed from a public company that files quarterly results to investors, to one that is under no obligation to report anything publicly about its business.

But this is not a story about Wall Street.  It's about Diamond.

How Do Timeshare Owners Fit into the Apollo-Diamond Merger?


After months of hearing nothing from Diamond about the merger, Diamond timeshare owners got two very friendly Labor Day Weekend emails from the “stay vacationed” company, on Friday, Sept. 2.

The first came from David F. Palmer, Diamond’s president and CEO.

Thirty minutes later, the second arrived from Stephen J. Cloobeck, Diamond’s founder, chairman and former CEO (until Palmer succeeded him in January 2013).

The dual messages announced that “an affiliate of funds managed by affiliates of Apollo Global Management, LLC” had completed its acquisition of Diamond Resorts International for $2.2 billion.  That’s right, they said it: “affiliates of... affiliates” bought Diamond.

Cloobeck, the man who peddled “the Meaning of Yes” as a timeshare theme in all of his corporate messaging, said he was “thrilled” by the buyout.  Palmer was a bit more restrained, saying he was “pleased.”

No surprise.  In reality, they should be ecstatic, because Cloobeck and Palmer are the two biggest beneficiaries of Apollo’s purchase of Diamond’s stock.

According to an Aug. 5 New York Times story that was based on public Securities Exchange Commission stock filings, the Apollo buyout was worth $384 million for Cloobeck’s shares and $173 million for Palmer’s.  Not bad for one day at the timeshare office.

They weren’t the only big winners.  Thirteen other Diamond executives and directors (all major shareholders) stood to share $67 million, according to the SEC filing and the Times story.

So if you’re a Diamond timeshare owner, what does all this seemingly obscene profiteering by corporate executives mean to you?  Maybe not much.  In his email, Palmer assured all Diamond owners that “this transaction will not impact your membership or ownership and you will continue to enjoy all of the benefits you have come to expect.”

Cloobeck, as is his wont, was much more exuberant.  He celebrated Diamond’s sale as a personal victory.

“I am confident that the new owners will be excellent stewards of my legacy,” Cloobeck wrote in an email to owners.  “I am also pleased to announce that Apollo offered me a special position to assist them as an advisor, leveraging my expertise in the hospitality sector.”

So, while he counts his millions, Cloobeck also plans to hang around, advising the company on how to make even more money.  In an odd way, it’s fitting, because Cloobeck’s over-the-top personality has set the tone for Diamond since it bought out Sunterra’s timeshare assets in 2007.


Whenever I Think of Diamond, I See Cloobeck


Back in 2012, Cloobeck participated in a couple episodes of Undercover Boss, the semi-popular CBS-TV show about executives who masquerade as regular employees in order to find out what is “really going on” at their companies. 

Cloobeck's appearance on the semi-reality show was notable because he managed to turn his episodes into an unintended comedy, disguising himself in an ill-fitting wig, baseball hat and glasses while posing as a not-too-smart handyman.  Since a camera man and sound person followed him around various resorts while the episodes were filmed, it’s unlikely that Diamond employees had much doubt about who the guy-in-the-wig was.  Still, when the episodes ended, he graciously thanked the employees who put up with his phony handyman and gave them hugs and lots of money.  (See what RedWeek members have to say about the episode here)

Rank-and-file Diamond employees already knew who he was, of course, because during his reign as CEO Cloobeck made himself a ubiquitous presence at Diamond resorts.  According to staff, he had a habit of popping in, unannounced, at various resorts to see what employees were doing.  For several years, he and his marketing team also liked to feature videos of Cloobeck, talking about how wonderful “the Meaning of Yes” was to Diamond owners, on continuous-loop, large-screen TVs mounted on the lobby walls at Diamond resorts.   At check in, you could not escape him.  In the TV video, he looked every part the timeshare salesman that he is: expensive coat, pressed jeans, white open collar shirt, gold chains, big watch, vivid tan, brilliant white teeth, perfect pompadour, all topped by a tone of self-satisfaction as Cloobeck held forth from a spectacular beach resort (fancier than anything Diamond owns, FYI).  Those videos disappeared, overnight, when Cloobeck was replaced as CEO by Palmer, his longtime executive running mate at Diamond resorts.

From a branding standpoint, the marketing video wasn’t a bad idea. But just like the Undercover Boss episodes, the video seemed to reveal more about Cloobeck than the average timeshare guest might want to know about him (which is, that he’s proud of being rich and happy to share his wonderful life with mere humble timeshare owners).  As one might imagine, Diamond’s front-desk people purportedly hated the video, because they could not get away from it.  

The last time I stayed at a Diamond resort, I asked the front desk folks, “where’s the Cloobeck video.”  They laughed out loud, then confessed, “locked in the general manager’s safe.” Never to air again.

In a semi-recent YouTube interview about his Undercover Boss appearances, Cloobeck told an interviewer that he initially balked at doing the show “because I was afraid of tarnishing the brand.”  Still, he was obviously proud of the whole adventure.  Later, when asked about Diamond’s philanthropic programs for charitable causes, Cloobeck beamed, “I’ve always been a great philanthropist.”

After the second Undercover Boss episode aired, Cloobeck decided to put his money where his mouth was.  “I wanted to do something special for our team worldwide.  I donated $1 million, matched by the company, for a $2 million fund for team members that need help,” Cloobeck told the interviewer.

Diamond timeshare owners should like that bit of philanthropy, since they paid for it with their purchases, mortgages and maintenance fees.

I only met Cloobeck once, but it was a total goof and probably did not even register with him.  I was attending an industry conference in Las Vegas, hanging outside the media room while CEOs attended a private session next door to talk about high-level (i.e., secret) timeshare issues.  Suddenly, there was a flurry of movement.  It was the unmistakable Stephen Cloobeck, larger than life, decked out in golf shirt and shorts, swaggering through the lobby with a cigar in hand and accompanied by a big, beefy, bald-headed bodyguard (a very big version of Kojak, for those who remember Telly Savalas) who cut a swath for Cloobeck through the curious folks in the lobby.  Compared to the other CEOs who were dressed like bankers, it was a classic Cloobeck entrance.  Arrive late, act like you just left the golf course (which he had), then leave early.  I tried to introduce myself to Cloobeck, without slowing him down, but desisted when the bodyguard started twitching at me while his gold earring bobbed like a fish hook.  The pockets of his business suit bulged, too.  Regardless, it was a great moment: short, sweet, unforgettable Cloobeck.

Inspired by what I'd seen, the next day I called Diamond’s corporate office in Las Vegas to see if I could arrange an interview with Cloobeck while I was in town.  Seemed like a pretty automatic thing to do.  He seemed much more interesting than many CEOs I’ve met and was obviously living life as a self-styled timeshare celebrity, so why not? Good idea to see him in his lair for a feature story just like this.

That was three years ago.  I’m still waiting for the call back.


Out with the Public Company, In with the Private Company


So now it’s time for all timeshare owners to say goodbye to the Old Diamond, and hello to the New Diamond.  While both Cloobeck and Palmer promised in their emails that nothing would change as a result of the merger, that is not realistic.  Business people outside Diamond’s inner circle say there are always big changes when one company takes over another.  There are many winners and losers, including the people who get hired or fired as a result of Apollo’s integration of Diamond into its many-affiliate universe of companies.  After all, Apollo did not buy Diamond to keep everything the same.  Apollo bought Diamond, which has been hugely profitable for 12 quarters in a row, to make even more money.  More importantly, now that it will operate as a private company, Diamond has no legal obligation to file quarterly reports about earnings or annual reports.  Here’s what that means: barring voluntary announcements or web postings from Diamond, timeshare owners will have no easy to way to find out what’s going on with their timeshare company.  You’ll only learn what they want you to know.

Will reservations get easier?  Will owners ever be able to sell their Diamond Club points on the resale market?  Will Diamond take them back?  Stay tuned.

FYI, we asked Diamond’s PR team to arrange an interview with Palmer to talk about these issues, but they have not responded.  We will keep you posted if they do!


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Full Disclosure: In addition to being a reporter who covers timeshare issues, I am a longtime Sunterra/Diamond owner who has had generally positive experiences using my legacy weeks.  Even though I have stubbornly refused to convert them to points, Diamond still comes after me, every six months, to become a full-fledged member, rather than an orphan, of The Club.  I don't mind.  Diamond has pretty likeable employees.  Their solicitations are always challenging.

I have also covered Diamond's showdown with Lake Tahoe Beach & Ski Club extensively.  
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For more info on Diamond's financial performance, see Diamond’s last quarterly earnings announcement, published Aug. 6, 2016. 



Let us know what you think!  Leave your comments below to continue this conversation.

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NOTE: The views expressed here are the author's own, and do not necessarily reflect or represent the opinions of RedWeek.com or its affiliates.

Wednesday, September 07, 2016

Marriott Vacation Club Expands Footprint in Hawaii with New Timeshare on Big Island

Marriott Vacation Club just announced a new travel option for people who like the Marriott timeshare experience and, most importantly, vacationing on the Big Island in Hawaii.

On Sept. 7, MVC announced the opening --- next May --- of its newest Hawaiian resort, the 112-unit Waikoloa Ocean Club, a one- and two-bedroom suite complex which will be co-located on the island of Hawaii with Marriott's existing Waikoloa Beach Marriott Resort & Spa.   It represents Marriott's newest “mixed use” property where hotel and timeshare guests share the same facilities and amenities.

"The Big Island has been the only Hawaiian island missing from our resort portfolio," said Stephen P. Weisz, president and CEO of Marriott Vacations Worldwide.  "We are excited that our owners and guests will get to experience its diverse landscape and rich culture."

That landscape includes black sand beaches and Kilauea, one of the world's most active volcanoes, which spits fumes and smoke daily and, since the 1983, sends hot lava tubes down the mountain into the ocean.  Hawaii Volcanoes National Park is a must-see day trip from the Waikoloa area, but it's not the only attraction for visitors. The Big Island is easy to navigate by car and full of wide open spaces with a population of 175,000 people (compared to Oahu's 905,000, Maui’s 131,000 and Kauai's 63,000). The resort areas in Waikoloa and along the Kona Coast are just as spectacular as any resorts on the other islands --- but they offer more rocky coasts and fewer beaches than, say, Maui.  If you like to see molten magma, up close and personal, this is the only place to find it in Hawaii.

Marriott owners can call owner services immediately to start booking reservations, starting May 5, 2017, as part of Marriott's Destinations Exchange program (meaning, using Destination Club points to book stays). Between now and then, Marriott will continue upgrading the grounds and rooms to make sure the new timeshare resort --- which is a conversion of part of the existing property, similar in scope to Marriott's Kauai Beach Club conversion --- lives up to the standards Marriott has already tried to create at its five other Hawaii-based timeshares in Oahu, Maui and Kauai.  Significantly, the company has already added a sales gallery to the complex for future timeshare presentations.  As with the other Marriott timeshare resorts in Hawaii, the complex will offer everything visitors might want to do --- from beaches and golf courses to spas and restaurants, all within walking distance.

The Big Island is just that, nearly twice as big as all the other Hawaiian islands combined.  It offers 10 of the world's 14 different climate zones due to the massive elevations of its most famous volcanoes: Maunakea is the tallest sea-mountain in the world --- bigger than Mt. Everest; Maunaloa is the world’s most massive mountain and covers half of the island.  While big and rugged, the Big Island is also a baby, since it’s the youngest island in the Hawaii chain at 800,000 years old.

RedWeek subscribers can sign-up to be notified when new Waikoloa Ocean Club timeshare rentals and resales are made available.


Additional resources:

Wednesday, May 04, 2016

Don’t Forget to Take Your Vacation!

It’s that time of year again - springtime! The weather is starting to get warmer (or at least getting better!), and our thoughts turn to vacation planning. There's been much research done, and many articles written on the value of taking a vacation and its beneficial effects on work performance, relationships and overall well-being. 

Unfortunately, many of us are not taking their vacation time. The U.S. Travel Association says 6 in 10 organizations report employees fail to use 3+ days of paid vacation each year. In case you were thinking of not using your vacation time this year, here’s a quick review of why you should.
  • Vacationing improves health and well-being
It reduces stress and improves your health (maybe even preventing heart disease according to one study), makes us happier and more relaxed. 
  • After vacationing the effects at work are dramatic
It helps to prevent burn-out and enhances productivity and creativity, increases job satisfaction, and probably helps you to get along better with co-workers.   
  • Vacationing improves relationships with family and friends 
Quality time spent with family and friends without distractions is priceless. The results are better relationships, the strengthening of family bonds, and the making of positive, lasting memories. You may even find out a few things you didn’t know about the other person! 


Even Planning a Vacation Makes You Happier

A 2010 study by Dutch researchers, found that just planning a vacation boosts happiness. When you start to look at places you’d like to visit and all the things you want to do, it builds excitement and gives you something to look forward to. Include your spouse and children in the planning process to make everyone feel a part of the adventure.


Make Your Vacation Even More Valuable

You know how good it makes us feel to do something for someone else - to feel that we've made a positive difference. Many people are doing that by turning their vacation into a volunteer experience.  Whether domestically or internationally, you can use your passions and skills to help build a house, teach a language, support children, get involved in a conservation or ecological project, provide health and agricultural support. There are several agencies that can team you with a project and a particular country.  Not only are you giving to others, it’s a great way to see the world, understand the country and experience a culture unlike your own. 

Monday, October 19, 2015

Owners at Legacy Timeshare Resort in Lake Tahoe Deny Diamond's Bid to Gain a Majority Seat on the HOA Board

By Jeff Weir

In a stunning setback for Diamond Resorts, timeshare owners at Tahoe Beach and Ski Club defiantly denied Diamond Resort International's bid to place a senior vice president on the HOA's board of directors. Instead, they reelected two board members who constitute a 3-2 majority opposed to Diamond's unannounced plans for the resort.

Frank Goeckel's defeat was a first on many fronts. He is Diamond's liaison and board relations consultant to 31 resorts and currently serves on four timeshare HOAs, including the nearby Tahoe Seasons resort. All he wanted to do, he told owners repeatedly, was serve on the board to protect Diamond's investment in Tahoe Beach and Ski Club and create a richer vacation experience for all owners. Diamond's investment is substantial: it has aggressively bought Tahoe Beach and Ski Club units at tax sales during the past two years and now owns 25% of all Tahoe Beach and Ski Club timeshares. To many outsiders, Diamond's ownership (including $1 million in maintenance fees this year alone), is viewed as a very positive key to the legacy resort's long-term financial survival.

But the 200 owners who assembled on the Tahoe Beach and Ski Club beach for the HOA election on Sept. 26 did not embrace Goeckel's pitch, or his sometimes combative personality. He finished a distant third out of four candidates, collecting 1,719 votes, including 1,604 he cast for himself as Diamond's proxy holder. In their rejection of Goeckel, Tahoe Beach and Ski Club owners voted to maintain their resort's independence in the face of a company with very acquisitive designs on older but valuable resorts across the country.

Jake Bercu and Alfred Fong after their reelection
Bad as the results were personally for Goeckel, the HOA vote was a triumphant victory for President Alfred Fong and Treasurer Jake Bercu, who were reelected to new terms on the strength of their campaign pitch that Goeckel, and co-challenger Cathy Ryan were bad for the board and bad for the resort. In effect, they portrayed Goeckel as a Trojan Horse whose ascension to the board would enable Diamond, over time, to take over the resort at the expense of longtime deeded week owners. Citing Diamond's and Goeckel's record at other Diamond resorts, Bercu-and-Fong supporters at the HOA meeting predicted that Diamond would increase maintenance fees, open up the resort's coveted private beach to non-owners, and pressure longtime owners to convert their deeded weeks into Diamond's point-based travel club.

Many owners also distrust Diamond's motives because of Diamond's decision, last February, to sue the current board for its refusal to recognize Diamond's purchase of 241.5 vacation units last December. As one irate owner pointed out at the HOA meeting, "Did you know you're being sued by this man? He [Goeckel] wants your vote!"

The candidate's forum at the HOA meeting was rancorous. The candidates aggressively challenged each other while members of the audience heckled Goeckel and complained about Diamond's corporate behavior at other resorts. Bercu and Fong beseeched owners to protect their vacation experiences and preserve the spirit of the resort by rejecting Goeckel and Ryan. Goeckel vowed that he would never open up Tahoe Beach and Ski Club's private beach to Diamond owners at the Lake Tahoe Vacation Resort, located right next door, but with no beach of its own. Ryan, a bit player in the drama, said she just wanted to work with all owners and improve the financial stability of the 140-unit resort.

200 Tahoe Beach and Ski Club owners gather for the vote
Goeckel answered every accusatory charge (and boos) from owners with as much reasonableness as he could muster. But he was also obviously upset at the hostility he absorbed from Tahoe Beach and Ski Club owners at the candidates' forum. He even told a story about how his wife and children, at home in Florida, got hateful and threatening phone calls from owners at The Point in Poipu, a Diamond resort on Kauai that went through an owner class-action lawsuit several years ago (over a $6,000 one-time assessment to repair ocean-water damages). The case was eventually settled --- with Goeckel calling the experience one of his proudest achievements as a board member at Poipu --- but still left a bad aftertaste among many Poipu owners. To this day, they complain loudly, and bitterly, on online forums (including this one on RedWeek.com) about their alleged mistreatment from Diamond.

Unlike Poipu, the HOA election at Tahoe Beach and Ski Club ended peacefully, with all candidates retreating to the best wishes of their supporters while owners milled around, excited and nervous, about whatever history they were about to make. An hour later, they found out.
With two seats open on the board, the referendum on Diamond's investment in Tahoe Beach and Ski Club was:
  • Bercu, 2,217 votes
  • Fong, 2,207.5
  • Goeckel, 1,719 (including Diamond's 1,604)
  • Ryan, 1,624.5 (including Diamond's 1,604)

Saturday Night Pizza Party Puts the Vote into Perspective

The night before the election, Goeckel probably knew what was coming. He had dinner, by himself, at the end of a long bar at the Pizza Hut located right next door to the Tahoe Beach and Ski Club. His only visitor was a reporter who stopped by to say hello and engage in small talk. Goeckel was not in the mood for pleasantries. In response to several questions, he just stared back, stone-faced, like he was looking through a mirror.

While Goeckel munched on his lonely pepperoni, 50 or so Tahoe Beach and Ski Club owners held a pre-election party in a dining room just 20 yards away. With college football game TVs blaring overhead, they didn't know Goeckel was in the same room, and they didn't care. They were celebrating an owner-movement in its infancy: people taking charge of their timeshare destinies by getting involved in mundane things like HOA elections. For these folks, getting involved felt good --- very, very good.

Diamond Resorts' Goeckel takes the mic
Compared to the newby activist owners, Goeckel's been deeply involved in timeshare issues for 25 years. He has more board member experience than all of the Tahoe Beach and Ski Club members, combined. He also serves on the board for the American Resort Development Association and its owner-affiliate, ARDA's Resort Owners Coalition. But Goeckel, despite a resume that spans six pages, hit a rocky speedbump at Tahoe Beach and Ski Club. Owners, including other board members, routinely refer to him as a 'bully.' Goeckel claims to be baffled by all the hostility he's received from owners at Tahoe Beach and Ski Club, but he knows the truth of the situation. Bottom line: the owners that know him don't like him or his company.

The enmity is understandable. At an owners' meeting on the beach a month ago, Goeckel matter-of-factly told owners that if he did not get elected to the board this year, he'd get elected NEXT year. Diamond, he said, "is not going anywhere."

Owner Activism in Tahoe Starts a Movement?

The showdown on the beach at Lake Tahoe beach illustrates, in one isolated case, what can happen when legacy resort owners communicate and get organized to defend their perceived interests. It also opens a window into how major companies view the future of timeshare --- where big companies gobble up units at smaller resorts in high-value destinations like Lake Tahoe. It seems to be a natural part of the ongoing consolidation of the industry where big companies survive and smaller independent timeshares teeter on the brink of insolvency as owners age-out and go delinquent on their maintenance fees.

Across the country, a similar owners' rebellion sparked a civil and criminal investigation of The Manhattan Club timeshare resort by New York Attorney General Eric Schneiderman. As part of that investigation, Schneiderman obtained a court order in 2014 that terminated all sales at the club and froze the company's assets.

But those kinds of moments are few and far between. Most timeshare owners are concerned about their reservations and vacations, not the people who run their resorts.

In the aftermath of the vote, as the calm waters of Lake Tahoe lapped quietly at Tahoe Beach and Ski Club's private beach, Bercu and Fong were proudly optimistic about the challenges that still must be addressed --- Diamond's lawsuit, dealing with delinquencies and launching a new resale program to put foreclosed units back into circulation --- and creating revenues.

They also have to prepare for another election, next September, when two other board members, Steve Williams and Shannon Krutz, who back Goeckel, stand for reelection. The board has already asked Krutz to resign because of her role in approving Diamond's purchase of Tahoe Beach and Ski Club timeshares last December (without board approval), but she has not responded. Other owners, full of energy from their victory in reelecting Fong and Bercu, are openly debating whether to launch a recall election, immediately, to unseat Krutz. So the situation remains fluid, despite the election.
Bercu says that Goeckel, communicating with other board members through back channels, has already agreed to engineer Krutz's resignation --- in return for his getting an appointment to serve out her term.

Diamond's Lake Tahoe Vacation Resort behind TBSC
It's a risky proposition, since owners have already spoken about their position about Goeckel.
"Diamond is still trying to buy our inventory, so we don't want Goeckel on the board," Bercu said. Krutz declined to comment.

Goeckel also sidestepped comment after the HOA vote. In an email, he said, "I am unable to comment on issues relating to the pending litigation at Tahoe Beach & Ski Club in South Lake Tahoe, California."

Like all litigation, Diamond's lawsuit against Tahoe Beach and Ski Club will have a life of its own. The next status conference before a local judge is tentatively set for mid-November. That judge has already opined that Diamond will lose the case because Krutz had no authority to authorize the sale on behalf of the board. The Tahoe Beach and Ski Club board is actively fighting the case and, in a recent maneuver, filed a countersuit against Diamond and VRI, the club's former management company, over the December sale.

So what will happen next?

"The owners want more blood," Bercu said. "They are feeling empowered. We want to keep them engaged but channel the energy into something positive."

Tuesday, August 25, 2015

RedWeek's Casting Call Visits Hilton Head!

RedWeek's latest Casting Call features long-time RedWeek members Michelle and Bill at Marriott's Barony Beach Club on the beautiful Hilton Head Island! Featuring vibrant work by Hilton Head Island-based Kellie McCann, these photos truly capture the laidback, beachy spirit of Hilton Head. Check out more of the photoshoot on our exclusive Facebook album, and you can view more of Kellie's work and book a session of your own on her Web site

Don't forget that RedWeek's Casting Call has been reopened! If you're traveling to a timeshare resort in the next few months and are willing to work with a professional photographer, check out the details and apply here. You'll receive all of the digital photos from the shoot, a $50.00 printing certificate and you'll be featured on the RedWeek homepage for all of our 2 million+ registered users to see! Casting Call registration closes on December 31st of this year, so be sure to enter as soon as possible.