It all depends on how you look at it. Whether you’re looking from an industry perspective or a consumer perspective, the timeshare industry can present a very different look based on your point of view.
In reading through the second quarter financial report from Diamond Resorts, it is apparent that their IPO from last month is having an impact on how they present their message. From an industry perspective, it’s a very rosy picture with major indicators all up. Total revenue, sales, tours generated and price are all up, which is a consistent theme among the big brand timeshare developers during this reporting season.
The growth numbers are impressive but need to be viewed in light of recent acquisitions this year. Even so, a 43 percent jump in total revenue is more than just pocket change at a time when the global economy is sputtering along.
Long live tourism! And the discretionary spending that it brings.
But from a consumer perspective, there are the standard flash points that need to be checked and have been a point of emphasis for years with this industry.
Diamond reported that their average transaction price went up nearly 30 percent to just over $16,000. Good news for the developer – bad news for the consumer. Their reasoning? Because of selling larger points packages and higher sales to new customers rather than existing owners.
So let me see if I have this straight. Their sales went up because owners need to buy more points (the Monopoly money-type value of which is arbitrarily determined by the developer) and because they can get away with it with new customers who don’t know the difference like existing owners.
Nice… for the developer. For the consumer, not so much.
But this isn’t to say that the product isn’t worth it. The value of any product is determined by those who are willing to pay for it and, to be fair, their average price is about $4,000 less than the average overall price of an interval industry-wide. But there are better ways to buy in than this.
Especially when you look at their sales and marketing expenses, the amount of overhead that went into generating that sale in the first place. Diamond says it is 50.7 percent of the overall price, and they clapped their hands because it’s down from 57 percent at this time last year. Which means that out of that $16,000 price tag, $8,000 is going to pay for expenses – which is your money.
Owners often wonder why the timeshare prices on the resale market seem depressed, but this is the major reason why. Think in terms of car sales – the new car purchase covers marketing and commissions and the used cars are significantly less on the resale market. Same with timeshare.
Again, this isn’t a knock on the developer, it’s just that there is a better way to buy timeshare than through the developer. And that’s online through sites such as buyatimeshare.com. I saw a Diamond Resorts Cypress Pointe Grande Villas in Orlando right now for $7,000, but people need to know that the option exists and many don’t until they are already exposed to the product.
The good news for consumers is that Diamond only closes about 13 percent of their toured customers, which means 87 percent walk away from the resort without purchasing on the spot. Research supported by the American Resort Development Association not only shows that 32 percent of all timeshare sales occur through the resale channel (up from 17 percent in 2010), but that the number of people attending sales presentations has decreased. This would indicate that those buyers, once they have toured, are looking at other purchase channels other than through the “for today only” atmosphere created at the resort.
Again, the more awareness created about the savings through buying timeshare on the resale market, the better.