Exit Companies: The Industry Fights Back

During the “Timeshare Relief” panel at ARDA World 2018 attendees were given an inside look at the various ways the industry is responding to the challenges of exit companies. While there was some brief discussion of the older “viking ship” model, the focus was clearly the newer companies offering to “cancel your timeshare contract.” Because these companies encourage owners to default on their mortgages, they pose a unique threat to entire timeshare ecosystem; one that I highlighted in an article for Resort Trades in September of last year. Naturally, I was eager to attend this session, and I wasn’t the only one: The conference room was packed with many more attendees than chairs, and no one got up to leave early despite the event running well over its allotted time. Three speakers offered three very different approaches to the problem, with Rob Webb of Baker & Hostetler serving as the moderator.

There’s certainly no love lost between Dave Ramsey and the timeshare industry, and the session kicked off with a brief video of the “financial guru” denigrating timeshare ownership. This was effective in illustrating the opposition viewpoint (Ramsey has actually endorsed an exit company), and elicited plenty of knowing groans from the audience.

The first speaker was Maria Kalber, Senior Vice President of Customer Service and Club Operations for Diamond Resorts. Kalber’s presentation focused on Diamond Resorts’ efforts to eliminate demand for exit companies by taking extraordinary measures to keep their owners happy. Starting with the reasonable premise that owners who are using their timeshares for memorable vacations will have no interest in responding to exit company advertising, she explained in detail the many strategies her team is using to ensure owners enjoy their timeshares. By making the customer “king and queen,” extensively training and monitoring customer service reps, educating owners, and adding value wherever possible, Diamond Resorts demonstrates a “100% commitment to bottom up top down service.” Perhaps most impressively; Kalber’s customer service team makes outbound calls to owners who haven’t been using their timeshares to check-in, make sure they know how to use it, and make certain there is not a potential problem brewing. When problems do arise, her team will “act fast to recover at lightning speed.” If Diamond Resorts continues these proactive strategies, I have no doubt they will reduce problems caused by exit companies to a negligible (and manageable) level.

Next up, Cullen Williams, Director of Legal Services & Corporate Counsel for Orange Lake Resorts – Holiday Inn Club Vacations, offered attendees his “prosecutorial” approach to combatting exit companies, while disparaging resale companies as useless to owners. According to Williams, exit companies write a high volume of complaint letters to the resort and regulatory authorities; containing boilerplate unsubstantiated allegations of wrongdoing, and demanding the resort “immediately cease & desist all communications” with the owner. The exit companies advise owners to stop all payments to the resort, which usually occurs simultaneously with the barrage of “ghost written” letters. Williams is understandably troubled by the “harm to consumers” caused by exit companies, especially the financial harm resulting from foreclosure. After explaining some common exit company red flags, he went on to condemn all “third party companies” who can only “provide instant gratification.” Repeatedly using the terms “resale” and “exit company” interchangeably, he warned of nefarious companies “infiltrating ARDA” in an effort to trick developers by trying “to convince you they’re the good guys.” Given that ARDA membership isn’t open to exit companies, it was clear at this point Williams was referring to resale companies, and condemning them as equally bad actors. Sadly, if his presentation accurately reflects the position of his employer, it can only be interpreted as a wish to close all the exits; making Orange Lake ownership a permanent proposition, at least for owners with a mortgage. That doesn’t seem like a recipe for success. One can only hope Williams’ view does not spread any further throughout the industry, since the resale market, led by innovative resale companies, is the ultimate alternative to exit company shenanigans.

The final speaker of the session was Wes Kogelman, President & CEO of the resale company BuyaTimeshare.com. Undoubtedly Williams was a hard act for Kogelman to follow, but he acquitted himself admirably; making the case for “trusted resale providers” as the proper solution for owners who want out of their timeshares. He explained that it is owners who contact resale companies, not the other way around. One of the slides in his presentation even listed the differences between exit companies and resale companies; encouraging developers not to “lump everyone together.” He advocated for cooperation between developers and resale providers, and hinted at possible synergies that could develop once both sides worked together. Again and again, Kogelman reiterated that trusted resale providers are pro-timeshare and employ “industry-friendly messaging.” In truth, the few resale companies still standing, after The Great Recession and numerous rounds of onerous industry regulation, are as committed to the industry as developers are, and Kogelman’s presentation attested to this fact.

 

By Doug Milbrath