Long ago, as an idealistic young finance geek learning the timeshare business, I was discouraged by bad industry press. Wandering into my boss’ office, I asked him about exaggerated television reports of high-pressure timeshare sales, and sensational newspaper articles alleging vacation rip-offs. Was it wrong for me to push financial services personnel to collect delinquent payments, or to demand high close rates from our salespeople? Were we in an unethical business?
He smiled and told me, “Just walk around our resorts. That’s what I do. I see happy people in our pools, on our ski slopes, playing golf, at the barbecue pits. I watch people having fun, partying on the back decks of our villas, taking their kids canoeing, biking, playing ball and tennis.”
“Harry, we’re in the business of making people happy. As long as our customers have fun, the vacations we sell have value. So you can hold your head high, and our business will be successful. Because if they play, they will pay.”
“If they play, they will pay” has since become a core principle for me. In different ways, we have used that principle at every resort or development business where I have been involved for the past 33 years, also in Whitebriar’s actively-managed lender portfolios.
Getting disaffected customers happy and back on vacation is a huge profit driver. Happy customers who receive what they bargained-for (or sometimes a little more) rarely default. Even those with tight budgets find a way to make their payments if they value what they own. I am not referring just to economic value, although affordability is certainly a benefit for many timeshare buyers. I am referring also to intrinsic value. The value of time spent with their family, the value of something more personal than an OTA, the value of belonging somewhere that in turn values them.
The economics are compelling. Here are a few of our Examples:
- A customer has been struggling financially and needs the motivation to pay $500 and bring their loan under 60 days past due. If they do, our eligible portfolio increases by thousands of dollars, and the customer is half-way back to being current. They have not vacationed with us in years, so we offer a ‘complimentary’ 3Day/2 Night stay (not in peak time so we don’t take away a prime reservation or tour) at their home resort in return for the $500. We spend about $60 on housekeeping. The customer gets a taste of what they paid for, and we significantly increase their incentive to become current.
- A delinquent maintenance obligor has been ‘blocked’, and lost their 2019 prime week. In order to collect their $900 maintenance fee, we offer an instant reservation. This customer will not get their prime vacation this year, but they will get a decent week that keeps them in the game and having fun while reminding them that to enjoy their full benefits next year, they must pay on time.
- A defaulted customer expresses some interest in refinancing. In order to close the transaction, our financial services department requires a $500 payment of intent. This also entitles the customer to a 4 day/3Night stay after they return their completed Refinance paperwork (or complete it on-site). The reinstated customer gets the instant gratification that costs us little, and they feel like owners again.
- A customer with excellent credit and liquidity grows dissatisfied with their interval, points, unit or vacation package. They are looking for something better. Rather than dunning them into default, we invite them up, either for a day with an amenity pass or overnight in a nice unit. Either way, they meet with a top reload salesperson whom we have briefed on their situation. This often results in a big upgrade, at a low marginal cost. And we have a happy customer again.
Keeping customers happy is our best hedge against Timeshare Exit companies. We see so many developers and industry groups litigating and lobbying against blind trusts, predatory law firms, and other scams. But the simplest way to fight them is to mitigate consumers’ vulnerability to their pitches. Happy customers aren’t susceptible to internet, television and radio charlatans blathering about how awful timesharing is. Because they LIKE their resort, their exchange, their vacation memories. After all, they just took a vacation, upgraded, rented some bonus time, banked points, brought friends up for a weekend, or planned next year’s getaway.
Again the economics are compelling. We know that the combined costs of acquiring a lead, converting it to a tour, converting that tour to a sale, and finally solidifying that sale into a customer – can exceed 50% of the selling price. Subsequently losing that customer to some Timeshare Exit outfit because the customer could not book a vacation, get an exchange, or have some simple complaint resolved, is a huge waste for a developer. It can be an even greater tragedy for a mature project, where HOA deficits balloon when the Timeshare Exit predators sink in their teeth. Not to mention the exponentially higher cost, for everyone but the lawyers, if an unhappy customer joins a lawsuit or creates negative publicity.
Despite our best efforts, some customers still fall prey to Timeshare Exit scams. So Whitebriar figured out how to cost-effectively link key resort departments like customer service, reservations, financial services and legal. All are on the look-out for any customer being pressured to give up their timeshare. Wherever possible, we get such customers on vacation, in the pool, on the ski slopes or to the beach. Even if we suspect the Timeshare Exit firm already has poisoned the relationship with our customer, we make multiple efforts to get the consumer everything to which they are entitled and make certain we document those efforts. Rare complaints, from customers who simply refuse to pay, are very different from frequent complaints where customers were not given what they bargained for.
Keeping customers happy also is the best way to generate ‘referrals’. Satisfied owners, proud of their resort and eager for an extra weekend there with friends, are ideal ambassadors. The leads they generate convert to high-quality referral sales at a very favorable rate.
Finally, very happy customer who is not an owner….is a potential owner. Making sure mini-vac and day tour prospects are happy is obvious to us all. But exchange guests, owners’ guests, and retail renters are also more likely to tour and buy when they have fun at our resorts. Keep your resort at or above 90% occupancy all the time, filled with people enjoying their vacation and (wherever feasible) paying-into your amenities. Then your ‘worst case’ is that some customers with no interest in timesharing keep coming back and spending money. Who doesn’t want loyal, high-ADR renters who also generate extra property revenues, good social media, and positive word-of-mouth marketing?
If the key to success in our business is maximizing the number of happy resort customers, why isn’t everyone doing it? I hear several misguided reasons:
“We are in the Sales business, we’re not a hotel. We need the inventory for tours.” We are all sales-driven. But the cost of losing one financed customer is far higher than the ‘opportunity cost’ of not booking one tour, and the cost of a consumer complaint or Timeshare Exit can be even worse. But you should almost never have to curtail marketing to keep owners happy. Whitebriar has facilitated appropriate, company-wide access to updated, interactive resort inventory matrices. Even our most popular resorts have periods with low occupancy, and even our most consistent marketing programs have dips and no-shows. The marginal cost of filling an empty unit with a ‘complimentary’ stay is not much more than housekeeping. Notwithstanding the big economic end game of solving delinquency, sales or customer service problem, we also try to win the little economic game of marginal profit on every transaction. So as noted above, we rarely allow a ‘complimentary’ stay without first receiving payment.
“The Contract states that if the obligor is delinquent on any payment, we don’t have to let them in.” We see this misguided approach often. It is technically correct but very short-sighted. Breakage may be good for travel cert issuers and providers of frequent flyer miles, but it is bad for resorts. Ultimately, breakage can destroy a vacation company which hypothecates, securitizes or pledges receivables or contracts. Do everything you can to maximize customer occupancy, especially owner occupancy. You invested thousands of dollars to acquire each owner, and in many cases, you have since borrowed millions or even billions on them. You don’t have to give ‘freebies’, and never reward delinquency. But take every opportunity to meet a delinquent and/or dissatisfied owner half-way. To repeat the mantra: If they play, they will pay.
“They get the minimum they are entitled to, and nothing more.” Virtually every timeshare contract and/or declaration allows for extra owner occupancy based on availability. It’s a great way to keep your customers happy and connected to your resorts. Whether you call such programs ‘bonus time’, ‘owner rentals’ or ‘member getaways’, we recommend expanding owner occupancy wherever you can. We price such rentals so that they are attractive to the consumer, but still profitable for us. We don’t let these programs burn inventory needed for contractually-mandated occupancy or exchange. Nor do we let them interfere with marketing occupancies like mini-vacs or referrals, but to repeat a point – every time a customer enjoys a happy stay at your resort, you have successfully marketed. We also use discounted certificates at our restaurants and for-pay amenities usually targeted to the customer’s closest or ‘home’ resort. These increased traffic and customer satisfaction, are still profitable and are tracked back to the originating department (financial services, reservations, customer service, sales, etc.)
“We’re trying to reduce operating costs.” Anyone in our business who sees adding guests as a net cost, or who can’t manage their project so that revenues from improved customer satisfaction exceed the expenses of improving customer satisfaction….is in the wrong business.
Harry Van Sciver has been a receivables financier since 1986, and a developer since 1995. He is the President of Whitebriar Financial Corporation (see www.whitebriar.com), and also a Director of Resorts Group, Inc. Whitebriar offers receivables financing, portfolio valuation, CRO services, resort consulting, and resort equity. Harry can be reached at 508- 428-3458.