Excluding magic wands or pixie dust as options, what exactly would
you (and / or the authors of the proposed SC legislation) suggest as a clear and specific way to "restore value" (...a very convenient but painfully fuzzy phrase) to such "weak weeks"? Unless the place is in disrepair (...mine isn't), the management company has
no influence on the marketplace or value. Likewise, forcing "weak weeks" down the throat of the HOA is certainly
not any form or flavor of solution and, just to repeat an earlier observation, those "weak week" owners did
not acquire their week from the HOA in the first place, so how or why (possible later foreclosure proceedings aside and notwithstanding) should the owner-based HOA
ever have to involuntarily accept responsibility for that now-unwanted ownership, voluntarily acquired previously elsewhere (
not from the HOA) by its' current owner?
Thanks for your question. I think it is important to note that the proposed legislation ignores the negative effects on the Association and puts an emphasis on consumer protection.
Here is a list of items that I am sure your association already considered, but it is worth a review.
This is free advice, so the value of this advice is suspect by definition.
1) Get advice and ideas
a. Engage owners in suggestions
b. Engage Your management company in an analysis
c. Have Board members attend TBMA on a regular basis and increase Board education and education budget.
2) Reduce and better manage activity with 3rd party entities that are renting your units bellow Bonus Time, and renting prime weeks below annual dues.
3) Reduce your Bonus Time price to a break-even level on a 2 night stay and increase Bonus Time availability to increase owner satisfaction and increase occupancy
4) Introduce a Friends and Family program to increase occupancy
5) Introduce an “Adopt A Week” program where owners can book an additional week from Association Inventory in addition to their ownership.
6) Select a Management company that understands the hospitality rental market so that the association can maximize rental income.
7) Introduce a resort specific Social Media site where owners can buy, sell, trade, and swap their ownership or their annual reservations.
8) Promote an on-site sales program that not only sells association Inventory, but also helps owners sell their units to the public.
9) Get off the Fee-For-Service model with you Management Company, and introduce Substantial Incentive Pay to achieve association Goals and Objectives. For example, 50%-50% split on rental income above budget rental income.
10) Develop statistics that Management must report on a quarterly basis. A critical statistic is how many owners in good standing pay their dues and do not use their weeks (either use or exchange). This is the alarm that can tell you if the value of your Association Intervals is going to be valued at $1. Industry standard is about 14% which includes many Associations at $1. You need to drive this metric below 10%.
11) Increase owner engagement using timely electronic reports, newsletters, surveys, meeting attendance, parties, celebrations, activities, prizes.
12) Modify your founding documents and ownership transfer procedures to eliminate the ability of Viking Ships and Card Companies to gain ownership at your resort.
13) From the limited summary information that you gave, it is obvious that you have two distinct challenges, and you should develop specific programs targeting specific solutions:
a. Attrition due to demographics which should account for 2% to 4% of the annual turnover. Consider taking back up to 1% per year
b. Steep seasonality and Float intervals and cause disenfranchised owners. Consider opening last minute occupancy of prime weeks if available.
14) Develop specific targets based on your specific Association situation for example and build a budget with the targets in mind:
a. Association owned Inventory – 3% to 4%
b. Deed back 1% per year
c. Foreclosure – 1% per year
d. Association Sales/Giveaways 2% per year
e. Total Occupancy 85%
f. Owner Occupancy and Exchanges 70% occupancy
g. Rental 15% of Occupancy
15) There is no timeshare association today where the owners in good standing are not paying for the delinquent owners. The question is how does the Board deliver that message to the owners, and what is the projected level, and is the Board and Management able to achieve that level?
Please note that I purposely ignored any discussion of bulk sale to clubs, which is the favorite solution of ARDA and ARDA-ROC, because it is a sure way to drive deeded ownership value to zero.
I also detected an attitude about the responsibility of the consumer to understand the contract they entered into. In this direct answer to your question, I am much more concerned about the attitude, responsibility and fiduciary duty of the Board member regardless of hypothesizing on how the consumer became a deeded owner.
In short, the valueless intervals are most likely the symptom of questionable Board and management procedures and decisions, and that is consistent with the strong statements made by the South Carolina proposed bill. While temporary factors such as economic conditions can make timeshare ownership valueless, these are temporary conditions that a good Board and good Management must be able to overcome.
You can PM me if you would like more specifics on how to accomplish any of the items on the list.
