RCI asks for use or money if resort damaged

[timeos2]

An interesting letter from RCI to our resort arrived today. If I am interpreting it correctly it is stating that should a resort suffer a loss of use that impacts a previously deposited use time they expect a future deposit OR a monetary reimbursement to cover it.

While I can understand that if an exchange company plans to honor a deposit that subsequently becomes unusable they need something back this may present a real problem to the resorts involved. How do they decide which owners lose the use and which don’t if not all units are out of service? Where do the future use times come from if the resort is sold out? You cannot treat one owner different than another. What if the resort simply says if your week is lost due to disaster you are out that use – a typical way things are handled. Who would pay RCI if the owner goes ahead and uses that exchange anyway? I see it as a disaster following a disaster trying to figure it all out.

I wonder what others think about this policy announcement and if you also see it as unworkable.

 

[Carolinian]

I just posted this issue on Timeshare Forums. Pat Connolly's letter does represent a change from past policy. Actually, the OBX probably got the best disaster treatment from RCI after Hurricane Isabel in 2003. They allowed members to continue to bank weeks even while the resorts were closed, and DAE also did the same.

This will definitely hit sold out resorts, which has no source for substitute inventory, harder than resorts still in developer sales, which would have a source for such inventory.

They suggest resorts cover this with Business Interruption Insurance. There are Business Interruption riders availible on Wind policies but not on Flood policies. It is the storm surge, which is under Flood coverage, that is most likely to zap oceanfront resorts. So oceanfront resorts will be hurt worse than inland resorts. I would suggest that such resort try to see if there is such an animal as stand alone Bussiness Interruption Insurance.

It will be interesting to see what the independents do. DAE took a more member-friendly stance after the last set of hurricanes.

 

[CaliDave]

This could be it's own disaster waiting to happen..

So I deposit my Aug 08 Florida week.. I use that deposit to exchange for a summer 07 week. I enjoy my vacation.. Then decide to sell my week with useage starting in 2009.
July 2008 rolls around.. Hurricane hits my resort.. Aug week is unusable.
what happens next?
Sold Out HOA's cannot afford to pay RCI or give them a replacement week.

This is even more of a reason to not buy in Hurricane prone areas.

 

[timeos2]

Well you better not own where there are fires, floods, snow storms, earthquakes or any other natural or man made diasters as any one could hit a resort. I agree it is a diaster just waiting to add to a diaster.

 

[spatenfloot]

I would tell RCI that they should have purchased disaster insurance from the depositor. If they did not, then they are out of luck. :whoopie:

 

[short]

What was RCI's position with members who had incoming exchanges for affected areas after Katrina, Rita, Charly etc.

Were they allowed to cancel and get there deposit back if they did not have insurance?

Were owners deposits for affected areas and times canceled from their account if they had not used them?

Did they end up with a negative deposit if they had already used the exchange?

Short

I had an exchange through II for New Orleans for Sept 23rd. While I lost my exchange fee I was allowed to cancel and got a replacement week.

 

[Kola]

I would tell RCI that they should have purchased disaster insurance from the depositor. If they did not, then they are out of luck. :whoopie:

The best insurance from RCI-caused disasters is to quit RCI.

Kola

 

[Jya-Ning]

What happen if an owner reserve a week, deposit it to RCI, then loss it by nature force? I doubt anyone will think it will be resort's responibility to pay?

Also, RCI is put its own insurance on their site to sell. I doubt any resort will want to pay if RCI is already take insurance from owner.

If RCI rent out that week, the resort is not really responsible for that loss, the resort should ask RCI to give out detail information on what they use that week for. Since resort is agree to give out the week for exchange, so RCI should present clear flow what these weeks goes. Resort need to make sure the week is give out to owner for the purpose designed by owner.

I take RCI decides to be resposible instead just tell exchanger "Sorry, the week is gone" from now on?

I guess the resort will stop space bank to RCI, the owner has to be respoible for their own act.

Actually, I think RCI just loss big time in last year's nature disaster, however, it does not reflect on their finacial statement.

Interest act.

Jya-Ning

 

[reddiablosv]

Funny, RCI wants the resort to pay for loss of use in case of natural disaster,but, I seem to remember that when an RCI members EV was cancelled due to Hurricane Katrina last year RCI refused to refund the rental fee!!!! I guess if you are RCI "YOU CAN HAVE YOUR CAKE AND EAT IT TOO!" Ben:annoyed:

 

[reddiablosv]

I would tell RCI that they should have purchased disaster insurance from the depositor. If they did not, then they are out of luck. :whoopie:

You make a good point. RCI goes to great lengths in the T+Cs to make clear that once deposited the banked week belongs to RCI. Then it follows, if they didn't insure their property against natural disaster, and it is subsequently destroyed, then thats their own tough luck! Likewise, If they accept for deposit a property that has been destroyed by natural disaster, then thats due to their own stupidity and by their own choice. Resorts are not responsible and neither are the timeshare owners. IMHO Ben

 

[CaliDave]

Lets say a hurricane destroys a week I exchanged into .. RCI tells me "you didnt have insurance, tough luck" then RCI goes back to the resort and asks for compensation, even though they aren't giving me a replacement week?

 

[jerseygirl]

Call me a cynic, but do you think this is related to rentals? They can't continue indefinitely to get away with refusing refunds for uninhabitable units ... it sounds like they're looking to the resorts to provide the reimbursement.

On the not so cynical side, didn't they recently announce a fairly liberal in-house insurance program? Maybe they're hedging their bets there also.

But, I agree with the poster who likened the situation to "having their cake and eating it too." There's no way this can fly if the exchanger is not entitled to a new exchange and the renter is not entitled to a refund.

 

[Aldo]

Yet ANOTHER ripoff and outrage by the greedy crooks from RCI.

If you exchange into a week that gets blown away by a hurricane, you're outta luck (unless you buy insurance).

But if the week you deposit gets blown away, your supposed to cover for it...even though the person exchanging into it is outta luck.

In a pure exchange model, this ought to be a wash, right?

Of course, they can't do that with weeks they RENT out. If they rent a week, they've got to cover.

Basically, they are now demanding OWNERS cover RCI's butt with regards to RENTING and hurricanes.

Outrageous.

This RCI outfit gets worse every week.

 

[Carolinian]

On the not so cynical side, didn't they recently announce a fairly liberal in-house insurance program? Maybe they're hedging their bets there also.

RCI established an in-house insurance program that copies what DAE has had for some time, except that it is more expensive than DAE's program, and covers less than DAE.

DAE, while offering a similar but better insurance program, has also had a more customer friendly disaster policy. As with rentals, there is clearly no ''need'' for RCI to do this.

 

[geekette]

I will be interested in how this goes. Surely some resorts will be outraged by this and start encouraging their owners to deposit elsewhere. RCI can create any policy it wants, but resorts do not have to continue their relationship with them.

I agree with the poster that cited RCI's t & c - let them cover their own butts on what they "have all rights to."

 

[Mel]

If they are going to require the depositor (or the resort) to replace the week, then I would expect the same in the other direction - they replace the weeks they give out that cannot be used.

I realize they cannot treat members differently - If my neighbor and I deposit 2 week in 2008 and I use mine for an exchange next month, my "credit" is used, and can't exactly be taken away. Taking the deposit from my neighbor would be punishing him for not using his week quickly.

Also by not accepting deposits, they are teating some members differently. You could say such a policy should encourage early deposit of weeks (just in case of disaster), since not all owners can deposit that early, they don't have that option.

Of course, there are problems with the system as it is - if I take a week from the spacebank and know 7 months out that the resort won't be open, I am still allowed to cancel my exchange and confirm something else - the only cost to me is an extra exchange fee. In other words, as an exchanger, I am effectively allowed to redeposit an unusable week, as long as I'm not the owner. Perhaps they shold stop that from happening - but then you'll see people cancelling their exchanges when it becomes clear that a resort is going to be damaged, but before the actual disaster.

In the past RCI has had enough excess inventory to absorb these lost weeks. Obviously with the internet rentals, that is no longer the case. Somebody has to take the hit for a week that is no longer available, and I bet RCI found that nobody would insure them for loss of business on most of these weeks, and thus they already know the resorts won't collect on loss of business either. I do wonder how enforceable such an agreement would be if the resort does not own any weeks.

Perhaps we'll see a new model in hurricane prone areas - the resort reserves 2 weeks for maintenance, sells 40 weeks, and reserves the remaining 10 weeks per unit to cover issues such as closures due to hurricanes. The resort bulk banks to preserve the rights of owners who use the resort - Over an 6 year period for each week 60 reserve deposits are made for a given unit. The next year the resort is hit by a natural disaster, and is closed for 2 years. Owners who want to exchange are given credit for weeks already deposited and used by RCI over the last 6 years, and maybe RCI agrees to let the resort use a master membership to arrange for exchanges by owners who are not RCI members already.Remember, they have sold only 40 weeks, so this covers 75% of the owners. When the resort reopens after 2 years, the remaining 25% are given an extra week to use from the reserve weeks (nothing extra is deposited to RCI). After 2 more years, reserve deposits to RCI resume. Knowing that RCI doesn't hold any banked weeks for 8 years (or however long is necessary in this model), RCI treats these in much the same way that resorts treat their maintenance weeks. While they come from a specific resort, for bookeeping purposes they are used to cover for weeks from other resorts that are closed at the time.

Of course, this will result in a significant increase in maintenance fees, as the resort will now have only 80% of the units generating fees. But then, you are guaranteed a weeks of usage even when the resort is unable to remain open.

 

[copper]

Why would the resort be responsible to RCI? The deposit was from the RCI member not the resort. If RCI wants a refund or replacement they need to talk to the depositor.

I've been trying for years to get a resort I own to drop RCI and this may be the stick I can force the issue with.

 

[Carolinian]

Some OBX resorts have explored whether such a thing as stand-alone Business Interruption Insurance exists, and have been told by insurance agents that it does not. That coverage only comes with a rider attached to another policy and insures against losses from business interruption from the perils insured against in that policy. The National Flood Insurance Program does NOT offer a business interruption rider. For any business interruption primarily caused by flood, such as storm surge or inland flooding from a hurricane, there is NO insurance coverage availible in the market.

Thus RCI's suggestion for resorts covering themselves and their members simply doesn't exist for much of the damage caused by hurricanes.

I do suspect that this policy by RCI will offer a huge opportunity for II, DAE, SFX, and others to poach resorts and members from them.

 

[geekette]

Why would the resort be responsible to RCI? The deposit was from the RCI member not the resort. If RCI wants a refund or replacement they need to talk to the depositor.

I would expect the resort to pass along the pain.

As for Mel's suggestion, better to roll the dice or swap alliances. Why should the resort hose itself in trying to please RCI?

 

[Carolinian]

I just spoke with a resort manager who had talked with their RCI account rep on this issue. The RCI account rep said that rather than RCI cancelling the members deposit credit, RCI would require the resort to either give alternate inventory or make a cash payment. Rereading the letter, I can see this interpretation of it.

This would put resorts in an even worse position than merely having members deposits cancelled.
The implication that resorts could just not pay and then the members deposits would be cancelled comes from the last line of the fourth paragraph which says: ''As Business Interruption Insurance may be availible to resorts, this should not pose a threat to your members deposits''

Resorts need to look at their RCI contracts to see if RCI has any legal grounds to enforce such a policy. Even if they do not, I suspect they may hold the resort's continued affiliation over its head to extract payment.

 

[CaliDave]

Well you better not own where there are fires, floods, snow storms, earthquakes or any other natural or man made diasters as any one could hit a resort. I agree it is a diaster just waiting to add to a diaster.

Other than Hurricanes, I have never seen a disater that effects so many weeks of timeshare at once. I doubt all the other disasters combined over the past 20 years, even comes close to the last 2 years of Hurricane damage and loss of timeshare weeks.

I would not own a resort in a hurricane area. RCI is getting rid of the last small amount of risk they had.

 

[Carolinian]

Of course, a big earthquake out west could also have a big impact on timeshares. Can resorts insure against business interruption on earthquakes?

 

[Carolinian]

I have heard of another resort contact with an insurance company as a result of this letter. Again, they were told that the National Flood Insurance program does NOT have a Business Interruption rider, and never has.

As to wind, they were told that the company with their master policy had a limit on the amount of Business Interruption coverage sold in each area, and that amount was already covered on the Outer Banks, so no Business Interruption rider could be obtained on their wind coverage at the present time. The agent further told them that they did not push, or usually even mention, these riders unless the customer brought it up because they were extremely expensive and had so many clauses and conditions, the insurance company usually got out of paying anything under them anyway.

 

[Aldo]

I don't see the need for any of this.

Say I deposit my beach week with RCI into the pool, and take an exchange. They make their money off of my exchange fee for the resort I'm trading into, whether or not the week I deposit still physically exists or NOT at it's actual usage time.

Likewise, if I exchange INTO a unit, unless I buy insurance, RCI STILL makes it's exchange fee whether or not that unit actually physically exists by the time I take my planned vacation there.

Am I wrong or does RCI currently bear no loss if the resort is damaged or destroyed?

Even in the case of rentals...just give the people their money back if you can't deliver the week you rented to them.

The point made above was excellent...RCI makes great hay that once the week is deposited, it's THEIR property. It's up to them to insure their own property as they see fit, and pass those costs on to their members, who can take it or leave it (..."leave it"....) as they see fit.

 

[Carolinian]

There are a number of provisions in their Owners Asociation Agreement that RCI might try to interpret to force resorts to pay, particularly paragraph 8, ''Denial of Acess''. Resorts need to deal with this issue seriously and not wait to have Hurricane RCI potentially add to the damage of a natural hurricane.