Reform needed: Lack of transparency in exchange companies

[BocaBum99]

On these message boards, we hear a lot of complaints about RCI and their rental activities. We also hear about how difficult it is to get an exchange these days. The general sense is that exchanging used to be a whole lot better than it is today. We see messages on class action lawsuits. We see theories and counter theories for how inventory is being managed or mismanaged. Assertions are made about the role of point systems in depleting exchange inventory. Moreover, we see never ending fees that increase well above the rate of inflation and poor customer service. I'd say that these are contributing factors for why RCI is the most visibly discussed and scrutinized exchange company on TUG.

Why do I bring this up now? I do so because the introduction of the Redweek points based system has opened pandora's box for us regarding the transparency, and lack thereof, of exchange companies and their practices for keeping their systems in balance. In essence, have you ever thought, "I wonder how safe my deposit is in XYZ exchange company?" What are the key criteria for understanding how safe an exchange company is to use? Are they committing too many exchange credits for the available inventory? What can I do to feel comfortable about their long term viability? These are important questions we should all consider prior to placing our deposits into one of these companies.

It is very clear to me that exchangers are not being told the whole truth of how exchange companies keep their books in terms of exchange credits vs. deposits. They claim that it is "proprietary" information on how they conduct inter-exchange company trades and manage inventory. I'll accept part of that answer. But, I believe we are owed a conceptual model for understanding how these exchange companies ensure that there is a healthy exchange balance of existing inventory vs. outstanding exchange credits. Better yet, they should provide us with statistics that prove their strength and viability. They are simply not providing this information to us today.

We often times criticize RCI for dodging tough questions and we blast them for providing explanations that defy our own common sense and experience. But, at least they provide concepts for how they keep exchange balances in check. We may not buy their answers, but they do provide high level answers for how they manage inventory.

On this thread in "Ask DAE",question to DAE regarding week subsidy, DAE provides exactly ZERO information on how they manage a very real trade imbalance. Since they won't answer it, I will have to draw my own conclusion. I believe they don't tell us because they have something to hide. Could it be a huge trade imbalance? Could it be that the inventory that is online is predicted to never be exchanged since they are undesirable weeks? So, if they get anything for it in return, they will be happy. If that's true, then that begs another question. How many weeks are there in inventory vs. how many exchange credits are due to depositers? Given there is 3 years to exchange, there could be a HUGE exchange imbalance. I think depositers should know this before they deposit. All they have to do is share outstanding inventory available for exchange = X. And, exchange credits is roughly equal to X. Since they are a one for one system, if these two data points are roughly equal, then they are sound. I fail to see how that is proprietary. How can any competitor capitalize on such published information? And, I'd like to see ALL exchange companies provide this information. It would be very illuminating for all of us.

Redweek is providing information on deposits available. All anyone needs to do is count all points for all available inventory and that gives you a number, Y. They just need to report the outstanding exchange credits in terms of the Redweek points they represent. If that total is roughly equal to Y, then the system is in balance.

Today, exchange companies feel like a bunch of secret societies. The hidden trading power formulas were always maddening to folks. Now that Redweek is seeking to shine light on these hidden values, how far will this drive the rest of the industry to provide us with more relevant information for us to determine how strong or weak their system is? I hope is forces more to provide the information we need to make a reasonable deposit decision rather than keeping it opaque and saying "trust me".

 

[Jya-Ning]

All they have to do is share outstanding inventory available for exchange = X. And, exchange credits is roughly equal to X.

I believe exchange credit is easy to give out. outstanding inventory available for exchange is likely predict of future. Just look at RCI, they have developer deposit in, they have member deposit in. Today, if few Tug suddenly want to deposit all their weeks in, it could become 52 deposits per person. Besides the exchange credit is good for 3 years, today's available unit is only good for less than 12 months in most of the cases. And if Disney suddenly find RCI can give them more levelage, and switch to RCI, it could mean few hundred's of inventory unit.

In order to achieve what you want, more likely, they have to give out the yearly deposit week, yearly exchanged week, and yearly expired week. So you should get deposit in = exchange + expired.

There is no imbalance, there is expired week (and probably owner unhappy and think they were robbed). The question is, how many exchange companies want to tell you the expired week number? RCI given out once long ago, I believe is 15%.

The difference is small exchange company like DAE usually allow the owner doing a search first before deposit. I believe if any, the owner will at least get a feeling what they will get, that is called I believe "manage expectation". So they either deposit because they saw a week they like, and in that case they get that week immediately. Or they deposit with a rough idea what to expect to get.

Few owner actually have a lot of weeks they can not used and need use exchange company to extend it. If they do, chances are, they probably has too many week anyway and thus can not use it all, and some will doom to get expired.

And more likely, they will deposit to some big exchange companyt if that is the case since they now have more chance to get exchanges they want.

Actually, DAE does has a lot of renting partner which deposit quite some units that are in the shoulder or white or quite season. So to ask them to show the balance, does in some extend ask them to open their trading rate with their renting partners, and someone can figure out how much they actully offer these partners per week if they really want.


Jya-Ning

 

[Carolinian]

What do you mean by ''renting partners''.

I am aware of member supplied rentals, which move over to exchange deposits if they do not rent by a cerain date. I am also aware of ''trading partners'' which include other exchange companies as well as some developers.

 

[BocaBum99]

In a weeks based exchange system, there is always an exchange imbalance created from expiring weeks, bonus weeks and rented weeks. In other words, Total deposits = exchanges + bonus weeks + expired weeks + rented weeks. I could create a category of lost or stolen weeks, but I will leave that out by giving all exchange companies the benefit of any doubt that they are honest in managing inventories.

For example, let's assume the exchange company has 1000 deposits (request first or deposit first does not matter). Let further assume that 20% of those deposits get bonus weeks. Also, let's assume that 10% of those weeks expire and 10% are rented to owners or non-owners within 30-days of checkin to mitigate spoilage. Using those numbers, here is what you get:

1000 deposits =
600 exchanges+
200 bonus week exchanges+
100 expired weeks+
100 rented weeks

As you can see, there is a clear and real exchange imbalance created by bonus weeks, expired week and rented weeks. There are 1000 deposits and only 600 exchanges. That leaves a 400 week exchange imbalance.

Now, we all know that nearly all exchange companies provide bonus weeks. In addition, they want to minimize expired weeks and rentals couldbe smaller than 10%. Whatever the real numbers are, there is a real exchange imbalance created.

If bonus weeks and rented weeks are givens, then the only other variables to balance the books are expired weeks. Before, the Redweek experiment, I thought that the missing link in balancing these equations were very high expired weeks. Now, I think that it is something else.

If an exchange system relies on expired weeks to balance the exchange imbalance, then depositers will get disenchanted with the exchange company and stop depositing. Now, I don't think that that is how they achieve balance.

Now, I believe that the only realistic way that an exchange company can keep a reasonable exchange balance is to get FREE weeks from developers. If several hundred weeks were deposited by developers for FREE with the hopes of getting fresh meat for the sales front line, then there is a real possibility that the exchange company could have a negative trade imbalance. In other words, more deposits than exchange credits available. That is the most ideal exchange company to join.

Perhaps RCI and II once had very negative trade imbalances since they got so many free weeks from developers. That could go a long way to explain how people got great trades and trade ups in the early days.

And now, a huge amount of the lack of exchange availability today could be easily explained by resort developers finding better ways to attract new sales clients to timeshare presentations than giving free weeks to exchange companies.

Perhaps DAE has great developer relationships in Europe and the Pacific. Maybe that it why they have so much inventory there. And, if that is true, then why wouldn't they want to promote it aggressively? It would certainly give people confidence that they have a very favorable trade balance for their depositers.

I will reiterate, unless we know this type of data, we really don't know the relative health of the exchange company. I hope that the timeshare industry can put pressure on exchange companies to provide this type of data for all to see.

 

[e.bram]

Why have an exchange company. Why not an exchange service which allows owners list their properties and those they are willing to exchange for and let the service facilitate the transactions for a set fee.

 

[Jya-Ning]

What do you mean by ''renting partners''.

I am aware of member supplied rentals, which move over to exchange deposits if they do not rent by a cerain date. I am also aware of ''trading partners'' which include other exchange companies as well as some developers.

How about holiday property, will that better than "renting partners"

Jya-Ning

 

[BocaBum99]

Why have an exchange company. Why not an exchange service which allows owners list their properties and those they are willing to exchange for and let the service facilitate the transactions for a set fee.

This works well for direct exchange for owners. But, if owner A wants Hawaii and has Myrtle Beach. Owner B wants Aruba and has Hawaii. Owner C wants Myrtle Beach and has Aruba. Then, an intermediary needs to be involved.

A deposits his MB. C takes that MB and deposits Aruba. B takes Aruba and deposits Hawaii. A takes Hawaii. And, an exchange cycle is completed.

There are 3 deposits and 3 exchanges and 3 exchange fees.

A takes the most risk, so exchange companies tend to give them bonus weeks to start the cycle.

These exchange cycles works like the game tetris. You need to clear out entire rows or non-exchanges and expired weeks occur. Either the exchange company needs to be great at clearing the pieces or it needs to accept the expired weeks and replace them with alternate weeks. Otherwise, they will have lots of expired exchange credits and lots of unhappy customers.

 

[Jya-Ning]

, Total deposits = exchanges + bonus weeks + expired weeks + rented weeks.

But is all deposit come from members?

We know for cetain RCI's deposit is come from developer, HOA, and member. In fact, member probably less than 1/3

A lot of developer's deposit get AC in return. Most AC usually can only see Winter in a North beach, or Mud season in a mountain. That does not sounds fair trade.

A lot of HOA's deposit either because HOA control the deposit or they have foreclosure property which they deposit automatically. Then they let member choose the week or just assign the week to member.

That is the reason RCI can give out bonus week.

Now, from the other point of view, if your worry about DAE is true, majority of member deposit a week that none want to use, therefore, it will have hugh imbalance, then it seems fit that these member will not get a similar week in return. After all, it is a small exchange company, to claim anyone has hug success without USA which has more than 50% of TS market can not prove anything.

Check DAE's inventory, count how many you see are TS unit. I think it can get balanced. Even if not, when it crash, people will not loss too much since based on most of assumption, it is a dog week anyway.

As a pure guess, can you figure out how much a company need to spend to get a trading power? And how much they need to spend if they did not have to get any point value close to reasonable?

Be a small company, each has to find a way to growth. Until they have enough size, they can not do anything on the so call trading power, or market indicator. SFX use the unit size, restrict on deposit resort and season. DAE will get any week, and rely on people who know them at least play with TS for a while and will either willing to give them some week that pleasant or find other inventory source to compensate it.

The question is, what is decent week? Based on the hotel occupancy rate, most are in 60%, so how can you expect a TS has 100%? Especially if it only have very small % of market? If it does not have 100%, guess the % some so call good week can get unused. I saw in eBay a July 4th week 1 BD is $250 and none bid. At this moment, DAE has a HI week for rent at $199 that start next week.

With the size of their membership, it is much easy to cover the imbalance.

Jya-Ning

 

[Jya-Ning]

Why have an exchange company. Why not an exchange service which allows owners list their properties and those they are willing to exchange for and let the service facilitate the transactions for a set fee.

As Boca said. Also a few owner have no idea what they want do with their week to start with, so if you don't have a company willing to take the week 1st, they will let their week sit there until none can use that week.

Plus, with the size (say 4 M owners in USA, and 8 M units), you have 1/3 of them actually exchange it, the toatl size is 2 M, that probably no way to support any effecient market.

Jya-Ning

 

[BocaBum99]

But is all deposit come from members?

We know for cetain RCI's deposit is come from developer, HOA, and member. In fact, member probably less than 1/3

I completely agree with this point. More so than ever before. I believe that the only way that an exchange company can keep a reasonable trade balance is when there are a lot of weeks deposited for free without an exchange credit provided. That means developers or HOAs giving free weeks to the exchange company.

Dog or Tiger doesn't matter. They all cost MF. If you deposit a week and get nothing, that costs the onwer real money.

 

[Carolinian]

Why have an exchange company. Why not an exchange service which allows owners list their properties and those they are willing to exchange for and let the service facilitate the transactions for a set fee.

That is the basis of direct exchange companies like:

www.timex.to

www.exchangesworldwide,com

 

[Carolinian]

I completely agree with this point. More so than ever before. I believe that the only way that an exchange company can keep a reasonable trade balance is when there are a lot of weeks deposited for free without an exchange credit provided. That means developers or HOAs giving free weeks to the exchange company.

Dog or Tiger doesn't matter. They all cost MF. If you deposit a week and get nothing, that costs the onwer real money.

From my knowledge of resorts on the OBX, yes developers have and do provide weeks to RCI, but only one resort is still in developer sales. HOA's have sporatically given RCI deposits of HOA-owned weeks, and they received an exchange credit back, which was then used as a member reward, resale bonus, or the like. Several years back, RCI changed its policy on credit for such deposits. Previously, they were like member deposits, where you kept the credit whether or not anyone actually used the week. Now, if no one uses the week, the exchange credit to the HOA is cancelled and the week returned. The OBX resorts that I am familiar with that used to deposit with RCI have not done so since that change in policy. A couple of them have deposited occaisionally with DAE which honors the credit whether or not an inbound exchanger uses the week or not.

 

[wbtimesharer]

Why have an exchange company. Why not an exchange service which allows owners list their properties and those they are willing to exchange for and let the service facilitate the transactions for a set fee.

Why, because without them the game of exchanging has to rely a lot on trust and management by the parties involved. Say exchanger 1 says he wants to exchange a May 2008 Marriot Cypress Harbour week looking for a 2008 Summer Dells week. A Dells Cottage owner says she has a week in July and both parties say lets do it. Now obviously the Dells owner gets to go first and does the week in Orlando. Now, she decides that the Dells Summer week is too good for that Orlando week and decides to keep it for herself. What recourse does Exchanger 1 have without a company managing this transaction.

Now I am making the assumption that there are dishonest people in the world and I probably am right. Must my opinion.

Bill

 

[wbtimesharer]

On these message boards, we hear a lot of complaints about RCI and their rental activities. We also hear about how difficult it is to get an exchange these days. The general sense is that exchanging used to be a whole lot better than it is today. We see messages on class action lawsuits. We see theories and counter theories for how inventory is being managed or mismanaged. Assertions are made about the role of point systems in depleting exchange inventory. Moreover, we see never ending fees that increase well above the rate of inflation and poor customer service. I'd say that these are contributing factors for why RCI is the most visibly discussed and scrutinized exchange company on TUG.

Why do I bring this up now? I do so because the introduction of the Redweek points based system has opened pandora's box for us regarding the transparency, and lack thereof, of exchange companies and their practices for keeping their systems in balance. In essence, have you ever thought, "I wonder how safe my deposit is in XYZ exchange company?" What are the key criteria for understanding how safe an exchange company is to use? Are they committing too many exchange credits for the available inventory? What can I do to feel comfortable about their long term viability? These are important questions we should all consider prior to placing our deposits into one of these companies.

It is very clear to me that exchangers are not being told the whole truth of how exchange companies keep their books in terms of exchange credits vs. deposits. They claim that it is "proprietary" information on how they conduct inter-exchange company trades and manage inventory. I'll accept part of that answer. But, I believe we are owed a conceptual model for understanding how these exchange companies ensure that there is a healthy exchange balance of existing inventory vs. outstanding exchange credits. Better yet, they should provide us with statistics that prove their strength and viability. They are simply not providing this information to us today.

We often times criticize RCI for dodging tough questions and we blast them for providing explanations that defy our own common sense and experience. But, at least they provide concepts for how they keep exchange balances in check. We may not buy their answers, but they do provide high level answers for how they manage inventory.

On this thread in "Ask DAE",question to DAE regarding week subsidy, DAE provides exactly ZERO information on how they manage a very real trade imbalance. Since they won't answer it, I will have to draw my own conclusion. I believe they don't tell us because they have something to hide. Could it be a huge trade imbalance? Could it be that the inventory that is online is predicted to never be exchanged since they are undesirable weeks? So, if they get anything for it in return, they will be happy. If that's true, then that begs another question. How many weeks are there in inventory vs. how many exchange credits are due to depositers? Given there is 3 years to exchange, there could be a HUGE exchange imbalance. I think depositers should know this before they deposit. All they have to do is share outstanding inventory available for exchange = X. And, exchange credits is roughly equal to X. Since they are a one for one system, if these two data points are roughly equal, then they are sound. I fail to see how that is proprietary. How can any competitor capitalize on such published information? And, I'd like to see ALL exchange companies provide this information. It would be very illuminating for all of us.

Redweek is providing information on deposits available. All anyone needs to do is count all points for all available inventory and that gives you a number, Y. They just need to report the outstanding exchange credits in terms of the Redweek points they represent. If that total is roughly equal to Y, then the system is in balance.

Today, exchange companies feel like a bunch of secret societies. The hidden trading power formulas were always maddening to folks. Now that Redweek is seeking to shine light on these hidden values, how far will this drive the rest of the industry to provide us with more relevant information for us to determine how strong or weak their system is? I hope is forces more to provide the information we need to make a reasonable deposit decision rather than keeping it opaque and saying "trust me".

Boca,

Even if the various exchange companies made this info known, what would the common exchanger be able to do with information. Most exchangers aren't tuggers and really aren't that deep into the game to be able to understand the numbers especially with companies like RCI handling what 50 to 60 thousand exchanges a year and I am probably off by 90% on that number.

From what I see hear on Tug, most people believe that their timeshare exchange is so exclusive as to be only worth the top 1% of resorts in the world. They will never ever be happy getting less. They would rather let their exchange rot than to get a simple 3000 sq ft palace for their Orlando studio week.

I have been exchanging for the last 3 years and have been happy mainly because I am flexible and I don't expect to win every exchange. I look at timesharing as a way of going places in roomier accomodations for significantly less than what I had paid in the past for less.

Now there is no way the game is perfect and it has become a matter of profits for the big 2 exchange company with RCI appearing to be the greediest. I think the way to put pressure on them is to stop patronizing them. But those who don't know better continue to step up for the spanking and those who do know better continue because there are no other players with the inventory they desire.

Of course some people are finding what they want in the smaller companies and maybe these will continue to grow and supplant the big ones. Only time will tell.

Bill

 

[PerryM]

The Perfect Exchange Company already exists...

To me the ultimate exchange company already exists (“Perfect Exchange Company”) – it’s typified by RedWeek, MyResortNetwork and TUG – you rent your unit for cash then use that cash to rent someone else’s unit.

The problem with this approach is that you need to pay federal taxes on the rental income – kiss 25% goodbye. Then there are the skills needed to rent your unit to the public.

eBay is another “Perfect Exchange Company” – you put your reservation for auction and then take those proceeds, minus the eBay charges and taxes, and bid on other rentals.

R2R has the next best solution – each day of the year, for each unit, has a rental rate. Their charts are published and everyone can determine if they want to deposit a week into R2R. R2R, however, decides if it wants your unit – they don’t have to take it if there is a glut of identical units or if their history indicates that your unit and week is a dog.

RedWeek is trying to do what R2R does and I wish them luck. However, in just less than 3 weeks there is starting to be doubt that they truly appreciate the trust they need to instill in their members by offering 100% rental rates that reflect current rates – no bias to either party.

There is NO reason why a 100% Point system can’t be 100% transparent and dominate the industry. II and RCI have so much baggage that a new company can kick their butts down the street if they just act as a company who is there to be neutral and make ALL the rules of the game available to everyone.

Will RedWeek do this or will they stumble? Time will tell.

And just what is MyResortNetwork doing while RedWeek introduces a new product?


And Marriott, just what are they doing - the old barter system of weeks (secret formulas and mysterious workings) or a 100% Point and 100% transparent system for their owners?

 

[e.bram]

The perfect exchange company already exists

The way I see it the PRIME weeks are owned by people who intend to use or/and rent their TS . The enters have no need to exchange and there are many venues to rent. The users (like myself) only exchange if some conflict or emergency arises. This usually happens close to the (ithin 90 days) of use. So ifI I can't use my week I look on II search first and will usually find a reasonable exchange. If I can't I will deposit it with SFX(who try to concentrate on prime weeks) who have on the average better TSes than the other exchanges. That combination seems to give one the best shot at getting a prime for prime exchange. This of course leaves with many subprime weeks whose depositors are looking for a smaller number of prime weeks that they imagine these exchanges in inventory.

 

["Roger"]

The way I see it the PRIME weeks are owned by people who intend to use or/and rent their TS . The enters have no need to exchange and there are many venues to rent. The users (like myself) only exchange if some conflict or emergency arises. ...

I am glad that this works well for you (really), but not everyone follows this stategy. Take a look at message #4 in this thread.

Others act differently

Personally, I think the fact that different people can all follow different strategies to success is one of the strong points of timesharing.

 

[Kola]

The way I see it the PRIME weeks are owned by people who intend to use or/and rent their TS . The enters have no need to exchange and there are many venues to rent. The users (like myself) only exchange if some conflict or emergency arises. This usually happens close to the (ithin 90 days) of use. So ifI I can't use my week I look on II search first and will usually find a reasonable exchange. If I can't I will deposit it with SFX(who try to concentrate on prime weeks) who have on the average better TSes than the other exchanges. That combination seems to give one the best shot at getting a prime for prime exchange. This of course leaves with many subprime weeks whose depositors are looking for a smaller number of prime weeks that they imagine these exchanges in inventory.

I suppose if you have two owners, you will have two different opinions. I cannot agree with most assumptions:
(a) I am a prime weeks owner (July) but 90 % of the time I exchange, don't rent (b) in most places rental supply far exceeds rental demand except in a few very popular locations, e g. Hawaii; (c) II search first method hardly ever produces a desirable exchange, - that how the system was designned to work ! (d) while SFX try to focus on prime weeks their inventory is insignificant relative to that handled by RCI and II. Their Mexican bonus selections are simply a temporary feature reflecting excess supply of unsold weeks from one or two Mexican developers. If you try to get prime time in many other popular areas SFX will draw a blank. (e) subprime weeks are sold by RCI, II, SFX and others for cash often at 50% discounted prices relative to M/T fees. Some of them use all sorts of fictional values to stimulate demand for what in their hands is a perishable product.

Kola