Timeshare, the sick cousin of the tourism industryPOSTED: 12/30/15 5:52 PM
After many years, legislation remains in limbo
St. Maarten – Trouble in the timeshare industry probably dates back further than December 2010, when the controversial sale of the Pelican Resort caused uproar among employees and timeshare owners alike, but it is a good starting point for getting an impression of the state of this industry and the lack of action on the part of successive governments.
When the Pelican Resort changed ownership in December 2010, the jobs of 182 employees were suddenly on the line. The new owner offered lower conditions and the controversy resulted in numerous court cases whereby the rulings went from one end to the other. In the end, the argument somehow went away. But timeshare owners also felt the pinch, when they were locked out from their units.
Many of them had flown to the island on non-refundable airline tickets and they had paid their maintenance fees to the resort. The timeshare owners protested at the government administration building, saying that some of them had spent up to $6,000 for alternative accommodation.
The Pelican-case was an ugly early warning from what was to hit the industry in later years. In the political arena, the discussion focused mainly on the plight of the Pelican-workers. It brought to light the first split between UP-faction leader Romaine Laville and the party leadership. The politicians hardly paid heed to the damage the developments would do to the timeshare industry and by association to the island’s tourism driven economy.
In January 2012, the timeshare industry was negative in the news again, when the Royal Palm Beach Resort in Simpson Bay presented a maintenance fee of close to $100,000 to one of its timeshare owners.
Diamond Resorts, the Las Vegas-based owner of the resort decided shortly after Arthur McDonald, a retiree from Rhode Island, had bought a so-called whole-ownership that gave him the right to 52 weeks at his unit. The maintenance fee on his contract was something like $500 per month, but a few months later diamond changed its policy, saying it would treat whole-owners the same as interval-owners. The company slapped McDonald with 52 times the weekly maintenance fee, a far cry from the $500 a month he was prepared to pay.
The case is still in court, but the news about the controversy has not escaped other timeshare owners and potential buyers. Under the current conditions, with a maintenance fee that comes close to $50,000 per year, McDonald would not even be able to give his condo away, let alone sell it for the serious money he invested in it.
In May 2012, timeshare-owners called on parliament for reform. “Protect timeshare ownership contracts that exceed a certain number of weeks or a certain purchase value as deeded condos with apartment rights and make it possible to record these contracts with the Land registry Office.”
That was one of the recommended changes to timeshare legislation that has the support of Arthur and Laina Mcdonald.
The Mcdonalds submitted a letter outlining their situation and the recommendations they support in a letter to the vice chairman of parliament Leroy de Weever.
A second recommendation concerns a ban on charging for fees, reserves, assessments, expenses or other obligations “other than the ones provided in the plain language of the purchase contract.”
“The reform might also include the requirement for an audited budget to be provided to all owners on an annual basis and prior to the increase or imposition of any new or changed fees,” the letter states.
Instead of working on reform, the United People’s party came with a proposal in July 2012 to increase the stay-over tax for timeshare owners by 40 percent. The measure would generate $1 million a year in additional tax revenue.
In early 2013, MP Leroy de Weever submitted a draft law to regulate the timeshare industry. Part of the proposal was the establishment of a timeshare watchdog. The draft also contained a prohibition on the use of scratch cards off premise consultants use to lure potential buyers to timeshare projects.
Jeff Berger, owner of the electronic newsletter St. Maarten Weekly News was “monumentally unimpressed” with the draft law. “Were they serious, they would have enacted real consumer protection years ago and they would have involved timeshare owners in drafting it from the get-go. They didn’t,” Berger wrote in February 2013. “Perhaps they don’t realize that 36,000+ timeshare owners have left the island, selling their units at bare-bones prices to people who cook in their rooms and don’t buy anything anywhere. If parliament and ministers want to know why the economy here is still so up-and-down, all they need to do is look in the mirror: they ignored the single biggest contributor to their economy and are now suffering the consequences. Timeshare owners have zero interest in being ignored and are voting on this “legislation” with their feet.”
In November 2013, a survey initiated by Oyster Bay Beach Resort manager /ricasrdo Perez and conducted by hotel consulting firm HVS reveled the significance of timeshare for the island’s economy.
The survey showed that timeshare owners on average spend 10.9 days on the island and that during this time they spend $980 on dining, mostly outside of the timeshare resorts. They also spend money on nightlife, groceries and alcohol, though the highest spending category is in casinos: around $1,000.
Perez said at the time that the survey results clearly show that timeshare owners contribute a lot to the local economy.
In 2014, the timeshare industry reached a new low after Alegria real Estate bought the Caravanserai Beach Resort in Beacon Hill at auction. The new owner voided all timeshare contracts, which resulted in another truckload of negative publicity, not just in St. Maarten but also on travel websites.
In October, Alegria meets with outgoing Minister of Tourism and Economic Affairs, Ted Richardson, to address the concerns of timeshare owners. While “Richardson took the initiative for the meeting, he hardly spoke when it was in progress and he left before the meeting was over. His policy advisor Ludwig Ouenniche provided a press released that was distributed to the media by MedPro.
It triggered an outraged reaction from Jim Rosen, the first vice president of the St. Maarten Timeshare Association, who was present in the meeting. At the office of this newspaper, he crumpled the press release into a ball and threw it on our desk, saying: “The SMTA does not agree with the content of this press release.”
It is probably the most astounding example of how disinterested the government really is in the plight of timeshare owners. The press release headline was “Government achieves positive results for timeshare owners.”
In reality, Minister Richardson achieved nothing at all. The press release was a draft provided by Alegria and it spun the situation to the resort-owners advantage. “Alegria was gracious enough to extend and offer to the previous time share owners the use of the resort, its facilities and all its benefits exactly as they were accustomed to. Effectively, the timeshare owners will not notice any changes whatsoever in the use of the resort and its facilities for the same annual maintenance fees as previously paid,” the release stated.
It did not mention that timeshare contracts had been canceled and that all customers got instead was the use of a hotel room, without exchange facilities.
Furthermore, the press release put Minister Richardson on a pedestal, for playing “a pivotal role in finding common ground between parties.”
That common ground however, did and does not exist, given the fact that the timeshare association strongly disagreed with the content of the press release. “We do not agree with the cancellation of timeshare contracts,” Rosen said at the time.
In January 2015 it becomes clear that the draft timeshare legislation is a long way from home: the Council of Advice issues a negative advice, saying that the legislation should be written in Dutch, not in English.
Around the same time, American TV-stations pick up the timeshare debacle at Caravanserai, now dubbed Alegria.
In February, parties discuss the stumbling blocks that hinder the draft timeshare law. They agreed “to work together expeditiously” to respond to the advice of the Council of Advice, DP-MP Sarah Wescot-Williams stated in a press release. “Under consideration is also a separate ordinance to regulate timeshare rather than pursue amendments to the civil code. This will circumvent the language issue to a great extent.”
A few days later, this newspaper reports that the civil code allows for the sale of the part time right of apartment, a system whereby buyers obtain a deed to the part of the property they buy. Changing the business model from timeshare to the sale of the right of apartment sounds attractive for buyers, but the idea does not inspire politicians.
In June more bad news: the Sapphire resort in Cupecoy, which has been ejected from the RCI-system, tells its timeshare owners that they can now trade their units through Interval International. RCI (Resort Condominiums International) is the largest broker of timeshare units in the world.
Industry-watcher Jeff Berger wrote that the examples of Interval-resorts Sapphire provided in a letter to its timeshare owners are “resorts other than Sapphire in nice tropical locations like China.”
Expeditiously or not, ever since February nothing much has been heard about so-called progress with the timeshare legislation. In the meantime, we hear that projects like the Royal Palm in Simpson Bay have a measly occupancy of just 50 percent – a painful indication how inaction from the side of the government and the parliament has affected an industry that is in economic terms more important than our also fledgling cruise tourism industry.