The Great Timeshare Escape
We have already experienced a lot in the USA. After the excitement of the Kennedy Space Center, this story is more down-to-earth. It is going to be a story of my first face-to-face experience with a consumer trap. Luckily, we did not fall for it, but it was an educational experience none the less.
After our two big days at NASA, we did absolutely nothing for a day when we got into Fort Lauderdale. It was a very well needed break since we are all introverts and need our alone time. We stayed in Fort Lauderdale for about a week in a unit through Booking.com, but the place was actually owned by Club Wyndham.
Club Wyndham turns out to be a modern form of time share real-estate solution. According to the dictionary, time shares are arrangements whereby several joint owners have the right to use a property as a holiday home under a time-sharing scheme. The idea is solid, in practice you end up spending more money than a simple short-stay rental. So how come I suddenly know so much about time shares? The people working for Club Wyndham offered David a tour of the facilities and a ‘free holiday’ if he attended the “short presentation”. In reality we walked over to a meeting room where we were greeted by two energetic businessmen. We then went into a presentation where their colleague gave us a very over the top presentation about how wonderful Club Wyndham was. They stressed how important taking holidays are, and via their program you can “save for it automatically” and have a guaranteed holiday every year.
My mum and David knew very quickly this was a scheme with a sales presentation that they wanted nothing to do with. However, they decided to stay to provide a learning experience for my brother and me. A learning experience it was my brother had to giggle as the presenter was trying to get us to sing a song and give “hi fives”. I knew something wasn’t right and it was a bad deal but couldn’t quite figure out how they made their money, the offer seemed too good to be true.
After the presentation, they gave us a tour of one of their apartments (a five-bedroom Presidential Suite), not really what we wanted. We wanted to see the facilities like the pool, gym, spa, sauna etc. Then they sat us down again and explained how this “offer” worked. They showed us the numbers, but something didn’t add up.
They also showed us how their website worked, and I noticed two things. One, they didn’t have a very wide variety of so called “resorts” in Australia. What I saw didn’t look like resorts to me and these offers were only available in the bigger cities. Second, they did not have a program or support for if you were unhappy with your resort, they just said that this never happened – people being unhappy. As you have heard from our travels, we had to cancel accommodation a couple of times because it didn’t meet the standards of a clean or safe space to rest and recover from travelling.
Let’s get into the numbers because as someone interested in F.I.R.E. (Financial Independence Retire Early), I like to calculate these things. You had to make a lump sum payment of $17,000 USD around $25,695.50 AUD*. Then you had to pay $780 USD monthly around $1,179 AUD*. When you wanted to go on a holiday you also had to pay extra “small fees” a few hundred dollars here or there. So now I knew how they made their money.
* at the time of writing
If I would invest this money for 10 years at 5.00% interest it would be $225,398. I would have made $58,223 in interest alone.
If I would invest this money for 20 years at 5.00% it would be $554,310. I would have made $245,655 just in interest.
These calculations have been made with Money Smart’s compound interest calculator based on leaving my money in a bank savings account. If I were to invest it in LICs or ETFs with a dividend reinvestment strategy, I would most likely earn more through an increase in compound interest and a likely increase in share price.
They stated that you could pass this onto your children in your will, but it still required a fee once fully paid off, of a few hundred dollars a year.
When they showed us these numbers, we tried to leave but they made it difficult for us to get out the door by rotating different salespeople at us trying their luck by discussing ‘different aspects’ of the proposal and offering discount after discount. Two red flags were that we had to make a decision “for a good rate” that day only. Another red flag was that we could not take the paperwork with the calculations out of their facilities. When reviewing Australian government website money smart, they state you should always be allowed to think through a purchase before you commit.
After we had left the “one hour presentation” having rejected their offer (which actually took about 3.5 hours) we did some online research. The company had a very bad reputation, wouldn’t allow people to book in the weeks they had holidays, the resorts were average, and people got into real financial difficulties because of this scheme. I am not saying that all time shares are by definition bad, but this set up was not beneficial according to my calculations. Anyway, my brother and I really learned a lot that day about how they tried to shape our opinions and influence us with techniques designed to trigger an emotive response in order to make a quick sale with decades long financial implications.
In the next blog I will talk about something very different, as we go to our first baseball game!
