Mike, a friendly salesman at the Westgate Park City Resort and Spa, unintentionally showed how drastically developers may overcharge for timeshares.
And while trying to sell a timeshare to a Deseret Morning News reporter (who disclosed where he works), Mike made a claim that would be considered illegal in such states as Florida and South Carolina, and which the industry says is unethical.
That claim: "These units will only increase in value," he said. "Park City has only so much land where you can build, and when it is gone it's gone. Demand will continue to go up, so values will increase."
Actually, the News reporter found he could have lost tens of thousands of dollars immediately if he had believed Mike.
To illustrate, Mike offered ownership of a week in ski season of a two-bedroom unit for $41,900. He also offered a one-bedroom unit in non-ski season for $23,900. Later, Mike's sales manager said an owner had turned back a summer week in a one-bedroom unit to buy a larger unit, so Westgate was offering that turnback for $11,900.
The next day, the Morning News found several dozen similar timeshares at the Westgate in Park City advertised for much less on the Internet by owners trying to resell them. Most two-bedroom, ski-season units (similar to what Westgate offered for $41,900) were selling for between $5,000 and $11,000. Offseason weeks were selling for even less.
Why are developers selling them for so much more? Developers often mark up prices significantly to cover their costs of the free trips, dinners and other incentives they use to lure customers, and the commissions they pay sales representatives.
In fact, the Utah Department of Commerce requires people who buy timeshares from developers to read and sign a paper that warns, in part, that reselling their units in the future "may not produce a profit as the original cost includes promotional, advertising and sale commission costs."
Westgate is not the only one in Utah making claims about timeshares as investments.
A saleswoman introducing herself as Chari trying to sell a reporter credits that allow stays of varying lengths for resorts developed nationwide by Trendwest/Worldmark, owned by the same parent company as Wyndham hotels promised high-value retention.
She said those credits "are always in high demand" by other Trendwest/Worldmark owners seeking them to allow more or better vacationing. She said they are snapped up quickly on Trendwest's own online bulletin boards, so they keep high value. "I doubt you will ever find many Trendwest shares for sale" on the open resale market, she said.
Later the same day, the Morning News found more than 100 such ads on the open market on Internet sites. Most of the ads offered credits for about 56 cents on the dollar for what Trendwest had offered. Some were as low as 7 cents on the dollar. None were for near the full price offered by Trendwest.
Another example of a claim creating the impression of increasing value is that of Marriott Vacation Club saleswoman Misty McTeer, who sent an e-mail to a reporter who had inquired about prices at its resorts in Park City (for possible use to exchange for travel elsewhere). She said it might be wiser, for travel exchange purposes, to buy instead at an under-construction Marriott resort in St. Kitts, an island in the Caribbean.
"The best time to join any location is when the resort is under construction like St. Kitts. Our prices increase over time every 30-45 days," she wrote.
Another example was an e-mailed offer for Deer Haven, a new fractional ownership community near Zion National Park.
Pamela Neeleman Clark wrote in that e-mail that "property values (are) appreciating at a rate of as much as 50 percent in the last couple of years in this area" so "these properties are going to go fast."
Those are just a few of numerous incidents reported by timeshare owners or found by the Morning News of pitching timeshare purchases as financial investments.
Ron West, a Texan who has bought timeshares for seven resorts over the years (mostly through resales), including at Park City, said he found, "If you buy a timeshare at a presentation, the value drops about 50 percent immediately when compared to the aftermarket. I bought my first timeshare in 1993 from Marriott for $12,300. That unit today is worth about $5,500." But some units he bought as cheap resales increased in value.
Mario Collura, owner of Tri West Real Estate in California, which specializes in timeshare resales nationally, including in Utah, said, "Timeshares are not an investment ,and potential owners should be looking at timeshares as a long-term usage product."
Collura compared it to buying a new car where the value also drops after it is driven off the lot.
Howard Nussbaum is president and CEO of the American Resort Development Association (ARDA), which calls itself the voice of the timeshare industry. He offers reasons why timeshares should not be marketed as investments, nor considered such.
"The value of owning a timeshare comes from its use, not its appreciation. No one should be selling it as a real-estate appreciation investment," he said, adding that ARDA's code of ethics says the same. He said his group supports state laws that ban marketing timeshares as investments, measures Utah does not have.
Nussbaum says, however, that timeshares often are a wiser use of money than going to hotels. He said, for example, if a vacationer buys a timeshare for about what he would spend on hotels over 10 years, then he would reach a break-even point in 10 years and could have a lifetime of vacations after that for the cost of annual maintenance fees. He could also pass it on as an inheritance to children.
Also, he said even if the resale value on a timeshare depreciates, any eventual sales would still help reimburse at least some of the owner's overall vacation costs through the years. "But if they stayed at hotels, all they would have is receipts," Nussbaum said.