Diamond Resorts Quietly Expanding Empire: A Look at the Timeshare Club/Trust Concept

January 5th, 2011

Las Vegas based Diamond Resorts International® has been quietly expanding its timeshare holdings; continuing a trend of buying assets of bankrupt developers. Having established itself as a leader in the timeshare industry, with several successful Las Vegas timeshares including the popular Polo Towers, Diamond Resorts made headlines in 2007 with their purchase of  the Sunterra Corporation, a developer with a long history of financial woes. By most accounts, the Sunterra acquisition was a successful one – providing stability for Sunterra’s 326,000 timeshare owners. In recent months, Diamond Resorts has set its sights on two more troubled developers: ILX Resorts and Tempus Resorts.

ILX Resorts is the Arizona based developer of ten resorts, including the Premiere Vacation Club at Los Abrigados Resort & Spa in Sedona. Tempus Resorts, headquartered in Orlando, Florida, is the developer of the Mystic Dunes Resort & Golf Club, located just 3 miles from the Walt Disney World® complex. Diamond Resorts’ plans have owners at both resorts wondering what to expect from the new management. If the Sunterra acquisition is to serve as an example, then Tempus and ILX owners should find themselves in good hands, but there will be changes…

Ownerships sold by both Tempus and ILX are “deeded” weeks, while Diamond Resorts’ vacation ownership product is a Club/Trust arrangement. Deeded owners will, or course, be able to retain their deeded weeks – but there will be enticements for Tempus/ILX owners to upgrade to the Club/Trust, and over time many likely will. This scenario highlights one of the paradigm shifts occurring throughout the timeshare industry: the move from deeded owner-managed resorts to Club/Trust developer-managed resorts. We’ve seen this trend with Blugreen, Festiva, Welk Resorts, and others, but what are the implications for the individual owner?

Real Estate Investment vs. Use Product

We’ve touched on this issue in previous posts: how should timeshare be perceived, as an investment or a use product. In the case of a deeded timeshare, owners are wise to acknowledge they have made a real estate investment. Once developer sales have ceased, the owners (through the HOA/POA) will be largely responsible for decisions regarding upkeep and amenities at their resort. This can be a double-edged sword, as resorts with an active owner base have been able to keep maintenance fees low and timeshare resale values stable, but resorts with unengaged owners often suffer from soaring costs and abysmal resale values. Ultimately, owning a deeded timeshare is a responsibility – one that few developers explain fully at the time of sale.

The Timeshare Club/Trust Concept

With a Club/Trust timeshare product, owners receive a true “use product.” While specifics vary from brand to brand, in a Club/Trust arrangement the timeshare is deeded to either the developer, or more often to a non-profit Trust created by the developer. Decisions about upkeep and maintenance at the resort are made by the developer or trustee. Since individual ownerships are not directly tied to real property, maintenance fees are calculated as a fraction of the aggregate upkeep costs of all resorts in the Club/Trust. In theory, this arrangement puts the entity with the most knowledge of resort operations (the developer) in complete control, and as long as the developer continues selling Club/Trust timeshares they have an incentive to manage costs carefully in order to attract new buyers. In practice, the results have been mixed; with some owners happy to have less responsibility, and others complaining of excessive maintenance fees.

Choosing The Right Form of Ownership for You

Owning timeshare, in any of its variants, is a smart choice for regular travelers – a means to save money, and a hedge against inflation (During the height of the recession timeshares remained over 80% occupied.) Both deeded and Club/Trust ownerships have advantages and drawbacks, and each family is different. If you’re considering buying timeshare, consider the level of involvement you want to have with your resort. A Club/Trust ownership represents a sharp departure from the ideal of timeshare – owning a fraction of the vacation home that would otherwise be unaffordable – but delivers on the promise of timeshare as a use product. For those ready to make the departure from deeded property, Diamond Resorts timeshare stands out as the clear choice!

Entry Filed under: Developers,Diamond Resorts,Orlando,Resale Market,Timeshare Owners

6 Comments Add your own

  • 1. Ilx resorts | Sektion31&hellip  |  January 17th, 2011 at 1:34 am

    [...] Diamond Resorts Quietly Expanding Empire: A Look at the Timeshare … [...]

  • 2. EncUplejelp  |  January 24th, 2011 at 7:14 am

    I love helptimeshare.com! Here I always find a lot of helpful information for myself. Thanks you for your work.

    Best regards

  • 3. buy timeshare  |  March 3rd, 2011 at 1:41 am

    I’ve read about the timeshare available in this resort and it’s quit improving knowing the amenities, facilities and service that they offered!

  • 4. Rudy  |  March 27th, 2011 at 10:55 pm

    the main goal is to achieve more money and less honest interest in the customer. Diamond is top heavy with their considered Golden Children managing everything from reservations to the subcontracting of Mastercore which is affiliated with and somehow intertwined with Textron the larger corporation, Consumer beware !!

  • 5. John  |  January 26th, 2012 at 12:19 am

    Whenever DRI comes in, they take over the Board of Directors and the management company. Then they keep increasing their management fees year after year. Eventually the deeded owners all are foreclosed on and then they take the foreclosures and turn them into points. An unethical business model.

  • 6. Lynn Paul  |  January 26th, 2012 at 11:50 am

    I am an owner at the Point at Poipu in Kauai. I agree with the statement that by owning a deed we have made a real estate “investment.” Heaven knows that we have made an investment that has cost us tens of thousands of dollars. However, now that our maintenance fees have skyrocketed since Diamond Resorts took over and we have had an assessment of approximately $12,000 for water intrusion damage our “investment” is now worth zero. Can’t sell it, can’t give it away, they won’t buy it back and we are on the hook for a future that looks very expensive with no way out. This is no hedge against inflation, either. With everyone trying to recoup some of their losses, I can rent cheaper than my maintenance fees. This is a good business model for who? Oh yeah, the big corporations. So what else is new? Buyer, beware when buying a timeshare especially from Diamond Resorts International.

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