Need to know
- 70% of the 351 timeshare members we heard from say their long-term schemes pass on to their children, who will have to pay the yearly fees
- Almost 30% say they’d like to leave their schemes but can't, and another 12.5% say they’re thinking about leaving
- CHOICE talks to legal experts about whether locking members into long-term timeshare schemes is even lawful
In this latest instalment of our ongoing investigation into the timeshare industry, we analyse feedback from 351 timeshare members.
Many say they're getting a raw deal from timeshare operators including Accor Vacation Club, Classic Holidays, Club Wyndham, Holiday Concepts and Ultiqa.
Survey reveals almost a third want out
Of the 351 timeshare members we surveyed, almost 30% say they'd like to leave their schemes but can't, and another 12.5% say they're thinking about leaving.
A staggering 70% of these members say their schemes pass on to their children, who will be burdened with the yearly fees. (Another 15% said they weren't sure if this would happen.)
Frankly, I would give my share away to have this out of my lifeClassic Holidays member Colin
One Classic Holidays member who's in this bind, Colin, says, "Frankly I would give my share away to have this out of my life." Another, Phil, says, "the levies are more expensive than the holiday itself".
Classic Holidays member Leanne, also stuck in her scheme, says "the ongoing fees outweigh the benefits".
But Classic Holidays isn't the only operator with members who want out.
Megan: 'One of our biggest regrets'
"Signing up for this has become one of our biggest regrets and has contributed to financial and emotional distress," says Megan, a member of Accor Vacation Club.
"On sign-up it was apparent to them that we couldn't afford it at the time. We needed a special exemption to get the deposit together.
"It's expensive and such a waste of money, but we haven't been able to find our way out. They said if we didn't want it any more we could sell it, which is technically true, but unrealistic. No one buys memberships at our level, and even higher-level memberships are sold for peanuts."
Jason: 'Aggressive sales tactics'
Jason*, a Club Wyndham member, says he felt "misled by sales staff". "They promised many benefits with aggressive sales tactics to lure the people to purchase credits and gave little or no time to think about their product. I think Wyndham has misled innocent people." (*Not his real name.)
Robert, who's a member of Intervale International, would get out if he could, and calls his timeshare scheme "basically a con".
Barb: 'It is not value for money'
Ultiqa member Barb, who's also stuck in her scheme and looking for a way out, says, "The accommodation is usually unavailable when required, and mostly in areas that have nothing to offer. It is certainly not value for money. The sales tactics were pushy."
These are just a few of the hundreds of stories we've heard in 2021 from disaffected timeshare members.
And there's an even darker side to the timeshare industry: elderly and vulnerable members of Classic Holidays, who are facing serious health problems and life crises, are sold into new schemes as a condition for being let out of their existing ones.
We heard from hundreds of trapped timeshare members. Here are just three of their many stories.
Hard-sell practices of timeshare salespeople
CHOICE first started looking into the murky world of holiday timeshares in 2016. We focused on the hard-sell practices that prop up the industry, the elusive value of timeshare points, and members getting stuck in a contract with no way out.
In one marketing tactic, unsuspecting consumers are handed 'scratchie' cards in busy public places, including theme parks and shopping malls, that instantly win them a free holiday. Other giveaways are also on offer.
But it's all a ruse to get you to attend a holiday timeshare seminar, where skilled salespeople try to get you to buy into a scheme.
Upfront fees and short 'cooling-off' periods
Falling for the timeshare hype at the seminar will see you handing over an upfront fee ranging from $14,990 to $29,250 depending on the scheme provider. Then come the annual fees, which average about $800 and tend to go up substantially every year. (As of December 2019, annual timeshare fees had gone up 4.3% on average every year over the previous five years.)
If the salesperson persuades you to sign up on the spot, you have a mere seven days to change your mind (the 'cooling-off' period) if the scheme is a member of the Australian Timeshare and Holiday Ownership Council (ATHOC), and 14 days if it's not. (Most major scheme operators are ATHOC members.)
Timeshare salespeople are exempt from the ban on conflicted remuneration that applies across the financial services industry
It doesn't help that timeshare salespeople are exempt from the ban on conflicted remuneration that applies across the financial services industry. (The ban basically means advisers can't recommend financial products that pay a commission but aren't the best choice for the client.)
Many of the roughly 184,500 timeshare members in Australia say they regret having fallen prey to their inflated promises of golden holiday deals.
Many timeshare members have complained about the quality and condition of the properties that take part in their schemes.
Timeshare schemes offer poor value
At CHOICE, we've attended timeshare seminars and done the maths to demonstrate that timeshare schemes don't deliver good value for money. You'd do a lot better financially by booking a holiday directly through the property or a third-party booking service.
Worse, our investigations have found that these schemes can lock you into contracts that run from 60 to 99 years, and can cost you as much as $450,000 over the long run.
In 2018, we handed Marriott Vacation Club a CHOICE Shonky Award for running a 40-year timeshare scheme that was more than nine times (938%) more expensive over the first five years than similar accommodation booked online would have been ($154,823 versus $14,907, respectively).
CHOICE investigates timeshare schemes
CHOICE verdict: ASIC fails consumers
We find that the 2018 ASIC regulatory update is failing to protect consumers.
CHOICE investigates another 99-year timeshare trap
We investigate case of a 66-year-old woman trapped in a 99-year Classic Holidays scheme until 2084.
ASIC launches investigation
ASIC launches investigation into the timeshare industry.
CHOICE reveals couple in 99-year timeshare trap
CHOICE investigates case of a 69-year-old couple trapped in a 99-year Classic Holidays scheme until 2076.
CHOICE makes second complaint to ASIC
We issue another formal complaint to ASIC alleging that Classic Holidays engaged in deceptive conduct.
Regulatory changes offer limited additional protections
ASIC updates its timeshare regulations to give consumers some limited additional protections.
CHOICE makes first complaint to ASIC
We issue a formal complaint to ASIC, alleging that Ultiqa violated the best interests duty.
Shonky Award for Marriott Vacation Club
We give Marriott Vacation Club a Shonky Award for 'trapping holiday-makers into a bad deal for a lifetime'.
Our number crunch shows poor value
Our fact checkers crunch the numbers and conclude that booking your own holidays is substantially cheaper that using timeshare schemes.
CHOICE investigator attends sales conference
Our staff attend a timeshare seminar and witness pressure sales tactics first hand.
CHOICE first looks into the hard sell of timeshare schemes.
We investigate pressure sales tactics and deceptive practices in the timeshare industry.
ASIC taking notice – but too late for some
The Australian Securities and Investments Commission (ASIC), which regulates timeshares as managed investment schemes, has been taking a greater interest in the industry in recent years.
ASIC has tightened the regulations on timeshare operators, imposing anti-hawking rules that restrict some of the pressure sales tactics that have lured so many in, and requiring better product disclosure, longer cooling-off periods, and financial-hardship relief.
Disproportionally high complaints
ASIC also released a comprehensive report in 2019 saying "there was a high level of discontent" among timeshare members.
In 2018–19, ASIC received 19 reports of misconduct by timeshare operators, amounting to roughly 20% of all reports the regulator received about registered managed investment schemes over that period – even though timeshares make up just 0.43% of all registered schemes.
The Australian Financial Complaints Authority (AFCA) has also received a disproportionately high number of complaints in recent years.
Too little too late?
ASIC has taken an interest, but the regulatory fixes that have gone through in recent years are of little help to people already signed up to a scheme and who want out – especially members of so-called legacy timeshare schemes, which can keep members and their children locked in for up to 99 years with no exit option. About 60,885 timeshare members are potentially trapped in these types of legacy schemes.
Regulatory fixes ... in recent years are of little help to people already signed up to a scheme and who want out
In 2019, we profiled the distressing case of John and Linda Booth, who found out they weren't allowed to leave their Classic Holidays-managed timeshare scheme and, when they tried to, discovered that it goes into their estate (meaning their children will inherit it). The Booth's scheme runs until 2076. The pair were in their 70s at the time.
In 2020, we followed up with the equally disturbing case of Coral Matcham and her daughter Cass. Coral's Classic Holidays-managed scheme comes with the same liabilities and runs until 2084. She was 66 years old when we published the story.
Can't you just walk away?
We talked to legal experts about the defensibility of timeshare contracts with no exit option that purportedly pass into a member's estate and on to their children. After all, the members don't actually own the property. Is it really legal for a business to force you to keep paying for its services when you want out?
Shaky legal ground
Professor Jeannie Paterson of the University of Melbourne Law School, whose own parents are caught in a Classic Holidays scheme, says the timeshare operator's threat that the obligation to keep paying for the timeshare will pass to their children may be on shaky ground. (Paterson specialises in contracts and consumer protection.)
Classic Holidays tried one of its standard tactics on Paterson's parents. The company pressured them to sign up to its Aspire scheme and pay a hefty upfront fee as a condition for leaving their long-term scheme, ostensibly to avoid burdening their children with years of ongoing fees.
But the professor is sceptical about the basis of such tactics. "Children are not automatically or necessarily liable for their parents' debts," Paterson says. "A debt doesn't transfer to children on the death of a parent. The executor is responsible for the debts of the estate.
Children are not automatically or necessarily liable for their parents' debtsJeannie Paterson, University of Melbourne Law School
"On the death of a timeshare member, what Classic Holidays has is a claim against the estate for the payment of the debt owing under the timeshare scheme. Whether that debt is paid or not depends on the assets in the estate and where Classic Holidays sits in the order of priority for the payment of debts."
The right to pay out of the contract?
And when a timeshare contract doesn't mention or is unclear about a member not being able to leave – as has been the case in a number of our previous investigations – the member has the right to offer to pay out any remaining contractual obligations.
"Because the payment is being made now, instead of over many years, this payout amount is unlikely to amount to the full cost of the fees payable to the timeshare operator for the remaining term of the timeshare," Paterson says.
Paterson says refusing to let members leave their schemes by paying out any debts is unfair and an overreach.
We support calls for the timeshare industry to undergo a rigorous reviewLaw Council of Australia president Dr Jacoba Brasch QC
Along with professor Paterson, the Law Council of Australia also expressed concerns about the timeshare industry.
"Timeshare contracts are complex, long, and commonly misunderstood," says president Dr Jacoba Brasch QC.
"The Law Council of Australia has heard anecdotal reports that some consumers have reported ongoing problems and dissatisfaction with timeshare contracts. We support calls for the timeshare industry to undergo a rigorous review."
CHOICE investigations have found that simply booking a room yourself is a far better-value option than a timeshare scheme.
Classic Holidays' Aspire scheme: A dubious 'way out'
Half of the 54 Classic Holidays members who took our survey would like to leave their schemes but can't, and another eight said they were thinking about leaving. Twenty-seven members said Classic Holidays had tried to sell them into its Aspire scheme, but they all said no.
One member, Adrian, told us: "Aspire wanted $29,000 to join up and get out of a Classic Holidays timeshare. I have had a stroke and therefore have no income. Pure greed."
Aspire wanted $29,000 to join up and get out of a Classic Holidays timeshareClassic Holidays timeshare member Adrian
Another, Brian, turned down the Aspire offer too, but says, "We would welcome a way out of the whole deal."
In 2019, we filed a formal complaint with ASIC about an 87-year-old woman who was pressured into taking up the Aspire offer and agreed to join a six-year point-based scheme at a minimum cost of $12,500.
Classic Holidays made the threat that her long-term scheme, which was due to expire in 2084, would pass on to her daughter. Among other things, we alleged in our complaint that Classic Holidays deceptively characterised the $12,500 deal as a hardship-relief offer in accordance with ASIC regulations, which it wasn't.
We've also seen other substantial documentation of Classic Holidays refusing to let financially strapped elderly members suffering serious health problems out of their schemes and, in many cases, pushing the Aspire option instead. In many cases, these members are unable to travel, but continue to be billed their yearly fees.
Other timeshare schemes no better
Many members of other timeshare schemes such as Accor, Ultiqa and Wyndham are also looking to leave. Of the 356 members we heard from, 145 would either like to get out but can't, or are thinking of trying to get out.
Of the 59 Accor members we surveyed, 26 would either like to get out but can't, or are thinking of trying to get out. In the case of Ultiqa, this holds true for 16 of the 25 members we heard from.
Accor and Wyndham told us they don't take over management of title-based legacy schemes, as Classic Holidays does. Ultiqa declined to respond to our query.
ATHOC: 'We actively support consumer protection'
Despite the negative views expressed by so many respondents to our survey, an ATHOC spokesperson told us its own survey shows that "over 65% of timeshare members are satisfied or very satisfied with their membership", and that timeshare schemes are "an important economic stimulus for the local community".
The spokesperson characterised the 351 respondents to our survey as a "tiny sample size [that] does not accurately reflect reality".
Yet our in-house survey experts dispute this assertion, saying 351 timeshare members is a robust sample size for the purposes of our investigation and does suggest systemic issues.
Why no exit option?
When asked why timeshare contracts generally don't include an exit option, and whether demanding that consumers accept and keep paying for a service they no longer want is the aberration it appears to be, the spokesperson said "state-based title laws and regulations do not allow for these owners to exit or walk away from their titled ownership without the title being transferred to another party.
"This is no different to how other real property, such as a home, is treated. Home owners can't just decide one day they don't want to pay rates and taxes, for example."
But Professor Paterson disputes this explanation, saying many timeshare members "don't own specific property in the way they might own a house or land". Instead, she argues, members typically hold a ''share of the net assets held by the timeshare scheme and managed by the operator".
Under current law, "a timeshare operator may hold the timeshare assets of a managed investment scheme on trust for the timeshare members," Paterson says, adding that such an arrangement "carries certain obligations, including acting honestly, with reasonable care and diligence and in the best interests of members".
Potentially misleading conduct
According to Paterson, telling members they own title to property, can never be released from the ongoing fees, and that their children will be burdened with the ongoing liability "may in some circumstances be contrary to the prohibition on misleading conduct in trade or commerce under the ASIC Act".
Big upfront fees
Similarly, she says, trying to pressure older members into paying a significant upfront fee to move from a title-based scheme to a points-based scheme (such as the Aspire program) by giving inaccurate information and playing on parental concerns about burdening their children "is close to the advantage-taking behaviour that, in the right circumstances, will be unconscionable under the ASIC Act".
Timeshare members need clear, accurate information so that they can properly price the options available to themProfessor Jeannie Paterson
Paterson adds: "Timeshare members trying to make important decisions about their timeshares need clear, accurate information so that they can properly price the options available to them.
"They are not decisions that should be made on the basis of uncertainty, anxiety or even despair."
Meanwhile, ATHOC says it "actively supports consumer protection and works diligently to support our timeshare owners".
Reiterating a point that Classic Holidays made in an earlier CHOICE investigation, ATHOC also says it "invites CHOICE to help it petition the regulators for changes that would allow further options for consumers in legacy schemes to exit their timeshare".
Classic Holidays stands by its claims
Classic Holidays CEO Ramy Filo tells us that the timeshare operator, which manages a number of legacy schemes, "strongly refutes any allegation or insinuation of unconscionable conduct" and reiterated the company's position that members can't leave schemes, but only sell or give them away.
Filo also stresses that Classic Holidays only manages the legacy schemes, wasn't involved in setting them up, and acts on behalf of the boards of the individual properties where the schemes were started. (However, legacy scheme members who have contacted the properties about leaving have been directed back to Classic Holidays.)
CEO defends Aspire program
Filo says the option to pay a sizeable lump sum and join a shorter points-based scheme through the Aspire or other program is open to some members for whom the legacy scheme is "no longer suitable for their holiday needs and objectives". He adds that Classic Holidays doesn't offer Aspire to members in hardship circumstances.
As Filo points out, hardship-relief provisions don't apply to legacy schemes in any case. And where they do apply, he says, "responsible entities have until 1 October 2021 to determine whether or not it is in the best interests of members to implement hardship withdrawal provisions".
Good business for Classic Holidays?
Nevertheless, having legacy members take the Aspire option appears to represent a windfall for Classic Holidays.
On top of the lump sum that legacy-scheme members must pay – and the commitment to a points-based scheme with yearly fees – Classic Holidays also receives the week or weeks from the legacy scheme, which it can then sell to its members.
[Classic Holidays] complies with its obligations under the Corporations ActRamy Filo, Classic Holidays CEO
When moving a legacy scheme member to a points-based scheme, Classic Holidays "complies with its obligations under the Corporations Act [ASIC's governing document]", Filo says.
Filo adds that 28% of Classic Holidays points-based members are former legacy-scheme members who took the Aspire or similar option – and he denies that people are pressured into taking up these offers.
He also confirmed that, in Classic Holidays' view, a scheme becomes part of a member's estate when they die and the obligation to pay yearly fees continues. How this holds up legally in cases where nobody can find any documentation that spells this out remains unclear.
Correction: An earlier version of this article said the cooling off period for timeshare sales is 14 days for members of ATHOC and 21 days for non-members. The correct figures are seven days for ATHOC members and 14 days for non-members.