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Timeshare bankruptcy: Readers want to know if they should be concerned
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David Siegel, Westgate Resorts CEO
In light of the reports of Consolidated Resorts in Las Vegas filing for Chapter 11 bankruptcy, and the impact the financial crisis has had on the timeshare industry in general, I received the following email.
I have a question. I bought a timeshare (Planet Hollywood – Westgate) in Las Vegas. If the developer/investor files bankruptcy, do I lose all the money that I paid?
SN
The reader should rest easy, specifically when it comes to Westgate, and in general when almost any developer goes out of business.
As to Westgate considering filing, CEO David Siegel’s response to the Examiner’s inquiry regarding past reports and future speculation: “Bankruptcy is not in our mind or future. Our competitors love to spread false rumors. Not only did Westgate not file in '08, we have never even been in default once during our 30 year history. We are strong, healthy and doing record sales in spite of the crunch.”
In more general terms, while their may be some short term speed bumps for owners in timeshare companies that go out of business, the owners will generally come out relatively unscathed.
It’s not out of the question that in the immediate aftermath of a company shutting down, floating week reservations not yet entered in the system could be lost, staffing could be reduced for a bit.
But in the long run, a substantially sold out program belongs to the owners, and is operated by the owners association.
Bankruptcy is not in our mind or future….we have never even been in default once during our 30 year history. We are strong, healthy and doing record sales in spite of the crunch.”
This is the case with Consolidated, for instance. An insider speaking on background (not an official spokesman) points out that with more than 80% of inventory sold, the owners association is more than stable enough to support the operation of any of their properties in manner that the owners are accustomed to.
Reader “HappyOwner” says it better than I could:
“Well I own a Consolidated timeshare at the Kona Islander Inn on the big island of Hawaii. I love my little condo that I own and get to use every year for a week. My ownership makes me get off my old lazy ass once a year and go to Hawaii. Actually, Consolidated does not own my condo week, I do...so I am not worried about the Consolidated Resorts problem.”
What happens if the resort does not have a critical mass of owners when the developer goes under? In many cases, the property, and the owners already in, will be acquired by a different developer, and become part of that program. Many of the rights and privileges are built into the CC&R’s (Covenants, Conditions, and Restrictions), the document provided at purchase.
Let’s close with Las Vegas Consololidated owner Frank, who says:
“I own there and I have had much success with it. We just came back from Hawaii and stayed at the Marriot there, total cost for the week at the hotel $164. Tacky are the people who go to these presentations for free stuff. We went there to see the property because we travel a lot and wanted to find a less expensive way to do it. It's not for everybody but it works for us.
