Towards a 21st Century Exchange
Part 2: Set My Timeshare Free

By David Skinner, President Holiday Equity

In the second installment in our series we’ll look at the events that gave rise to our current exchange systems—what’s good about them, what’s not, and what could be done better.

One thing everyone seems to agree on is that the flexibility to exchange is a major contributor to timeshare’s value and popularity. When surveyed, eighty-six percent of timeshare owners responded that exchange flexibility was the most important consideration when deciding whether to purchase a timeshare. Yet paradoxically, this most important consideration comes at a dear price—the freedom to choose which exchange network is right for you.

 
You Can’t Get There From Here

This basic right of choice was bargained away years ago by means of the exclusive affiliation agreement, a binding contract between a timeshare developer and an exchange company. For his part of the agreement, the developer may promote access to the timeshare exchange and offer an exchange membership as a purchase incentive. In return, the exchange company gains the sole and exclusive right to include the resort in their network, to charge annual subscription fees to the members, collect transaction costs, and to profit from the management and disposition of any inventory deposited to make an exchange.

Therein lies the paradox. If your desired destination is not part of the exchange system, then “you can’t get there from here.” In other words, the value of exchange flexibility extends only as far as the particular network’s reach. And alternatives are few. So, how did we get here and what can be done about it?

A Short History of Timeshare Exchange

Timeshare in the US got its start in the early 1970s with the formation of Vacation International. Developers Bob Burns and Robert Ringgenberg held nightly seminars at most every Holiday Inn along the West Coast’s I-5 corridor. The concept was both new and simple: one week of vacation each year, same time, same place. And people bought it—lots of people. But it wasn’t flexible and so they complained.

Then one evening in 1974, Christel De Haan cleared the dishes from her dining room table, sat down with note cards in hand, and founded Resort Condominiums International. Suddenly timeshares became flexible, and soon after Christel became rich! This single event overcame the public’s major objection and fundamentally advanced the concept of timeshare, thereby assuring its longevity. But things were simpler then; with one exchange company, exclusivity was not an issue; with one network, choice was not an option.

It wasn’t long, however, before things got complicated. A new exchange company came to town and it meant business, big business—RCI’s business. Mario Rodriguez and Thomas Davis, founders of Interval International, saw Gold Crowns “in them thar hills,” and they wanted their share. And so the “turf wars” of 1976 began. The territorial walls went up and the exclusive affiliation agreements came out. With no alternative, developers signed off on the agreements and sold out your freedom of choice.

Since then, the timeshare world has been divided into two parts: Resort Condominiums International, which boasts the larger number of resort affiliates, and Interval International, which claims the higher quality. While the two were systematically similar, they were technologically incompatible. Systems-wise, both networks can be categorized as “closed systems.” A closed system is one that restricts any activity beyond its borders, versus an open system that has no walls and allows interaction from the outside. But like the Hatfields and the McCoys, regardless of their commonality, they were simply not going to get along.

From the beginning, each of these closed systems served as an impenetrable wall against the encroachment of the other company—and an effective barrier to further competition. Over time, other companies have entered the fray, such as Trading Places, Dial-an-Exchange, and San Francisco, but all have found it difficult to grow market share. And as the great Jack Welsh of GE fame noted, if you’re not number one or two on the field, you’re not in the game.

Back to those exclusive affiliation agreements: they were also effective in protecting the huge infrastructure that these companies came to represent. As an example, old-timers fondly remember the hefty annual resort catalogs packed with pictures and descriptions of every resort in their systems, the collation, maintenance, and distribution of which was a demanding and expensive task that grew even more so as the industry expanded. These annual catalogs served as “vacation wish books” for their members; that is, until the Information Superhighway arrived and changed everything.

Today, most of this information is available online for free, with reviews and social communities to boot. The original rationale behind these vast exchange company infrastructures, their centralized business models, the closed network systems, and the resulting duopoly market control are all gone. As did the arrival of the railroads and the building of the interstate highway system, the arrival of the Internet has changed all the rules.

Is it time to “set my timeshare free”? Or, as Ronald Reagan put it, “to tear down these walls”? In this new age the restriction on your freedom to choose is no longer acceptable. Is there a better way, a 21st Century approach, you ask? I believe the answer is, yes!

Imagine

Despite the various criticisms you can throw at them, exchange companies have through the years done an excellent job. Without them the timeshare industry would probably not exist. But times have changed; technology has overrun their proprietary programs and made their closed exchange systems a costly problem rather than an adaptive solution. One can only imagine that they would resist any change that threatened the status quo—at least and until they felt there was no alternative, or their shareholders and clients demanded it.

They could, however, as did the music industry discussed in Part 1 of this series, accept the inevitable, embrace change, reinvent themselves, and emerge as an important part of a super exchange network. A 21st Century exchange that is self-governed, transparent, fair, and built on open source collaborative principles—a peer-to-peer owners’ network of sharing and exchanging, a community of timeshare enthusiasts and enterprises working towards a common goal and individual owner value.

As the late John Lennon so wistfully penned: 

You may say I'm a dreamer,
But I'm not the only one.
I hope someday you'll join us
And the world will be as one.
                              —“Imagine”

In Part 3 of this series, we’ll look at just how a global open source system might work, the important role the exchange companies could play, and how all timeshare owners and the industry as a whole could benefit.

Click Here to read part 3>>

David Skinner is founder and CEO of the Holiday Equity. The company was started in 1992 to fill a vital need in the timeshare industry. It serves as a financing and sales bridge between resort sales and the resale market. He has spent his professional life in real estate brokerage, investment banking and securities, and as an entrepreneur. These qualities came together to form the basis of which Holiday is built upon.

David has three adult children, is married and resides in Puerto Vallarta, Mexico, from where he commutes to Seattle, Holiday’s home base. He can be emailed at dskinner@holidaygroup.com.

Click Here to Learn More >> Visit Our Archived Article Library!