Why exchange companies should allow rentals of exchanges...

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

My view on this subject is not a popular one. I believe that exchangers should be allowed to rent their exchanges. Rentals of timeshares is a very highly charged subject, as we have seen on these message boards. I actually believe that timesharing would become much stronger if rentals became widespread. Here's why.

The problem with rentals in today's weeks exchange model is that the trade ups are so rampant that if entrepreneurs were able to rent their exchanges, they would hog up all the good weeks and the normal exchanger would be left with the dog weeks. I agree that this would actually happen using today's approach to timesharing exchange. However, this is a system issue, nothing more. I believe it is possible to update how an exchange system operates for it to more efficiently match supply and demand. When it is efficient, then exchanges actually become fairer and transaction fees go down. Think the stock market. It used to require brokers and over $100 to trade a stock. Today, it's $8 or less and a stock is a far more complex product than a timeshare. Timesharing exchange is going up in price, not down.

Part of the reason why timesharing is so inefficient is that there is so very little incentive for entrepreneurs to enter it and make it more efficient. In every industry, this capitalistic mentality helps to improve the industry's efficiency to the point that the system gets stronger, productivity increases over time and the cost per transaction goes down relative to what is delivered. That isn't happening in timesharing. It is in the stone age and resort developers and exchange companies want to keep it that way. Unfortunately, what this will do is force the Vacation industry to create other more efficient products and timesharing will be left behind with archaic technology, business models and standards.

So, let's back up for a moment and look at the big picture of what is going on. One step removed from all the controversy. Timesharing exchangers tend not to like rentals of exchanges because they get into competition for good weeks by those businesses, right? Actually, what this does is makes the timesharing exchange companies lazy. Lazy because they do not have to deal with the real problem which is come up with an ever increasingly more efficient way of matching supply and demand in exchange.

THINK ABOUT THIS STATEMENT:

The only reason why a business would exchange a week, pay the exchange and guest certificate fee and rent that unit, is that the rental value of that exchanged week is GREATER than the rental value of the original week. If it weren't then the business would simply rent their original week.

Think about it for a second. Why would anyone running a business pay $99-175 to exchange a week if it were an equivalent week? That would reduce their margin by $99-175, right? The guest certificate fees reduces it even more.

The reason for this situation is that trade ups are so rampant that it is trivial to take a week that would rent for $299 and trade it up for something that will rent for $999. So, people would do it and pay the $149 + $49 fee at RCI or $135 + $39 for II to acquire that week.

If entrepreneurs were allowed to enter the market and arbitrage this situation, then the exchange companies would have to come up with a way to equalize that trade up. When they do, the opportunity to arbitrage would decrease and the end result is..... Fairer trades. By eliminating the competition of such entrepreneurs, there is less incentive for the exchange companies to fix this problem.

In summary, I fully understand why exchangers don't like to see exchanged weeks for rent because that reduces the availability for them to get that exchange. However, if rentals were allowed, the natural forces of capitalism would force the exchange companies to implement fairer methods for matching supply and demand. And, if someone is renting a Marriott exchange on eBay, then exchangers would be okay with that since that exchanger would have actually deposited something that was really worth as much as that week vs. what actually happens today.

[djyamyam Senior Member Find all posts View Profile Close djyamyam]

Boca,

I understand your logic, but it makes certain assumptions that I'm not sure the exchange companies would agree.

Yes competition does force you to focus on better managing expenses. You're asking the large exchange companies which seem to be very cost inefficient (e.g. RCI's new website and the time/money spent in introducing that) to pare their costs. Why would they do so when they don't have to right now?

Opening up the rental of exchanges brings the exchange companies competition. So if they already have an oligopolistic market that optimizes their profit, why would they introduce competition that could threaten that profit? Smaller entreprenuers would snap up the good stuff and leave all the bad weeks for the majority of TS exchangers, which happen to be RCI/II's bread and butter membership. If they are unhappy, then the memberhsip and revenue drops.

Your perspective comes from a consumer mindset, which isn't necessarily shared by the large corp.

Just my humble thoughts.

dj

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

THINK ABOUT THIS STATEMENT:

The only reason why a business would exchange a week, pay the exchange and guest certificate fee and rent that unit, is that the rental value of that exchanged week is GREATER than the rental value of the original week. If it weren't then the business would simply rent their original week.

Think about it for a second. Why would anyone running a business pay $99-175 to exchange a week if it were an equivalent week? That would reduce their margin by $99-175, right? The guest certificate fees reduces it even more.

The reason for this situation is that trade ups are so rampant that it is trivial to take a week that would rent for $299 and trade it up for something that will rent for $999. So, people would do it and pay the $149 + $49 fee at RCI or $135 + $39 for II to acquire that week.

Looking at this from a personal and not a business standpoint I don't feel that it is "trade-ups" that would drive someone to rent an exchanged week.

We will take my summer cape 1 bedroom week as an example. Or we could use my Arizona week although we are less likely to use that property but the costs are very similar. My annual ownership fees are +/- $450. I happily use the week when we can or trade for somewhere else when we can't. I'll use RCI's fees for this example and because we generally go to the caribbean an exchange would be $199 and a third of my annual membership fees would be $17.

So we exchange our week for a total of $667. That price is far less than most annual fees in the caribbean, hawaii, florida or large metropolitan areas but is it REALLY a trade-up?

I don't believe it is.

Now we will go back to the antiquated weeks exchange program. As users become more savvy I have noticed that even like for like trades have become harder to get and planning must either be done within 90 days or out to 18 or 20 months in the future. A lot can happen in that timeframe, financially, physically or emotionally that would make taking that exchange impossible.

I believe in that instance that a rental to recoup expenses should be allowed.

I do not believe that renting exchanges should be pursued as a business enterprise. If that were allowed exchanges would die completely. There is already a dearth of availability for first quarter 2007 that I have NOT been able to figure out. Our trade test in February showed ONE non-AI caribbean resort between Feb1 and April 1 2007 there are NONE today

Ongoing Search
No results were found for your search criteria. If you like, you may also save your search options as an Ongoing Search to continually check for availability.

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Search Criteria Destination1 CARIBBEAN: NO ALL-INCLUSIVE
Check-in Date(s) 02/02/2007 - 04/01/2007
Destination2 CARIBBEAN: NO ALL-INCLUSIVE

Now is this because they are being rented or used by their owner's as opposed to being deposited for exchange? ALL OF THEM? I can't possibly concieve that NO ONE is depositing weeks but if they are it is their right to do so. Certainly renting would be a more adviseable strategy for people in a going forward view.

So now that I have generally come to that conclusion that RCI weeks is DOA what should I do with my weeks? I am considering the smaller exchange companies as an alternative for now but may rent my weeks going forward and just renting an alternative.

But should exchanges be rented? If you can get them.

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

Boca:
I actually against this. If I own a house, and rent to you, usually, in the standard form of contract, I will not allow you to rent to other people, or to sublease unless I know and want to agree.

The exchange company really is serve as a broker in my opion, they do not own the week. Whoever deposit it owns. As an owner, I do believe we can do whatever we want. As an excahnger, once I got a week from someone, that should not give me the same right as owner.

Yes, it does post a risk to exchanger, since exchange company as a broker, will charge a transaction cost, and that is the only thing they can recoup. But if it is treat as rent, then, the fisrt system need to be put in is the tax system. Otherwise, If I deposit an exchange, you get it an rent it out, get who will have to pay the sales tax if local government can not get it.

Jya-Ning

[short Senior Member Find all posts View Profile Close short]

Price not the only problem.

Boca,

From a pure economic point of view your arguement makes some sense, however, from a practical standpoint having other using exchanges for their rental base would create way more problems than it would solve.

If I rented a week from an resale rental/exchange company and I got to the front desk and I could not check in because it was a phony reservation, canceled by RCI, or some other problem, who is responsible? Who do I call? My natural instinct would be to call RCI which has no idea of what I am talking about. The rental office I purchased from is closed and I am SOL.

What if I did check in and the units was a 1 br and I thought I was renting a 2 bedroom. What if the room had bugs, dirty, unacceptable location etc. Who do I call?

Considering the number of scams that are proliferating in this internet age it would become chaos. To much temptation for those business to over promise and under deliver. And who becomes the bad guy, RCI or II whether it is there fault or not. I just think there is no upside for RCI or II to do as you suggest and a significant downside.

If someone wants to rent RCI weeks the can do that buy paying a franchise fee and becoming a certified reseller of Extra Vacations ie Snap Travel.

Short

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

Don't get me wrong, I think rent market is good, reseller is good. However, I think if this whole thing can become health, you have to estatblish the risk/reward model accordingly, and has the majority players educate enough. The owner is the one that pays the initial capital. The owner is the one that pays MF, the owner is the one that take most of the risk associate with that particluar resort, and that week. Now, to assume when owner deposit the week to an exchange company, the owner does not know there is a rental market, thus whoever get that week can rent it out, does not seems good.

As an owner, when deposit to the exchange company, the current exchange model actually allow you to transfer a part of the risk to the exchange company. So you no longer worry there is a risk nobody will take that week, and your MF will be wasted, or if a nature hit, you loss the week. However, when you take a week from them, you take some risk back, but it will not be full risk. Thus a good health model should never allow you to enjoy the full benefits.

I do believe if there is enough market, there will be a rental sevice company that handles all the rent transaction, the maintainance (if it is just a condo), and act as broker, escow company type thing. And owner will deposit the week to that company if they want to rent out, and the owner will deposit to the exchange company that does not rent at all with a full understand that if at certain days none want to get it, what will happen to that week.

Unfortunately, at this moment, I don't believe there are enough inventories to provide a health rental market. So what will guarantee that someone will not try to abuse an exchange if he/she can not rent out? More likely, he/she may work with someone inside the exchange company (not owner or top manager) to gain advantage, what can prevent them? If this things happen, exchange company, unlike the TS developer, does not own the power of the HOA or turst, will get hit, in other word, by allow rent, they increase their risk but does not immediately increase their profit.

Jya-Ning

[Barbeque Senior Member Find all posts View Profile Close Barbeque]

When I bought my first week at Solmar it was not stated but was implied that I could rent an exchange. They mentioned I could rent my week, exchange it for anywhere I wanted in the big RCI book. Since my resort was gold crown and red time I would have no problem getting anywhere I wanted whenever I wanted. Hawaii Europe whever NO PROBLEM LIE LIE LIE LIE. I could use a guest certificate for whomever I wanted, all I had to do was to pay $ 49 for this privledge. RCI has helped the resorts perpetuate this fraud and has equipped the resorts with the materials to support their lies. If I can rent my week at my resort why can't I rent an exchange?
Also if an owners family situation changes money is tight and they can't afford the air tickets or the gas to go on vacation maybe it's a way to recoup the maintainance fees and some of the original bad investment made partly because of the razzle dazzle promotional materials provided by RCI.

I think these facts have big implications for RCI if some attorneys want to push it. Am I unhappy with my resort? NO
Am I totally dissatisfied with RCI? No I have worked the system, and have done ok with RCI exchanges. BUT most haven't joined tug, studied the system and learned how to use their timeshare.

Do I feel I was lied to when I bought my first week? Absolutely
Do I think RCI helped my resort missrepresent what they had to sell? You bet
If I could turn the clock back would I have never bought a timershare? NO
BUT I WOULD HAVE BOUGHT REASALE.

SHOULD I BE able to rent an exchange ? Yes

Was I informed about trade restrictions like the 1 in 4 year rule? NO
Or that I couldnt trade into other resorts in the Cabo area? NO
That I could make an exchange like The Grand Mayan for my excellent week and RCI and the resort could downgrade me to the Mayan Palace. ( This has happened to many but not to me) I am trading in with SFX Thanks to help from others.
RCI reeks of Big Brother worse than Microsoft

[Barbeque Senior Member Find all posts View Profile Close Barbeque]

I think you misintrepreted the salesperson. You CAN rent your owned week to anybody you please ... it's an exchanged week that you cannot rent.

Kat,
I did not misinterpret the salesperson. First of all I am a businessman and a salesman. I know what I was told. It was implied that exchanges could be rented, or most sharp entrepreneurial people would come to that conclusion with the presentation that we received.

The presentation was that it was vacation ownership (The Cabo Property) and with ownership you can buy it, sell it, rent it, will it (It has rights of survivorship). And with this amazing organization RCI you can go anywhere you want to go for an exchange fee. And guess what with this neat thing called a guest certificate for a fee you can send whomever you want whereever they want to go.

I believe RCI with their promotional materials has helped these developers perpetuate deceptive sales practices on many customers.

I know now that most exchange companies do not permit exchanges especially RCI.
But most timesharers arent as understanding of the rules as the people on this board or tug.

[JudyS Senior Member Find all posts View Profile Close JudyS]

....If entrepreneurs were allowed to enter the market and arbitrage this situation, then the exchange companies would have to come up with a way to equalize that trade up. When they do, the opportunity to arbitrage would decrease and the end result is..... Fairer trades. By eliminating the competition of such entrepreneurs, there is less incentive for the exchange companies to fix this problem......

This is the part that I don't get. OK, let's say that some people start businesses of grabbing the best exchange weeks, and renting them out. (This already happens some, but let's say it happens a lot more.) Why would this force the exchange companies to equalize trades? The exchange companies, or at least RCI, don't seem to care at all if their members are happy with their trades. I'll bet most RCI members are already very unhappy with what RCI offers them. But, they don't know of any other options, or they just bought their timeshare recently and deposited it before they knew how little RCI would give them. So, deposits keep coming in to RCI. Why would any of this change if rentals were allowed?