Points Programs: A Sales Solution for Legacy Resorts

A points program offers control, flexibility and, best of all, no long-term commitments

November 2019

By W. John Funk*
for Timesharing Today magazine

Timesharing Today magazine

Legacy resorts have been struggling for years to sell remaining or recaptured inventory. Many have not committed resources to support a sales staff. Those that have, experience resistance from buyers against long term commitments. Resort documents frequently are based on deeds and week intervals and require that the same annual fee be assessed regardless of the quality of the week. Buyers want flexibility and they want choices.

A Points Program Can Be A Solution

A new product has arrived that is solving these problems. The resort association creates a points program that is layered on top of its resort documents. Week intervals are conveyed to a trust to protect them from claims against the association. The week intervals are assigned point values by one or more exchange programs and represent the points the buyer owns in the resorts program. The association would be the initial owner of the points. These points that are then sold to buyers by the association. In order to use them, the buyers will be required to join an exchange. The number of points purchased is not tied to a particular week interval, but rather the number of points the buyer needs to have a desired vacation experience.

For example, suppose a week interval has a 10,000 point value. In order to have better options, a buyer may want to purchase 30,000 points. That is the equivalent of 3 week intervals. Under the old model, the buyer would have to purchase 3 week intervals and would be obligated to pay assessments for each of those weeks. Under the new model, the assessment would be based on the 30,000 points. The annual assessment would vary depending on the points purchased.

Another feature of the program is that the commitment is short term – frequently under 5 years. The buyer has the right to extend for another 5 year term by paying a modest renewal fee. If the buyer doesn’t extend, the points revert to the association. This counters the aversion of buyers to long term commitments. It’s the equivalent of a long term rental of points by the association.

How and Why A Points Program Works

First, it puts the inventory to work and generates income from the sale of points and assessments. The amount received for assessments may not be the full equivalent of what interval owners would have to pay the number of intervals represented by the points, but it is revenue that the association otherwise would not have had. This works because the association in effect owns the points and is letting the buyers use them under the program. It frees the association from the constraints of the resort documents.

Second, in many jurisdictions, this short term points product is not treated as timeshare and is not subject to registration or other requirements. This reduces the cost and time in getting started. Also, the role of the trustee is simply to hold the inventory and protect the buyers to make sure points are not oversold. This limits the trustee expense as well.

Third, the points product is what the consumer wants – control, flexibility and no long term commitment.

Fourth, there are sales companies that are looking for opportunities to either assist legacy resorts to sell points or acquire the points for their own programs.

Resort associations should consider this points product to revitalize sales and create long term growth.

Questions? Call or email Attorney Funk who can assist you with implementation of a points program for your legacy timeshare resort.

* W. John Funk is admitted in New Hampshire, Vermont, Massachusetts and Maine.