Litigation against timeshare resorts isn't uncommon. But, even if the lawsuits get class action status, the damages for publicly traded companies including Hilton, Marriott and Travel + Leisure Co. are unlikely to be significant as it is part of "normal course of business."
Timeshares are a contentious topic in vacation hospitality. Some of the biggest and publicly traded companies have often been censured or ruled against for not upholding consumer protection laws by using deceptive sales tactics.
In yet another attempt to bring transparency to timeshare, a Florida-based law firm plans to file a lawsuit seeking class action status against the top timeshare resorts including Travel + Leisure Co. (Formerly Wyndham), Holiday Inn Club, Hilton Grand Vacations, Marriott, and Westgate.
The Timeshare Law Firm was established in 2004 to exclusively litigate against timeshare companies that violate consumer laws that were specifically designed by government regulators to protect timeshare purchasers at the time of sale and before they sign a contract.
“People don’t even realize that their rights were violated. They were unlawfully denied government warnings and advisories, mandated by laws that they never even knew existed,” said John Abrams, the lead attorney at The Timeshare Law Firm in a statement.
Timeshare resort companies are prone to heavy litigation for allegedly deceiving consumers and violating consumer protection laws for failing to disclose to prospective buyers that timeshares are not a good investment, are not an appreciating “asset,” that they’re hard to sell, and that oral promises made by sales reps and managers are not to be relied upon.
In October last year, a superior court jury in New Jersey ruled against Atlantic City timeshare company FantaSea Resorts in favor of consumers deceived by the company, awarding the plaintiffs over $1 million verdict for FantaSea Resorts’ intentionally deceptive sales practices.
In this case, FantaSea Resorts admitted to committing multiple violations throughout the sales process by failing to inform buyers of required legal disclosures and withholding important documents that revealed details about the timeshare until after the buyer had signed a purchase and sale agreement.
And in June last year, the Missouri Attorney General’s Office filed a civil suit against a group of St. Louis County-based timeshare exit companies, who promise to get customers out of onerous timeshare contracts for thousands or tens of thousands of dollars in fees. The defendant companies in question were already involved in a federal fraud case involving millions in pandemic relief money.
Abrams said to expect the first action in Orlando in the next few weeks, followed by similar filings in Tennessee and Nevada.
“We’re swift and to the point,” Abrams told Skift. “We’re filing a lot of cases and each one of those can have multiple actions covering perhaps thousands of people in each jurisdiction, all the defendants involved in the case are the same salespeople.”
The American Resorts Development Association, which is the trade association for the timeshare industry, acknowledges some bad actors in the business, but overall is committed to bringing reforms.
“American Resorts Development Association and its members are committed to not only changing the past misperceptions of the timeshare industry but also continuing its efforts to educate timeshare owners on how to make the best decisions possible regarding the purchase and exit of their timeshare ownership,” said Jason Gamel, the association’s CEO and president. “For the past 40 years, the American Resorts Development Association and its members have worked closely with state and federal regulatory agencies to enact laws to protect consumers during the sales process as well as from predatory third-party exit firms. “
Timeshare companies categorize damages arising from litigations as risk factors to shareholders in company filings, and declare them as “normal course of business,” and are often insured against them – in the case of Hilton Grand Vacations, the company recorded an insurance claim receivable of $81 million for the fiscal year 2022 and paid $15 million in settlements.
“While we cannot comment on ongoing litigation, there has been a disturbing rise in timeshare exit schemes that deceive vacation ownership customers. We are committed to protecting our owners and members from these scams,” a Hilton Grand Vacations spokesperson told Skift.
As of December 31, 2022, the company accrued liabilities of approximately $124 million for legal matters. Approximately $96 million of these accrued liabilities relate to a judgment entered in March 2022.
“While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material effect on the Company’s financial condition, cash flows, or materially adversely affect overall trends in our results of operations, legal proceedings are inherently uncertain and unfavorable rulings could, individually or in aggregate, have a material adverse effect on the Company’s business, financial condition or results of operations,” according to the 10-K.
New Jersey-based Travel + Leisure Co’s disclosure in its 10-K is similar:” We are involved in various claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our results of operations, financial condition or cash flows. The company paid liabilities amounting to $7.6 billion listed as commitments and contingencies which includes damages arising from lawsuits.
Note: The story has been updated to reflect American Resorts Development Association’s comment.