Our in-depth analysis exposes the seamy side of timeshare while our survey of 450 people showed huge dissatisfaction

Club Mahindra and Sterling Holidays control the majority of the small, but growing, timeshare business in India. But there are plenty of others promising you grand holidays for a price—these include Country Club, a company with lots of complaints against it, and the multi-level marketing (MLM) company called QNet/QuestNet/QI which has graduated from selling numismatic coins to a host of products including timeshare holidays. Are they worth it? Let’s start with the big two, Club Mahindra and Sterling Holidays. They position themselves as family-friendly resort chains run for the happiness of their members. Well, how a company sells you something, tells a lot.

Neither of them, for example, tell you what their membership costs, on their websites. You wonder what they are hiding. If you receive calls or text messages from their pushy salesmen, you should wonder if the commission they get is so lucrative that it makes them push the product so aggressively. If their brochures and advertisements don’t answer half of your questions, perhaps it is because the answers would bring discomfort. If there is a free-look period during which you are allowed to repudiate the contract, you should question what other consumers have found out immediately after signing on the dotted line.

In reality, they are not transparent about their offerings and have made a habit of being unfair to their members, particularly those with the cheaper memberships. Timeshare is a complicated subject and its contract requires the kind of careful examination that we do not usually devote to booking holidays. If you’re considering membership, view it with the same degree of interest that you would bestow on any 25-year investment opportunity.

At the same time, keep in mind that timeshare memberships don’t have a singular objective like financial products, whose sole aim is to provide better-than-average returns. If your mutual fund doesn’t beat its benchmark over a couple of quarters, you may decide it is a poor investment. Timeshare membership, on the other hand, is selling you ‘experiences’. You may admit that membership is expensive or that it is almost impossible to get a room when you want it or that the advertisements have the potential to mislead, but still, eventually, decide that it’s worth it. The high costs of good experiences are relatively easy to validate than those of financial products. So while a timeshare membership may well suit your family, this report merely attempts to separate the fact from the fiction.

Projecting Happiness? Ads that Mislead
Timeshare companies are usually big advertisers. Sometimes, the pictures shown to you are of the resorts; but, more often, you are shown families enjoying themselves, on a beach or in the mountains. The price is only indicated in equated monthly instalments (EMIs), usually just four digits, and you’re told you’ll be getting a lifetime of holidays inflation-free. When the advertisement isn’t specific to a single location, you may also be told that you can holiday in one of the thousands of affiliated resorts. Advertisements are meant to paint a positive picture, so no harm done. But they’re a good place to start asking questions because they usually make first impressions.

Selling Holidays: Timeshare companies claim to sell vacations. In fact, the product is usually called vacation-ownership. For example, say it sells ‘25 years of fun-filled holidays’ while Club Mahindra calls itself a ‘vacation provider’. Both these are inaccurate. Timeshare companies don’t sell you holidays, tour operators do. Timeshare companies sell you accommodation. If you wish to eat dinner, you pay. If you need to be picked from the airport, you pay. If you wish to use any other facility, you pay. At Sterling Holidays’ Munnar resort, for example, it will cost you Rs110 to ride an all-terrain bike and Rs56 to play snooker for 30 minutes. If you were, in fact, sold a holiday or, as they put it more often, ‘owned your vacation’, shouldn’t these have been included in the price?

Price Glimpses: In advertisements, you’re informed that membership is available at EMIs of Rs4,000 to Rs5,000. As expected, this is the EMI for the cheapest membership to be paid over the longest tenure. But that’s just the beginning. In fact, the ad excludes much more than it tells you. Let’s use Club Mahindra as an example. As on 1 April 2012, its cheapest membership, Blue – Studio Apartment, was available at a cost of Rs1.99 lakh, payable at an EMI of Rs5,101 over 48 months (interest rate of 16%). The low figure, of course, excludes the down-payment of Rs20,000. But this is minor, compared to the annual subscription fee (ASF), currently at Rs10,748 for a studio apartment. This is for the cheapest membership. Cost increases with the size of the apartment you want (studio, 1BHK or 2BHK) and the privilege of your membership (in ascending order, Blue, White, Red and Purple). Privilege means the ability to holiday at a time of your choice. Blue members would, for example, be unable to take a vacation during the summer holidays or Diwali. No such restrictions apply to Purple members, though this is also subject to availability. What does Purple membership cost? As on 1 April 2012, it was Rs6.99 lakh to Rs15.49 lakh for just the membership!

Inflation-linked: For all its bragging about prices being inflation-free, it is amusing that the ASF rises, by Club Mahindra’s own admission, in accordance with the wholesale price index. For example, as on 1 April 2011, the ASF for a studio apartment was Rs9,681, exactly a year earlier, it was Rs8,994. Every year you go back, you’ll find that prices have increased steadily by 7% to 10%. Sterling Holidays, whose memberships are cheaper, also raise membership prices. It has two types of charges —a utility fee and annual subscription fee. The former increased by 40% and the latter by a whopping 75% in 2012. So should the company still be able to claim that its holidays are inflation-free? Neither company posts its fees and charges on its website. Their websites barely make a mention of any of this. Past prices have been found online in pictures of rate cards uploaded by members, many of whom are disgruntled.

Thousands of Locations: Both Sterling Holidays and Club Mahindra are affiliated to RCI, the big daddy of timeshare companies, which, in turn, has over 6,000 hotels affiliated with it. The advertisements boast that you will be able to holiday at thousands of locations worldwide. Sterling Holidays, on its website, says that you can use your vacation ownership points at ‘over 6700 RCI-affiliated resorts in India and overseas’. What it fails to mention is that this is only valid for three years. To renew your RCI membership, you must pay a further Rs15,000 to Rs25,000 every three years, depending on the type of membership you want. Moreover, even though RCI has over 6,700 resorts, it has over two million members. If everyone wishes to use their week in the same year, around 40% of all requests would have to be declined. But, even if your request is granted, your week may not have the same value at a foreign location, particularly in the first world. If you wish to stay in an RCI location in Spain, for example, you may have to trade in your week-entitlement for just two or three days.

Selling Smiles? Grim Facts
Club Mahindra and Sterling Holidays sell memberships aggressively. They advertise heavily and have several sales representatives pushing their products even in shopping malls, where they creep up on you claiming to get your details for a ‘lucky draw’. In FY11-12, for example, Club Mahindra derived 61% of its income from the sale of membership and its biggest expense was, of course, sales and marketing costs, at 36%. The aggression is not surprising, given that a single sale grants them a customer for 25 years.

But it also leads to mis-selling. Here’s an example. In March 2010, the Chandigarh Consumer Disputes Redressal Forum came down heavily on Club Mahindra, observing that its sales representatives’ methods not only resulted in deficiency of service but were unfair trade practices. The case was filed by Chandigarh resident Sanjeev Kochhar, who had been promised four one-way air tickets, a week of international holiday with RCI, four nights at a Club Mahindra resort and food vouchers worth Rs3,000. Of course, these promises weren’t fulfilled. The Forum then directed the company to refund the Rs1.71 lakh Mr Kochhar had been charged, and awarded Rs50,000 as damages and Rs5,000 as costs of litigation. If you’re interested in cases such as these, also look up Col (Retd) SP Putchala Vs Mahindra Holidays and Resorts India Ltd (decided on 16 October 2012). In its prospectus dated 10 April 2013, filed with SEBI for issue of equity shares, Club Mahindra has said that it has 133 cases pending against it in various consumer courts around the country. It says the complainants in these cases “allege negligence and deficiencies in services provided by our company and have sought refund of membership and compensation for mental stress, physical agony and legal costs.” The total amount at stake in these cases is Rs39.07 crore.

Sterling Holidays, of course, is also known to indulge in such malpractices. There are several cases, dating way back to the late-1980s, wherein orders were passed against the company, which had sold timeshare memberships without having built the resorts in the first place. Of course, the bulk of aggrieved consumers don’t go to court. Run a few searches online, go through consumer forums or even look at the respective companies’ Twitter or Facebook profiles and you’ll have no trouble finding a host of complaints by consumers who believe they’ve been cheated by Club Mahindra or Sterling Holidays. Granted that all the claims posted online may not be credible, but mis-selling is rife in the timeshare industry. Ankur Singla, CEO, Akosha, which helps consumers solve their problems, says, “Most of our customers who have enrolled with Club Mahindra and Sterling Holidays complain about mis-selling. The sales teams make false promises and customers do not receive the promised services after enrolling. Also, despite fraudulent selling, the money is not refunded. Recently, for example, a customer of Sterling Holidays came to us alleging that membership was sold on the basis of a resort which was actually not built. The brand hasn’t responded, despite multiple follow-ups.”

Refunds may not be prompt, but sales associates are exactly the opposite. Both companies regularly send text messages to their databases without mentioning the outfit they work for. This is done by most industries that employ direct sales teams. What is not common is this: You may receive a call saying you’ve won free movie tickets. On asking where and when you can collect them, you’ll be asked whether you have a family and own a car. This is because only married individuals usually buy membership and car-owners are considered the target market. In a February 2013 Investor Report, for example, Club Mahindra infers that penetration of vacation ownership is low because just 1 in 33 car-owners has timeshare membership. If you do have a family and own a car, you will be informed that you are eligible for the prize, but you will first be required to sit for a free seminar on timeshare.

During presentations, sales associates are predictably polite and courteous and project the claimed values of family fun, without painting a clear picture. In researching timeshare, this writer has shopped for it on multiple occasions never to be given the full story. It’s only if you know the questions to ask that the answers follow. If you’ve been sold a membership, you have a 10-day free look period during which you can back out. Getting out is possible, but you’ll need to be proactive. Mr Singla says that, in his experience, Club Mahindra is easier to deal with than Sterling Holidays. He says, “Club Mahindra is active in reaching out to unhappy customers. A settlement is possible in a matter of days, depending on the nature of the complaint. But we’ve had less success with Sterling Holidays.”

Defining Luxury? Standardisation Stumble
A big problem with any timeshare membership is lack of standardisation. You have access to various hotels around the country and abroad, but they don’t maintain the same standard. One may have a swimming pool, multiple restaurants and other facilities you expect in luxury resorts, but most of them do not. Nonetheless, you pay the same rate. Here’s what you should know about the resorts.

Massive Variations: Given that your cost each year is the same, you probably would expect uniformity in features and facilities, to the extent possible, at each resort. This is not the case. Some of Sterling Holidays’ resorts, even in states like Tamil Nadu, don’t even have a swimming pool. Club Mahindra claims it has luxury facilities, but only some of its resorts have luxury facilities, such as a spa or a gym. While different weather conditions may be the reason for the absence of certain facilities, even when two properties are owned in the same town, differences can be vast. Club Mahindra has two properties in Goa, both at Varca. One has “two swimming pools, three restaurants, a recreation centre, a state-of-the-art gymnasium and a spa,” while the other has “a single pool and restaurant and no gymnasium or spa.” Some resorts don’t even have Internet connectivity. Unlike hotel staff, which is trained to be courteous at all times, timeshare staff is surly and will not even greet guests.

Location: The resorts are often situated far from places of interest. In Goa, for example, it is not uncommon to pay even low rates for a resort on the beach, given that the state has a 101km coastline. Club Mahindra’s Varca resort is, however, 2.5km away from the nearest beach. Even worse is Sterling Holidays’ Club Estadia which says it is in ‘proximity to the beaches of Calangute, Sinquerim and Baga’ when it is actually 10km away. Club Mahindra’s resort in Dharamsala is 5km from the city. Perhaps the most amusing example of poor location, though only if you’re not a member, is this one. Among the amenities listed for Sterling Holidays’ Kodai – Valley View resort is an “Internet caf located 7 km from the resort. The caf provides a peaceful, dedicated browsing space.”

Rooms: You may find a way to excuse all else as long as the room of your choice is available. Here it is worth mentioning that Sterling Holidays and Club Mahindra have different timeshare models. With Club Mahindra, there is no flexibility. If you get a Blue (cheapest) membership in a studio apartment, it remains that way. You can only travel when Blue members are allowed to travel (say, peak winter in Manali or the monsoon in Goa) and can’t opt for an apartment larger than a studio. If you take a higher-class membership, you’ll be able to travel during more congenial months and stay in larger apartments. Let’s now assume that you have two young children and have, therefore, opted for a two-bedroom apartment. When you travel to, for example, Naukuchiatal (Nainital) or Emerald Palms (Goa), you’ll find that the resort has only studio apartments. If you agree to stay there, either your children or you will have to sleep on a sofa-cum-bed. In this regard, you’ll have less reason to complain at Sterling Holidays. Your membership here buys you points, which you’re free to spend as you please. You’ll pay 70 points per night for a studio in a Blue season, but stay in a two-bedroom during a Purple season will set you back 480 points per night. Sofa-cum-beds will be unavoidable still, but at least you wouldn’t have paid for a two-bedroom apartment.

Property Rights? Week Argument
The deal is that you can go on one holiday for one week in the year, for 25 years. You could think you’re entitled to a stay, given that you’re paying maintenance, but your holiday is subject to availability. You may not have been approached by a sales agent and have no problem with the disparity in resorts, but the difficulty in finding room at a time of your choice is one aspect of timeshares that no one escapes. The first of the two points apply to only Club Mahindra members, but the second applies to Sterling Holidays as well.

Full House: Club Mahindra’s February 2013 Investor Presentation is happy to mention that it has 155,000 members and 2,200 rooms at its 40 resorts. The problem is that the equation doesn’t work out. If 2,200 rooms are available for 52 weeks in the year, only 114,400 (2,200x52) would be able to go on a holiday (actually, it’s a bit lower because its resorts are shut for two weeks a year). So either there is no room for everyone or they are exaggerating the number of their members. Both are somewhat true. Club Mahindra, in February 2013, would have had 155,000 members, but many of them would have been ineligible to go on holiday because they have not paid a sufficient number of EMIs to be permitted to use the facilities. We’ve mailed Club Mahindra for this figure, but did not receive a response. In the absence of current information, we must rely on year-old words of the company’s CEO, Rajiv Sawhney.

In April 2012, during a conference call, one investor, R Shankar, asked when Club Mahindra would reach some ‘acceptable levels of fulfilment’. Mr Sawhney’s answer might sound complicated at first, but isn’t. He replied that of the 143,000 members, 22,000 members are still not eligible to take holidays. So that leaves us with 121,000 eligible members. He also said that the company had 2,049 rooms. At 50 weeks, just 102,450 members could go on holiday. But then what would the remaining 18,550 members do? He said, “Typically, 70% or so of all members exercise their right in a given year. So if one was to apply a factor of 0.7 to 121,000 members, we come to 84,000 people and if one was to divide that by 50, it comes to a number of 1,680. We currently have 2,049 rooms. So, at this time, we are, in our opinion, ahead of the curve.” This line of reasoning would hardly appease a customer being denied a room, given that he/she would have already paid for the membership.

While the company doesn’t make public the number of members it has in each category (Blue, White, Red and Purple), it is likely that members in the lower categories would have access to an even smaller inventory of rooms, as higher-category members can holiday throughout the year, but Blue and White members are usually restricted to off-season.

Everyone but You: After selling you 25-year memberships and, at least in Club Mahindra’s case, not even having enough rooms to accommodate all its paid customers, both companies still have the audacity to sell their rooms to corporates and non-members. They do so openly, without regard for the members. In FY08-09, 25% of Club Mahindra room bookings were made by non-members, but this has been dropping steadily to 14% in FY11-12. Sterling Holidays has not made available the percentage of bookings by non-members. But it advertises hotel stay to the common consumer and accommodation plus conference room facilities to corporate customers. Even if a single room is occupied by a non-member, a member would predictably be furious. After all, he has paid up in advance, while the non-member hasn’t.

One Club Mahindra member we talked to, who prefers to remain anonymous, had a completely unsatisfactory experience at a Coorg resort in March 2011 because of a corporate event that took precedence over their holiday. She says, “We were completely sidelined because of this major conference that was held at the time. The food was not up to the mark and service was poor. More importantly, though, we were looking for a fun family holiday. The conference created a totally corporate environment. We informed the management that we were unhappy. Of course, they couldn’t let go of their corporate clients for the few members at the hotel. So what they did instead was offer us one-day free stay at the Taj hotel in Mangalore, which we took.”

Prices of rooms at Club Mahindra and Sterling Holidays are available on the Internet, sometimes at lower prices than those advertised on the company’s websites, too. For example, on 19 April 2013, a group deal website www.groupon.co.in was offering a one night-two day stay at Club Mahindra’s resort in Mussorie for Rs3,499, at a discount of 53%. If non-members have access to your holiday, while you are denied room, do you really own your vacation?

Bidding Goodbye? Tough Sell
Once you’ve paid the membership fee, you start getting bills for the maintenance fee annually. If you’re unhappy with the service after, say, five years, or simply feel you aren’t going to use the product, you probably won’t want to pay this fee. You could simply stop paying it, but that will mean sending the membership money also down the drain. You don’t want this, nor does the company, which would, in this case, lose out on future ASFs and the chance to make more money off you when you visit the resort. So what do you do? Your only option is to sell your contract to someone who wants it. You may put up such advertisements in newspapers or websites such as Quikr or eBay, but the only space we’ve seen that deals exclusively with timeshare is on the blog run by Shrinidhi Hande, a Bengaluru-based software engineer. His tryst with Club Mahindra is an interesting one.

In 2007, Mr Hande published a post on timeshare, in general, and Club Mahindra, in particular, after encountering their sales agents. His post received so much attention from victims of mis-selling and others generally interested in timeshare that it once featured just below the official Club Mahindra website. He says, “I think Club Mahindra began to realise my blog had a negative impact on their sales. So they even gave me an opportunity to explore their Coorg and Binsar resorts and interact with their senior staff. This was nice, but I informed them that my problem was never the resorts, but with the fundamental flaws that exist in timeshare membership.”

Mr Hande then wrote about his visit to the resorts. This started getting attention too. As many of the comments were from those who wanted a way out, he decided to make it a space where you could sell your membership, too. He says, “I set up a simple mechanism using Google docs. You enter your membership details and the same is visible in my blog post. This is a purely non-commercial activity. My blog is only an enabler, bringing buyers and sellers together. Actual sales happen outside.” So far, a few thousand listings have been made, for Club Mahindra and Sterling Holidays memberships, of which a few hundred have managed to sell off their membership.

While the article so far has focused only on the big two, Sterling Holidays and Club Mahindra, this story is repeated across the industry. Country Club is another company, whose beams at you from hoardings, newspapers and television screens give a smiling thumbs-up. Unfortunately, its customers aren’t smiling as much after they have paid. Internet review forums are plastered with complaints about Country Club. Amit Gupta of Faridabad wrote to us about losing Rs50,000 for the expensive lessons documented in the preceding paragraphs. In fact, Country Club members have often complained that it does not even have properties at locations claimed by it, or arranges shoddy accommodation on request, which is a far cry from what you pay for.

QNet’s QVI Club is a timeshare with a 30-year membership that lures people with the promise of holidays abroad and access to XchangeWorld’s 2,000 resorts worldwide and special holiday packages. Here, again, the website says little about what you pay, while there are pictures of luxury resorts to ensure you reach for your wallet. A simple Google search throws up plenty of angry and discontented buyers.

If you are still tempted to buy a timeshare, you may like to check out the reviews at www.mouthshut.com. It lists a string of reviews—mostly negative or reporting outright frauds. Among these is Awesome Holidays of Delhi, Averina Beach Club at Goa, Royal Goan Beach Club, Progressive Times Planner, Highland Holiday Homes (offices in Mumbai and Pune), among many others.

There are, indeed, people who know how to use timeshare packages extremely well and have no complaints, but they are usually those who have high-end packages and are not tied down to specific vacation times that are dictated by festival holidays or school and college vacations.

In the final analysis, the names and details are immaterial—the bottomline is that by plonking down a big chunk of money for a timeshare package, you are not inflation-proofing your holidays. In fact, you pay escalating annual charges, you pay plenty of extras and you risk rejection. Instead, if you are a savvy Internet-user, you can get yourself great holiday deals around the world with big benefits in countries that are—at some point or another—going through economic difficulties and laying out the red carpet to attract tourists.

Moneylife survey: High Costs, Poor Service

A majority of timeshare members are dissatisfied with the high costs, regular fees and poor service

We received 450 responses to our holiday timeshare survey. Just one out of every two of our survey participants have availed of a holiday timeshare. More than half of them have done so to save on costs on future vacations. However, less than half are satisfied with the price paid for it. Many have complained of the rising cost of maintenance.

More than one in every four timeshare members fell for the sales pitch. One out of every three timeshare members felt that the membership was mis-sold to them. One in every three timeshare members felt it would be easy to book vacations. However, one in every five members have never got the location of their choice and just one out of every eight timeshare owners have always got a booking at their desired time. One-third of the respondents fell for the quality of service and amenities provided while buying the timeshare. But, nearly 60% of the participants who have availed of a timeshare vacation have said the vacation could have been better or was fraught with issues and poor service. Less than half have had an above average vacation experience. Over 40% of timeshare owners have tried to sell their membership. This shows that many are not happy. Nearly, five of every six timeshare owners who have tried to sell their membership have not been able to do so.