Resort time-sharing, a concept that promises use of a vacation home to those who cannot otherwise afford one, has run amok here in world-famous Waikiki.
The tactics of time-sharing and vacation-club promoters have angered homeowners and tourists alike, caused concern about the area's economic future and prompted restrictive legislation.
A major objection to vacation-club operators in the way they are promoting their product. Waikiki's streets and beach are crowded with solicitors promising free gifts and food in return for sitting through what is usually a 90-minute sales presentation. Blind ads in tourist throw-away publications offer free shows, free car rental, free luaus, free sailing trips, free pineapples, flowers and macadamia nuts. Only one such advertisement of dozens appearing during one recent week included any mention of time-sharing or vacation clubs. Most merely listed a phone number and urged the reader to call for "reservations and qualifications."
Complaints have been pouring into the state's Office of Consumer Protection since time-sharing was introduced here about two years ago, according to director Stanley Suyat. Some who have attended the presentations have used such terms as "shady operators," "a sham," "misrepresentation" and "high-pressure salesmanship" to describe the vacation-club promoters.
"Many of the people who sign contracts for vacation clubs appear in our office the next day saying they were high-pressured into buying something they did not want or could not afford and want to know if they can get out of the contract," Suyat said. Until recently they could not. Suyat says his agency has since been able to win agreements with time-share companies to release reluctant buyers from their contracts within 48 or 72 hours.
Condominium owners, for their part, say they have had to put up with excessive traffic and noise in their buildings because of vacation-club sales agents and their prospective buyers, as well as from vacation-club members who have bought a one- or two-week share in a condominium. The full-time owners also complain about carpets wearing out, a breakdown in building security, overcrowded elevators, vandalism, thefts, clogged trash chutes, graffiti on the walls and loud parties. They say those were not problems until the vacation-club people came on the scene.
"These vacation clubs are knocking the romance out of Hawaii, taking away the charm," asserted one condo owner who asked to remain unidentified for fear of retaliation.
The storm of criticism reached a peak this year, resulting in passage of Legislative Act 186, which requires a change in zoning as they affect time-sharing vacation clubs. A local ordinance mandated by the new state law is on its way to the city council.
The new legislation will restrict future time-sharing units to the so-called "resort area" of Waikiki (about 50 percent of the community) where the hotels are located, according to Jack Gilliam, branch head of regulations for the city Department of Land Utilization. They will be outlawed in the designated "apartment area" (which includes most of Waikiki's condominiums). The hitch is that where time-sharing promoters have made inroads in condominium buildings, they will be permitted to remain and even buy up additional units in those structures.
Suyat of the Consumer Protection Office sees continued problems with time-sharing despite the new laws. "This is going to be a long-term situation that's just going to have to work itself out. I don't think the passage of one law is going to be the panacea."
On-street solicitation will be prohibited by the new ordinance, Suyat said. "We are trying to deal with the advertisements now," he added. "We believe full disclosure is the best policy and we tell them [the promoters] so." But Suyat admitted that all are not cooperating. "Ultimately, we would try of enforce our edicts through the courts but that would be an action of last resort. We would prefer to work in other ways."
Suyat said his agency has taken no legal actions against any company involved in time-sharing. He said that although many of the promotional techniques are questionable, they are not against the law. There has been a running argument over whether the vacation clubs are selling a security or real property, Suyat said. There are legal ramifications involved.
In many time-sharing programs on the mainland United States, the time period is actually deeded to the time-sharing vacationer and can be sold, mortgaged and willed like any other piece of real property. Most of the plans offered at Waikiki involve only "vacation licenses." They give the time-share purchaser rights to use of the vacation accommodations for predetermined periods and they are not looked upon as interests in property.
Often, no appreciation in the value of the time share is permitted. The owner receives only the amount of his original investment when he sells and cannot place his share on the open market.
One typical vacation club manages to recruit 400 persons a day for its 90-minute sales presentations. Of these, 40 buy time shares, according to one of the club's sales agents. The club "pitches" the use of a one-bedroom apartment with kitchen facilities for one week a year for approximately $7,000, plus a $200 initiation fee and a $50-a-year maintenance fee (subject to increase, the sales agent emphasized).
Assuming that use of the same apartment is sold to 50 persons, each for a one-week period, and allowing two weeks vacancy a year for maintenance work, the promoters would be taking in $350,000, plus additional money for initiation and maintenance fees. The initiation fees alone will total another $10,000.
Spiraling inflation and its expected effect on the price of future vacations bolsters the argument for resort time-sharing. Sales agents for the vacation clubs use this line as their most effective inducement. It seems to work.
Waikiki real-estate broker Bill Frankoff sees a future for time-sharing in the islands, but only if it is handled in a reputable manner and with the buyer obtaining title. "Time-sharing has a lot of cleaning up to do," he said.