MYTHS AND FACTS
by Philip Abdouch
1 - MYTH: There is no conflict of interest in having Trendwest employees serve on the WorldMark Board of Directors.
As proof, they say that only they can best protect WorldMark, since they best know their way in and out of the Trendwest hierarchy. Also, it has been said that they understand how to “switch hats” between Trendwest and WorldMark. They say that since they have never acted on this inherent conflict of interest, it doesn’t really exist.
FACT: The existence of a conflict of interest is NOT dependent on the person in conflict actually taking advantage of this conflict. The conflict exists or it doesn’t; the person’s actions don’t affect the existence of that conflict of interest. The Trendwest executives on our board are bound by law to protect the interests of Trendwest’s (and Cendant’s, their parent company) shareholders, even if that conflicts with WorldMark’s interests. That’s called a conflict of interest. The interests of Trendwest and WorldMark are congruous in many cases; but not all.
2 - MYTH: The WorldMark Board of Directors can recommend, but has no authority to reject properties that Trendwest, the developer wants to annex to the club. The board also has no authority to negotiate credit assignments or seasonal calendars.
The board has stated this in person at the owners meetings, and has also posted that on the WorldMark forum. As proof, they’ve cited the Declaration of Vacation Owner Program.
FACTS: The Declaration of Vacation Owner Program is specific to individual properties. One is signed by both Trendwest and the WorldMark Board of Directors for each property added to the club. It is only effective AFTER it is signed by the WorldMark Board of Directors. If they don’t sign it, Trendwest will not annex it to the club. So the Board of Directors wields the final authority over whether to add a property to the club. If they don’t want it, due to poor location, poor quality, credit assignments too high, or seasonal calendars that include too many red weeks, it won’t be added. Truth is the board has abdicated their responsibility to the club to protect us from these poor decisions.
3 - MYTH: Only experts in the timeshare industry (such as the Trendwest executives) can effectively manage a company such as WorldMark.
FACT: WorldMark is effectively a homeowner’s association, and the board is supposed to provide oversight to the management company for the Homeowners Association (HOA). It’s not necessary to be in the industry in order to provide this oversight. A representative of Trendwest (the management company) is present at all board meetings to confer on technical issues. The current board rubber-stamps all Trendwest decisions; no expertise involved there. Of the 230,000 current WorldMark owners, 5 can be found with the necessary tools to oversee the management company. Our membership contains leaders in government and private sector firms across the nation. We don’t need Trendwest providing oversight of Trendwest.
4 - MYTH: Existing owners are given new resorts for “free”.
FACT: Every time Trendwest adds a new resort, tens of millions of new credits are generated. These new owners are given a large percentage of the existing resorts. So you are giving up a share of your favorite resort in exchange for the privilege of staying in the new resorts. As long as the new resorts are equal to or better than the existing resorts, you should be happy, or at worst neutral. When new resorts are brought in at higher credit values, or in undesirable locations, your interest in the WorldMark properties is diluted, and it becomes harder to get accommodations where and when you want them.
5 - MYTH: Existing owners are not promised access to new resorts.
FACT: It’s illegal to take a share of your existing resorts without providing access to the new resorts. As long as new owners are given the right to stay in the existing resorts in Seaside, Hawaii and others, we must also, by law, be given the right to stay in the new resorts.
6 - MYTH: The WorldMark Board of Directors has said that they have ALWAYS voted our proxies according to the popular vote until December of 2005. They state, “We’ve never used the proxies to affect the outcome of the vote for new directors.”
FACT: Our board made that claim at the October 2005 Owner’s meeting, knowing full well they intended to not comply with that claim. They used their proxies to affect the outcome, voting differently than the popular common vote. It’s their right to do so, but there’s no harm in telling the truth.
7 - MYTH: Trendwest has to charge more credits to stay in the new resorts, in Las Vegas, Orlando, San Diego and elsewhere, because costs are higher to build there. Timeshare regulatory agencies have permitted higher credit values based on cost.
FACT: Of course it costs more to build now than it did previously. However, the Declaration of Vacation Owner Program stipulates that credit assignments are to be based on relative use-value, not costs. As an example, the Camlin, San Francisco, and San Diego are all urban hotel conversions, and should be valued the same. However, San Diego comes in at 25% higher credit value than these other resorts. This is directly contrary to the governing documents (section 3.4(a) of the Declaration of Vacation Owner Program). If a property costs more, the credit price should go up, not the credit values. This would protect your investment, rather than dilute it. While our existing properties have risen in value between 100 – 500 percent over the last 5 years, the price of credits has risen around 25%. So your interest in the existing properties is being diluted by all these relatively cheap credits Trendwest is selling to new owners.
8 - MYTH: Cheaper resorts, such as Oklahoma, need to cost 10,000 credits for a 2-bedroom during red season, in order to off-set the higher cost of other resorts.
FACT: You can’t have it both ways. If higher cost resorts charge more than 10,000 credits for a 2-bedroom during red season, lower cost resorts (such as Oklahoma, Galena and others) should cost less than 10,000 credits for a 2-bedroom during red season.
9 - MYTH: The WorldMark Board and Trendwest adamantly oppose TOT (Transient Occupancy Tax) at the resorts.
FACT: Trendwest proposed the imposition of the TOT at Indio, even though the city leaders have acknowledged that they could not charge it if Trendwest hadn’t proposed it. And Trendwest gets a kickback of 45% of the TOT for the first 10 years, resulting in approximately $7.5million directly in their pockets, out of your pockets. When asked about it at the 2005 Owners Meeting, the WorldMark Board denied knowing about it; even though it was public information at that time.
10 -MYTH: Gene Hensley and Jack McConnell have now retired from Trendwest and Cendant (the parent company of Trendwest), respectively. So technically, they are now independent owners, not connected to the management/development company.
FACT: While they are no longer technically employees of the developer or Management Company, they are far from being independent of them. Gene Hensley was a senior executive of Trendwest for 17 years, and is probably still either being paid by them, or at least a major stockholder. Jack McConnell only became an owner of WorldMark when appointed to the board after Cendant purchased Trendwest, and is not an independent owner in any true sense of the word. Jack McConnell was an executive with Cendant for over 20 years, and is most likely also being compensated by Cendant, and/or is a major stockholder. These former employees are not representative of normal, independent WorldMark owners.