Diamond Resorts International (DRI) Litigation - Allegations and Update

I have read in these forums that litigation is underway against DRI. Please use this forum to outline the issues and status of this litigation, especially as the issues may relate to the entire vacation timeshare/points industry?

I suspect that the DRI litigation may not be that big a deal or may be isolated to a few with an interest in one DRI property in Hawaii. From what I had read in forums, it sounded like this was of epic proportions and would threaten business practices throughout the entire timeshare industry. Considering the lack of comment and/or interest, I suspect that Marty may want to close out this forum.

No, it's a big deal. DRI and two of its properties in particular have had differences. The Point at Poipu owners of weeks specifically have been upset for a while. I believe the big special assessment just put them over the top. There have been increased MF's over the past 3 ot 4 years and then to have that nearly $6000 special assessment dropped on really caused them to move to action.

However, as you know, timeshare owners in every program have their detractors.

charless345 wrote:

No, it's a big deal. DRI and two of its properties in particular have had differences. The Point at Poipu owners of weeks specifically have been upset for a while. I believe the big special assessment just put them over the top. There have been increased MF's over the past 3 ot 4 years and then to have that nearly $6000 special assessment dropped on really caused them to move to action.

However, as you know, timeshare owners in every program have their detractors.

Do you see this as an isolated incident pertaining to one property and DRI? Or, do you see this as an issue that might extend to other timeshare providers due to similar business practices? I sensed an attempt (not by you) to paint all timeshare programs with this matter which I think would be very unjust. Do you have a view?

dennish144 wrote:

charless345 wrote:

No, it's a big deal. DRI and two of its properties in particular have had differences. The Point at Poipu owners of weeks specifically have been upset for a while. I believe the big special assessment just put them over the top. There have been increased MF's over the past 3 ot 4 years and then to have that nearly $6000 special assessment dropped on really caused them to move to action.

However, as you know, timeshare owners in every program have their detractors.

Do you see this as an isolated incident pertaining to one property and DRI? Or, do you see this as an issue that might extend to other timeshare providers due to similar business practices? I sensed an attempt (not by you) to paint all timeshare programs with this matter which I think would be very unjust. Do you have a view?

Dennis,

As you know all timeshare programs have detractors and the biggest concerns are usually availability (for thoee who plan late) and increase of maintenance fees. DRI's challenge was to improve their newly acquired systems whose properties needed to be upgraded and better maintained. In order to to do that, it was going to require them to raise maintenace fees. In addition to that, there were deeded owners at some of the properties like the Point of Poipu and Ka'anapali Beach Club who owned multiple weeks at those resorts and were accustomed to maintenance fees that did not increase by very much from year to year. What DRI's business plan seems to have the model of buying financially stressed timeshare systems at a bargain price and then refurbish and/or upgrade the properties to their standards.

Deeded owners are the ones most upset within the DRI system because of the increased maintenance fees which increased by huge amounts over a 2-3 year period when they initially took over. The increases have been more reasonable over the last couple of years. The other big concern of the deeded owners has been the control of the HOA by DRI so when votes are taken there are people who are either employees of DRI or a relative of a DRI employee so there is a matter of conflict of interest. DRI owns a large number of units at those two resorts and initially agressively pursued as many deeded owners as possible to convert to the points programs instead of the deeded weeks. Like our DC program in Marriott, many chose to not go to the points system.

DRI took over Sunterra which was in financial difficulty. Sunterra owned both The Point at Poipu and Ka'anapali Beach Club which they bought from Embassy Vacation Clubs. Who knows where the financial problems began? Was it with Embassy or Sunterra. Sunterra kept maintenance fees low and but the properties were not as well maintained over time. However, owners at these resorts were accustomed to low maintenace fee increases. Thus, DRI was for sure going to have issues just with those resorts alone.

However, the whole system felt this pain. As a points owner, I felt the pinch of those fees increasing by $500 and $600 for a couple of years in maintenance fees. That is when this forum and timeshare forums were abuzz with complaints. In addition, the European Collection owners were also very angry because their maintenance fees went up as well. Then DRI closed a couple of the resorts especially one that was close to London. That irritated European owners a great deal too. These owners are mostly from Britain. However, owning in the European collection is different than here in the US. In England they can own their points until the are 70 and get out.

The other issue as with all points system is the inability to sell the points and get any value. When the economy went south, both US and European owners were losing jobs and mainenance fees were increasing. People could not get out of their financial obligagtion with DRI as they were losing income and/or their jobs. This was when people were really hating DRI. However, what people may not know was that at the height of the finacial crisis, DRI did call some members and offer to reduce their points if they were having difficulties. I was one of them. I had lost income and was having problems making payments. I did not accept the offer, but I did appreciate their willing to do that. I am not sure what the criteria was for them to make that call, but the fact is the did make that call to me and sent me the paperwork to make my decision.

Interestingly, DRI does not have the same level of complaints on these forums as they used to have. There are many happy owners. Now being happy does not mean that they don't question certain policies or motives of DRI from time to time. However, people like the use of their points and have learned to maximize the DRI system. Dennis for what I pay in maintenace fees about $4000, I can use my points and literally stay on the road for MONTHS at a time all over the world without exchange fees of any kind. Now, DRI resorts are not at the Marriott level, but some of their properties are not far off. The Point and KBC are really nice and spacious resorts. I pay about $1600 for my Ko Olina property and can only stay there for a week even if I change to points and go into a one bedroom instead of a two bedroom. If I were to take my DRI points and use $1600, I can stay in Hawaii for a minimum of 2 weeks with my points because DRI has different kinds of resorts and different levels.

I believe the economy and different timeshare systems handling of the economic crisis is what has made a difference in how cash strapped owners have felt. People have to realize that if more and more people foreclose on thier interest in the timeshare, it can only mean the bill is going to have to paid by those who are left and increased maintenanc fees will eventually follow.

I see some differences with Marriott. First, they gave you an option to join or not and owners were given a chance to come in at a low, low rate of $600 if you had one timehare to join their points system. DRI charged almost $3000 to join the Club which does all that the Destination Club does. Marriott base was all weeks, but DRI's was mixed with weeks and points from the beginning.

My only concern with Marriott is if they will start increasing maintenance fees by a larger percentage if people don't buy many of those expensive points. As we peak our heads out of the worst economic crisis since the Depression, only time will tell where this industry will go next.

Charles, thank you for writing this. It is helpful to understand exposures as they relate to our vacation ownerships. We all should be more anxious to take roles on the individual property board of directors to ensure that the interests of owners are not slighted.

Best,

Dennis