“If they can’t be rich, the next best thing is to feel rich. If they don’t [want to feel rich], they’re probably dead.” – David Siegel
During a Hollywood party celebrating the opening of Donatella Versace’s new store, photographer and filmmaker Lauren Greenfield met a curious socialite that immediately piqued her interest. Jackie Siegel was a former beauty pageant winner married to a billionaire timeshare tycoon 30 years her senior. Unlike most ultra wealthy, this buxom beauty seemed more like the girl-next-door than the heiress to the largest house in America. Greenfield convinced Jackie and her husband, David Siegel, to let her document the completion of their 90,000 sq ft McMansion modeled after Louis XIV’s Versailles. The resulting documentary, The Queen of Versailles, would follow the Siegel’s struggles to weather the 2008 financial crisis which not only jeopardized their timeshare empire, but also the completion of the famed house itself.
Origins of Timeshares
The original concept of timeshares was born out of a post-World War II European vacation system in which four families would purchase a vacation property together and rotate use by seasons. In the 1960s, enterprising entrepreneurs in the UK decided to extend this concept by dividing ownership by 1/50th, granting owners one week’s use during the year. After the model marinated in Europe for over a decade, Caribbean International Corporation launched the first timeshares in America in 1974 in Fort Lauderdale, FL but replaced true ownership in the property with a “license ownership” in which the ownership would revert back to the company after 25 years. Customers paid on average $3,500 ($17,000 in 2014 dollars) per week up front and $15 per diem per night.
Westgate Conquers US Timeshare Market
After seeing the growing success of timeshares in Florida, real estate developer David Siegel, launched Westgate Vacation Villas one mile from Walt Disney World in 1982. By 1986, Florida Magazine called Westgate the “world’s largest timeshare resort.” Greenfield’s documentary picks up in 2009, when Westgate is the largest private timeshare company in the world with over 15 properties and tens of thousands of so-called “owners”. Siegel has built Westgate on the backs of lower and middle class Americans. He describes his customer as being “the Wal-Mart customer. They pay their credit card on time. It’s the truck driver from Iowa who is treated like a king. We make Middle America feel like a Rockefeller.”
In the film, we are introduced to Richard Siegel, VP of Sales at Westgate and one of David’s estranged children from his first marriage. Richard describes the high pressure sales pitch that he trains Westgate employees to use. Prospects are lured into lengthy sales presentations (aka “tours”) with free giveaways that range from cash, show tickets or free hotel nights. Westgate employees refer to these potential customers as “mooches.” Westgate trains the sales team to “take someone greedy like that and get them to buy today.” In a passionate pep talk, Richard likens his sales staff members to doctors, nurses or firemen. He spouts off the benefits of vacations even claiming that people who vacation are less likely to die of a heart attack. He states, “we’re saving lives, we’re saving marriages…make a sale, save a life.”
In 2013, the average sales price of a timeshare rose nine percent to over $20,000 and for what? Around 50% of the purchase price goes to marketing and commissions. Owners do get access to a vacation at one of Westgate’s 28 resorts, but they are also saddled with a hefty maintenance fee (ranging from $300 – $2,000/yr) and a constrictive contract that even passes on to heirs at the purchaser’s death. Given that timeshares are more of an obligation than an asset, they are incredibly difficult to unload as can be seen by the hundreds of timeshares for sales on eBay for $0.01.
Group Ownership Done Right
The concept of dividing up an asset amongst a large group of people is actually quite noble. In 1955, Catholic Priest Jose Maria Arizmendiarreta launched the first worker-owned cooperative in Spain that would grow into Mondragon Corporation. Mondragon is now the largest worker cooperative in the world with 257 companies and 75,000 workers. In 1975, Jack C. Bogle founded Vanguard Group with a mutual ownership structure in which investors own the company. Unlike his peers, like Fidelity’s Chairman Edward C. Johnson 3rd, who has an estimated net worth of $5.8B, Bogle has a relatively small fortune given the way he structured the company. In a 2012 NY Times interview, Jack Bogle admitted his own wealth was in the “low double-digit millions.”
Actions Speak Louder Than Words
Unfortunately, most in the timeshare industry has defiled the original concept of joint ownership by preying on people and pressuring them to make large financial decisions without properly thinking through the ramifications. No matter what values may be hanging on the wall, a company’s business model reflects the core beliefs that it is built upon. Too few companies have their values and business model in balance. Many others have failed to properly define the values that should inform strategy, hiring, and culture.
Take a moment to assess your own company. Do you know WHY you are doing WHAT you are doing? Is it clear how team members should act and how decisions should be made? Does your business model function in tandem with your values?
As for Westgate Resorts, they claim to “enrich the lives of our guests by providing a lifetime of wonderful vacation memories.” It is quite clear that the only people that are being enriched are the Siegels. David and Jackie Seigel’s $100MM mansion is slated to be completed in 2015.
Photo courtesy of Magnolia Pictures. Photo Credit: Lauren Greenfield