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Time-Sharing Puts Disney Magic to Test : Development: Company has done well in Florida, but Newport Beach project must transform industry image.

March 09, 1994|JAMES M. GOMEZ | TIMES STAFF WRITER

When Walt Disney Co. jumped into the time-share business two years ago, it entered an industry suffering from a serious credibility problem after widespread accusations of fraud and unscrupulous sales tactics.

But that foray into the time-share market in December, 1991, included a repackaging strategy by Disney officials aimed at sprucing up the shabby image of time-sharing. That strategy--which included a conspicuous absence of the very word time-share from the colorful brochures touting the Disney Vacation Club near Orlando, Fla.--appears to have worked.

"They have definitely put the Disney touch to time-sharing," said David Matheson, a spokesman for the American Resort and Residential Development Assn., a time-share trade group in Washington. "They are really top notch."

Some observers, however, speculate whether even Disney, which said Monday it will build a time-share development near Newport Beach, has the ability to burnish the tarnished image of the industry.

Disney is not the only high-profile national corporation to get into time-sharing in recent years. Marriott Corp., Hilton Hotels Corp. and International Telephone & Telegraph Corp. have also invested in time-share resorts.

But there continue to be abuses, despite the recent entry in the market of publicly traded companies with reputations to protect, said Ralph E. Stone, a lawyer in the Federal Trade Commission's San Francisco office. "Although they add credibility, I'm not sure they solve any real problems" that the industry faces, Stone said Tuesday.

As long as some companies engage in hard-sell tactics and offer unrealistic promotions, Stone said, the industry will continue to suffer from a lack of credibility.

The pall over the industry wasn't always so dark, and companies that offered lifetime ownership in vacation properties made millions of dollars trading on dreams of spending lazy weeks at beach or ski resorts.

Glen Ivy Corp., a Corona-based time-share operator, was one of the most lucrative operations. In its heyday, the Glen Ivy time-share group drew thousands of prospective customers to its ritzy Newport Beach conference rooms each week, dazzling the would-be vacationers with slick video presentations, fast-talking sales representatives and promises of free dinners, televisions, cars and other prizes.

But after becoming embroiled in accusations that the company was guilty of defrauding thousands of owners by overselling time-share weeks and pressuring customers with one-time-only offers, the company folded last year.

Glen Ivy is not alone. In October, California Riviera Vacations in Laguna Hills agreed to pay $100,000 in civil penalties to settle charges that it lured customers with deceptive advertising. The company agreed to pay the settlement but admitted no wrongdoing.

The state attorney general's office is still investigating that company, according to a source familiar with the case.

And as recently as Monday, the FTC sued a Fountain Valley firm for allegedly defrauding as many as 20,000 time-share owners by falsely promising to match them up with prospective buyers of their vacation-resort stakes.

Stone said that pressures from the resale market will feed further abuses as supply vastly exceeds demand. Though there are an estimated 500,000 units on the resale market now, he said, only about 6,000 units--new and previously owned--are purchased each year.

Those units, most of which are being sold at highly discounted prices, compete with new time-share properties--including Disney's, Stone said. Some companies are forced, therefore, to increase the use of high-pressure sales promotions.

"It can be a hell of a problem," Stone said.

Michael Burns, vice president of sales and business development for Disney Vacation Development Inc., said that the company's 410-unit time-share complex at its Epcot Center theme park outside Orlando is half sold after 27 months of operation.

But the company is more than pleased with the progress, he said, considering that Disney does not use promotions such as giving free dinners or other prizes in exchange for a sales pitch.

Instead, the resort hands out information about the time-share complex at its amusement parks and hotels, including Disneyland and the Disneyland Hotel. Prospective customers are encouraged to take videos and brochures home with them and call sales representatives at their leisure, Burns said.

Customers also have 30 days to cancel the purchase, Burns said.

"We knew we had to be 180 degrees different," he said. "It seems to be working very well."

Disney Vacation Development is also planning resorts in Vero Beach, Fla., and Hilton Head, S.C., as well as the 650-unit Disney Vacation Club between Newport Beach and Laguna Beach.

The Orange County complex is expected to open by early 1997. Time-share units are expected to start at $12,390, making them among the most affordable in the nation.

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