House of Lords - European Union

Select Committee on European Union Third Report

Chapter 2: Historical Progress: the timeshare market, the UK and the EU

12. The Organisation for Timeshare in Europe (OTE) told us that the industry is growing, albeit not as fast as in the 1990s, with the reduction in growth at least in part attributable to greater demand for second homes abroad (Q 45). Peter van der Mark, Secretary General, OTE, said that the number of timeshare owners in Europe had been fairly stable in recent years, with only one to two per cent annual growth overall. However, growth rates varied between countries (Q 51).

13. By contrast, Sandy Grey, Chairman of the Timeshare Consumers Association (TCA), told the Committee that there are 1.4 million timeshare ownerships in the EU and that ownership is declining at about 3% per annum, with resorts being closed for redevelopment as hotels and many timeshares becoming worthless: "For every one How to Buy Timeshare we send out, we send out 500 How to Sell, a clear indication of the lack of demand" (Q 1). The TCA said that there were eight or nine per cent fewer owners than five years ago (Q 13).

14. After strong and sustained growth in the 1970s and 1980s, the growth of the European timeshare market slowed down in the early 1990s, with the rate of increase in sales volumes falling further from 15% in 1996 to less than 5%: "this stands in strong contrast to the rest of the world" according to the Commission[4].

BOX 1

What is "timeshare"?

Timeshare, as defined in the new directive, means a contract of more than a year under which a consumer acquires the right to use one or more places of accommodation for more than one period of occupation. It also covers "points clubs", where "owners" hold points which entitle them to holiday accommodation from a pool of resorts.

Complaints and consumer satisfaction

15. Submissions to the Committee generally agreed that the 1994 Directive has, as the OFT told us, "put an end to the most problematic practices which were notorious in the timeshare industry" (Q 72).

16. The OTE said that consumer confidence had increased and that complaints had decreased (pp 13-16). It quoted a survey undertaken for it which said that 76% of respondents were happy or very happy with their timeshare (Q 57). Other witnesses, however, questioned whether consumers were as happy with their purchases as claimed. As the European Commission noted dryly, "Surveys purporting to assess the levels of consumer satisfaction in the timeshare industry tend to paint diverging pictures of market outcomes, usually depending on the source of the survey"[5].

17. The OFT told us that complaints to trading standards departments and the OFT about timeshare peaked at over 11,500 a year in the early 1990s: by 2000, complaints to the OFT about timeshare had fallen to less than half of the peak levels.

18. From January to July 2007 there were 372 complaints or enquiries to Consumer Direct (the OFT's new advice line) about timeshare and 363 about timeshare resale (Q 72). Citizens Advice also reported a reduced number of timeshare complaints (pp 72-76). Tony Sedgwick (who for four years until 2006 was the CEO of the International timeshare resale association) referred to internet websites increasingly used by consumers with timeshare complaints, and which are not reflected in official statistics (pp 96-99).

19. The OFT pointed out that timeshare and holiday clubs are significant purchases, perhaps of £10,000 or more, and that consumer detriment could be high even though there are relatively small numbers of complaints (Q 72).

Flaws in the 1994 Timeshare Directive

20. Most submissions also agreed that the degree of prescription in the 1994 Directive had resulted in some negative consequences, in particular that some operators—described as "inventive entrepreneurs" (Q 72) but more often as "rogues" or "rogue traders"—had devised new products specifically intended to evade its provisions.

21. The word "rogue" was used widely in submissions and in oral evidence to the Committee to describe elements within the timeshare and holiday club industries. Gareth Thomas MP, Parliamentary Under-Secretary of State for Trade and Consumer Affairs, described these elements as "crooks and criminals" (Q 103). The forms of rogue trading discussed in this Report include misrepresentation, aggressive sales techniques and the defrauding of people of substantial sums of money.

22. The 1994 Directive only applies to timeshares of 36 months and over, leading to the development of so-called "trial period" timeshares of 35 months or less, as explained by Sandy Grey (Q 1). It also only covers immovable properties, thus excluding caravans, canal boats and cruise ship timeshares. The main unintended consequence of the 1994 Directive has been the development of long-term holiday products, sometimes known as holiday clubs. These are explored in the next Chapter.

23. Arlene McCarthy MEP, Chair of the Internal Market and Consumer Protection Committee of the European Parliament, said that her Committee "first raised the problems with existing timeshare legislation in November 2001", leading to a hearing in the European Parliament and the adoption of a Resolution in June 2002 calling on the Commission to propose further legislation (pp 92-94). The Minister told us that the UK was "probably the lead nation pushing for a revised directive" (Q 97).

4 op.cit. p 14 Back

5 op.cit. p 74 Back