Vacations for Life: Too Good to Be True?

April 11, 2008— -- If you think buying a timeshare in Mexico sounds like more trouble than it's worth, the Royal Holiday Vacation Club has a deal for you. It offers something completely different -- let's call it the un-timeshare.

A promotional video produced by the company says, "Welcome to the exciting world of Royal Holiday … a great way to have luxury vacations without breaking the bank."

Based in Mexico, Royal Holiday is doing a booming business signing up vacationers at busy sales offices around the Caribbean. It isn't selling property; it's selling points and promises. A typical member pays roughly $11,000 to join the club, plus a yearly fee of about $465. For that, a member gets points that the club says can be used to book luxury vacations.

Royal Holiday calls its Vacations for Life plan an alternative to the complaint-riddled timeshare business. But a "20/20" hidden camera investigation inside the club's sales operation in Cancun raised troubling questions about how Royal Holiday sells memberships and delivers on its promises. According to angry complaints placed both in the United States and in Mexico, hundreds upon hundreds of the club's members wish they weren't.

"We love to travel," says Natasha Rajtar of Albany, N.Y., who signed up with her husband, Jason. "And we thought how cool over the next 30 years to be able to travel the world with our children."

A Royal Holiday promotional video says, "Today we can share a secret with you, one that guarantees luxury vacations in first class hotels around the world."

What is Royal Holiday's real "secret"?

"20/20" interviewed a cross-section of the growing number of members who say Royal Holiday misled them about how the club operates, and the availability of vacations they'd want. They say the only thing royal about their membership was the way they were ripped off.

John and Robin Chomko, who are from the St Louis area, joined in the Dominican Republic in 2006. "They'll tell you anything," John says of the Royal Holiday salespeople. "They'll lie, I mean, they lied completely to us."

Royal Holiday says 97 percent of its approximately 65,000 members never complain. But Mexico's consumer protection agency, Procuraduria Federal del Consumidor, or Profeco, says Royal Holiday has 1,800 complaints. Asked to comment, Royal Holiday referred us to its Mexico City lawyer, Agustin Garcia. We pointed out to Garcia that in 2005, Royal Holiday had 282 complaints; 506 complaints in 2006 and 761 complaints in 2007. A short time after our interview, Royal Holiday provided the following written statement:

"Royal Holiday Club is fully committed to providing a best-in-class vacation experience to all our members. While the kind of complaints reported by '20/20' have come from only a small percentage of our customers, we take these issues very seriously and are working aggressively to address them. Building on our 25 years of experience, we are undertaking a comprehensive effort to improve the quality of our services and increase customer satisfaction."

The Federal Trade Commission says the travel, vacations and timeshare industry was in its top 10 complaint categories in 2007. And it says complaints about Royal Holiday are also piling up at the Better Business Bureau of South East Florida and the Caribbean, located in West Palm Beach, Fla.

Better Business Bureau Senior Vice President Carol Venello read from a stack of complaints for things like "high pressure sales tactics that are absolute lies" and "no destinations ever available, no matter how far in advance they called."

Venello says the pattern is members reporting high-pressure sales, misrepresentation and failure to disclose conditions of the offer. "What they are alleging is that they are being pressured into signing," she says. "That the product or the vacation is misrepresented as to how they can use it, when they can use it, hotels that are available."

The Better Business Bureau gives Royal Holiday its lowest rating, a mark understandable in Spanish or English: an F. Royal Holiday's lawyer Garcia acknowledges to ABC News' Jim Avila that "F's not good, even in elementary school."

With that kind of complaint record… how do the salespeople get tourists to bite? Long of West Virginia says, "They are good. I will give them that. They are good."

It starts at the airport and follows potential buyers across Cancun. When "20/20" traveled to Cancun in January, producers found a Royal Holiday sales presentation with offers of free meals, a spa day and other enticements at the airport. After accepting the offer of a free breakfast at the Hyatt Cancun Caribe hotel, a producer asked a Royal Holiday worker whether the sales presentation would include high-pressure tactics or hard selling. The employee said emphatically no.

But "20/20" producers posing as tourists were repeatedly solicited by Royal Holiday representatives bearing gifts. During the first cup of coffee at breakfast, the saleswoman -- who sat right down at the table to eat with the producers -- began serving a classic high-pressure technique: the limited time offer. "If you join the club today, you have incentives, only today," she said. "If you wanted to come back tomorrow we cannot."

Members had warned of a luxury suite switcheroo. Doug and Karin LaClair say the beautiful suite they were shown before they joined in the Bahamas in 2003 is not what they got after they paid. "It was just a regular room," Doug says. "It was just a regular Motel 6 kind of room," agrees Karin.

Sure enough, down in Cancun, the saleswoman showed our undercover producers a beautiful ocean-front presidential suite at the Hyatt. The truth is, an average Royal Holiday member would have to spend nearly their entire year's points to stay here for just one night on a weekend in high season. But again and again the saleswoman assured us that the suite was standard for Royal Holiday members. When a producer asked, "Are all your rooms this nice, are all these suites this nice?"

"Well I think they are nicer!" replied the saleswoman.

Royal Holiday's lawyer says members must read their agreement and the operating rules, and remember -- this is key -- nothing the salesperson says really matters. But at least until late last year, that advice may have been less helpful than it sounds because even those who read their contract might have been fooled.

For example, in Mexico, a buyer can cancel a timeshare or vacation club contract for any reason within five days. That's the Mexican law. But that's not what a Royal Holiday contract signed in 2006 and obtained by "20/20" said. That contract not only made no mention of the right to cancel within five days, it actually declared, "This agreement cannot be canceled by either party" and "this agreement, for which there is no reconsideration period … "

We asked Garcia whether he found that misleading and why the contract would include those untrue statements. He said, "No, I cannot think … why. … " Asked if it bothered him, Garcia said, "well, yes."

The company later told "20/20" that until late last year Mexican law did not require it to disclose customers' right to cancel, so it didn't. Royal Holiday is now required by law to disclose the five-day cancellation plan, and they say they have changed their contracts accordingly.

In Cancun, the sales presentation we were told would last just 90 minutes dragged on for more than three hours. Breakfast was followed by an open bar. But even after a couple of cocktails, our producers turned down a $70,000 membership. A new saleswoman took over, and cut the price in half. The producers said no again, so the tag team continued with yet another saleswoman, the third.

But perhaps the most incredible claim we heard all day was the promise that our entire purchase price would be invested in a Swiss bank, that would return every cent to us in 30 years. Even Royal Holiday's lawyer said he never heard that one. Later, Royal Holiday explained that it offers an option to invest a small part of the purchase price with a company in the British Virgin Islands and, if the investment pays off, 30 years later customers could get their money back.

But while your money may be traveling to exotic locations, most of the would-be world travelers we interviewed said they have gone nowhere. "We expected to do a really cool thing for our family," New Yorker Rajtar said. "We thought that we were doing something that would enrich our lives, and it's done nothing but the opposite."

After "20/20" began investigating, Royal Holiday refunded the money most of the members we interviewed, and released them from their contracts.