A lawsuit has been filed over a multimillion-dollar dispute pitting the Palazzo hotel-casino and its shopping mall against a Las Vegas vacation timeshare company.







The parent companies of the Palazzo and its shopping mall, the Shoppes at the Palazzo, filed suit this month in Clark County District Court against Consolidated Resorts Inc.

Consolidated, which is based in Las Vegas near Summerlin, is accused of failing to open marketing booths as agreed at two locations in the Palazzo and two more locations in the Shoppes at the Palazzo.

Officials of Consolidated could not immediately be reached for comment.

Consolidated has three timeshare properties in Las Vegas: Tahiti, Tahiti Village and Club de Soleil; along with properties in Florida and Hawaii. The lawsuit claims the hotel and mall are each owed $4.25 million in annual rent -- along with damages for allegedly interfering with plans by the Palazzo parent to sell the mall to General Growth Properties Inc. Of Chicago.

The lawsuit says Consolidated is owned or controlled by Whitehall Street Global Real Estate LP (limited partnership) 2007, which is in turn sponsored and managed by Goldman Sachs Group Inc., the fund's largest investor and a longtime investment banker for the parent company of the Palazzo.

The Palazzo and Shoppes at the Palazzo lawsuit says that after Consolidated was acquired by Whitehall, Consolidated was directed not to establish the marketing booths and that Goldman knew this would harm the plaintiffs since Goldman was aware of the plan to sell the mall.

The $1.9 billion Palazzo and the Shoppes at the Palazzo had their grand opening in early 2008. They are part of Las Vegas Sands Corp.'s collection of properties on the Las Vegas Strip and Sands Avenue that include the Venetian resort and the Sands Expo Center.

TIMESHARE operator Diamond Resort International has stepped in to defend its record as opposition mounts to increases in management fees due to be paid this month.

President Simon Crawford-Welch has assured members of his timeshare points club that their concerns will be taken seriously.

He said: "Listening to and communicating with our owner and member base is always a primary component of our strategic direction and consumer-centric operational approach, be it through one-on-one discussions, various forums, e-mails or through third party mechanisms such as newspapers like Scotland on Sunday."

As a points-based timeshare club, owners can use their points to buy holidays at any of the 133 worldwide resorts, which even disgruntled points-owners admit are of a very high standard. Members are also protected by timeshare legislation.

Facilities have expanded considerably since the original owner Grand Vacation Club, from which many Scottish consumers bought their points, started with only four resorts. Diamond Resorts International acquired the company in April 2007.

Points owners are obliged to pay an annual management charge and it is recent increases in these fees which has caused concern. Open meetings between the company and members in Lancashire on February 2 and Staffordshire on February 3 look set to be stormy.

Members claim they have risen by around 37% compared with last year, although DRI maintains that on average the increases are closer to 19%. The discrepancy may be due to an interim levy last May. As such, compared with the levy in January 2008, the increase may be nearer to 37% for some members but only 19% when the fees for the whole of 2008 are compared with those being demanded this month.

The company points out that the fees are discussed and agreed by members of the owner committees at every resort. DRI is effectively a management company.

The points club, which in Europe is called the Diamond Resorts European Collection, is owned by the points owners in that investments and assets are held in a trust controlled by an independent trustee and operated for their benefit. In Europe, DRI owns 10% of the points, with private owners controlling the remaining 90%.

DRI's European director of legal services, Susan Crook said: "The setting of the budgets is a transparent procedure. Every report committee is provided with a detailed draft budget at a dedicated budget meeting and committee members are able to discuss, dissect and amend them as appropriate. There are a minimum of two timeshare owners on each committee with fixed property or fixed week timeshare and one points owner. The maximum company representation is two. The majority of the members that make up the committees are British."

She said that fees had increased to fund a refurbishment programme, bills had climbed in general, particularly utilities, and labour costs in Spanish resorts had soared following new agreements with the unions.

But she confirmed, as Scotland on Sunday reported last week, that the annual charges had been subsidised by the previous management company and this subsidy had now ceased.

She said: "The new owner, Stephen Cloobeck, did not feel it was appropriate to subsidise the management charges. If expenses are legitimately incurred for the benefit of the resorts then he believed that the members should pay them."

An action group of more than 40 members has now formed in Scotland and plans to join forces with another larger group operating south of the border.

They remain unhappy with the fee increases, and many would like to rescind their points, but the company says this is against the terms and conditions which they signed when they joined.

According to the company, they can dispose of their points, by selling them, giving them away or converting them to a fixed week and trying to sell this via a resale agent.

Crook said: "We note that some members say they are unable to sell their points. However, we continue to sell our product successfully to new members and have some difficulty in accepting that they are unable to do so."

Members are only able to rescind their points if someone dies, becomes bankrupt, is over 75 or has health problems.

Crook added: "DRI is prepared to listen and consider every member's request to relinquish his or her membership. Indeed, we believe we are more considerate in taking into account the personal circumstances of our members than most other businesses who have entered long-term contractual and financial commitments."

Nevertheless, many members are very unhappy at being tied into what they see as an open-ended arrangement, which locks them into rising management fees until 2054. They are adamant this risk was never pointed out to them when they bought their points. Particularly badly hit are any owners who took out loans to buy into the club.

The Hilton Grand Vacations (a Hilton timeshare) has decided to layoff employees despite confirmed expansion plans.

Hilton timeshare has laid off 187 employees over the course of the last six months. Yet, reports confirm that the company is actually expanding. Its resort in Orlando is actually launching the first phase of its newest project: Club Parc Soleil (a 7-phase project in the busiest tourist area of Orlando).

The company, as reports claimed, is currently building a new Hilton hotel in Orlando's renowned International Drive. Hilton is also continuing the construction of the 1400 Orlando Hilton - a vacation place that is scheduled to open this year.

As of press time, the Hilton timeshare company did not release any statements regarding the issue.

After retrenching more than 2,000 employees, Bluegreen timeshare is still considering further cutbacks in personnel.

John Maloney - chief executive of Bluegreen - said that they will reduce approximately 60 percent of the company's timeshare sales and development team sometime this year.

If you look back at Bluegreen timeshare's past performance, you'd be surprised how quickly things turned for the company.

In July 2008, Bluegreen timeshare stocks were pegged at more than $12 per share. In fact, the developer of the resort - Diamond Resorts - was aiming to acquire Bluegreen at $15 per share plus all outstanding debt.

Many reports confirmed that the timeshare industry was doing well despite the economic credit crunch. Timeshare resale values had double-digit interest rates that sometimes exceeded 20 percent. However, as John Maloney aptly put it, the music stopped.

With a tighter credit market, timeshare companies are being forced to cut back personnel and delay or cancel expansion/growth plans. Now, Bluegreen is aiming to reduce its growth and acquisition budget to $150,000 million.