An exclusive live interview with David A Siegel, Founder, President & CEO of Westgate Resorts on his journey to creating the largest privately owned timeshare company in the world and billionaire status. Interviewed by Paul Mattimoe, Perspective International Ltd, at the Arabian Court, One & Only Royal Mirage, Dubai – March 2008.
Paul
David, thank you for giving us the opportunity to speak to you today. To start with, can I first ask what your background was prior to starting your first company?
David
Well, I have been working since I was 4 years old. I grew up in business and have been in various businesses. I was in the TV sales and services business, I was in the exporting business, I owned a gas station, I had a large furniture store. I had a store that was almost like a mini Wal-Mart at one time. It had furniture, appliances, TV. It even had a record department.
In 1968, during the Republican Presidential Convention at Miami Beach, riots broke out in Miami. My store was wiped out. At that point I went into the real estate field and for a couple of years, I worked in real estate in Miami and then in 1970 I moved to Orlando with my wife and children and no money, and went into selling real estate around the Disney area. Disney was a year from opening, so I saw the opportunity there. I am one of the few people in the world who was at the grand opening of Disneyland in Anaheim, California and at the grand opening of Disney World in Orlando, Florida.
I lived in California for one year in 1955 and they opened in the middle of an orange grove and I saw all this farm land around and years later I went back and saw that Anaheim had become a big city. I felt the same thing was going to happen with Disney World in Orlando. I had that insight that few other people had and I started selling and buying land around the Disney World area and I did quite well. I went from having no money when I got to Orlando to thinking about retirement by 1975.
Paul
At that time when you first started in Florida in 1970, was your vision for the future similar to today’s reality, the size that you are?
David
Actually I thought back then in 1970 if I could find a house and pay off the mortgage and have some money in the bank and have a few investments that could give me income and I would not have to work so hard, I would be perfectly happy. I did not have the grandiose vision at that point when I moved to Orlando, that I would be where I am today.
Paul
At that point you did not start with timeshare either did you?
David
No.
Paul
When and why did you enter into this market place?
David
Well as I told you, by 1975 I had done so well in real estate that I was thinking about an early retirement and I was making real estate investments with apartments and hotels. I even built the most successful small tourist attraction in Orlando called The Mystery Fun House which I built and operated for 25 years but at that time I built it and hired a management company so I would have a source of income along from the other investments I made, and one of the investments I made was an 80 acre orange grove next to Walt Disney World. In 1980 after basically living a very comfortable existence, I didn’t retire, but I really didn’t work very hard either because I was getting income from the orange grove, from the hotels and apartments and attraction. It was kinda like very comfortable and no pressure.
In 1980 a gentleman came to me and said he wanted to buy 10 acres of my orange grove and he offered me double what I thought the land value was worth and I asked him “What are you going to do with it?” and he said “I am going to timeshare it”. I didn’t understand, I said “What is timeshare?” So that was the first time I learnt about it. He explained the concept to me and I fell in love with the idea and so I didn’t sell him the property, but I decided to go ahead and build a timeshare resort in the back of the orange grove. I had a beautiful orange grove and I didn’t want to ruin the look of it in case this did not work.
So I started with 16 villas at the back. I had a small pond which I had some farmer come and dig out and make a lake out of it and not knowing the construction business, it took me almost 2 years to build the 16 units.
By December 15th 1982, we were ready for sales.
I had a dirt road going through the orange grove that the fertilizer trucks and maintenance trucks used leading back to it. I had no sales office so I poured a concrete slab next to my buildings. I put a tent on the slab. No sides on the tent, just the cover, and I put 8 tables and I hired 8 sales people and we were ready to start sales. The night before we started sales, I realized people were going to want to know where the club house and swimming pool were going to be, so I had an old real estate sign in my garage and I painted it white and I got some black paint and I painted ‘FUTURE SITE OF CLUB HOUSE AND SWIMMING POOL”. I am not a painter and the paint was running down the sign but it was too late to change it, so I stuck it in a pile of dirt across from the timeshare. It turned out that December 15th 1982 was a record freeze in Central Florida. My sales people came to work in ski jackets and the customers were all freezing. I brought in some kerosene heaters from the orange grove, and I set them around and that is how Westgate Resorts began.
Paul
In contrast, can you give us an overview of what Westgate Resorts is today?
David
Well today that 16 units is about 10,000 villas in 28 resorts in 11 States. All in the United States. We are the largest privately-owned timeshare company in the world. Interval International says we produce more new members for them each year than any other timeshare company. So, on that basis we would be the largest public or private timeshare as far as sales volume. Our competitors publish higher sales numbers so we would be the 3rd largest if you based it on the numbers they put out. Marriott and Wyndham are the two bigger than us. But they include residence clubs and fractionals and a lot of things, we are pure timeshare.
So we have been very fortunate, very successful. We have over 10,000 employees. It seems that every time I add another 500 units, I have 500 more employees. So we have 10,000 units and 10,000 employees. We are proud to say we are considered the Rolls Royce of the timeshare industry.
Paul
And you have another exclusive project coming up soon, Planet Hollywood Towers. Can you tell us more about that?
David
Yes. We have what is probably the best location of any timeshare resort in the world. We are right in the very centre of the Las Vegas Strip and right across from the $8 billion city centre being developed by MGM Mirage.
We are attached to a 170 store upscale mall which is attached to the 2600 room Planet Hollywood Hotel and Casino. There will never be another timeshare resort like it in the world. It is 50 storeys tall. Every unit is what I like to say, a high roller suite. They have every amenity. My competitors’ customers have to get into a taxi to go enjoy the restaurants, the shows and casinos in Las Vegas. My customers just have to take the elevator.
Paul
And when will that be completed?
David
It will be completed in 1 ½ years. Actually, there are 3 buildings. The first building will be completed in a year and a half. The second and third buildings will be under construction at that time. It is 3.2 million square feet and the shopping centre will be the second largest shopping centre in America. It is all blue glass. It is going to be the new iconic building in Las Vegas. As the plane lands, as it is taxiing to the terminal, you look out your window, and that is what you will see. It is breathtaking. It is going up a floor a week as we speak and we are up to the 36th floor, maybe the 37th as I have been here in Dubai for a week.
Every one of our resorts we build to be the largest resorts in the world. Two of my resorts are Number 1 and 2 in the world in size and a typical one of our resorts is 1000 units. My first flagship resort, Westgate Vacation Villas, the one I started behind the orange grove, that one is going to be over 5,000 when we run out of land and approvals – just that one resort. We have Westgate Lakes, which was my second resort, it currently has 1500 villas already sold out and we are adding another 2500 villas. That ultimately will have 4,000 villas. When you think that the typical timeshare resort is 100 villas you see how we tower over our competitors.
Paul
Your activities, certainly in timeshare are immense. But if we can move away from that just for a moment, that is not the only industry you are involved in, is it?
David
Primarily, but we still own hotels, apartments. We used to be involved in retail but we sold our retail involvement. We own restaurants and we are in the insurance business. We own the world’s only timeshare dude ranch. I am trying to think what other industries – we still do some real estate business. I own the real estate company that put all the Disney property together for them some 40 years ago.
Paul
What would you say has been your greatest achievement over the past 38 years or so?
David
Well, my greatest achievement would have to be building this company from a one man operation myself to over 10,000 employees and I have to say, the thousands of success stories of my employees. I have made dozens of millionaires in my company. I have people with me that started back 25 years ago who are still with me.
One of my employees, my Executive Vice President of Sales and Marketing, Jim Gissy, became a multi, multi millionaire being with me. He was so appreciative that about 3 years ago he called a meeting of all the Managers in the company. We had about 200 Managers at that time, and they brought their spouses or other half, and we had a big meeting for about 400 people in a ballroom of a Disney World Hotel which I owned at the time, and he made a motivational speech to everyone thanking them at Christmas time and he was thanking them for a great job they had all done, and then at the end of his speech he said “now I am going to do something that I am sure has never been done before”. He said “I am going to give my boss a present which I know he would not buy for himself” and then the Rocky music started playing and the walls opened up and in the next room underneath a big chandelier, was a brand new Rolls Royce Phantom that he gave me as a present. Just to show his appreciation of being so successful for being with me. I don’t think it has ever been done before. I have never heard of it.
Paul
Or ever again, probably.
- David Siegel with Nelson Cienfuegos, Vice President of Marketing (left) and Mark Waltrip, Chief Operating Officer (middle)
David
I take a lot of pleasure … people ask me why I still work. I have achieved, more than achieved my goals. People ask why do I keep traveling all over the world looking at resorts and it really has to do with, I get a lot of pleasure out of these success stories of the people who work for me and for that reason, years ago I set up the Westgate Resorts Charitable Foundation and there are two parts to it. One part of the Foundation we help over 100 charities in the cities where we have resorts, and the other part of it is that we are a safety net for our employees.
No matter what could happen to one of my employees, if they are not covered by insurance, or by some other agency, we are there for them. My employees know that and it is a good assurance that they have, they know that they will be taken care of. I treat everyone like family and they know that if something happened to them we are going to be there for them. Just to give you an example, one of my employee’s sons was failing school because he had a hard time hearing. So the Foundation bought him hearing aids and now he is making straight A’s at school. Another example, another employee had a child that was very sickly because he had a hole in his heart and we
sent the child on an air-vac to a hospital in Cincinnati, a children’s hospital, and they operated on the child and today the child is doing fine. So we have helped a lot of people.
We have helped bury employees’ family members. Just whatever problems they have. During tornados we put them up. 3 years ago when we had hurricanes come through Central Florida, one right after the other, which was unusual because Central Florida had never had a hurricane before and we got 4 in one year, I actually had 1500 of my employees staying in my resorts free of charge until they could get their homes put back together. So they know we are for them and that is why they are very loyal and they look out for me as well.
And of course we help all these other charities, children’s charities and I don’t think we ever met a charity we did not like and we are constantly being asked to donate. I donate a lot of money to this one hospital in Orlando and last week one of my employee’s son fell off his bike and hit his head on the kerb so hard, he had a helmet on, but it split the helmet in half and she was on her way to an emergency room with him, and who knows how long you wait in an emergency room, so I picked up the phone, I called the President of the hospital. She was treated as if the Queen came there, they took her in, and they took care of him. So that is the kind of things we do. I am proud to be able to do it.
Paul
Absolutely. It is outstanding. In contrast, what have been your greatest challenges on the way?
David
Well, my whole life hasn’t been straight up. I have had a lot of external things happen through no fault of my own that have caused me to be like on a roller coaster through my business life.
In 1961 I was in the TV business, I was doing quite well, I had a new home, I had a brand new car. My first wife just had our first child and I got called to active duty in the air force. That was when they built the Berlin Wall and President Kennedy activated all the reservists. I never went overseas but I was on active duty stationed at an air force base and I came back a year later. When we got released I had no business, my home was foreclosed on and my car was repossessed. My credit was shot and I had to close up my business and I opened up another one and borrowed money. Within 6 months I was doing better than I had ever done before in my life. I know business; I know how to grow a business and my wife had our second child.
Next I go to visit her in the hospital the day after the baby was born. This was July 11th 1963 and one of the customers came in and shot and killed my store manager. So I am out of business again. But I started again and I built up what I called a mini Wal-Mart and then what happened 5 years later, I am doing fantastic and the riots happened and I am out of business again.
Then I come to Orlando in 1970 with no money and I built up a huge business – by this time I am on my second wife and, unfortunately, we went through a very nasty divorce in 1997 where she basically said that she was going to destroy the company if I did not give her what she wanted and she had the power to do that because I needed her signature on every loan that we made and this business is built on borrowing money. So at that time I had 5,000 employees and rather than seeing those employees all out of work, I gave into her and actually gave her more money than what the company was worth. All I had left was my ability to make money and so that was a challenge.
At the same time I had a renegade executive that decided to start his own competing timeshare company and told all of my top ranking managers I would be bankrupt in 6 months after paying that divorce settlement. So 26 of my managers all left with him and so that was a challenge but in the last 10 years we have had the greatest growth we have ever had in our company. So now everything I hope, all the challenges, are behind me and the only business challenges we have today are the increasing cost of construction, the increasing cost of land, of sales costs, marketing costs, but we deal with them and we just have to tighten our belts and watch everything we do.
As a private company we can make decisions on a dime which helps us, so if things get out of line we can bring things back into line very fast. If I didn’t read the newspaper and watch TV, I would think that the United States is going through the greatest economic boom in history. We had a record year last year and we are already up 36% over that this year, so I owe it to a great team of employees, and also a great product that we produce that obviously people like. We only have one chance to make a good first impression and I think that the product we produce definitely makes a good first impression when they see it.
Paul
I read, when I was looking into Westgate before this interview, that back in 1996 you were a candidate for Entrepreneur of the Year. How did you do?
David
I became the Entrepreneur of the Year for Florida and went on to the National Contest in Palm Springs, California and I came second in the whole country and was very proud of that. I lost out to a gentleman that had big office parks all over the country and I thought, what am I doing here? I didn’t feel bad about not winning because this guy was so far larger than me, and to come in second in a country the size of the United States…but I did win in Florida and, in fact, they asked me to be the MC of the next Entrepreneur the following year.
Paul
What do you contribute your huge success to and what pieces of advice could you give to the latest generation of entrepreneurs?
David
There are 6 steps to success and I like to tell people that if they follow those 6 steps they can be successful. I didn’t have any prior …, I didn’t graduate from Harvard or the Wharton School of Business… The first step I think is get a good education. My education was more on the street, I have streets smarts where I don’t have book smarts, but whatever business that I ever got into I learnt as much as I could about that business and became, what I call an ‘expert’ in that business and when people are considered experts other people seek them out and you get lots of opportunities, so my first bit of advice – get a good education.
My second would be – don’t be afraid to work hard. If you want to have a 9-5 job, 5 days a week and there is nothing wrong with it as most of the world do that, except in England where they work only 37 hours a week and 4 weeks vacation every year, which I just found out when I was over there… Do not be afraid to work hard. You have got to do whatever it takes to get the job done and be the first one in and the last one to leave basically.
The third thing that you have to have is you have to be lucky. But there are ways of being lucky. You have heard the saying “the harder you work the luckier you get” and there is a lot of truth to that. It is not just sitting in your living room in front of the TV hoping the Brinks plane is going to drop a bundle of money out of the sky into your lap, it is getting off your tail and getting out and doing things and going to meetings, meeting people and going to charitable events. It is being at the right place at the right time. And that is what being lucky is and that is why I go to these seminars, that is why I travel around the world, that is why I meet thousands of people every year and this is where your opportunities are, this is where your chance of hearing about a situation will come in.
The fourth one is being different. You have to be different. There will be a 2 lane road and you will see people all pull up in 1 lane and the other lane is empty. People typically are like sheep and they follow the leader. You have got to be the leader. Just because it has always been done this way, you don’t just keep doing it the same way. They say insanity is doing the same thing over and over again expecting different results. You have to be different. If you are working in a company you have to toot your own horn.
I have a lot of employees who go to work every day and they do a good job and I don’t know about it because they don’t tell me about it and I don’t hear about it. People think being humble is the way. Sheep are humble, you have to stand out, and you have to make yourself known. If you do a good job let everybody in the world know about it. Eventually it will get to the boss and you will get a promotion, you will get a raise and so be different. Don’t follow the same mode. Basically 99% of the population is probably not happy or not making money or in poverty and maybe that top 1% is where all the successful people are and that is because if you look at them, they are all different, like the Donald Trumps, they are kind of arrogant, and self-centered, but still a lot of that is what it takes. Maybe you don’t have to be a real arse, I like to think I am a nice guy, who treats his employees good but still I don’t consider myself one of the crowd.
The next thing, and this is probably the most important thing between being successful and being not successful, is that you have to be willing to take a risk. Every time I went into business I laid everything I had on the line. I was willing to take the risk, you cannot play it safe. It is like in sports. The guys that play it safe don’t score the goals, don’t score the touch downs, you have to take a risk, you have to be willing to play it on the line.
But there is calculated risk. If you do all the things I just told you about, you can narrow the risk a lot because you know what you are doing. I might say take a risk and you might take everything you have got and take it to the casino. That is not the sort of risk I am talking about, I am talking about risk where you know you have done your homework and now you are ready. You have confidence in yourself and you are ready to lay it all on the line.
The final thing, and I guess the most important of all, is never quit. You have to be like a bulldog, you have to sink your teeth into whatever you are doing and just don’t let go. Never quit. Too many people quit too soon and they never make it and you know what, 5 out of the 6 won’t do it. Look at my story, I could have quit so many times when I lost my three businesses. I could have found reasons to go home and pull the covers over my head but I didn’t. In the timeshare business I almost went broke a year after I started. I did my homework but I had no idea how much money it was going to take to fund this very hungry animal and I ran out of money and interest rates went to 21% and they had oil embargoes, everything happened and yet I didn’t quit, I just kept plodding ahead until I became successful.
Paul
Very valuable advice. Looking forward now. How do you think the timeshare industry will evolve over the next 10 years, or the timeshare product?
David
Well the product I think is pretty close, at least my product is pretty close to where it is going to be. I can see maybe it getting a little larger, maybe instead of the standard being 2 bedrooms it might go to 3 bedrooms but the quality I think is pretty close to where it is, but I think the industry is in its infancy, I think it is going to continue to grow for ever. I think the fact that every major hotel chain in the world is now in the timeshare business shows that they know that the trend is for people to stay in condos not in hotel rooms and even the hotel rooms are getting larger, so the days of a husband and wife vacationing in a hotel or motel with 2 double beds and a little TV on the dresser and one little bathroom are over. When people vacation like that, they get home and are ready for another vacation.
Since 9/11 the whole thinking of the population has changed to where people used to say “well we are going to live for ever and some day we might think about owning a timeshare”. Now it is “we don’t know how long we have, if we can afford it, we are going to go first class …” and that is in spite of all the terrible economy right now, that is why they tell me I have not experienced it myself. We are up 36% so far this year and we had a record year last year and we have never had a down year. From the day we started in timeshare 25 years or 27 years, 26 years ago now, we have been up every year except in 1997 when I went through a divorce and we had a flat year then. It is pretty hard to grow when your wife takes all your money. Ever since then we have been straight up and the timeshare industry as a whole has also been straight up every year since it started. They are growing about 15% a year, we are growing about 25% per year and this year we might even be better.
Paul
And finally, can you reveal any exclusives about upcoming projects?
David
Well I will tell you that we would like to grow 2 or 3 resorts a year. We have slowed down a little bit because the Las Vegas resort is so big. The Planet Hollywood Towers by Westgate, which is its official name, is costing $1.2 billion and in addition to that at our other 27 resorts we have a $1 billion in construction going on right now, so we are growing internally at every resort. We are looking at Mexico, we are looking at Dubai, we are looking at California. We are doing a resort in Anaheim, California looking down on Disneyland, and we are looking at Hawaii and we are looking at the Caribbean. But I cannot come out and tell you exactly where it is because we are the leaders in the industry and as soon as Westgate says we are looking at a certain area, all my competitors will try to get there before I do.
Generally those are the places we are looking. We are looking at several locations on theEast Coast of the United States, and we are building a big base out in the west part of the United States so from that we can jump off to Mexico, Hawaii, places like that. Maybe even Canada. It is a big country, a big world, a lot of great opportunities waiting.
I am very impressed with what Dubai is doing; it is just such a long distance to go. We are probably going to, if we do something here, look for a joint venture partner that is here, that we can work with and eliminate the learning process. You know everything is built on connections so going to a new area, not knowing the terrain, not knowing the people is rather short cutting it a little bit, make less money but have less work and less aggravation. We have built up a most incredible expertise in the industry. We have the best trained. Every standard that the industry standards, we exceed, every one of them.
This is because we have people that have been with us for years, we have gone through all the mediocre ones and they have gone and what we have left over are the best of the best. So our standards are very high. I anticipate us growing quite rapidly because we have that infrastructure already in place and we keep getting better and we keep coming up with new programs and, again, a lot of it is because we are a private company. I like to say that every morning when I shave I have a Board of Directors meeting, so we can make instant decisions, whereas our competitors, they have to have Board Meetings and they cannot turn on the dime like we do and this is a business where it is very vital to be able to make instant decisions and that is basically what I do every day, I put out fires and I make decisions that make us more efficient.
Paul
David, thank you very much for giving us your time for this interview.
David
That is all? I was just getting started!
Paul
Yes, that’s it.
David
Well let me just add one thing. Anyone that is thinking about getting into the timeshare business, whether it be a developer or a person that is just starting their career in the business, I cannot think of a better industry in the world today than the timeshare industry. As I said, what other industry can you name that has gone straight up year after year after year. You cannot say that about the automobile industry, you cannot say that about the airline industry, so it is a great place for people to start out their futures
and it is a great place for developers to get involved.
It is very expensive to get into though. It is not cheap, you have to have a lot of money or you have to have a lot of credit. The nature of the business is the people will buy and put down a small deposit that does not even cover your sales or marketing or construction and then they finance it, in our case over a 10 year period, so we have to lay out a lot of money and we get it back over 10 years. We are more like a bank than a real estate company. We basically service mortgages and collect payments and charge interest and all that just like banks do.
This industry is made up of so many components. It is not just selling, it is servicing mortgages, it is construction, it is management, you not only are managing the sales effort, it is managing the resorts, it is decorating, it is finding the land, it is maintenance, it is like you are in the hotel business, you are in the resort business, you are in the people business, you are in the banking business, you wear a lot of hats.
Purchasing – we spend a couple of hundred million dollars a year just on purchasing products. Whatever money we make we earn it. But it is a great industry and I am more than happy to be in it. I have done quite well in it, and I am looking towards a future. I plan to die at my desk.
I retired when I was 50 years old; I finally said “I am retiring”. I have achieved everything I want to achieve. That lasted for 6 months. My biggest failure in life – I failed retirement and I said never again, so now I tell everybody if you see me dead at my desk, just push me aside and get someone else in there to run the company. My mother is 99 years old so I know I have good genes and my mother, until 2 weeks ago worked 4 days a week. So you are supposed to outlive your parents, so hopefully I will be the first 120 year old timeshare developer.
Paul
So I will look forward to interviewing you again then, then?
David
On my 100th birthday you can come in and interview me again and ask me what my goals are – save the cover we will do something with it!
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