How Timeshares Work

​

Timeshares are vacation plans that have been around in the U.S. since 1969. Today, it’s a $9.2 billion industry, according to the American Resort Development Association (ARDA). That’s actually quite large when compared to the nearly $8 billion music industry or Major League Baseball's $9 billion in annual revenue. In 2016, there were 1,558 timeshare resorts just in the U.S., with an average of 132 units per resort.

​

A timeshare gives you partial ownership in a vacation property. You can even think of it as owning shares of stock in the vacation rental. You pay an upfront price to purchase your unit and then an annual maintenance fee. This gives you access to the property for a certain period of time, which is usually the same time slot each year. When you are not using the timeshare, others with similar interests are.

​

The average sales price for a one-week timeshare today is approximately $20,940, with an average annual maintenance fee of $880, according to the ARDA. Most timeshare agreements are indefinite contracts, meaning that you’re obligated to pay the maintenance fee indefinitely, which is a big financial commitment.

​

If you want to use your unit during another week, you must “bank” your week and exchange it for another time or location. In the sales pitch (I had the misfortune of attending one), the resort mentioned it's no longer doing week-based timeshares. It’s now a points-based system. You get X number of points per year when you buy a unit and can then use it any way you choose.

​

The points could be used for many other things: to purchase airfare, go to another location or upgrade to a bigger unit. Heck, it's like airline miles and credit card points. You can use your points in stores like Best Buy and Bed Bath & Beyond. Great — I can buy that toilet seat cover instead of going on vacation. I’m sure that, just as with credit card points, you are getting a fair exchange of points into dollars.

​

As if you can't tell, I’m being sarcastic.

​

I didn’t run the numbers, but I’m sure the conversion rates are awful. So in the end, they're making even a single week in a timeshare much more abstract to own than a hard asset. The high-pressure sales guy, please remind me again, what’s the purpose of owning a timeshare?

​

The Missing Investment Component

​

It’s been said in poker that if you can’t spot the patsy, it’s you. This applies to purchase a timeshare. The ones benefiting from the transaction are the salesperson and the owners of the resort. You, unfortunately, are stuck with a small slice of a unit that has little or no resale value.

 

Here are the issues with owning a timeshare:

• There is a huge resale market. Often you can pick up units for less than half of what was originally paid.

• Like a car, a timeshare depreciates once you “drive it off the lot” (take ownership).

• It’s rare that a timeshare increases in value. In fact, expect it to lose value, as the total cost of your ownership was marked up to cover sales presentations, incentives and giveaways.

• Timeshares are usually sold to you when you’re on vacation and your defenses are down.

• Most have high yearly maintenance fees. In any case, their fees are increasing every year, faster than the rate of inflation. For the amount that you pay in maintenance fees alone (forget about the initial “investment”), you could stay at a decent-quality hotel for a week.

• ​

Despite these drawbacks, the industry continues to attract new owners. In 2015, 46% of timeshare sales were to new owners, reversing a previous trend of increasing reliance on existing owners. 

​

If you really want to get rid of your time share contact timeshareexitusa.  

​