If I was a timeshare developer....

[Fredflintstone]

If I was a timeshare developer, I would want to create a community where HOAs don’t struggle, defaults are almost at zero and owners get huge value for their purchase.

Let’s face it. Timeshare Developers make obscene profits on the retail sales of these timeshares. At an average of 20 k per week, the average unit sells for over a million dollars (20 k x 52 weeks). If that same condo sold outright, prices would vary from 200 k a unit to maybe 500 k a unit retail. Even at these prices, developers rake it in.

What if timeshare developers keep their weekly unit prices at 20 to 25 k a week and put half the money in a trust fund for the HOA? Developers are still making a killing doing this.

Many benefits would happen:

1. HOAs would be set as they use the income from the investment trust fund to maintain the building. Maintenance fees to owners would be highly affordable. The resale market would increase the value of the timeshares reducing any risk of it being worth a dollar on EBay. Buildings would be well maintained forever. No more legacy resort struggles.
2. Developers would have a much easier time selling timeshares. Lower costs means more profits on the front load.
3. Defaults would go down.
4. Developers would sell faster freeing them to make more money on new projects.
5. Timeshare reputations would go up.
6. Exit companies would be a thing of the past as there would be a market for timeshare with a maintenance trust fund.

Ahhhh. Everyone wins. Being smart would be the theme instead of greed.


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[bizaro86]

The developers spend 50% of the sales price on selling expenses right now. I doubt they would sell too many without the high pressure sales force, the people cajoling tourists to go to presentations, and the perks for attending.

 

[Fredflintstone]

The developers spend 50% of the sales price on selling expenses right now. I doubt they would sell too many without the high pressure sales force, the people cajoling tourists to go to presentations, and the perks for attending.

Currently, that’s true because of their reputation. One salesman I know told me his commission was 50 percent. However, he said he needs to smash a lot of heads to get a bite.

However, if people knew of a huge HOA trust fund that keeps MFs very low and maintains the complex for life, I bet you there would be, as my salesman contact says, fewer heads to smash to get a sale.

I think the MF charges is what makes sales so difficult.


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[Steve Fatula]

Not sure most first time buyers know much about MF. I sure didn't.

There are a lot of expenses to account for though. Buying the land for a (one day) large timeshare development is not a trivial cost in most places, you'll be paying tax and interest and purchase price (down) on that land long before you make money. You would have to carefully plan building and pools, amenties, etc. as otherwise, if it takes you a while to sell what you built, then you add construction loan costs to those aforementioned costs along with many other pre-building costs. So, until you reach a critical mass, you'll not have any extra money to put into that trust fund, and, something has to pay those operating costs. It would be a difficult balancing act. The end result could be more as you suggest, but it would not be easy to get there.

 

[Fredflintstone]

Not sure most first time buyers know much about MF. I sure didn't.

There are a lot of expenses to account for though. Buying the land for a (one day) large timeshare development is not a trivial cost in most places, you'll be paying tax and interest and purchase price (down) on that land long before you make money. You would have to carefully plan building and pools, amenties, etc. as otherwise, if it takes you a while to sell what you built, then you add construction loan costs to those aforementioned costs along with many other pre-building costs. So, until you reach a critical mass, you'll not have any extra money to put into that trust fund, and, something has to pay those operating costs. It would be a difficult balancing act. The end result could be more as you suggest, but it would not be easy to get there.

All good points Steve. However, like any model, systems can change for the better if something like this was factored in. You are sure right about what a maintenance fee is.
I just looked at Wyndhams earnings. They made 661 M in Q2. Net profit of 124 M just on Vacation Ownership. They have dollars to make a model like this. I know it is ever came to happening, I would jump in. Right now, I found keeping my money and using the interest pays the rental costs and then some instead of paying required MFs.


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[Steve Fatula]

All good points Steve. However, like any model, systems can change for the better if something like this was factored in. You are sure right about what a maintenance fee is.
I just looked at Wyndhams earnings. They made 661 M in Q2. Net profit of 124 M just on Vacation Ownership. They have dollars to make a model like this. I know it is ever came to happening, I would jump in. Right now, I found keeping my money and using the interest pays the rental costs and then some instead of paying required MFs.

Maybe they do pay your rental costs, no chance they could pay mine. Depends where, when, etc. But sure, your idea sounds great.

 

[Panina]

If I was a timeshare developer, I would want to create a community where HOAs don’t struggle, defaults are almost at zero and owners get huge value for their purchase.

Let’s face it. Timeshare Developers make obscene profits on the retail sales of these timeshares. At an average of 20 k per week, the average unit sells for over a million dollars (20 k x 52 weeks). If that same condo sold outright, prices would vary from 200 k a unit to maybe 500 k a unit retail. Even at these prices, developers rake it in.

What if timeshare developers keep their weekly unit prices at 20 to 25 k a week and put half the money in a trust fund for the HOA? Developers are still making a killing doing this.

Many benefits would happen:

1. HOAs would be set as they use the income from the investment trust fund to maintain the building. Maintenance fees to owners would be highly affordable. The resale market would increase the value of the timeshares reducing any risk of it being worth a dollar on EBay. Buildings would be well maintained forever. No more legacy resort struggles.
2. Developers would have a much easier time selling timeshares. Lower costs means more profits on the front load.
3. Defaults would go down.
4. Developers would sell faster freeing them to make more money on new projects.
5. Timeshare reputations would go up.
6. Exit companies would be a thing of the past as there would be a market for timeshare with a maintenance trust fund.

Ahhhh. Everyone wins. Being smart would be the theme instead of greed.


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Sounds good but this is not how capitalism works. You can say what your saying for full ownership of houses, coops, condos, townhome developments. How about add money to trusts for car repairs for cars you buy, boats, etc., etc, etc. Most business models for any company is make the most profit you can.

If what you envision could happen, there would be no resales for us tuggers.

 

[WinniWoman]

Sounds good but this is not how capitalism works. You can say what your saying for full ownership of houses, coops, condos, townhome developments. How about add money to trusts for car repairs for cars you buy, boats, etc., etc, etc. Most business models for any company is make the most profit you can.

If what you envision could happen, there would be no resales for us tuggers.

Exactly. A lot of these kinds of ideas are idealistic, but not the reality of how things work in a marketplace.

 

[Fredflintstone]

Maybe they do pay your rental costs, no chance they could pay mine. Depends where, when, etc. But sure, your idea sounds great.

Well, I go cheap Airbnb. But saying that, I have been in some neat places. For example, I said in a 400 square foot cabin on the beach for 90 us a night. It was in kehei and was a guest cabin next to the main house. I never pay more than 100 a night. I know, cheap skate.


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[Fredflintstone]

Exactly. A lot of these kinds of ideas are idealistic, but not the reality of how things work in a marketplace.

I agree with Capitalism all the way. In capitalism, the business charges what the market will bear WITHOUT lifetime, locked in contracts that place the person at a disadvantage. The moment the papers are signed, one is locked into their rules allowing for potential abuse. This takes away from Capitalism as capitalism works because of ongoing free choice without restraints.

In a timeshare case, the onus rests with the owner to rid themselves of the problem. In capitalism, if the business starts to gouge, they walk away without any problem.

True about TUGGERS not getting resale for cheap to free.


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[LannyPC]

1. HOAs would be set as they use the income from the investment trust fund to maintain the building. Maintenance fees to owners would be highly affordable. The resale market would increase the value of the timeshares reducing any risk of it being worth a dollar on EBay. Buildings would be well maintained forever.

You certainly have some interesting ideas. But in reality, how much would MFs be reduced? How many owners want out because their MFs are too high? Most want out because they have to pay MFs on something that they can't afford to use whether the MFs are $100/week or $2800/week. It's not so much that the MFs are unaffordable. It's the peripheral costs of traveling such as air fare, car rental, checked luggage, activities, lost wages at work, gratuities, food on a per-week basis, etc.

Your idea(s) might reduce the average weekly MF by about $100. But would that be enough of an incentive for owners to keep vs. wanting to bail? For instance, how many owners would say something along the lines of "Well, if the maintenance fees are $1200, we can't afford to keep it. But if they are $1100, then that is much better and we will keep it."? Remember, the costs of accommodations are just a fraction of the cost of traveling.

Other people's mantra will vary but for us, a difference in about $100 of MFs is not going to convince us to buy one.

 

[Fredflintstone]

You certainly have some interesting ideas. But in reality, how much would MFs be reduced? How many owners want out because their MFs are too high? Most want out because they have to pay MFs on something that they can't afford to use whether the MFs are $100/week or $2800/week. It's not so much that the MFs are unaffordable. It's the peripheral costs of traveling such as air fare, car rental, checked luggage, activities, lost wages at work, gratuities, food on a per-week basis, etc.

Your idea(s) might reduce the average weekly MF by about $100. But would that be enough of an incentive for owners to keep vs. wanting to bail? For instance, how many owners would say something along the lines of "Well, if the maintenance fees are $1200, we can't afford to keep it. But if they are $1100, then that is much better and we will keep it."? Remember, the costs of accommodations are just a fraction of the cost of traveling.

Other people's mantra will vary but for us, a difference in about $100 of MFs is not going to convince us to buy one.

Excellent points.


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[WinniWoman]

I agree with Capitalism all the way. In capitalism, the business charges what the market will bear WITHOUT lifetime, locked in contracts that place the person at a disadvantage. The moment the papers are signed, one is locked into their rules allowing for potential abuse. This takes away from Capitalism as capitalism works because of ongoing free choice without restraints.

In a timeshare case, the onus rests with the owner to rid themselves of the problem. In capitalism, if the business starts to gouge, they walk away without any problem.

True about TUGGERS not getting resale for cheap to free.


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But this is why buyers must read and understand what they sign.

 

[Fredflintstone]

But this is why buyers must read and understand what they sign.

Yes and unfortunately most don’t. The impulse buy. I remember when I went to a Hilton presentation years ago and crossed out a whole slew of things like they can change any terms at anytime. The sales people got mad and I walked out unsigned. I suppose that’s why I once posted that all legal paperwork needs to be reviewed by buyers lawyer first. Too bad that requirement isn’t in law.

The contracts I have seen are extremely one sided and really let’s the timeshare company do whatever they want forever.


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[Panina]

Yes and unfortunately most don’t. The impulse buy. I remember when I went to a Hilton presentation years ago and crossed out a whole slew of things like they can change any terms at anytime. The sales people got mad and I walked out unsigned. I suppose that’s why I once posted that all legal paperwork needs to be reviewed by buyers lawyer first. Too bad that requirement isn’t in law.

The contracts I have seen are extremely one sided and really let’s the timeshare company do whatever they want forever.


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Forever is not the issue as most major purchases you are stuck with if you don’t do your due diligence. It becomes your problem until you figure out what to do with something that you purchased that isn’t worth what you paid for it.

Everyone has the right to have their lawyer read the contract and advise them during the recind period. One signs contracts with many different types of purchases, when they buy cars, get cell phone plans, appliance purchases....one has to take responsibility to be an educated consumer, and when one doesn’t read a contract they sign it is easy to blame everyone but themselves. Yes contracts in timeshares are very one sided but what they have by law is a recind period.

It is very easy to blame one side. It takes two sides that create this problem. I am not defending the outright lying salesperson. In my opinion, that is where the focus needs to be. Consumers need to be educated about the necessity of understanding what they sign.

 

[Fredflintstone]

Forever is not the issue as most major purchases you are stuck with if you don’t do your due diligence. It becomes your problem until you figure out what to do with something that you purchased that isn’t worth what you paid for it.

Everyone has the right to have their lawyer read the contract and advise them during the recind period. One signs contracts with many different types of purchases, when they buy cars, get cell phone plans, appliance purchases....one has to take responsibility to be an educated consumer, and when one doesn’t read a contract they sign it is easy to blame everyone but themselves. Yes contracts in timeshares are very one sided but what they have by law is a recind period.

It is very easy to blame one side. It takes two sides that create this problem. I am not defending the outright lying salesperson. In my opinion, that is where the focus needs to be. Consumers need to be educated about the necessity of understanding what they sign.

I agree. Consumers bear the blame signing something not understood or read. You hit the nail in the head when you said the sales people need to be held to account to.

Maybe I am a minority. On any contract that requires my signature, I cross out and initial anything I do not agree with especially if there is a clause that says terms can change at their pleasure. They can, at that time, decline the counteroffer.

I suppose when I bought my house, it is my problem to sell it so point well taken. But that contract was before my lawyer as required my law versus the back room signing happening after the timeshare presentation. If timeshares are a real estate law issue, then the process of agreement should work the same way,

As you said though, buyer beware. They aren’t innocent lambs awaiting sheering.


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[Fredflintstone]

As an addendum and based on me reading numerous timeshare contracts, I think if most people truly read and understood the contract they are signing, they would either cross most of it out or walk away. Timeshare companies would be forced to change the terms to equalize sides if people read and understood what they are signing. Luckily for the timeshare companies, people don’t do their due diligence and literally sign their lives away and their money.






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[bizaro86]

You certainly have some interesting ideas. But in reality, how much would MFs be reduced? How many owners want out because their MFs are too high? Most want out because they have to pay MFs on something that they can't afford to use whether the MFs are $100/week or $2800/week. It's not so much that the MFs are unaffordable. It's the peripheral costs of traveling such as air fare, car rental, checked luggage, activities, lost wages at work, gratuities, food on a per-week basis, etc.

Your idea(s) might reduce the average weekly MF by about $100. But would that be enough of an incentive for owners to keep vs. wanting to bail? For instance, how many owners would say something along the lines of "Well, if the maintenance fees are $1200, we can't afford to keep it. But if they are $1100, then that is much better and we will keep it."? Remember, the costs of accommodations are just a fraction of the cost of traveling.

Other people's mantra will vary but for us, a difference in about $100 of MFs is not going to convince us to buy one.

It would be quite a bit more than $100/week. I don't think it would work, but that isn't why.

He said half of $20k+. That's $10k per week, call it $500k per unit. To make it $100 per week would require 1% interest earned. Given the 2 year treasury rate is getting close to 3%, 1% is way too low. I think a mix of corporate bonds and index investments has a safe withdrawal rate of 4% over time, which would be $400/week.

I think going from $1200 to $800 would make a big difference on resale value.

 

[bnoble]

If I was a timeshare developer, I would want to create a community where ... owners get huge value for their purchase.

Then you'd be replaced by your board of directors, and quickly.

 

[Fredflintstone]

Then you'd be replaced by your board of directors, and quickly.

Yeah, I guess I’m not cut out for running a timeshare company. Better keep the day job


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[Passepartout]

If I was a timeshare developer:
I'd commit suicide!

 

[Fredflintstone]

If I was a timeshare developer:
I'd commit suicide!

Sigh. A dude with a conscience.


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[bizaro86]

If I was a timeshare developer:
I'd commit suicide!

Which is too bad, imnsho.

Timeshares are great. They've materially improved the lives of me and my extended family.

I own a bunch, all purchased resale for fifteen cents on the dollar of developer pricing or less (sometimes much less).

The best idea posted on the site is Alan Coles "Walmart for new TS, Carmax for used." If developers could switch to a lower gross margin, lower sales price model I think the product would sell itself. Especially for the hotel branded chains who have a points addicted captive market to sell into. People would buy them from a captive salary person in the lobby, I think. Then TS could be sold with honour.

 

[dioxide45]

As the CEO of Marriott Vacations Worldwide puts it, timeshares are a sold product. Rarely does anyone ever walk in to a sales presentation saying "I want to buy a timeshare." Timeshares are sold with high pressure sales pitches. It takes X number of heads to get a sale. Anywhere from 5-15. They know the numbers and as pointed out 50% of the cost of a timeshare is in the marketing. Both for the commissions and for all the crap poured in to getting people in the door. How many people on average do you talk to when going to a sales presentation? There is the sales rep, the person that signs you in, the person that tries to sell you an Encore Package, someone who gifts you on the way out. Fancy billboards and materials. Touchscreen televisions in the sales galleries. I suspect if such a system as proposed was feasible, someone would have already tried it by now. The problem with the industry is there is huge risk, so they need huge reward. It could all go to crap tomorrow as it did in 2008. Marriott Vacation Club nearly collapsed with all the inventory they were holding. You can't sell this stuff for slim margins.

Also consider that in many cases now the developers are going asset light, meaning there are investors actually building out the properties and the developer just sells it. That investor gets a slice of the pie too.

 

[WinniWoman]

Forever is not the issue as most major purchases you are stuck with if you don’t do your due diligence. It becomes your problem until you figure out what to do with something that you purchased that isn’t worth what you paid for it.

Everyone has the right to have their lawyer read the contract and advise them during the recind period. One signs contracts with many different types of purchases, when they buy cars, get cell phone plans, appliance purchases....one has to take responsibility to be an educated consumer, and when one doesn’t read a contract they sign it is easy to blame everyone but themselves. Yes contracts in timeshares are very one sided but what they have by law is a recind period.

It is very easy to blame one side. It takes two sides that create this problem. I am not defending the outright lying salesperson. In my opinion, that is where the focus needs to be. Consumers need to be educated about the necessity of understanding what they sign.

Right! I mean, right now I am having a hard time trying to sell my car. When I bought it, I didn't expect the car dealer to guarantee I could sell it when I no longer needed, wanted or could afford it. It's my problem and it is the same with any purchase, even a house. You buy it. You own it.

Most purchase contracts are one sided. That is just the way it is otherwise no one would go into business for anything.