Curious about the history of the timeshare resale market pricing

[jebloomquist]

I am curious about the history of the timeshare resale market pricing. Many of you have been involved with timeshares for decades and have seen and experienced both the retail and resale prices of timeshares over that time span.

Currently, as you know on ebay, resales can go from no bid, to $1, to over $1,000, but nowhere near the retail price. Has the resale market always been such that a timeshare loses 90-100% of its retail value immediately after the retail sale? Has the market changed since the economic downturn in 2008? Was there a downturn around 2000? What was it like in the 1970’s, 1980’s, and 1990’s? Do certain parts of the country or world have a better potential for a recovery in the resale pricing? Furthermore, has legislation affected the resale prices?

Basically, I am curious if anyone would like to comment on what things, such as the economy, have caused changes in resale prices. This is why I am asking about the history of the relationship between the retail and resale price.

 

[Patri]

Interesting post! I also wonder what resales were like in the 70s and 80s. There had to be a few people who needed to sell.

 

[ronparise]

Last night I saw Charlie Rose interviewing Marc Andreessen (developed Mosaic, the first web browser. and founded Netscape)

He made the point that one effect of todays technology (a computer in every pocket) is price transparency. In a minute or so you can compare prices for the same item across multiple vendors. Remember when buyng a car you would go from dealership to dealership collecting their offers so you could make the best decision possible. Thats not necessary for cars anymore, nor is it needed for timeshares

Spend a minute on ebay and a few other websites and you know exactly what these things are worth. Go to a couple of vacation rental websites and you know what the same vacation would cost you if you just rented a place. Now armed with the facts you can make your decision

I dont think the value of timeshares has come down at all.. They have always been worth very little. Its just that now I have some facts to back me up when I make an offer. Price is now much more in line with value, thanks to the internet

 

[pacodemountainside]

Lots of info below compiled from various sources. See following post as got zapped by 15K limit!

Originally all TSs were RTU which meant same room, same week, same resort and in 20 years your lease was up and Developer had all ownership rights. Not a doable model and changed mid eighties. However, Disney and all resorts in Mexico still have just RTU although much longer than 20 years.

No RCI, Interval, Internet, etc. so almost impossible to exchange and not enough money involved for real estate agent to handle.

When your 20 years was up MF went poof.

When Developers realized that the brick and stick cost of a condo were $400K but the could sell for $2 million as time share they all hopped on band wagon. So there was never much intristic value. As economists of old profferd when supply greatly exceeds demand then values will decline. Think Tulip Bulbs.

Or take Facebook. On Friday underwritters supported offering price but on Monday reality set in.


VACATION OWNERSHIP INDUSTRY BACKGROUND

The global vacation ownership industry, which is also referred to as the timeshare industry, is an important component of the domestic and international hospitality industry. The vacation ownership industry enables customers to share ownership of a fully-furnished vacation accommodation. Typically, a vacation ownership purchaser acquires either a fee simple interest in a property, which gives the purchaser title to a fraction of a unit, or a right to use a property, which gives the purchaser the right to use a property for a specific period of time. Generally, a vacation ownership purchaser's fee simple interest in or right to use a property is referred to as a "vacation ownership interest." For many vacation ownership interest purchasers, vacation ownership is an attractive vacation alternative to traditional lodging accommodations at hotels or owning vacation properties. Owners of vacation ownership interests are not subject to the variance in room rates to which lodging customers are subject, and vacation ownership units are, on average, more than twice the size of traditional hotel rooms and typically have more amenities, such as kitchens, than do traditional hotel rooms.

The vacation ownership concept originated in Europe during the late 1960s and spread to the U.S. shortly thereafter. The vacation ownership industry expanded slowly in the U.S. until the mid-1980s. From the mid-1980s through 2007, the vacation ownership industry grew at a double-digit CAGR, although sales slowed by approximately 8% in 2008 and experienced even greater declines in 2009 due to the global recession and a significant disruption in the credit markets. Based on research by the American Resort Development Association or ARDA, a trade association representing the vacation ownership and resort development industries, domestic sales of vacation ownership interests were approximately $6.3 billion in 2010 compared to $6.5 billion in 2003. ARDA estimated that in 2009, there were approximately 8 million households that owned one or more vacation ownership interests in the U.S.




A DIFFERENT VIeWPOINT

Greedy? | Self Dealing? | Breach of Duty? | Conflict of Interest?

The True History of Cendant, Fairfield and Wyndham

Ever wonder how your Fairfield or Trendwest timeshare became a Wyndham timeshare? Ever wonder what happened to Cendant? What happened to Fairfield? And what about the rumors of executives going to jail? Wonder no more, here are the answers.

In 1997, two major companies merged to form Cendant, Hospitality Franchise Services (HFS) and Comp-U-Card (CUC). Henry Silverman was the CEO of HFS, a major hotel and real estate franchiser. Walter Forbes was the CEO of CUC, a direct marketing giant. Silverman saw this merger as an opportunity to expand the HFS brands through CUC’s existing marketing structure. They agreed to share leadership of the new company, Cendant; however, Silverman had made his millions and was stepping into retirement. When Silverman was trying to quietly step down, the merged stock prices were soaring, until April 1998, when former HFS executives discovered CUC had previously overstated their financial condition prior to the merger. Stocks plummeted $14 billion in one day as shareholders jumped ship amidst the largest accounting scandal in Wall History (Enron and Worldcom would not happen until three years later). The SEC immediately opened up an investigation of Cendant. Silverman demanded Forbes to cede management of Cendant to him, Forbes refused and eventually Cendant nearly went belly up.


Silverman cancelled his retirement and jumped back into the fire to try and restore his great reputation. I don’t recall when Forbes was out of the picture, but it was sometime around 1999 or 2000 when he was charged by the SEC with misrepresenting company profits, corporate embezzlement and generally ripping off shareholders. Forbes and his CUC executives spent five plus years on trial. In 2005, Forbes’ second-in-charge, Kirk Shelton, was convicted to 10 years in jail. (A humorous side-note is that Shelton was ordered to make financial restitution to Cendant, to the tune of $3.3 billion, payable at the rate of $2000 per month. That works out to be a payment schedule of 134,000 years! What a joke.) Finally, after eight years of trial, in October 2006, Forbes was convicted and sentenced to up to 25 years in jail. Most of the other CUC executives went down with Forbes and Shelton, but provided testimony for immunity and/or were released on technicalities. Seemingly, all of these crooks were off Cendant’s payroll before Fairfield entered the picture. Incidentally, Silverman was found guilty only of NOT doing his homework prior to choosing business partners.

Silverman was left with Cendant in a shambles. After coming out of retirement, he made great strides to rebuild his personal reputation and save Cendant. One of his first steps was to have his lawyers contact the plaintiffs of every pending lawsuit and immediately settle all of them – to the sum of several billion dollars. They dumped some brands to fund this and Silverman pitched in personally as well. He worked hard to restore his reputation, but kept the name Cendant in place until his departure in 2006.

The way this history affects us as FairShare Plus or Worldmark owners is Silverman created Cendant Timeshare Resort Group (CTRG), a new Cendant division geared at taking full advantage of their direct-marketing resources already in place and applying them to the vacation ownership market. CTRG was headed up by Silverman’s former CFO at HFS, Stephen Holmes. (Keep in mind that Stephen Holmes worked for The Blackstone Group prior to working at HFS.) In January 2001, Cendant purchased Fairfield Communities, Inc., the developer of Fairfield Resorts and management company for the FairShare Vacation Owners Association (VOI), for $635 million. Then, in April 2002, Cendant purchased Trendwest Resorts, Inc., the developer and management company for WorldMark The Club, for $927 million.

During this time Cendant also acquired RCI which Fairfield had a close working relationship with and around Y2K had started a points program!


By 2004, everything was going smoothly for Cendant and its subsidiaries; Fairfield and Trendwest. Just about everyone was happy and enjoying the relationship. Silverman had regained the confidence of shareholders and built Cendant into the single largest hospitality/travel name in the industry, now a conglomerate with $20 billion in annual revenues. So, Silverman was once again content and decided to try to retire again. In October 2005, Silverman announced a decision to split Cendant into four separate companies. We will focus on the hospitality brands, which were coupled with CTRG to be spun-off in mid-2006 as Wyndham Worldwide, Inc. Other three parts were AVIS Car Rental, Century 21 Real Estate and Realogy!


Now, you might be wondering how Cendant decided to spin off a company called Wyndham? Let’s start with some quick history about the name “Wyndham”. Wyndham International, Inc., was an upscale and luxury hotel brand based out of Dallas, TX. They owned 34 hotels, 82 franchise agreements, and had 29 hotel management contracts. In August 2005, Wyndham International sold everything to Blackstone Group (a massive private investment firm that is famous for huge leveraged-buy outs and mergers) for $3.2 billion. (Don’t forget, I already mentioned Stephen Holmes used to work for Blackstone.) Within three months, Blackstone rebranded half of the most luxurious of the Wyndham hotels under their own brand, LXR Luxury Resorts; sold the remaining properties to Columbia Sussex Corp for $1.4 billion; and sold the brand name “Wyndham”, the franchise agreements, and management contracts to Cendant for $100 million. So, the only thing Cendant purchased was the leftover management contracts and the name, “Wyndham”. This was a perfect opportunity to get rid of three names that were blackened in the industry; Cendant, Fairfield and Trendwest, and replace them with a name everyone already associated with luxury travel accommodations.

Purchasing the coveted Wyndham name for just $100 million and burying the stigmatized names was a great idea by Silverman, but he made a mistake by putting Stephen Holmes in to lead this effort. Holmes rebranded everything. CTRG became Wyndham Vacation Ownership (WVO); Fairfield Communities (which had already been renamed Fairfield Vacation Resorts) became Wyndham Vacation Resorts (WVR), and Trendwest became Wyndham Resort Development (WRD). They even tried to change the names of a few cities (Fairfield Bay and Glade), but the post office and residents didn’t like that, so they compromised by adding “by Wyndham” to the end. Everything became something-Wyndham (even the soap) and they were successful at confusing not only the public and taxi-cab drivers, but even half of the employees.

Since 2006 the hotel-side of business was not diversified. They had enjoyed a long-time reliance on associations with businesses; hosting conferences, conventions, and discounting for business travel relationships. Holmes clearly failed to do what CEOs are paid to do; predict the impact of the gas crisis and economic downfall and shift their business strategies to remain competitive. He was behind the power curve and sought rescue from the only Wyndham Worldwide subsidiary that was still in the black; WVO, with its two primary brands, WVR (FairShare) and WVD (Worldmark), led by Franz Hanning.

Franz Hanning started with Fairfield in 1982 as a dreaded timeshare salesman. He worked his way up to become the sales manager at Kingsgate within five years. Often credited today as the "founder" or "brain-child" behind the FairShare Plus points program, it is curious to wonder how he could do that when he was still only a sales manager when the FairShare Program was fielded in early 1991. In 1992, Hanning was promoted to vice president of sales for Williamsburg and Myrtle Beach. In 1997, he became the overall vice president of sales for Fairfield. Within two years he became the Chief Operating Officer (COO), second-in-charge to Randolph Warner, the founder and CEO of Fairfield Communities.


When Cendant bought Fairfield Communities in 2001, Warner decided to retire. He made a deal with Cendant to promote Hanning to CEO of Fairfield Communities during the acquisition. So Hanning took over as CEO of Fairfield Communities in 2001, as a subsidiary of Cendant. After the spin off, Hanning took over as CEO of WVO, in charge of development and management of both WVR (FairShare) and WVD (Worldmark).

Back to Holmes and the mounting financial troubles facing Wyndham Worldwide. Following the spin off in 2006, Hanning had done a decent job of keeping WVO in the black. Right from the start, WVO started to make changes to the existing programs of each of their brands (including FairShare Plus and Worldmark), taking away benefits, and funneling inventory over to external Wyndham Worldwide programs, including Wyndham Hotels, Extra Holidays, Endless Vacations and RCI (there are others, but this mentions a few). This was all done without the permission of existing timeshare owners by using clauses built into the ownership contracts to control the Board of Directors and make decisions on “behalf of all owners” without any owner input.

What a great concept. In fact, they were successful at abusing this relationship for a few years, but Holmes forced Hanning to dig even deeper. With the recent changes in ownership benefits for both brands, owners are finally taking up arms against this corporate breach of duty and conflict of interest.(See Bill Spearman article in Timesharing today at http:://www.wyndsham.com


P.S. I don’t want to leave anyone hanging on the fate of Cendant’s founder, Henry Silverman. He took his meager $62 million severance package when Cendant did their split in 2006 and took over as CEO in the much slower-paced, and less controversial, spin off company, Realogy, Inc. Of course he’s doing well, but it turns out he’s always secretly been a Kid Rock fan. He took Kid Rock’s song, “She’s Half Your Age and Twice as Hot” a bit too seriously for a guy without a prenuptial. In November 2008, Silverman decided to dump his wife of over 30 years for a 28 year old chick he met in line at Starbucks. Looks like the 68 year-old Silverman won’t be retiring anytime soon if Mrs. Silverman (ex) gets what she’s trying to get from him!

Today Stephen P. Holmes is Chairman and CEO of Wyndham Worldwide!

Fran S. Hanning is President and CEO of Wyndham Vacation Ownership! Since no more Deanne Gabel a good choice for addressing ones complaints!

 

[pacodemountainside]

Post 4 continued

WYNDHAM HISTORY AND DEVELOPMENT


Wyndham Worldwide's corporate history can be traced back to the 1990 formation of Hospitality Franchise Systems (which changed its name to HFS Incorporated or HFS). HFS initially began as a hotel franchisor that later expanded its hospitality business and became a major real estate and car rental franchisor. In December 1997, HFS merged with CUC International, Inc., or CUC, to form Cendant Corporation (which changed its name to Avis Budget Group, Inc. in September 2006).

In October 2005, Cendant determined to separate Cendant through spin-offs into four separate companies, including a spin-off of its Hospitality Services businesses to be re-named Wyndham Worldwide Corporation. During July 2006, Cendant transferred to its subsidiary, Wyndham Worldwide Corporation, all of the assets and liabilities of Cendant's Hospitality Services businesses and on July 31, 2006, Cendant distributed all of the shares of Wyndham Worldwide common stock to the holders of Cendant common stock issued and outstanding on July 21, 2006, the record date for the distribution. The separation was effective on July 31, 2006. On August 1, 2006, we commenced "regular way" trading on the New York Stock Exchange under the symbol "WYN."

Each of our lodging, vacation exchange and rentals and vacation ownership businesses has a long operating history. Our lodging business began with the Howard Johnson and Ramada brands which opened their first hotels in 1954. RCI, our vacation exchange business, was established 37 years ago, and we have acquired and grown some of the world's most renowned vacation rentals brands with histories starting as early as Hoseasons in 1940, Landal GreenParks in 1954 and Novasol in 1968. Our vacation ownership brands, Wyndham Vacation Resorts and WorldMark by Wyndham, began vacation ownership operations in 1980 and 1989, respectively.

 

[timeos2]

The really simple version of resales in 1993 - 98 were they were not well known, handled by storefront operations & hardly ever exceeded 50% of retail pricing
From there along came the Internet information explosion and cheap rentals. Since then the prices have tanked to a near zero average value. More informed buyers aware of the true cost - annual fees - have further depressed any resale value there was.

 

[ampaholic]

To simplify the answer - the decline in resale value is date co-incidental with the rise of eBay and other electronic markets as nearly all the "blue sky" value is let out of the intervals for sale and they are sold as commodities.

"Blue sky" value in an item is any value other than the intrinsic utilitarian value. "Blue sky" value is what the time share sales weasels over blow in a resort presentation.

FYI "Blue sky" value is also rampant in the fashion industry - $325 worth of silk, intern design work and sewing sold for $13,000 because of the name on the label.

 

[e.bram]

How about the cost of travel. Right now accomodations are not a major vacation cost. Transportation and eating are!

 

[lindner]

Cause and effect

To simplify the answer - the decline in resale value is date co-incidental with the rise of eBay and other electronic markets as nearly all the "blue sky" value is let out of the intervals for sale and they are sold as commodities.

I would be cautious to suggest that electronic markets like eBay are the cause of low timeshare resale prices. There can be little doubt that the poor economy is bankrupting or causing financial strain on many folks, causing them to sell their timeshare on electronic markets or to utilize pcc's to sell them on electronic markets. At the same time, the poor economy is making many folks reluctant to purchase timeshare, or for that matter many other expensive items. An increase in sales couple with a decrease in purchases will normally lead to a drop in price, perhaps substantially so in the case of a luxury item like timeshare. In other words, the economy may be driving the low resale prices, although eBay and other markets may play amplifying the effect.

Most timeshare does have value. Look at it this way. Imagine a condo in a prime location. The cost to build it runs around 200K or more. Split between 50 weeks and you have a value of around 4000. Much less than retail because of the huge marketing expense, but more than zero for prime timeshare (subprime timeshare however may never have any value).

It is also dangerous to say that annual costs are too high. This is true for some timeshare but not for all. It is true that currently it is cheaper to rent than to own for most timeshare. However, that was not always the case and need not be the case in the future. Indeed, the poor economy is doubtless factoring into this, just as it is making it cheaper to rent a home than to own a home (yet most of us would admit that this is not likely to persist forever). Annual costs for timeshare are still less expensive than comparable hotels, and far less expensive than secondary vacation homes. Indeed, while you can often rent for less than annual fees, there are many on TUG and elsewhere who are currently renting timeshare for more than their annual expenses (making a profit).

 

[ronparise]

Im one that rents the timeshares that I own for a small profit, but I have to be very selective about what I buy..Im in a deal now where Im paying over $2000 for the week, because I think I can rent it for more than maintenance fees, and I should be able to get the purchase price back in my first year. But this isnt a typical week. Its a special event week. The other 51 weeks of the year here aren't worth the resorts transfer fee. because maintenance fees have exceeded rental value...

Sure there is an over supply and a bad economy, but even if the economy was strong and timeshares were in short supply; as long as maintenance fees are more than rents, there is no value

 

[lindner]

Im one that rents the timeshares that I own for a small profit, but I have to be very selective about what I buy..Im in a deal now where Im paying over $2000 for the week, because I think I can rent it for more than maintenance fees, and I should be able to get the purchase price back in my first year. But this isnt a typical week. Its a special event week. The other 51 weeks of the year here aren't worth the resorts transfer fee. because maintenance fees have exceeded rental value...

Sure there is an over supply and a bad economy, but even if the economy was strong and timeshares were in short supply; as long as maintenance fees are more than rents, there is no value

Ron is braver than I am. A timeshare where 51 weeks are losers and only one has value would scare me. What if the other 51 owners realize their folly and return their units to the resort, or worse yet give them to a pcc or simply default on their dues? It seems to me that significantly higher annual dues are the only option for the board in that scenario to make the budget balance.

 

[bogey21]

The really simple version of resales in 1993 - 98 were they were not well known, handled by storefront operations & hardly ever exceeded 50% of retail pricing
From there along came the Internet information explosion and cheap rentals. Since then the prices have tanked to a near zero average value. More informed buyers aware of the true cost - annual fees - have further depressed any resale value there was.

This is pretty much as I remember it. Back when I bought my first TS (a Marriott Sabal Plams pre-construction) Marriott controlled resales at their resorts and pretty much managed their price.

There were storefront operations that sold cheaper, usually for 50% of retail. I think the logic for this is that they were pricing the Weeks after deducting the marketing costs which were assumed to be 50% of the retail selling price.

This was all changed by the availability of information and cheap rentals on the internet.

George

 

[Mel]

I would be cautious to suggest that electronic markets like eBay are the cause of low timeshare resale prices. There can be little doubt that the poor economy is bankrupting or causing financial strain on many folks, causing them to sell their timeshare on electronic markets or to utilize pcc's to sell them on electronic markets. At the same time, the poor economy is making many folks reluctant to purchase timeshare, or for that matter many other expensive items. An increase in sales couple with a decrease in purchases will normally lead to a drop in price, perhaps substantially so in the case of a luxury item like timeshare. In other words, the economy may be driving the low resale prices, although eBay and other markets may play amplifying the effect.

Most timeshare does have value. Look at it this way. Imagine a condo in a prime location. The cost to build it runs around 200K or more. Split between 50 weeks and you have a value of around 4000. Much less than retail because of the huge marketing expense, but more than zero for prime timeshare (subprime timeshare however may never have any value).

It is also dangerous to say that annual costs are too high. This is true for some timeshare but not for all. It is true that currently it is cheaper to rent than to own for most timeshare. However, that was not always the case and need not be the case in the future. Indeed, the poor economy is doubtless factoring into this, just as it is making it cheaper to rent a home than to own a home (yet most of us would admit that this is not likely to persist forever). Annual costs for timeshare are still less expensive than comparable hotels, and far less expensive than secondary vacation homes. Indeed, while you can often rent for less than annual fees, there are many on TUG and elsewhere who are currently renting timeshare for more than their annual expenses (making a profit).

Electronic market have shown a direct correlation to the drop in prices. But I wouldn't say it was so much because of the markets and the visibility of both those markets and every other sales vehicle.

Some of the reduction might be blamed on the economy, but it wouldn't be as bad without the transparent market. Resale prices should recover some, for those resorts that manage to survive the next few years. As stated, there is underlying value to those weeks, but the cost to use those weeks is too high for many right now (I'm talking about the cost of the entire vacation, not just the accomodations). IThere are two factors at work here: first, when money is tight people either skip the vacation, or cut their expenses. While they might like the high-class hotel, they will settle for something less, which reduces the demand for the high-class hotel and for timeshare resorts; second, a percentage of owners who are giving up their own vacation are now renting their weeks out (increase of supply to go along with the reduced demand), and they are willing to take much less for their week.

Once the economy recovers, and those same owners can afford to travel again, they won't settle for $400 rent when their maintenance fee is $600. They will use it, or raise the rent, which helps everybody (except the renter).

One rental prices recover, and the perception of value returns, resale prices will rise again.

 

[ampaholic]

Mel: My statement was not correctly quoted - I didn't say what you have attributed to me.

Personally I doubt we will ever again see resale prices anywhere near 50% of developer prices unless (he he ha ha) developer prices get real.

There are plenty of studio and 1 bed full condos (52 weeks!) for under 300K on the Kaanapali beach which limits the "intrinsic" value of such to about 5K to 6K per week. There are also many 2 bedroom units for under 650K which I think limits the "intrinsic" value to 13K per week.

It took me 30 seconds to find over 25 such properties for sale right now.

So the days of $65,000 retail and 40,000 resale have sailed - so to speak.

As always - should you or any member of your team disagree - you will be disavowed :hysterical:

 

[pacodemountainside]

Electronic market have shown a direct correlation to the drop in prices. But I wouldn't say it was so much because of the markets and the visibility of both those markets and every other sales vehicle.

Some of the reduction might be blamed on the economy, but it wouldn't be as bad without the transparent market. Resale prices should recover some, for those resorts that manage to survive the next few years. As stated, there is underlying value to those weeks, but the cost to use those weeks is too high for many right now (I'm talking about the cost of the entire vacation, not just the accomodations). IThere are two factors at work here: first, when money is tight people either skip the vacation, or cut their expenses. While they might like the high-class hotel, they will settle for something less, which reduces the demand for the high-class hotel and for timeshare resorts; second, a percentage of owners who are giving up their own vacation are now renting their weeks out (increase of supply to go along with the reduced demand), and they are willing to take much less for their week.

Once the economy recovers, and those same owners can afford to travel again, they won't settle for $400 rent when their maintenance fee is $600. They will use it, or raise the rent, which helps everybody (except the renter).

One rental prices recover, and the perception of value returns, resale prices will rise again.

I would like to borrow your crystal ball. My sources such as WSJ, CNBC, Realtors, economic statistics such as unemployment rate, financial publications present a much gloomier outlook.

The economic crash of 2008 simply burst the time share bubble earlier than expected. Excess" sales"(beating people up and screwing them with something way over priced, sticks and bricks value of 20% and of marginal value and life time MF albratos) had to crash. People who bought some 15 years ago and could no longer use come into greater play each passing year.

Using Wyndham CWA membership which is average of some 56 resorts it has increased from $4.82 in 2010, to $4.84 in 2011 and $4.89 in 2012 no big deal. POA fee all UDI owners pay has not increased in many moons. So claims huge MF increases are problem is devoid of merit!

As far as the rich go they really do not suffer that much. While Donald Trump, David Seigel suffered some temporay setbacks they are living it up today. Shoot guy who owns Facebook lost a few billion on paper as did Warren Buffet, Bill Gates, et. al but they are still vacationing. Wyndham hotel/convention centers are doing great.

The middle class who buys timeshares are still hurting and many of those $75K-$150K jobs are gone forever.


Joe six packs with zippo credit ratings buying time shares for a buck, pay some MF and use for a year or two and dump when other activties appear more interesting are in market overhang.

No one knows for sure how many people are out there waiting for just a little recovery in real estate market and will dump..

How many time share owners like my self when I can easily get rid of for $500 cash in my pocket will be first in line. Renting and using become less vivable each passing year.

 

[lindner]

Electronic market have shown a direct correlation to the drop in prices. But I wouldn't say it was so much because of the markets and the visibility of both those markets and every other sales vehicle.

Some of the reduction might be blamed on the economy, but it wouldn't be as bad without the transparent market.

There is still some question as to the validity of the above argument, which many seem to be making. eBay is the dominant market for luxury items other than timeshare, all of which should depend on the economy. eBay also is the dominant market for many unique items which would not be considered luxury items. A quick study of these items would test this theory. If the economy is driving the steep decline, then we should see evidence in the price history of a steep decline in other luxury items that eBay is the dominant market but no concurrent steep decline in the non-luxury items for which eBay is the dominant market.

Timeshare is after all real estate (once the HUGE marketing cost is subtracted out). There is little doubt that real estate is in its worst depression since the great depression, with housing prices down by large amounts and vacation homes down even more.

Timeshare pricing evidence shows a huge drop right as the economy tanked. If eBay were the driving mechanism, we should expect a gradual decline, as eBay gradually takes over the market. We don't see that.

Which of these is the primary driver of the lower prices will determine the future of timeshare prices. If it is eBay, then the price will stay at zero or even go lower, as eBay or some other market with even greater transparency will only continue to dominate sales. If it is the economy, then the price will rise (although anyone who thinks they will recover purchase prices before the economy tanked or anyone who purchased retail will likely never ever see that price again).

 

[lindner]

How about we take the fight to the developers themselves? How about ARDA or someone else sets up a timeshare sales office outside one of the Wyndham resorts, selling nothing but Wyndham resales, using the same marketing incentives and sales folk Wyndham uses? Same for Bluegreen, and all the others. If our cost for resales is $1, surely we can undercut their prices if they are building more units. I'd bet they would quickly move to raise resale prices.

On the other hand, if Wyndham and others have already realized that they can make more money by buying $1 deeds and reselling those than by building new units and selling those, then that would gradually raise the resales price as well.

Either way, eventually resale prices would rebound to nearly equal the cost to build units (bear in mind that 70% or more of retail price is marketing and this will never be recovered).

 

[pacodemountainside]

How about we take the fight to the developers themselves? How about ARDA or someone else sets up a timeshare sales office outside one of the Wyndham resorts, selling nothing but Wyndham resales, using the same marketing incentives and sales folk Wyndham uses? Same for Bluegreen, and all the others. If our cost for resales is $1, surely we can undercut their prices if they are building more units. I'd bet they would quickly move to raise resale prices.

On the other hand, if Wyndham and others have already realized that they can make more money by buying $1 deeds and reselling those than by building new units and selling those, then that would gradually raise the resales price as well.

Either way, eventually resale prices would rebound to nearly equal the cost to build units (bear in mind that 70% or more of retail price is marketing and this will never be recovered).

As far as everything I have read, seen or heard Wyndham does not buy resales off e-bay, etc. Think about it, if they wanted $1.00 purchases all they would have to do is send out global e-mail, will buy any UDI time share for $1.00. WOW, hundreds of happy campers that don't have to pay PCC a couple grand. No closing costs as they have on salary! OK! $15 deed recording fee!

They do resell trade-ins or forclosures or dump in CWA.

HOAs(us owners) are stiffed when other owners default on dues!

Per Main Man their brick and stick cost is 22%. So if other high pressure sales expenses, bad debts and profits are 78% then this is bogey. In fact if one hangs tough Head Sales Manger will generally offer a great deal in his hip pocket or desk drawer since original purchasers typically pay 20% down as cash closing.

The only person who thinks time shares are worth original selling price is Tax Assessor. Just imagine if HOA grieved taxes based on current comparables. Taxes would have to fall abour 90%

 

[ronparise]

Ron is braver than I am. A timeshare where 51 weeks are losers and only one has value would scare me. What if the other 51 owners realize their folly and return their units to the resort, or worse yet give them to a pcc or simply default on their dues? It seems to me that significantly higher annual dues are the only option for the board in that scenario to make the budget balance.

Not so brave....I probably understated the value of the other weeks to make a point.

Ive been able to buy a lot at this resort for $100 a week or less. and rent them for double mf. So a $2300 purchase was a stretch for me. My point was that there are a very few weeks that are worth a whole lot more than the rest. Im not worried about the off weeks here. This resort has tackled the bad debt problem head on, with a good rental program, bonus weeks for paying owners and the ability to do split week reservations. (one $500 maintenance fee could get me 4 Saints home game weekends. and you can walk to the Superdome from here) Also every week floats over 47 weeks. what I paid so much for is a guaranteed Mardi Gras Week..Ill get my investment back in the first year.

 

[MaryH]

But Ron,

Are you not concerned about the risk of hurricane similar to Katrina and SAs?

 

[ronparise]

But Ron,

Are you not concerned about the risk of hurricane similar to Katrina and SAs?

I could ask you the same question...I see you own in New Orleans too

Im about as concerned about another Katrina in new Orleans as I am another Donna in Ft Myers (where I live)..If it happens (and it will) Ill adjust. If I cant live in my house any more Ill move, If I cand make a buck in New Orleans any more, Ill stop paying maintenance fees

If the threat of Hurricanes and Earthquakes and Floods were a deterrent, no one would live on either coast much less vacation there.....and yet we do.

I dont think that the threat of severe weather is responsible for the decline in timeshare prices

 

[MaryH]

I know some people lost the use of their week due to Katrina. Also the majority of the owners lost their year of usage at Club Le Pension during the renovation and they still had to pay the MF.

 

[Carolinian]

Having used eBay extensively as one of our sales venues in the years I had the HOA resale portfolio on my HOA board, I can tell you that eBay brought decent prices and everything, even the deep off season weeks sold during the early years I was doing that. When eBay prices tanked had nothing at all to do with the overall economy. It had everything to do with the arrival of the PCC's in force selling on eBay and flooding the market. I had a ringside seat to watch it happen.

Ebay is only a tiny niche of the resale timeshare market, and other parts of that market have not been impacted by eBay so much.

The other thing that is depressing timeshare is the decline in exchange systems. Up until about a bit over a decade ago, timesharing was based on an ownership / exchange model. You had to own to participate, except for the scattered rentals by individual owners and the occaisional developer. Off season weeks had the 45-day window which gave them value. Then RCI started its massive rentals to the public scheme, as well as starting to degrade the 45-day window. This let the public into the benefits without having to own, and that had a direct impact on the value of timeshare, as least to those who wanted to use it to go a variety of places. It also flooded the rental market for those timeshare owners who tried to rent their weeks. All of this impacted the value of timeshare.

The only way to put the genie back in the bottle is for resorts to try to migrate their members to exchange companies which do not rent, and I just do not see that happening, at least on the scale it would need to. RCI has essentially goosed short term profits at the expense of the long term viability of timeshare. The problem for timesharing is that the market has been flooded at several key points by both RCI and the PCC's, and that adds up to continuing problems for the industry.

Interestingly, the developer that started timeshare, Hapimag, is NOT a member of RCI or II, and is doing quite well. Their weeks have good resale value, but that is largely because the developer has a commitment to buy back weeks after a certain period of time at a set price. Given what has happened in the rest of the industry, they tend to shy away from the word ''timeshare'' these days.

There is still some question as to the validity of the above argument, which many seem to be making. eBay is the dominant market for luxury items other than timeshare, all of which should depend on the economy. eBay also is the dominant market for many unique items which would not be considered luxury items. A quick study of these items would test this theory. If the economy is driving the steep decline, then we should see evidence in the price history of a steep decline in other luxury items that eBay is the dominant market but no concurrent steep decline in the non-luxury items for which eBay is the dominant market.

Timeshare is after all real estate (once the HUGE marketing cost is subtracted out). There is little doubt that real estate is in its worst depression since the great depression, with housing prices down by large amounts and vacation homes down even more.

Timeshare pricing evidence shows a huge drop right as the economy tanked. If eBay were the driving mechanism, we should expect a gradual decline, as eBay gradually takes over the market. We don't see that.

Which of these is the primary driver of the lower prices will determine the future of timeshare prices. If it is eBay, then the price will stay at zero or even go lower, as eBay or some other market with even greater transparency will only continue to dominate sales. If it is the economy, then the price will rise (although anyone who thinks they will recover purchase prices before the economy tanked or anyone who purchased retail will likely never ever see that price again).

 

[MaryH]

There is also issue where some resorts are not year round where other hospitality in the area shut down for 6 months or more..

Before they sold some of the off season weeks as traders but with the increase of M/F combined with the degradation of RCI trade values for those off season weeks, the value proposition for those off season week is no longer there.

There have been a few spectacular TS failures in the last few year... But a number of TS have been hanging on at the edges of viability.. The deleveraging and/or refinancing of residential real estate, commerical restate and public soverign debt has only started scratched the surface of the issues in my opinion and there will likely be more bailouts of banks coming in Europe and elsewhere. If there is another credit crunch, I think it can tip a few more TS over the brink.

 

[timeos2]

The only person who thinks time shares are worth original selling price is Tax Assessor. Just imagine if HOA grieved taxes based on current comparables. Taxes would have to fall abour 90%

Not so. Even the tax Assessors routinely discount new timeshare vales at 50% of Developer cost as they also know the value just isn't there. Once they are sold out (or usually a ten year maximum) they start to look at comparables. But $1 eBay sales or other sales termed "distressed" are routinely thrown out. As are Association and family sales. So a whole resort may be valued on a handful of similar third party sales even if they are a tiny fraction of the actual sales for that resort. Plus the taxman (correctly) argues that a resort is not only worth say $8000 even if there are 8000 owners willing to sell their time at $1. There is a base intrinsic value that will usually be in the millions. Taxes are based on that, not 100% resale values.

While it can be nearly impossible for owners to extract that underlying value that doesn't mean it isn't there. And the tax folk will make everyone pay on that at a minimum.