Interesting WSJ article on timesharing: avg TS 24k from developer; >50% financed at >13%; Marriott buys back 90M & re-sells for 1B each year...

[mountainboy]

Sharing an interesting WSJ article on timesharing & hidden costs of free timeshares..

'In 2022, the average per-transaction sales price (for a TS) was $23,940 when bought from a developer.

Industry leader Marriott Vacations Worldwide said that in 2022 54% of its timeshare buyers used financing with an average loan of $28,400, an average term of 12 years and an average interest rate of 13.4%.

CEO John Geller told The Wall Street Journal last year that it spends $80 million to $90 million annually on existing timeshares that it then resells for about $1 billion. The difference isn’t pure profit because the cost of selling them is substantial—free stays or vouchers used as inducements, plus commissions for salespeople who have perfected those 90-minute pitches'....

Sharing an unlocked article link, so folks may read beyond paywall...

https://www.wsj.com/personal-finance/how-to-buy-a-week-in-paradise-for-1-d141ebee?st=DNj5x8&reflink=desktopwebshare_permalink

 

[jp10558]

Comments are fun there, also missing a lot of information, but they're not wrong on developer prices IMO. I do hate the give back for a dev to resell for lots of money.

 

[wmgjr]

Met a guy last week doing a Bluegreen stay for a tour. Told him not to buy developer showed him tug. Talked about resale, rescinding and how timeshares work etc.... he still went in and bought a 2 bedroom developer for 40k plus.
Ego is expensive

 

[pedro47]

Met a guy last week doing a Bluegreen stay for a tour. Told him not to buy developer showed him tug. Talked about resale, rescinding and how timeshares work etc.... he still went in and bought a 2 bedroom developer for 40k plus.
Ego is expensive

To the OP, you did your job.

 

[TUGBrian]

yep, TUG isnt here to tell you how to spend your money. TUG is here to give you the information you need to make an informed adult decision with your money.

if people dont want to believe that information once provided to them, that is perfectly acceptable! Some lessons have to be learned the hard way!

 

[jp10558]

Yea, the only comments I always find really missing the mark on these "normie" replies are the "you can take the/less than the $1,200 MF and stay in a hotel/VRBO/AirBnB each year". If that was true, I want these people to be my booking agent - but I want like for like - i.e. 2 bed rooms and bathrooms, kitchen and a hot tub and pool, and ping-pong table. Oh, and it can't be a timeshare rental, cause then you've still got the potential sales pitch.

I can't really evaluate the claim that you invest the $40,000 and go on vacation from the proceeds. I don't have investing luck or skill, and even my 401k that has well over that in it lately doesn't seem to return consistently growth amounts that I would feel comfortable would actually book multiple rooms etc. I suppose if you did consistently get the 8% sort of return, then yes, you'd have $3,200 a year to "play with", but if you're not an expert, and lucky, I don't see that in real life. Plus that $3,200 is before taxes etc.

 

[4TimeAway]

Plus that $3,200 is before taxes etc.

Either way its an expense.

Calling it an "asset" or using terms like "ownership" on product that loses 90-100+% of its value as soon as you sign on the line... In some places they call that robbery.

I think we all justify how we spend our money, rich, broke, stuck in the middle, its all the same. It comes into our life and it leaves our life.

They don't sell a product, they sell a dream. For some people timeshares seem to work well enough, but there are people sold a dream (usually based on lies) they can't afford and for those people there are no real protections. Buyer Beware.

 

[WaikikiFirst]

$3,200 is before taxes

It is. The $40K spent also had taxes paid. And the enxt $40K earned will be taxed. As for the 8% & the rest, where's bobby & the UPenn guy, Shiller. idky I always have to tweaze out which guy he is. Maybe b/c he is famous for 2 or 3 different things. Anyway, he is on TV all the time isn't he? (I don't watch any "stock mkt" TV, except sometimes Bloomberg on Fed Meeting days. Bloomberg on Fed Meeting days is HILARIOUS).

Funny? The "invest the $40,000 and go on vacation from the proceeds ... 8% sort of return" is the exact calculation I did on the back of a napkin in the only TS meeting I went to. I think I used $44K & 7%. The woman looked at it. She cried. She got up. She ran out of the room, never to be seen again.

 

[WaikikiFirst]

Those #s all seem predictable, but there are some non-obvious conclusions to draw from the average loan size being about 20% greater then the avg ticket size.

 

[WaikikiFirst]

Here is an interesting calc I will leave to someone else. If Marriott Vacations Worldwide spends $80 million to $90 million annually on existing timeshares and we assume avg cost is a few $K, let's say $2500 . Divide $85,000,000 by $2500 and you know how many they repurchase. Divide that by their stated membership base and you get the % of people who default/return/ etc each yr.

 

[jp10558]

Either way its an expense.

Calling it an "asset" or using terms like "ownership" on product that loses 90-100+% of its value as soon as you sign on the line... In some places they call that robbery.

I think we all justify how we spend our money, rich, broke, stuck in the middle, its all the same. It comes into our life and it leaves our life.

They don't sell a product, they sell a dream. For some people timeshares seem to work well enough, but there are people sold a dream (usually based on lies) they can't afford and for those people there are no real protections. Buyer Beware.

It's not an asset - I agree with that. As to robbery given a value loss - that's much trickier IMO. I think the dollar amounts are an issue, but everyone knows a new car loses something like 35% of it's value as soon as you buy it. Many other things like of all things a camera bag or specialist backpack often goes from $400 new to unable to re-sell once you buy it. Aside from completely different marketing, country clubs or really any other paid membership or service usually doesn't have a resale value. That doesn't make it robbery IMO.

Personally, I think the main problem with the whole situation is the sales lies. If people knew what they were buying, I don't think there's a problem. There's way less complaints about a Club store membership fee for instance.

If could have my druthers, I'd suggest cracking down on false advertising in general a lot more than the government does.

 

[e.bram]

I have an oceanfront unit on Cape Cod, and I am not a Kennedy. With out timeshares only Kennedys can sip wine looking at the waves.

 

[mountainboy]

I have an oceanfront unit on Cape Cod, and I am not a Kennedy. With out timeshares only Kennedys can sip wine looking at the waves.

True that, TS, done the right way, can be amazing for experiences.
It's the financial mistake which so many make, as detailed above by many which is the problem..

 

[mountainboy]

It's not an asset - I agree with that. As to robbery given a value loss - that's much trickier IMO. I think the dollar amounts are an issue, but everyone knows a new car loses something like 35% of it's value as soon as you buy it. Many other things like of all things a camera bag or specialist backpack often goes from $400 new to unable to re-sell once you buy it. Aside from completely different marketing, country clubs or really any other paid membership or service usually doesn't have a resale value. That doesn't make it robbery IMO.

Personally, I think the main problem with the whole situation is the sales lies. If people knew what they were buying, I don't think there's a problem. There's way less complaints about a Club store membership fee for instance.

If could have my druthers, I'd suggest cracking down on false advertising in general a lot more than the government does.

Agree 100%!

 

[mountainboy]

Met a guy last week doing a Bluegreen stay for a tour. Told him not to buy developer showed him tug. Talked about resale, rescinding and how timeshares work etc.... he still went in and bought a 2 bedroom developer for 40k plus.
Ego is expensive

Either way its an expense.

Calling it an "asset" or using terms like "ownership" on product that loses 90-100+% of its value as soon as you sign on the line... In some places they call that robbery.

I think we all justify how we spend our money, rich, broke, stuck in the middle, its all the same. It comes into our life and it leaves our life.

They don't sell a product, they sell a dream. For some people timeshares seem to work well enough, but there are people sold a dream (usually based on lies) they can't afford and for those people there are no real protections. Buyer Beware.

yep, TUG isnt here to tell you how to spend your money. TUG is here to give you the information you need to make an informed adult decision with your money.

if people dont want to believe that information once provided to them, that is perfectly acceptable! Some lessons have to be learned the hard way!

@wmgjr , Kudos for trying to help a fellow human being from making a terrible financial decision! Pls don't let the foolishness of some, stop you, from trying to help & save others... I am sure there are many who would have been incredibly grateful to you for helping steer them the right way, and save from a terrible financial decision...

@4TimeAway & @TUGBrian , Precious words & agree 100%!

 

[4TimeAway]

Personally, I think the main problem with the whole situation is the sales lies.

Lies.

Timeshare salespeople don’t have a fiduciary duty to the customers but there should be some standards applied. I’m specifically surprised that false representation, failure to inform, willful omission, etc. are not leveled against these licensed real estate agents who have had state mandated ethics training and fail to consider the Buyers Rights at all. Buyer Beware >99% of the time.

I wonder how timeshares will be sold in decade.... I can’t believe we will still accept the lies ad technology should transition the culture of sales more to the exclusivity of the product like a Club.

Personally, I see them adding more non-transferable perks tied to sales, free housekeeping, no resort fees (aka Junk Fees), but that will erode the “asset” argument that you are buying Real Estate and shift more towards pre-paid vacation contracts.

One other observation is that the market value of the sales basis relative to the "owners total weeks value" do not equate. There is a leakage in the math, which is interesting to me.

 

[jp10558]

Personally, I see them adding more non-transferable perks tied to sales, free housekeeping, no resort fees (aka Junk Fees), but that will erode the “asset” argument that you are buying Real Estate and shift more towards pre-paid vacation contracts.

If I had my other druthers, we'd also make drip pricing and junk fees illegal. You pay the top line advertised price however you book the stay.

 

[WaikikiFirst]

the market value of the sales basis relative to the "owners total weeks value" do not equate. There is a leakage in the math, which is interesting to me.

???? Meaning? Terms?
market value of the sales basis? definition? calculation? Is that PRICE?
owners total weeks value? definition? calculation? Is that VALUE?
quantitative example?

as an aside: Price is what you pay. Value is what you get.

 

[4TimeAway]

market value of the sales basis? definition? calculation? Is that PRICE?
owners total weeks value? definition? calculation? Is that VALUE?
quantitative example?

I'm probably missing many things with this, and I really don't have the time to determine my errors, but I observe:
Resale week pricing should reflect a percentage of ownership in a resort.
In places like CA the property tax rate is about 1.2% annually.
The tax burden on the share is significantly higher than this relative to resale prices.

 

[TimeshareGuru]

Timeshare products, whether deeded or non-deeded, are not for everyone. Most purchasers fail to factor in other costs besides the purchase price and if financed, interest charges over a 7 - 10-year period. A 40K TS can end up costing $80K. Additionally, MF and other charges like RCI or II membership fees, exchange fees, resort fees, cleaning fees, parking fees, etc. should be considered as well. Since it is a long-term financial commitment, timeshare ownership creates a burden, especially for the folks who do not earn enough to meet all their financial obligations. Therefore, renting a timeshare unit instead of owning one for vacations makes more sense, especially in this economy. Despite what they are told at the table during the sales pitch, timeshares are not easy to get rid of. Owners are getting burned by false and misleading claims of resale and advertising companies everyday.

 

[MamaBess]

Either way its an expense.

Calling it an "asset" or using terms like "ownership" on product that loses 90-100+% of its value as soon as you sign on the line... In some places they call that robbery.

I think we all justify how we spend our money, rich, broke, stuck in the middle, its all the same. It comes into our life and it leaves our life.

They don't sell a product, they sell a dream. For some people timeshares seem to work well enough, but there are people sold a dream (usually based on lies) they can't afford and for those people there are no real protections. Buyer Beware.

So true! When we first went in to a sales pitch, our sales person said "this is an investment", to which I replied," No, its a vacation, investments earn money, this will only cost money". She had to admit I was correct. Still, we are very happy with what we own, just not in a fantasy land about what it is that we bought into.

 

[pedro47]

Timeshare products, whether deeded or non-deeded, are not for everyone. Most purchasers fail to factor in other costs besides the purchase price and if financed, interest charges over a 7 - 10-year period. A 40K TS can end up costing $80K. Additionally, MF and other charges like RCI or II membership fees, exchange fees, resort fees, cleaning fees, parking fees, etc. should be considered as well. Since it is a long-term financial commitment, timeshare ownership creates a burden, especially for the folks who do not earn enough to meet all their financial obligations. Therefore, renting a timeshare unit instead of owning one for vacations makes more sense, especially in this economy. Despite what they are told at the table during the sales pitch, timeshares are not easy to get rid of. Owners are getting burned by false and misleading claims of resale and advertising companies everyday.

IMHO. this is what some TUGGERS, forget, in the beginning there were no resale or used timeshare. You had to purchase from the developer.
Now there is a resale market and yes! you can purchase a timeshare at a very low price: as much as between 80% to 90% of the developer original price. This is my opinion only.

 

[larrym64]

For us we bought Disney DVC in 2000 when the Boardwalk was first on sale. We seem to have bought at the sweet spot because Disney keep the resale market high. We have been able to rent when we want and cover are dues and have points for our own vacations. If we were looking now at Disney now it would be a hard no with the price per point it would be a long time to get ahead. We also only use it at Disney and rent when we don’t go to Disney because it is a bad value in a trade. Now reading about people trying to sell for a dollar I am glad my just ends in 2042.

 

[montygz]

Met a guy last week doing a Bluegreen stay for a tour. Told him not to buy developer showed him tug. Talked about resale, rescinding and how timeshares work etc.... he still went in and bought a 2 bedroom developer for 40k plus.
Ego is expensive

Those nice timeshares I like to stay in weren't built by me paying $1, so I guess we should thank that guy for paying $40K.

 

[wmgjr]

Those nice timeshares I like to stay in weren't built by me paying $1, so I guess we should thank that guy for paying $40K.

I get the point you're making and would agree for all new construction that's a good way to look at it.

But this wasn't a new build. When you're paying 40k for recycled developer repossessed inventory 25-30 years after the property has been in existence while there are 1000s of the same deeds available for $500 or less there's no praise to be had... That's just poor decision making at best, dumb at worst.

Id feel differently if all developer sales went directly into the HOA and kept mf low but there's no benefit to current owners. Give it two to 5 years he'll probably default and start telling everyone how timeshare is a rip off increasing bad debt for owners and making it harder to sale.

There's no upside for that type of activity at this stage of the propertys lifecycle, of course other than for sellers.