Timesharing and MF's- Will it doom the industry?

[scottmindib]

Hello,

My question for everyone is this- Will the continual rise in Maintenance fee's for timeshare units end up eventually pricing the resorts right out of the business?

For instance- I bought a Sheraton Desert Oasis unit this year and the 2008 MF's went up by $70 for a total of a 9% for one year. Is this ridiculous or what? I know they have costs associated with running the resort but it is the responsibility of the association to keep dues low.

Are the rate hikes around the country as steep as this one?

Also, if this trend continues do you all think that the associations will price themselves right out of the timeshare industry?

What can we do to prevent these increases?

Your help would be appreciated. Thanks

Scott Billings

 

[Carol C]

Get rid of the golf courses on timeshare resort grounds in order to keep maint fees in line. Better yet, have golfers pay separately for memberships and spread those golf costs to those who golf. Why should non-golfers pay for that perk if they don't use it?

As for other costs rising, all of mine seem to be up 7% or more. I think part of the reason is personnel costs. Don't forget, the minimum wage was raised by Congress and that has kicked in and caused wages to rise across the board, I'm sure. Benefits (esp. health insurance) also cost way more this year than last.

 

[DeniseM]

That's interesting. I own at SDO too, and mine didn't go up that much. What size unit do you own and what did you pay last year and this year? Mine went up 6.3%

 

[scottmindib]

I still own (just sold and is closing) a 2 bedroom L/O and the dues went from $728 to $799 this year.

 

[DeniseM]

I still own (just sold and is closing) a 2 bedroom L/O and the dues went from $728 to $799 this year.

Are you an SVN member - does that include the SVN dues which went up this year? Or did you buy resale?

 

[timeos2]

Costs nearly always go up but can be heald to reasonable levels

The problem will be more obvious at resorts awash in great amenities that buyers love until they have to pay for them all! Water parks, golf courses, lazy rivers, multiple pools, the list goes on and on. While the developer is getting rich on overpriced retail sales and supplying all the perks it all seems great. Once the units as well as all those shared amenities have to be maintained and upgraded by those owners the reality will set in.

It is tough to keep a resort with "standard" features up to snuff. Those mega resorts that are so nice when new are likely to be albatrosses to the buyers in years to come. But all resorts that don't plan ahead and realize the true cost of upkeep will suffer either slow degradation of quality and desirability or special assessments that are very hard to swallow. I cringe when I hear a mismanaged resort like Wastegate plans to put in a water park as that will be a major headache for owners in the not too distant future.

 

[DanM]

Reasonable is relative

It seems to me that the principal questions on maintenance fees are 1. are they less than rental value, and 2. if they are close to rental value, is there something special enough about the resort that it is worth owning to get a particular week every year even if it is no bargain? The corollary, of course, is whether, if you are a trader, the unit trades into timeshares with higher rental values than the maintenance you are paying.

The "doomed" timeshares are the ones with maintenance equal to or higher than rent at the same or similar resorts (at that location in high season) and no particular trade value. They won't be able to demand more before owners bail out. I own one that is borderline and as soon as I can't trade it for something with a significantly higher value I will dump it.

So the formula for disaster is a region with too many timeshares or not enough visitors; relatively low cost rentals; relatively high operating costs (taxes, labor, amenities, etc) and a false sense of worth.

 

[bogey21]

Hello,

My question for everyone is this- Will the continual rise in Maintenance fee's for timeshare units end up eventually pricing the resorts right out of the business?

Yes. But it will be resort by resort and take a long time.

GEORGE

 

[PigsDad]

Has anyone ever tracked the inflation rates of MFs and compared it to hotel inflation rates? In the larger markets, hotel rates have been increasing by double digits the last few years. Almost makes the MF increases seem like a bargain.

Kurt

 

[Jennie]

Many of the causes of increased maintenance fees--labor, employee benenfits, repairing storm damage, sky-rocketing insurance premiums, upkeep of aging properties--plague non-timeshare hotel resorts as well. The cost of hotel stays will probably rise at a similar rate, making the cost of ts maintenance fees still attractive in terms of vacation options.

 

[bnoble]

Will the continual rise in Maintenance fee's for timeshare units end up eventually pricing the resorts right out of the business?

I don't think so. As near as I can tell, hotel/resort rental rates are going up just as fast, and with a larger cost basis.

My ownerships are all at resorts with less-posh amenities, with owner-controlled BODs that have a prudent reserves policy, but try to keep costs in line just the same. So, I don't get hit quite as hard as many do.

In *most* markets, if I tried to rent something other than another timeshare with the sum of my MFs plus lost opportunity on the purchase price, I wouldn't get anything nearly as nice.

 

[Jya-Ning]

MF and TS along would not

A recession maybe.

For new resort selling, about 70% goes to new owner, only 30% goes to owners that has TS. All new resort's MF are in much lower good looking number. New Owner has no idea (otherwise they will buy resell) Of the 30% maybe 10% know what they are doing, so the only impact a MF increase is on 20% existing owner. That along will not crash that part. Only recession will crash the 70% new owner base.

For resell, it will crash them (MF increase). Since suddenly it will start flush with a lot of resell. Will see if eBay resell can survive. If not, a lot of PCC will become scam operation (i.e, they take the owners money, then do nothing and left owner with the deed).

As resort operation, it is very hard to shut it down. Most states does not allow it to be done in any remote chances. Even in recession, there will always has certain owner willing to keep the ownership at all cost. So they will rent it and put it in exchanger. If that happen, it will be a lot of inventories in exchanger if you don't care about quality. They usually shut down when recession hit the whole country, at that moment, there will be no recourse, so the local government will collect the resort. But that kind of recession does not seems to be in now. Even US is crash, there will be a lot of other countries take over, and at least in the 1st few years, US still remain to be a very attractive place to visit.

As exchange company, they will be flushed with inventories if that happens. They may not have too many business though.

The rental market will depends on the whole travel industrial. There is no realation between it and MF. Event like 911 has hit travel industrial as whole already, and that does not crash it. So I have hard time to see. Unless of course, there is a WWIII, or someone invade US, which at near future, I don't see it happen.

The only effect of increasing MF is it will either force owner to flee, or force owner to face the situation and start care more about the resort operation. Based on what happen in New Orlean, Califorina, FL, I will believe majority of owners will select to face the challenge and find way to solve it. Although TS sometimes is difficulty operation, the solution to reduce cost and make a enjoyable resort is not, so the whole industrial will not end easily.

JMHO, and I am often wrong when predict things.

Jya-Ning

 

[DaveNV]

My MFs at one of my resorts went up 14% this year. But that was to cover building a new swimming pool. I'd expect any increase next year to be lower. We'll see...

With hotel rental costs rapidly increasing as they are, t/s MFs still make the per-night stay a bargain. Setting aside the buy-in costs, all the t/s really costs you is your MFs. In my case, the per-night costs at my resorts are well below the rental price to stay in a comparable hotel in the area. If I owned in a less-costly area i'm sure things would be different.

So it's a perspective thing: In the USA, even at more than $3.00 per gallon for gasoline, we're still paying less per gallon than we are for designer coffee drinks and bottled water. Right?

Dave

 

[london]

Maintenance Fee Increases

Our timeshare Maintenance Fee's have consistently gone up by 5 to 10% each year, depending on a variety of factors.

We pay $760.00 MF for a week at Resort on Cocoa Beach, 2 BR condo. Resort has lots of amenities.

The Hilton next door, charges well over $100 per night for just a room.

As long as you purchase resale.......you will come out okay in the end.

Resale values will continue to decline....as M Fees go up.

 

[frenchieinme]

Maybe, maybe not...

Hello,

My question for everyone is this- Will the continual rise in Maintenance fee's for timeshare units end up eventually pricing the resorts right out of the business?

Scott Billings

You have to do the math to find out the answer. In some cases the answer is "maybe" and in other cases the answer is "probably not".

In our case we own large 4BR & 3BR lockout untis where with 4 weeks ownership we can convert that to 11 weeks of lodging that when considering MFs/Taxes at $900 for the 4BRs and $820 for the 3BR and including exchane II fees, that equals $4500 for 11 weeks of luxurious lodging. That comes to $409 per week.

When you consider the initial investment in these 4 weeks has been more than paid off not only when considering the rentals but also in the savings over the years, these 4 weeks have paid for themselves over again.

From this math point of view, timesharing MFs & Taxes are still reasonable. Now if you were to consider a 1BR or 2 BR which does not allow this flexibility, then that becomes another story with different math conclusions and a whole new ball of wax as they say.

frenchieinme

 

[hunkyleebo]

It's not the MF I worry about, it's the Special Assessments to keep the older resorts habitable. The laws (at least in FL) need to change so that it's easier to shut down an old resort and sell the land.

 

[timeos2]

Plan ahead and it all works

It's not the MF I worry about, it's the Special Assessments to keep the older resorts habitable. The laws (at least in FL) need to change so that it's easier to shut down an old resort and sell the land.

Its not only the laws. Even if they were altered - not likely to occur - the Associations would be restricted by the disclosure documents which also place onerous restrictions on any potential disbanding of the resort.

All of which means it is far better to have a BOD/Management that will properly maintain and upgrade the resort rather than low ball fees and then need large special assessments to recover every few years. Its easier to handle on a planned basis over over time than "emergency", often patchwork efforts.

 

[Polly Metallic]

I don't think so. As near as I can tell, hotel/resort rental rates are going up just as fast, and with a larger cost basis.

In *most* markets, if I tried to rent something other than another timeshare with the sum of my MFs plus lost opportunity on the purchase price, I wouldn't get anything nearly as nice.

I agree with this completely. Maintenance fees seem to rise in line with cheap hotel rates. Maintenance fees increase, but so do hotels rates, so the price relationship remains constant. The way I look at it is, 1) the cost to buy a timeshare is the price you pay to get facilities that are over and above a mediocre hotel. 2) The maintenence fees are the equivalent of a base price to get the most basic of accomdations. 3) Exchange fees are +/- the equivalent of paying hotel room tax, depending on the value of your timeshare week.

 

[AwayWeGo]

Luxury Timeshare Accommodations At Motel 6 & Super 8 Rates.

I agree with this completely. Maintenance fees seem to rise in line with cheap hotel rates. Maintenance fees increase, but so do hotels rates, so the price relationship remains constant. The way I look at it is, 1) the cost to buy a timeshare is the price you pay to get facilities that are over and above a mediocre hotel. 2) The maintenence fees are the equivalent of a base price to get the most basic of accomdations. 3) Exchange fees are +/- the equivalent of paying hotel room tax, depending on the value of your timeshare week.

I think that is correct. I think it's also explains the semi-fuzzy thinking behind my personal timeshare-cost baseline of getting spacious & luxurious places to stay in desirable vacation locales for approximately the rack rates of those famous economy motel chains.

Of course, it never works if I buy big-bux timeshares for full freight. The key is buying timeshares resale for nickels on the full-freight dollar.

Putting it another way, I can pay years & years of rising maintenance fees for the difference between buying a timeshare for big bux & the cost of buying it low via eBay.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[bnoble]

One of the other things that comes to mind: quite by accident, I bought resorts that seem to have owner-controlled boards, and are no longer in active sales.

This seems to really help keep a sane MF strategy---neither artificially low to spur sales by deferring important maintenance and reserve costs, nor too high because the BOD seems to have the owners' best interests at heart. The annual letters explaining fee increases are pretty open about what the money is going for, what the plans are for upkeep and improvement, etc.

 

[hunkyleebo]

Timeos2, the legislation is needed to override some of the onerous restrictions (e.g., requiring 100% of owners to agree to disband). You couldn't get 100% of a large group of people to agree on what time it is.

 

[AwayWeGo]

Consensus Can Be Elusive -- Not That There's Anything Wrong With That.

You couldn't get 100% of a large group of people to agree on what time it is.

Not to mention agreement on some vexing brain teaser along the lines of How Many Grasshoppers Does It Take To Kick All The Seeds Out Of A Dill Pickle ?

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[Docklander]

Medium tier destinations will probably be ok but I can see the 'high end' destinations getting themselves into trouble with a combination of high MFs and the increasingly ridiculous prices developers are asking for units. Take Westin St John as an example; Starwood are asking $54,000 a week for a 3 bed 3 bath unit in platinum season with maintenance fees (before taxes!) of $1,687/week. For the same time of year you can purchase 4 weeks in your own private luxury villa (3,000 sq ft + deck + pool) with stunning views over the bay for $100,000 with total MFs of $5,200 for the month. Fractional ownership (or their equivalent) will start to make more and more sense the higher the prices go and that (IMHO) will be the biggest risk to the high end TSs.

 

[AwayWeGo]

Be Sure You Guard Your Pocketbook Whenever The Legislature Is In Session.

legislation is needed to override some of the onerous restrictions (e.g., requiring 100% of owners to agree to disband).

Can legislation override deeded property rights & restrictions?

When it's for a public purpose (e.g., highways, airports, etc.), government can legally take over people's private property by paying just (i.e., fair) compensation for it.

Is there a government role (i.e., public purpose) in rewriting the laws -- even the vexing laws -- regarding condo association dissolution rules ?

Just asking. I don't know from property rights legislation.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​