What's wrong with Timeshares and can the industry survive these issues?

[e.bram]

Timesharing is DEAD. Points killed it.

 

[pedro47]

The timeshare developers do not need to change their sales model because the XX 10% generation have too much disposable income to spend on large homes and condos, luxury automobiles, luxury vacations and designer clothes. IMHO..

 

[Docsdrillers]

When the condo in Miami went down and the new laws for Florida forcing the cash reserve to be fully funded that ultimately will be the death knell of the florida timeshare industry.So far those of us owning Platinum weeks at Ocean Pointe will be able to survive.However those with silver or gold weeks that the resort won't even take back for free are in trouble..not to mention all the timeshare owners in Orlando that won't remotely come close to being able to rent their units at close to the MF's.

On a different note; i hope someone from Marriott reads these threads.
I've always been of the belief that once you bought a Marriott TS you became loyal to the brand and whenever you travel you try to stay in Marriott properties..i've started asking all our friends we made down here over the past 20 years at Xmas time if they would still continue to try and stay in Marriott hotels once they sold or got rid of their TS weeks.,.the answer was 100 % yes...since they still own Marriot visa cards and want to accumulate Marriott Rewards points for future travel.
So in my mind the Big guys running Marriott don't understand their own product and should view TS owners as a feeder for hotel sales.so rather than penalize the secondary market purchases they should embrace it and encourage it ..we are after all the cheapest advertising they will ever have,
Think about it..if i bought from the developer originally and then that same week got transferred by multiple sales later on,each time that next family became loyal to the Marriott brand when traveling anywhere in the world..someone should do a study of how many nights of hotel on average each Marriott each owner generates annually.

thoughts?

ps i learned something new this week..i was always of the belief that to be an Interval member you needed to own a TS..WRONG..initially yes..but after you sell it as long as you pay the Interval fees you are grandfathered for life...but don't ever let your dues lapse or you will never get back in..That means that forever you can make use of getaways that truly present great value.

 

[boyblue]

When the condo in Miami went down and the new laws for Florida forcing the cash reserve to be fully funded that ultimately will be the death knell of the florida timeshare industry.So far those of us owning Platinum weeks at Ocean Pointe will be able to survive.However those with silver or gold weeks that the resort won't even take back for free are in trouble..not to mention all the timeshare owners in Orlando that won't remotely come close to being able to rent their units at close to the MF's.

On a different note; i hope someone from Marriott reads these threads.
I've always been of the belief that once you bought a Marriott TS you became loyal to the brand and whenever you travel you try to stay in Marriott properties..i've started asking all our friends we made down here over the past 20 years at Xmas time if they would still continue to try and stay in Marriott hotels once they sold or got rid of their TS weeks.,.the answer was 100 % yes...since they still own Marriot visa cards and want to accumulate Marriott Rewards points for future travel.
So in my mind the Big guys running Marriott don't understand their own product and should view TS owners as a feeder for hotel sales.so rather than penalize the secondary market purchases they should embrace it and encourage it ..we are after all the cheapest advertising they will ever have,
Think about it..if i bought from the developer originally and then that same week got transferred by multiple sales later on,each time that next family became loyal to the Marriott brand when traveling anywhere in the world..someone should do a study of how many nights of hotel on average each Marriott each owner generates annually.

thoughts?

ps i learned something new this week..i was always of the belief that to be an Interval member you needed to own a TS..WRONG..initially yes..but after you sell it as long as you pay the Interval fees you are grandfathered for life...but don't ever let your dues lapse or you will never get back in..That means that forever you can make use of getaways that truly present great value.

What the Marriott folks must realize is the the resale market provides a soft landing for folks who if not for the secondary market would be taking civil action.

 

[TolmiePeak]

Timesharing is DEAD. Points killed it.

The sales pavilion at the Lakeshore Reserve was packed with victims when I was there a few weeks ago.

 

[dioxide45]

Timesharing is DEAD. Points killed it.

Points are just another form of timeshare. Record number of people are buying points.

 

[Larry M]

Here are four things that I believe are wrong with timeshares that if fixed could change things. There are other issues but if any one of these could be fixed, the industry might enjoy new life.

• Purchase price – Over and above a great return on investment for developers, buyers pay commissions for high pressure salespeople that are not exactly cheap. This is compounded by the unrealistic expectations of new owners.
• Maintenance Fees – In all fairness, MF is a function of use, so seasons are not considered when making the assessment, however when an owner is unable to use their week the seasonal difference becomes evident in terms of ease of exchange or rental.
• Divestment – When change of circumstance or need, occurs and the TS owner must sell, they are left to absorb an unfair portion of development cost. This dynamic is the main reason that TS’s now have a poor reputation.
• Resales – Overdevelopment in the most popular TS markets is a problem. These weeks now turn up everywhere and sometimes drive prices below MF. Of all the issues with timeshares, this one is probably the most difficult to fix.

I posted an idea a week ago that I thought would be helpful, I realized from the responses that we have some really knowledgeable owners. So why not think bigger, if we can come up with a fix to the issues there would be a blueprint to build TS that work equally for the developer and owner.

You never mentioned the problems caused when the developer maintains a seat on the board. My last timeshare was independent (not part of a chain), and the board (elected only from the owners) ran the show. Yes, they made some mistakes and should have had more oversight, but the properties were well-maintained, the maintenance fees were reasonable, and they never nickel-and-dimed you with add-on fees for every little thing.

 

[LannyPC]

Overdevelopment in the most popular TS markets is a problem. These weeks now turn up everywhere and sometimes drive prices below MF. Of all the issues with timeshares, this one is probably the most difficult to fix.

It's not just "Overdevelopment in the most popular TS markets is a problem." It's anywhere there is a supply greater than demand. Key West is a "popular TS [market]" yet most TSs there have positive value because the demand seems to outweigh the supply. It's that famous marketing law of supply and demand.

I think (IMHO, FWIW) that many developers felt that TSs were the best thing to hit the travel industry since the airplane and felt that, the more you build, the more people will buy. Unfortunately, too many were built and not enough people wanted them.

You say that "this one is probably the most difficult to fix." One possible, but definitely difficult, solution would be to sell off a lot of these resorts whole as perhaps condos or other uses. That would reduce the supply and bring it closer to the demand. Of course, this is a matter of easier said than done.

 

[LannyPC]

The question is what would be the features of a good TS?

IMHO, here is my simple answer. "A good TS" would be one where what a rental rate would easily exceed the MFs.

Now to elaborate, what the developer sales people try to convince buyers of is that owning what they're trying to sell will save the owner thousands of dollars in vacation expenses each trip when you factor in accommodations, food, attractions and activities, and other supposed discounts one would get by owning at said resort and belonging to a connected travel club such as discounts on car rentals, airline fares, and restaurants, etc.

If owning a TS at that particular resort would actually (don't pay attention to the skewed facts and figures the sales people present) save you thousands of dollars each trip, then, IMHO, it would be "a good TS".

 

[AwayWeGo]

"A good TS" would be one where what a rental rate would easily exceed the MFs.

That's exactly how it was for our initial 3-4 years of timeshare ownership.

We rented out our nice 3BR Orlando timeshare for enough to cover maintenance fees plus a little something leftover to pay for our own Last Call reservations -- sometimes for a 3BR unit at our own nice timeshare resort. It was almost like vacationing for free.

After those 1st few years, though, it got harder & took longer to get renters, & the margin shrank between what we collected in rent & what we had to shell out in maintenance fees. Before long the game was no longer worth the candle. Eventually, we gave away that timeshare.

It was nice while it lasted.

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

 

[vacation911]

ROFR is not the timeshare owner's friend. ROFR does not keep timeshare values up. ROFR does not keep timeshare timeshares from being sold for a pittance. ROFR just means that the timeshare company gets to buy bargain-priced timeshares out from under buyers who have negotiated low prices. The willing buyer says Yes to the low price for a timeshare but the timeshare company swoops in & grabs it up thanks to ROFR. The timeshare seller doesn't get a nickel more than the willing buyer was already set to pay. ROFR just saw to it that the timeshare company got the great deal instead of the ready & willing buyer.

ROFR = ROFL.

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

You make a good point, but I think if ROFR (Right of First Refusal) was exercised more often on higher amounts, it could help maintain resale values. Without ROFR, developers would have no way to prevent timeshares from being sold for next to nothing.

For a seller looking to get out, ROFR doesn’t really change much—they’re still out if it’s exercised. ROFR is more of a buyer's concern. If people worried that ROFR might actually be executed, they’d probably be more inclined to make higher offers if they really wanted the timeshare.

But because developers almost never exercise it, buyers feel safe paying next to nothing. Meanwhile, sellers—just wanting to get rid of their timeshare—won’t even try to ask for more, since they know the market is flooded with those “giveaway” deals. In fact, sellers may even offer buyers extra incentives just to seal the deal.

It’s sad, but that’s what happens when ROFR isn’t used—it’s basically the same as not having it at all. At the end of the day, ROFR just adds more lag time to a transfer and rarely leads to a buyback, unless it’s for a super-prime unit or week. And even then, it’s not often enough to make a real impact.

 

[dioxide45]

You make a good point, but I think if ROFR (Right of First Refusal) was exercised more often on higher amounts, it could help maintain resale values. Without ROFR, developers would have no way to prevent timeshares from being sold for next to nothing.

There does seem to be an uptick in resale prices when DVC is more active with ROFR than when they are not. When a developer is active it does introduce another buyer into the mix, thus creating more demand. That said, it doesn't protect owners or protect the price they paid. There is no guaranty that a developer will be there to exercise ROFR or what their floor price might be.

 

[AwayWeGo]

Without ROFR, developers would have no way to prevent timeshares from being sold for next to nothing.

Even with ROFR, developers have no way to keep timeshares from selling for next to nothing. All ROFR does is make it so only the developers can buy timeshares for next to nothing.

If you're about to buy a ROFR timeshare for peanuts, the developer holding ROFR can swoop in & buy it out from under you for peanuts. It still sells for peanuts.

ROFR, that is, does nothing to prop up timeshare values. ROFR, if exercised, just blocks individuals from access to low value timeshares while the timeshare developer grabs them up for itself.

That's why ROFR = ROFL.

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

 

[vacation911]

There does seem to be an uptick in resale prices when DVC is more active with ROFR than when they are not. When a developer is active it does introduce another buyer into the mix, thus creating more demand. That said, it doesn't protect owners or protect the price they paid. There is no guaranty that a developer will be there to exercise ROFR or what their floor price might be.

I totally agree with you on this. Disney Vacation Club (DVC) definitely enforces their Right of First Refusal (ROFR). It really stops those super low “giveaway” prices from happening—you definitely don’t see DVC contracts selling for $1.00!

I don’t really see this as something where the developer should offer more, either. The seller already agreed to the terms of the deal, so ROFR is just the developer’s right to step in and buy for the same terms. If the owner isn’t comfortable with such a low price, they probably shouldn’t strike that deal in the first place. The sale was made on those terms, and I don’t think the developer needs to or should up the offer.

I think this approach, combined with DVC’s niche appeal and the higher rental values they offer, has made them a prime example of how a developer can maintain integrity in resale value. ROFR isn’t a guarantee, but it definitely feels more like a buyer issue. If an owner is willing to accept such a low price, it’s either going back to the developer or being scooped up by another buyer for the same deal.

 

[vacation911]

Even with ROFR, developers have no way to keep timeshares from selling for next to nothing. All ROFR does is make it so only the developers can buy timeshares for next to nothing.

If you're about to buy a ROFR timeshare for peanuts, the developer holding ROFR can swoop in & buy it out from under you for peanuts. It still sells for peanuts.

ROFR, that is, does nothing to prop up timeshare values. ROFR, if exercised, just blocks individuals from access to low value timeshares while the timeshare developer grabs them up for itself.

That's why ROFR = ROFL.

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

I agree with that when it's not exercised. Disney Club exercises it, and I think it's helpful.

 

[Docsdrillers]

You never mentioned the problems caused when the developer maintains a seat on the board. My last timeshare was independent (not part of a chain), and the board (elected only from the owners) ran the show. Yes, they made some mistakes and should have had more oversight, but the properties were well-maintained, the maintenance fees were reasonable, and they never nickel-and-dimed you with add-on fees for every little thing.

THE OP board is rigged.The developer controls 50% of the votes and recently voted in a Points owner to have the balance of power if needed.

 

[Docsdrillers]

At OP we have the option to deposit our unit every second year for 100K Marriott Reward points..that worked when MF's were 649.00..Now at 2921 we should be getting 450K..then at least we'd be where we started..

 

[jp10558]

So I don't think the TS industry is in trouble - they're selling more and more every year, and for the general public I don't see how the TS reputation could be lower. So obviously the market works, and bad press isn't hurting it. It also works reasonably well for those of us who are on TUG and do the research to get value for money. I think it's fundamentally wrong to think a good TS has to be one that rents for multiples the MFs. Look at the thread on here about Valuing a TS for a long discussion on it.

 

[boyblue]

IMHO, here is my simple answer. "A good TS" would be one where what a rental rate would easily exceed the MFs..

Are we talking rent rate 20% above MF? 30%?

 

[4TimeAway]

It’s interesting to me that we are debating something like this and think we all might be missing the point.

The fractional model has several options at several different price points and has existing for many years inside of family networks with the communal family cabin the woods.

Honestly for most people real estate vacation homes historically have been a huge money drain. In more recently with low interest rates and huge appreciation this has turned into an asset class and appreciated, so the mast is not quite as clearly negative. We could blame the Boomers for their retirement flight out of citied to the hills, beaches, and warm locals for much of this, but that’s not my point.

Here’s how I see the industry:
Timeshare replaces hotels- pure consumption
Fractional Ownership replaces vacation homes- limited appreciation potential
Vacation Condos- moderate appreciation potential some offer rental management
Vacation Homes- maximum appreciation potential

If you have time and money, we find ways to spend it. Life being finite and many people looking to have pleasant experiences are sold timeshares to “save money” or “make money.” The make money part of timeshares seems mostly dead now, so that leaves saving money as the main motivation. Personally, I think we spend more on timeshares than our standard camping trips in the past, but I must admit the accommodations are quite pleasant and to replace the timeshare with an STR or Hotel would not be any less expensive and would probably be 50%+ higher.

Third Home, Airbnb, etc. have disrupted timeshares growth potential and now are cannibalizing aspects of what the developer brought to the table. Developers/Management Companies responded with pushing points and flexibility in their systems to fight this and seem be holding their own now.

Looking forward the economy seems the biggest risk to developers (as it has always been) and many projects they plan must be prepared to ride out a recession or two. My guess is shortening the pipeline and offering more options is why Hilton (HGVC, HVC, etc.) bought Blue Green and why consolidation in the industry will continue. Bottomline is the game will continue...

 

[boyblue]

It’s interesting to me that we are debating something like this and think we all might be missing the point.

The fractional model has several options at several different price points and has existing for many years inside of family networks with the communal family cabin the woods.

Honestly for most people real estate vacation homes historically have been a huge money drain. In more recently with low interest rates and huge appreciation this has turned into an asset class and appreciated, so the mast is not quite as clearly negative. We could blame the Boomers for their retirement flight out of citied to the hills, beaches, and warm locals for much of this, but that’s not my point.

Here’s how I see the industry:
Timeshare replaces hotels- pure consumption
Fractional Ownership replaces vacation homes- limited appreciation potential
Vacation Condos- moderate appreciation potential some offer rental management
Vacation Homes- maximum appreciation potential

If you have time and money, we find ways to spend it. Life being finite and many people looking to have pleasant experiences are sold timeshares to “save money” or “make money.” The make money part of timeshares seems mostly dead now, so that leaves saving money as the main motivation. Personally, I think we spend more on timeshares than our standard camping trips in the past, but I must admit the accommodations are quite pleasant and to replace the timeshare with an STR or Hotel would not be any less expensive and would probably be 50%+ higher.

Third Home, Airbnb, etc. have disrupted timeshares growth potential and now are cannibalizing aspects of what the developer brought to the table. Developers/Management Companies responded with pushing points and flexibility in their systems to fight this and seem be holding their own now.

Looking forward the economy seems the biggest risk to developers (as it has always been) and many projects they plan must be prepared to ride out a recession or two. My guess is shortening the pipeline and offering more options is why Hilton (HGVC, HVC, etc.) bought Blue Green and why consolidation in the industry will continue. Bottomline is the game will continue...

The vacation clubs with their multiple locations are cool because theoretically you can go to many different places without engaging the trading companies. Funny thing is we own Vacation Village but have never used its internal system because it seems like we get more value for our 92,500 points through RCI. I've never done a comparative calculation but as RCI fees creep up I'm going to have the check this out.

I always check our cost per room, per night, and despite rising fees everywhere, we're always below hotels and vacation rentals of similar or lesser quality.

 

[ScoopKona]

Here's how to fix this fast: People need to stop falling for the lure of "free" stuff.

Those "free gifts" cost money. The OPC who offers random couples the free gift gets paid for putting a couple onto the passenger van to the presentation, whether or not they buy anything. OPCs typically make more than salespeople. That is where the mark-up comes from.

Roughly once a month in Key West, we'd get someone who looked at her hotel bill for the week, marched to the sales office, and asked for the abbreviated elevator pitch. (It was almost always "her." Never "him." He was too busy getting loaded at Sloppy Joe's.) Close to 100% of the time, she walked out with a timeshare week. No gifts. No OPC. No song-and-dance. She knew what she was already spending. She saw what it costs. She was capable of doing basic math.

THAT is the market for timeshares. Everyone else has to be lured in with gifts and then sold. When Hapimag started timesharing, all of their customers were like this. Skiers who were already paying more and getting less. So they bought without any OPCs, free gifts, or sales presentations. All that came later when 100 Disney World timeshares sprung up in the space of 10 years.

 

[CalGalTraveler]

Here's the economics of oversupply. New building: You sell a developer timeshare or you sell individual condos.

Say the individual condo sells for $1.5 mil. That same condo can sell for $4.5 mil ($75k * 52 weeks). Net $3 mil. Even with foreclosure and customer service costs for example $1million per condo you are way ahead. Multiply $2 million by 50 condo units you are ahead by $100 million. Multiply that by 100 units, that's $200 million.

Take back the condo week for nothing when surrendered because of oversupply and sell for $75k again. Lather, rinse, repeat. Buyers cannot afford a $1.5million vacation condo but can afford $75k for their annual vacation - a deal compared to full ownership. Full ownership of a condo can incur costs and risks of maintenance. Instead of $2000 maintenance/year you are closer to $16,000 - $20,000/year plus capital improvements.

No brainer for the developer. OPM: The HOA pays for the capital reserves to maintain the building for when you eventually exit and sell off this prime real estate.

OPM = Other People's Money

 

[Sugarcubesea]

I have purchased all of my timeshares resale and all of mine have been purchased in areas that the resale market for these timeshares keeps going up not down. I purchase all of my timeshares to use in the winter months...

 

[4TimeAway]

I have purchased all of my timeshares resale and all of mine have been purchased in areas that the resale market for these timeshares keeps going up not down. I purchase all of my timeshares to use in the winter months...

Some places really are a deal. I think that's why many TUG Members keep buying them.

I also think its like my Marbrisa unit, I'm mid-range on the $/pt at about $.15/pt but it does have GPX with the last minute deals at about $100/night all in at places that people routinely pay more than twice that amount. The way I see it every other year at a last minute deal makes the economics work well enough.

Roughly once a month in Key West, we'd get someone who looked at her hotel bill for the week, marched to the sales office, and asked for the abbreviated elevator pitch....She was capable of doing basic math.

I think this is very true for most people. Even a 2 Bedroom next to LegoLand for $200/night is well below hotel costs for the area. The only issue I see is how large of a price drop the salepeople give for Retail Purchase.

What the industry struggles with is when the salepeople call it Real Estate to imply appreciation or atleast a store of value, knowing that's not true. They layer on the possibility to "make money" renting, but really that is iffy and even blocked at some places. If there was an efficient resale market that was not negative value for the weeks (ok, lose 81-90% of purchase price) then it would be easier to buy are Retail knowing the possible resale price. Note: I do believe there are placed that have this, just not generally the rule.

No brainer for the developer. OPM: The HOA pays for the capital reserves to maintain the building for when you eventually exit and sell off this prime real estate.

I do argee that OPM is huge profit center for the TS industry.