What I learned about timeshares, and you can, too

Last weekend my wife and I spent a weekend in Las Vegas, with the cost of the hotel partially offset by having to visit a time share presentation. Anybody who has hit a certain income level has probably received a call from a timeshare company at least once, offering a free vacation, free hotel stay, or some other nice-sounding perk in exchange for visiting a “no-strings-attached” presentation. There’s nothing wrong with signing up for those perks, as long as you know what to expect, and what to do during one of those presentations. Here’s some random tips that I gathered after attending a few of those.

What are timeshares?

Whenever a real estate developer builds one of those nice towers in a highly touristy place like Orlando, Las Vegas, San Diego, etc., they would like to sell those condo units to interested parties. However, unless you happen to live in a highly touristy place, your interest in purchasing one is probably quite minimal. Spending vacation there, however, is another story. Hence the timeshare company breaks up a single condo ownership into roughly 50 weeks. Buying a timeshare entitles the owner to one week at the aforementioned property, with 1-2 weeks of the year left for various maintenance work, like replacing the carpet, or installing a new dishwasher.

Ok, I get it, so you buy a week?

The weeks sold can be of different variety, and sell for different prices. It’s a no-brainer that being in Las Vegas for New Year’s or at Lake Tahoe in the midst of the ski season beats Las Vegas in July, or vacationing in Florida during hurricane season. Not all weeks are created equal, and companies selling timeshares know that. They apply different pricing to their weeks, marking them as peak, high and low season. Naturally you pay less for a low season week than what you pay for a peak week.

Some trickier ones (like Westgate) tell you that they’re selling a floating week – the week you can use whenever, as long as you call the company in advance. The trick here is that the concept of peak weeks still exists, and you’ll be charged extra for it.

Some get even trickier, and sell you points. Points are assigned to your account, as you’re making your regular timeshare payments, and they generally seem lavish, as you’re told that you’ll be given 500,000 points each year, which you can then use to reserve the weeks and properties you’re interested in. Naturally, peak weeks cost more points, and generally the only way to get more points is either to skip the vacation this year, and let those points accumulate, or pay up to get more points.

Wait, did you say you could reserve other properties?

As going to the same spot will eventually get tiresome, timeshare companies are doing two things to add variety to your future vacations.

Number one: you can generally work out a deal to stay at a property belonging to the same company, if someone else wants to exchange. This might or might not cost extra, and usually involves calling the company, and letting them know which one of their other properties you’d prefer to visit. During the presentation the sales rep will make it seem as easy as it can be, but note that generally everybody wants to take their vacation during the peak seasons, nobody wants to go on vacation during a dead season. So when you call up the company and tell them you’d like to exchange your Orlando time share for a week in company’s San Diego property, people who own that timeshare in San Diego get a higher priority than you.

Number two: there are brokers on the market, like RCI or Interval, which work out deals for timeshares belonging to different companies. They charge for their services, as they’re not affiliated with the resort developers, but they do allow traveling internationally, since their directories generally include thousands of participating resorts.

What you will be told at a timeshare presentation

  1. The general script of any timeshare presentation I’ve been to starts with the sales rep asking the couple to list their favorite vacation spots. You’re told that this will be used for research on where to build next vacation spots, and those destinations will reappear in the conversation, as the sales guy as making a pitch on exchange programs (see above). If you feel like disrupting that part of the presentation, tell them your vacation destinations for the near future include Nepal, Greenland, and Iraq.
  2. You will be asked about the vacations you took. From here the script diverges two ways. One – the easiest – is if you haven’t taken any vacation, obviously money is the problem, and the timeshare company is here to help. Second – you list the vacations or trips you took over the past 12 months – involves tedious calculation of how much you spent for it.
  3. This is where it gets interesting – you will generally be asked to quote the entire price of vacation. In future comparisons these numbers will be used to compare with timeshare costs, and how much money you could’ve potentially saved, but you’re rarely asked to break down the price of airfare, hotel, and attractions. Most vacations are bought as packages, so rarely you have a clue as to what the exact cost of the component was. Usually you and the sales rep begrudgingly agree that you probably spend $180-200 for that hotel room.
  4. If you spend two 6-night weeks on a vacation every year, that means $2,400 of your budget goes towards paying for a hotel (12 nights at $200 each). So far so good. So what’s that going to be over the next 25 years? Well, you say, looks like $60,000 to me. And are the prices of hotels going to decrease or increase, asks the rep. You’re no fool, you know inflation theory, and you’re pretty sure it’s only going to increase. Is it fair to say that the prices of hotel rooms will be double of what they are now in 25 years? Year, pretty reasonable. Boom! Your sales rep multiplies everything by 2, and you’re obviously going to spend $120,000 on just hotel stay in the next 25 years. I will let you figure out what’s wrong with multiplying the whole sum by 2.
  5. At this point you’re probably indignant at hotel companies and yourself. Well, it turns out, your sales rep informs you, that you never get that money back. You’re just giving the money away without getting back anything, but a bag of receipts. You’re renting your vacation, spending $120,000 on it in the course of the next 25 years, and receiving 0% return on investment on that money.
  6. Introducing the concept of vacation ownership. Each timeshare company claims to have invented this, and according to sales rep, it’s only due to the goodness of their heart, helping doofuses like you and me save that $120,000 over the next 25 years, and also get something back in return. For something like $150 a month, you can be a proud owner of your vacation.
  7. At this point it totally makes sense. Why throw your money away to evil hotel companies, when you can be an owner of your own week, be able to own it forever, and gift it to your children, if you choose to (this concept of gifting or willing comes up often).

So why doesn’t it make sense?

The financials presented sound pretty good, right? Generally if you look at the pure numbers, they come to around $60-70 a night, generally pretty competitive rates when you line up the hotels in the same area. Well, the secret is that there are two kind of fees – your timeshare payments and maintenance fees.

The payments go towards collateral and interest (if you chose to finance), the maintenance fees go towards hiring people to maintain the resort (duh!) While your monthly payments are set in stone (a contract, that is), maintenance fees fluctuate from year to year, or so you’re told. Well, unless you’ve witnessed a strike of maintenance workers asking for lower wages, there’s only one way they can fluctuate – up. Those fees are applicable even if you decided to skip vacation for a year, either due to time constraints, or desire to accummulate points. Also, maintenance fees never go away. Even if you’re completely paid up on your timeshare payments, the maintenance fees still have to be paid. If you gift the paid-off timeshare to anybody, they will be stuck with maintenance payments set by the resort.

Another highly objectionable technique used by timeshare companies is points inflation. As the years pass by, and you keep paying stable payments and rising maintenance fees, you will find out that either you get fewer points for your money (few companies do this, as this is pretty obvious attempt) or things cost more and more points, requiring you to buy up some extra ones each year. Combine the payments + maintenance fees + any points fees or any peak/high week fees, and you’re most likely looking at $150-200 a night, the exact price quoted to you by the sales rep, only in reference to the evil hotel industry.

So does it ever make sense to buy a timeshare?

Generally the high dreams of getting any return on investment never materialize, as deteriorating properties require higher maintenance fees each year, and there are always more people selling timeshares than buying them. However, does it make any sense to get one?

  1. It seems to be a reasonably good deal for large families, or families taking vacations together. Since most of the timeshares can accommodate two families, in price comparisons you’re looking for 2 hotel rooms or hotel suites, which generally cost much more. But even then, your costs may very.
  2. It seems to make sense if you have any recurring travel. Every year I go to a conference in Las Vegas that always happens to be during the same week. But even then a timeshare would not make sense for me – the week is in August, when hotel rooms are cheap, and the conference might move to another location, which would imply getting a different hotel that year.
  3. If you happen to have a week in a property that someone else wants to buy out, you might make some money. But even then the investment return will most likely be obliterated by various fees attached by timeshare resorts.

When you think that getting (or not getting) one might make sense for you, make sure to check eBay Timeshares, Sell My TimeShare Now, or places that rent timeshares just to get sense of the going market rate. From reading the forums, it looks like the biggest mistake one can make (outside of buying a timeshare) is buying it retail as a result of a high-pressure presentation, that has a special rate going on that’s going to expire today (isn’t that convenient).

Another good place to do some reading is tug2 – forums for timeshare owners, run by people who actually bought timeshares, not companies that sell them. There’s apparently also a huge market to get rid of timeshares, and Timeshare Relief is the primary buyer for those. Most of people unloading timeshares are willing ti give them away for any price, just to get rid of high maintenance fees and property taxes, and hence you can frequently get a bargain if you’re looking for a secondary market timeshare. Vacation Rentals by Owner site will give you a good idea of what the vacation spots rent for in the markets you’re looking at – would suck to get a timeshare costing you $2,000 for the week, when larger vacation houses rent for half the price at the same location.