A timeshare is a form of vacation property ownership. With timeshares, the use and costs of running the resort are shared among the owners. While the majority of timeshares are condominium vacation resorts, developers have applied the timeshare model to houseboats, yachts, campgrounds, motor homes and cruises.
The notion of a timeshare was originally created in Europe in the 1960s. A ski resort developer in the French Alps innovatively marketed his resort by encouraging guests to "stop renting a room" and instead "buy the hotel". The developer was successful in increasing occupancy and the idea spread worldwide. While a useful tool for many, the timeshare industry has also become a magnet for attracting illegal and barely legal methods for the sale and resale of property.
Methods of use
Timeshare is a business model whereby a company buys something and sells small slices of it to customers. This concept is most frequently used for vacation condominiums/homes, but it has also been used for high end private jets. In general, "timeshare" refers to the former rather than the latter.
Timeshare owners may elect to:
Use their usage time
Rent out their owned usage
Give it as a gift
Exchange internally within the same resort or resort group
Exchange externally into thousands of other timeshare resorts
Though some developers may limit which of these options are available at their properties
Timeshare owners can elect to stay at their resort during the prescribed period, which varies depending on the nature of their ownership. In many resorts, they can rent out their week or give it as a gift to friends and family.
Timeshare offers owners the possibility to exchange their week, either independently or through several exchange agencies, to stay at one of the thousands of other resorts worldwide. There are many exchange agencies, of which the two largest are Resort Condominiums International and Interval International.[citation needed] Both have resort affiliate programs and members can only exchange to affiliate resorts. It is rare to find a dual affiliate resort, it is more common for a resort to be affiliated with only one of the larger exchange agencies. Together they have over 5800 resorts. The timeshare resort one purchases at determines which of the major exchange companies can be exchanged through. Both RCI and II charge membership fees and exchange fees. They also bar members from renting weeks they have exchanged for.
Timeshare owners may also arrange a direct exchange, this requires locating a timeshare owner with the location and weeks both mutually desire. This form of exchange is rare but since it can save in exchange fees it is often sought after. Several bulletin boards have been created to help timeshare owners meet others and swap.
Timeshare takes different forms depending on who is selling it. The vast majority is one week of ownership, i.e. 1/52 year, but some developers sell point based systems that are a different form of vacation currency that allow hotel stays, car rentals, and stays at large networks of resorts.
Ownership
Types of ownership
Fixed, Floating and Rotating Weeks
Ownership is often sold as weeks, the use of these weeks can be fixed, floating or rotating weeks.
Fixed Week Ownership
The most basic timeshare unit is a fixed week; the resort will have a calendar enumerating the weeks roughly starting with the first calendar week of the year. As an owner you may own a deed to use a unit for a single specified week. For example week 26 normally includes the Fourth of July Holiday. If you owned Week 26 at a resort you could use your week every year.
Floating
Sometimes a timeshare is sold as floating weeks. The ownership will be specific on how many weeks you own and from which weeks you may select for your stay. An example of this, a timeshare may be a floating summer week where the owner may request any week during the summer season generally weeks 22 through 36. In this example there would be competition for prime holidays such as the weeks of Memorial Day, Fourth of July and Labor Day. The weeks when schools may still be in session would not be so high in demand. Some floating contracts exclude major holidays so they may be sold as fixed weeks.
Rotating
Some timeshare is sold as rotating weeks. In an attempt to give all owners a chance for the best weeks the weeks are rotated forward or backward through the calendar so one year the owner may have use of week 25, then week 26 the next year and then week 27 the year after that. This method does give each owner a fair opportunity for prime weeks but it is not flexible.
Deeded vs. Right to Use
A major difference in types of timeshare ownership is that between deeded and right to use contracts. With deeded contracts the use of the timeshare resort is usually divided into weeklong increments and these are sold as fractional ownership and are real property. As with any other piece of real estate you may use your week, rent your week, give it away, or leave it to your heirs. Whilst this form of ownership can offer additional security to the owner as a form of physical ownership, deeded timeshare ownership can be as complex as outright property ownership in that the structure of deeds varies according to local property laws. Leasehold deeds are common and offer ownership for a fixed period of time after which the ownership reverts to the Freeholder. Occasionally, leasehold deeds are offered in perpetuity however many do not convey ownership of the land but merely the apartment or 'unit' of accommodation.
With right to use, the timeshare purchaser has the right to use the property in accordance with the contract but at some point the contract ends and all rights revert to the property owner. In other words, the right to use contract grants the right to use the resort for a specific number of years. In many countries there are severe limits on foreign property ownership, so this is a common method for developing timeshare resorts in countries such as Mexico. Disney Vacation Club is also sold as a right to use. Care should be taken with this form of ownership as the right to use often takes the form of 'club membership' or right to use the reservation system. Where the reservation system is owned by a Company not in the control of the owners, the right of use may be lost with the demise of the controlling Company.
Vacation Clubs
Vacation clubs are organizations that may own timeshare units in multiple resorts in different locations. Some clubs consist only of individual weeks at other developer's resorts. They are sold both as deeded or right to use and club members may reserve vacation time at any of the owned resort units based on availability. Vacation clubs cater to a wide range of economic backgrounds and income levels.
Points Programs
Resort based points programs are also sold as deeded and as right to use. Points programs annually give the owner an amount of points equal to the level of ownership. The timeshare owner in a points program can then use these points to make travel arrangements within the resort group. Many points programs are affiliated with large resort groups offering a large selection of options for destination. Many resort point programs provide flexibility from the traditional week stay. Resort point program members, such as Worldmark, may request from the entire available inventory of the resort group.
Exchange company point programs are not a method of ownership nor are specifically associated with one resort or resort group. With the exchange company points programs the members may be limited to exchanging for weeks deposited by other members.
A points program member may often request fractional weeks as well as full or multiple weeks stays. The number of points required to stay at the resort will vary based on a points chart. The points chart will allow for factors such as:
The popularity of the resort;
The size of the accommodations;
The number of nights;
The popularity of the season;
and the specific nights requested.
There is flexibility as well as complexity in point programs.
Important Note on Ownership
With any of the above mentioned ownership methods, a timeshare owner is legally and contractually tied to that ownership.
A timeshare owner has rights, responsibilities and legal obligations. Once the timeshare contract is made it is not easily ended.
These contracts and obligations belong to the timeshare owner until the timeshare is sold or ownership is transferred through some other means.
Rescission Period
In many developer contracts (and often required by government statutes and/or regulations) there may exist a Rescission period. The Rescission period outlines how many days after a timeshare purchase, from a developer, that a buyer has an opportunity to change their mind and cancel the purchase. The Rescission period is usually only a few days long and the buyer must follow the cancellation procedure exactly or risk the request to rescind being ignored.
Types and sizes of timeshare units
Timeshare properties tend to be apartment-style units ranging in size from studio units (with room for two) to three and four-bedroom units.[citation needed] These larger units can comfortably house large families. Timeshare units normally include fully equipped kitchens with a dining area, dishwasher, televisions, VCRs and more.[citation needed] It is not uncommon to have washers and dryers either in the unit or easily accessible on the resort. Kitchens are equipped to the size of the unit, so that a unit that sleeps four should have at least four glasses, plates, forks, knives, spoons, and bowls so that all four guests can sit and eat at once.[citation needed]
Timeshare units are usually listed by how many the unit will sleep and how many the unit will sleep privately.
Sleeps 2/2 would normally be a one bedroom or studio
Sleeps 6/4 would normally be a two bedroom with a sleeper sofa
Sleep privately refers to the number of guests who will not have to walk through another guests sleeping area to use a restroom. Timeshare resorts tend to be strict on the number of guests per unit. Unit size can effect demand at a given resort where a two-bedroom unit may be in higher demand than a one-bedroom unit at the same resort. The same does not hold true comparing resorts in different locations. A one bedroom with a great location may still be in higher demand than a resort with less demand. An example of this may be a one bedroom at a great beach resort compared to a two bedroom unit at a resort located inland from the same beach.
The concept of vacation timeshare has also been extended to luxury items such as planes and luxury cars.
Scope of timeshare industry
The scope of today's timeshare industry in the USA is well-documented. The ARDA International Foundation ("AIF"), which is the research arm of the American Resort Development Association ("ARDA"), reports there are 1,604 timeshare resorts, with 154,439 units, in the USA as of January 1, 2006 (AIF 2006). Though reportedly fewer than six percent of U.S. households own a timeshare, the prevalence of timeshare ownership continues to expand (Scoviak 2005). Approximately 4.1 million households own one or more U.S. timeshare weekly intervals or points-equivalent as of January 1, 2006, an increase of five percent from the prior year (AIF 2006). About half of the resorts in the USA are currently selling timeshares, generating sales of $8.6 billion in 2005 (AIF 2006).
The global scope of the industry is not as readily quantified. Interval International, one of the two major timeshare exchange companies, reports there are 5,400 resorts in nearly 100 countries, with 2004 worldwide timeshare sales estimated at nearly $11.8 billion (Interval International 2006).
A market exists for the resale of timeshare intervals. Many of these can be found searching the Internet as well as an active market in the online auction sites such as that on eBay. Most management companies of individual timeshare resorts also have on-site resales offices which an assist you in selling your timeshare or purchasing additional weeks at the resale price. Some entrepreneurs allow donation of a timeshare for tax benefits.
Pros and cons
The timeshare industry has been widely criticized and even sometimes likened to a travel scam[1]. Unlike the customary renting arrangement, where the customer decides every year on the quality and price of accommodations, timeshare requires to make a major payment up front. There exist doubts as to whether timeshare buyers ever recover the money spent.
One of the major benefits of the product is the fact that vacation timeshare is real property. Resort developers purchase land in a location and develop a timeshare resort. They are actually selling consumers deeded weeks of real property at a specific location, meaning customers can do what they wish with the weeks they own. This flexibility includes the opportunity to rent out weeks that are not used or indeed to lend them to friends or family.
Many people complain that they cannot trade their weeks easily, or that the weeks they bought are suddenly "unavailable." There are also some complaints that owners have to return to the same resort every year, but there exist several companies that enable timeshare owners to exchange their weeks into literally thousands of resorts around the world. Using these companies, however, increases the overall financial cost of owning a timeshare. There are a growing number of independent timeshare exchange organizations available to timeshare owners.
Other complaints include issues surrounding the yearly maintenance fee. Some critics talk of ever escalating fees that mean owners cannot afford to keep their weeks due to financial pressure. These vary case by case, but many timeshare owners cannot afford the escalating fees. In the worst cases, there are maintenance fees, homeowners' fees, rental fees, fees for trading weeks, property taxes (depending on location), and an assortment of hidden fees that buyers were not aware of when they first bought their timeshares.
Persons interested in purchasing a timeshare are strongly advised to look online at the secondary market listings for the development they are interested in. Developers put a very large mark-up on new inventory and a new owner will find the resale value of their timeshare to be half or less of what they purchased it for. In the very worst of cases, timeshare resales are virtually impossible and users are stuck paying fees indefinitely. This is what is commonly known as the "timeshare trap," although companies like TimeShare Relief have developed that will, for a fee, take the worst of these timeshares. It is very helpful to have this information in hand before going into any timeshare sales presentation.
Like any other product, timeshare exchange is subject to the law of supply. This should make the exchange mechanism a fair and meritocratic system. For example if a timeshare owner deposits a studio apartment in low season that owner is unlikely to be able to exchange into a villa during a country's high season. In practice the major exchange companies have proprietary exchange formulas that add complexity to the system. The study of and issues revolving around exchanging are beyond the scope of this article and should be researched before making any timeshare purchase.
One aspect that is little known outside of the travel industry is that timeshare companies generally have very generous compensation programs for those sales agents able to convince individuals to take a tour of their timeshare facilities (something that normally takes approximately 90 minutes).[citation needed] With this in mind, a crafty individual can bargain for incredible vacation deals with a sales agent if they are willing to spare a bit of time. At one time, timeshares were known for applying considerable pressure to these touring individuals to purchase (even prompting a South Park episode called Asspen parodying the process), though that is generally supposed to have been lessened after a backlash by customers. The movie Once Around provided a look at the "inside" of a timeshare company. Each timeshare has its own rules for who it's willing to allow to tour, and most only allow one tour per year, though this does not prevent multiple tours from different resorts. An entire industry has sprung up based around this concept, negating the need for the frugal individual to do his own bargaining.
Several people have discussed what should be the motives for purchasing a timeshare. It is important to review them based on the facts and avoiding to be trapped with false expectations.
