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Big Hotel Chains Have Legitimized the Time Share Business,
However, Like the Automoble, Most Time Shares
 Drop in Value Rather than Appreciate

By John Schmeltzer, Chicago Tribune
Knight Ridder/Tribune Business News

Chicago Tribune

June 13, 2004 - Times have changed in the 25 years since Art Merrick, who lives on an island outside Seattle, bought a time share that guaranteed him four weeks of vacation at a Washington state resort near Cascade National Park.

Melting away are the days of the high-pressure sales presentation in which customers were given incomplete or inaccurate information and forced to decide within minutes whether to spend thousands of dollars on a resort that was nothing more than a few drawings and some blueprints.

Fading, too, are most of the telemarketing calls that used to flood consumers with offers of a "virtually free" vacation in return for sitting through a sales presentation. The Federal Trade Commission's do-not-call list and trouble with prequalifying potential customers have all but ended that practice.

And apparently gone are the fly-by-night operators that prompted federal and state investigations and lawsuits from the 1970s to early 1990s. Today, there are major hotel chains pushing the product, and they don't want to damage their reputation over a $15,000 time share.

One thing, however, hasn't changed. Just like a new automobile, most time shares drop in value rather than appreciate.

"It's a buyer's market out there. It has been for years and years," said Bill Rogers, founder of the Timeshare User's Group Web site, www.tug2.net. "You can get a time share [from an existing owner] for less than 50 cents on the dollar."

In fact, he said, consumers buying time shares from another consumer pay an average of $5,000 compared with the average $14,800 price if purchased from a developer.

Despite that issue, sales of new time shares are booming. Nearly $6 billion in sales were recorded in 2003 at the nearly 1,600 U.S. resorts offering time shares, an 11 percent increase over 2002, according to Vacation Ownership World, an industry trade publication. About 3 million U.S. households own time shares at U.S. resorts.

Helping drive sales is a dramatic change in what is being sold. Rather than focusing on selling the traditional one-week-at-one-resort time share called an interval vacation, most developers are selling points that allow you to make shorter stays at more resorts.

The points system also has made it easier to trade vacation time through exchange companies, which allow you to trade time at resorts worldwide.

"Trading has turned out to be almost as important as the [home] resort," said Merrick, an account executive for a public affairs consulting company. "I've traded perhaps 30 times, and only once have I gone away disappointed."

But the biggest change in the industry has occurred in the past decade, when some of the nation's largest hotel companies entered the market. Now you can find the likes of Marriott, Hilton, Hyatt, Starwood Hotels & Resorts and Disney selling time shares.

"The publicly held companies brought to time sharing the Good Housekeeping seal of approval," said Sheldon Ginsburg, chairman and chief executive of Northbrook, Ill.-based Shell Vacations Club, one of the nation's 10 largest time-share companies.

"This past year, we had our eighth consecutive year of 20 percent increases in sales," said Ed Kinney, a spokesman for Orlando-based Marriott Vacation Club International. Marriott Vacation Club, a subsidiary of the giant hotel operator Marriott International Inc., is the largest seller of time shares. It sold $1.22 billion in time shares in 2003.

"We have so much value at stake in our customers we couldn't risk putting any pressure on them that would displace business out of our hotels. Branded companies just can't risk those lifetime customers," said Kinney.

"The big hotel chains more or less legitimized the business when they got into it in a big way three or four years ago," said Rogers, who founded the Timeshare User's Group after years of listening to friends complain about the tactics used by many time-share companies.

"Sure, there will be exceptions to the rule, but they've taken the pressure off the sales presentation. The whole industry has gotten quite a bit better."

Despite the growing appeal of time shares, many problems remain, including brokers cropping up that offer to sell a time share in return for an upfront fee of several hundred dollars.

"Their goal is to get the fee and not sell the time share," said Larry Hayden, owner of Timeshare Resales Worldwide.

"Education is the key to owning a time share," said Rogers, who said it takes time to evaluate the company running the vacation destination as well as the company that sells the time share.

Merrick adds that time shares are not for everyone.

"You have to be pretty organized," said Merrick, who begins planning his family's vacations a year in advance.

Is there any way to recoup your investment if you want to sell your time share?

Resales have "always been the biggest weakness in time sharing," said Ginsburg. Shell Vacations Club is testing a program to assist its time-share owners with selling their units.

Hayden, whose Web site (www.vacation-realty.com) provides a wealth of information for resellers, said that many owners receive 50 percent of what they paid, but there are many others who receive far less, as little as 30 percent of what they initially paid.

However, resales at premium resorts, operated by such companies as Marriott, Hilton and Hyatt, can be for as much as 85 percent of the original purchase price.

"It's a lot like driving a new car off the dealer's lot. Half the value is lost as soon as it is sold," he said, noting there is little demand for studio units or off-season weeks.

Hayden said sellers must realize that when they sell, they're getting more than the check the buyer gives them. They should focus on the obligations they are getting out of, "the maintenance fees and taxes which go on forever."

LOCATION KEY DECISION WHEN BUYING

Before you take the plunge into time shares, consider these points:

--Location: "If you want to spend Christmas in the Wisconsin Dells every year, then buy in the Dells," said Lisa Ann Schreier, author and founder of Timeshare Insights, a consulting firm in Clermont, Fla. "But if you think you are going to exchange it for a week in Venice, it's not going to happen."

You have to buy in a high-demand area if you want to exchange your time share for other sought-after locations.

--Availability: You don't have to wait for a direct-marketing solicitation or attend a presentation to buy a time share. Most people head to Resort Condominiums International or Interval International, both exchange networks, for leads and information on time-share resorts. You then can directly contact the place that interests you.

--Cost: The average price of buying a two-bedroom time share in the United States is $13,500. Most resorts offer financing, but you're looking at an average seven-year loan with an interest rate between 15.9 and 17.9 percent. Many buyers use a home equity line.

--Deeds: If the time share is fully deeded in perpetuity, that means you can rent it out and pass it on to your heirs when you die. Right-to-use properties won't provide those options.

--Availability: Fixed week means you have to show up the same week year after year. Point-based systems are more flexible but aren't inflation-proof. It could cost 100 points to score that time share in Hawaii this year but 120 points next year.

--Fees: Find out the annual maintenance fee, your share of annual property taxes and if you have to pay to belong to one of the exchange networks.

--Lorene Yue

-----To see more of the Chicago Tribune, or to subscribe to the newspaper, go to http://www.chicagotribune.com/

(c) 2004, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. MAR, HLT, HOT, DIS,

 
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