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Timeshare

[tahym-shair]

A timeshare is a form of ownership or right to the use of a property, or the term used to describe such properties. Timeshare properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week) in which they may use the property. Timeshares may be on a part-ownership or lease/"right to use" basis, in which the sharer holds no claim to ownership of the property.

According to one account, this notion was originally created in Europe in the 1960s. A ski resort developer (Hapimag) in the French Alps marketed his resort by encouraging guests to "stop renting a room" and instead "buy the hotel". Subsequent success followed, and the concept was quickly embraced by developers worldwide, boosting sales of surplus condominium units at a time when the resort industry was depressed.

Due to the promise of exchange, these units, called "vacation ownership" by the industry, often sell regardless of their deeded resort (most are deeded into a certain resort site, though other forms of use do exist). What is not often disclosed is that all differ in trading power. If one is in Hawaii or Southern California it will exchange extremely well, however, those areas are some of the most expensive in the world, subject to demand typical of a highly trafficked vacation area. The vast majority of inventory flows briskly through two international exchange companies: Resort Condominiums International (RCI) and Interval International (II). Critics contend these units are often overpriced, especially in places such as Mexico and Florida where almost every resort offers this style of accommodation.

Industry

This innovative concept has attracted the eye of many resort developers and prominent hoteliers, among which loom Starwood, Wyndham, Hyatt, Hilton, Marriott, and Disney. Vacation ownership has proven to be remarkably lucrative for stakeholders in these major resort families, due to its popularity with vacationgoers. This "slice" of the industry foreshadows perennial profits, with an optimistic economic forecast. Indeed, this form of lodging has spawned a variety of products sold on similar occupancy schemes; cars, planes, condo-hotel units and luxury fractional properties (at which affluent guests may stay for as long as a quarter of a year, and which often command a six-figure price tag)

Methods of use

Owners can:

  • 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 resorts
  • Sell it either through traditional advertising, online advertising or by using a licensed broker

Recently, with most point systems, owners may elect to:

  • Assign their usage time to the point system to be exchanged for airline tickets, hotels, travel packages, cruises, amusement park tickets;
  • Instead of renting all their actual usage time, rent part of their points without actually getting any usage time and use the rest of the points;
  • Rent more points from either the internal exchange entity or another owner to get a larger unit or more vacation time or at a better location;
  • Save or move points from one year to another.

Some developers, however, may limit which of these options are available at their properties.

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.

Much lauded is the idea of owners exchanging 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 (RCI) and Interval International (II). They have resort affiliate programs and members can only exchange to affiliate resorts. It is most common for a resort to be affiliated with only one of the larger exchange agencies, but it isn't rare to find a dual affiliate resort. Together they have over 7,000 resorts. The time share resort one purchases determines which of the major exchange companies can be used to make exchanges. RCI and II charge a yearly membership fee and fees for when they find an exchange. They also bar members from renting weeks for which they already have exchanged.

Owners can also exchange their timeshare through independent exchange companies. Dial an Exchange, Trading Places International, Platinum Interchange, The San Francisco Exchange, Timex, and Redweek.com are the main independent exchange companies. Owners can exchange without needing the resort to have a formal affiliation agreement with the companies.

Sometimes, owners may also arrange a direct exchange. This requires locating an 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.

This type of lodging may take different forms depending on the seller. The vast majority consist of 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.

Varieties

Deeded vs. Right to Use

A major difference in types of vacation ownership is that between deeded and right to use contracts.

With deeded contracts the use of the resort is usually divided into week long increments and these are sold as fractional ownership and are real property. As with any other piece of real estate the owner may use his or her week, rent his or her week, give it away, leave it to his or her heirs or sell the week to another prospective buyer. While this form of ownership can offer additional security to the owner as a form of physical ownership, deeded 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 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 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.

Fixed Week Ownership

The most basic unit is a fixed week; the resort will have a calendar enumerating the weeks roughly starting with the first calendar week of the year. An owner may own a deed to use a unit for a single specified week. For example, week 26 normally includes the Fourth of July Holiday, week 51 - Christmas and so on. If an owner owned Week 26 at a resort he or she could use that week every year.

Floating

Sometimes units are sold as floating weeks. The ownership will be specific on how many weeks the owner owns and from which weeks the owner may select for the owner's stay. An example of this 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 are 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.

Vacation Clubs

Vacation clubs are organizations that may own 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 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.

Types and sizes of accommodations

These properties tend to be apartment-style units ranging in size from studio units (with room for two) to three and four-bedroom units. These larger units can comfortably house large families. Units normally include fully equipped kitchens with a dining area, dishwasher, televisions, VCRs and more. 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.

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 guest's sleeping area to use a restroom. Timeshare resorts tend to be strict on the number of guests per unit. Unit size can affect 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.

How to Buy

There basically are two ways to buy a timeshare.

  • Buy it directly from the resort developer.
  • Buy it from a current owner.

Buying from the developer, you'll see exactly what your buying, the developer will have financing available, closing will be fast and the developer will often have extras included in the deal. But if you buy from a current owner, you will likely save at least 50% over what the developer is asking for the same timeshare. Please keep in mind that several contracts stipulate that once they are sold from person to person many benefits are lost. In other words, it is not the same contract originally bought from the developer. The advantages and disadvantages of buying from developer vs another owner have to be analyzed in an individual basis as no two contracts in the industry are alike.

Scope of the industry

The scope of today's time share 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 one, the prevalence of vacation ownership continues to expand. Approximately 4.4 million households own one or more U.S. weekly intervals or points-equivalent as of January 1, 2007, an increase of sixteen percent from the prior year.

About half of the resorts in the USA are currently selling, 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 exchange companies, reports there are 5,400 resorts in nearly 100 countries, with 2004 worldwide sales estimated at nearly $11.8 billion (Interval International 2006).

See also

References

External links

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