Timeshare

This article is about the type of property ownership. For the computing term, see Time-sharing.

A timeshare is a form of ownership or right to the use of a property, or the term used to describe such properties. These 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, and almost always the same time every year) in which they may use the property. Units may be on a part-ownership or lease/"right to use" basis, in which the sharer holds no claim to ownership of the property.

History

The notion of the term "time-share" 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).

Industry

This concept has attracted many resort developers and prominent hoteliers, such as Starwood, Wyndham, Accor, Hyatt, Hilton, Marriott, and Disney. Vacation ownership has proven to be lucrative for stakeholders in these major resort families, due to its popularity with vacation-goers. This form of lodging has spawned a variety of products sold on similar occupancy schemes; cars, planes, boats, 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)

Scope of the 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 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 1,800 resorts in nearly 80 countries, with 2004 worldwide sales estimated at nearly $11.8 billion (Interval International 2006). RCI has more than 4,000 resorts in nearly 100 countries.

Worldwide exists 5,425 timeshare resorts, of which around 31% are situated in North America, 25% in Europe, 16% in Latin America (where Mexico leads with 40% in the region). Emerging resorts in Asia offers 14%, led by Japan, but with Thailand and India increasingly prominent.

The timeshare industry is now showing signs that it too is suffering lately, similar to the subprime mortgage meltdown.

Legislation

The industry is regulated in all countries where resorts are located. In Europe, it is regulated by European and by national legislation. In 1994, the European Communities adopted "The European Directive 94/47/EC of the European Parliament and Council on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis", which was subject to recent review which resulted int the adoption on 14 January 2009 of the European Directive 2008/122/EC.

Methods of use

Owners can:

• Use their usage time
• Rent out their owned usage
• Give it as a gift
• Donate it to a charity
• 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.

Exchanging timeshares

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, two of which are the largest: 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 timeshare 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 weeks or points through 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 versus 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. The Owner is also liable for his portion of real estate taxes, which usually are collected with condominium maintenance fee. Potentially owner can even deduct some property related expenses, such as real estate taxes, from his taxable income.

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. 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.

A variant form of real estate-based timeshare that combines features of deeded timeshare with right-to-use offerings was developed by Disney Vacation Club (DVC) in 1991. Purchasers of Disney Vacation Club timeshare interests, whom DVC calls "members," receive a deed conveying an undivided real property interest in a timeshare unit. Each DVC member's property interest is accompanied by an annual allotment of "vacation points" in proportion to the size of the property interest. Like right-to-use products, DVC's vacation points are highly flexible, and may be used in different increments for vacation stays at DVC resorts in a variety of accommodations from studios to three-bedroom villas. In addition, DVC's vacation points can be exchanged for vacations worldwide in non-Disney resorts or may be "banked" into or "borrowed" from future years.

DVC's deeded/vacation point structure, which has been used at all of its timeshare resorts, has been adopted by other large timeshare developers including Hilton and Hyatt.

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 [[Independence Day (United States)|Fourth of July holiday]4th july], 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, commonly referred to as flex 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

Major international hotel chains such as Hilton and Marriott have introduced their own Vacation Ownership Programs which are based on point systems. The share of membership is sold is either deeded or with right to use the club's services for a certain number of years.

There are also Vacation Clubs that may own units in multiple resorts in different locations. Some clubs consist only of individual weeks at other developer's resorts. 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.

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.

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, DVD Players 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. These 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.

Critique of timeshare concept

Critics contend timeshare units are often overpriced, especially in places such as Mexico and Florida where almost every resort offers this style of accommodation.

The U.S. Federal Trade Commission provides consumers with information regarding timeshares.

Individual timeshare owners also complain about annual maintenance fee (which includes property taxes) being too high.

Pricing is compared to staying at hotels in the long term, when interest and fees are not included. However with a hotel you do not have a fixed payment, upfront cost, fixed schedule, and set locations.

Secondary Market

The secondary market for timeshares consists of rentals and resales initiated by the owner. Resale transactions involve the owner permanently transferring his or her deed or right to their timeshare to another party. Rental involves the owner transferring all or part of their week or interval to another party, without transfer of ownership. This typically takes the form of an owner renting one week to a traveler who uses it as one would use a hotel or other vacation rental. Either transaction can be accomplished entirely by the owner, or with the assistance of a third party, or broker.

Timeshare Resales

Timeshares are generally treated as real property and can be resold to another party. However, most timeshares do not appreciate in value, and therefore should not be considered a money-making investment. Additionally, as much as 50 percent of the original purchase price of a timeshare from a developer or resort went towards marketing costs, sales commission, and other fees, which realistically can never be recouped by the owner.

There are brokers and agents who specialize in reselling timeshare units on behalf of their owners. This arrangement typically involves listing fees, commissions, or both, being paid by the owner to the broker/agent. In return, the broker/agent markets the resale to prospective buyers. This marketing can take the form of printed materials, Internet postings, radio and television advertisement, and direct telephone solicitations. Some of the fees associated with third party resales are up-front and non-refundable, regardless of whether the unit sells, or for how much.

Donate Timeshare to Charity

Another option for timeshare owners who are seeking to sell their property is to donate it to charity. The owner is able to get a tax receipt for the appraised value of the timeshare. The proceeds of the sale is then donated to the charity of the donors choice. Unfortunately many charities will no longer accept timeshare donations.

The legal transfer of ownership for the majority of timeshare resales can be very difficult. Only specialist agents and closing companies throughout the World can ensure this is processed with ease. It is important to understand that trying to do this on your own can cause many long hours of administration. Whilst using a timeshare resale broker or agent can mean paying a third party, you do then allow them to take on the work load of the sales process and more importantly the legal transfer of ownership.

Timeshare Rentals

Unlike resales, an owner who does not wish to use their week in any given year (or ever again), may in fact recover or exceed their yearly cost of ownership (such as annual maintenance fees) by renting their unit to another party. Ownership does not change hands, but rather, a traveler will use the week or interval in exchange for payment to the owner. Owners should familiarize themselves with the terms of their original timeshare contract.

There are many third parties that will rent timeshares on behalf of their owners as one time event, or an annual occurrence. The broker/agent will find a suitable renter in exchange for fees and commissions. In addition to a hands-off experience for the owner, third parties typically handle the money transfer as well.

Rentals handled by the owner offer the greatest possibility for financial gain on the part of the owner. The obstacle of finding a suitable renter remains the same, with the added liabilities associated with renting any real property. Namely, ensuring payment prior to transferring the use to the renter, and coverage for any damage to the unit by the renter. Written contracts and or third party escrow services are popular ways to ameliorate these concerns.

See also

• Timeshare tour
• Vacation rental
• List of house types
• Fractional ownership
• Fractional financing
• Destination club