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
condominiumA condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...
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
EuropeEurope is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
in the 1960s.
Hapimag, a
ski resortA ski resort is a resort developed for skiing and other winter sports. In Europe a ski resort is a town or village in a ski area - a mountainous area, where there are ski trails and supporting services such as hotels and other accommodation, restaurants, equipment rental and a ski lift system...
developer in the French Alps, was experiencing trouble finding customers for his high priced resort. Realizing that coffee shops sold cake only by the slice (since the entire cake was too expensive and could not be consumed at one sitting) he marketed his resort by encouraging guests to "stop renting a room" and, instead, "buy the hotel". Success followed and the concept of partial ownership was 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: RCI and
Interval InternationalInterval International is a publicly traded company and former subsidiary of the corporation IAC/InterActiveCorp and is headquartered in Miami, Florida, USA. The CEO is Craig Nash.-Background:...
(II).
Industry
This concept has attracted many resort developers and prominent hoteliers, such as
StarwoodStarwood Hotels and Resorts Worldwide, Inc. is a hospitality ownership and management organization, headquartered in White Plains, New York. One of the world's largest hotel companies, it owns, operates, franchises and manages hotels, resorts, spas, residences, and vacation ownership properties...
,
Wyndham-Localities:*City of Wyndham, an LGA in Victoria, Australia*Shire of Wyndham-East Kimberley, a LGA in Western Australia, Australia*Wyndham Hills, Pennsylvania, an opulent community in York County, Pennsylvania, United States*Wyndham, New South Wales...
,
AccorAccor is Europe's leading hotel group , part of the CAC 40 index , and operates in over 90 countries. Headquartered in Courcouronnes, Essonne, France, near Évry, France, the group owns, operates and franchises 4,229 hotels ranging from economy to luxury on five continents .Previously, the group...
,
HyattHyatt Hotels Corporation , is an international operator of hotels.Hyatt Center is the headquarters for Hyatt corporation...
, Hilton,
MarriottMarriott International, Inc. is a worldwide operator and franchisor of a broad portfolio of hotels and related lodging facilities. Founded by J. Willard Marriott, the company is now led by son J.W. Marriott, Jr...
, 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 InternationalInterval International is a publicly traded company and former subsidiary of the corporation IAC/InterActiveCorp and is headquartered in Miami, Florida, USA. The CEO is Craig Nash.-Background:...
, 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.
A 2001 report estimated there to be 5,425 timeshare resorts worldwide, 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
JapanJapan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, but with
ThailandThailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
and
IndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
increasingly prominent.
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 CommunitiesThe European Communities were three international organisations that were governed by the same set of institutions...
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 in 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: RCI and
Interval InternationalInterval International is a publicly traded company and former subsidiary of the corporation IAC/InterActiveCorp and is headquartered in Miami, Florida, USA. The CEO is Craig Nash.-Background:...
(II). Together they have over 7,000 resorts. They have resort affiliate programs and members can only exchange affiliate resorts. It is most common for a resort to be affiliated with only one of the larger exchange agencies, although resorts with dual affiliations are not uncommon. 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 saves money on exchange fees and is often sought after. Several bulletin boards have been created to help timeshare owners meet other owners 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.
Deeded versus right to use
A major difference in types of vacation ownership is that between
deedA deed is any legal instrument in writing which passes, or affirms or confirms something which passes, an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions sealed...
ed 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 incomeTaxable income refers to the base upon which an income tax system imposes tax. Generally, it includes some or all items of income and is reduced by expenses and other deductions. The amounts included as income, expenses, and other deductions vary by country or system. Many systems provide that...
.
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
MexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
. 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
Fourth of July holidayIndependence Day, commonly known as the Fourth of July, is a federal holiday in the United States commemorating the adoption of the Declaration of Independence on July 4, 1776, declaring independence from the Kingdom of Great Britain...
, week 51,
ChristmasChristmas or Christmas Day is an annual holiday generally celebrated on December 25 by billions of people around the world. It is a Christian feast that commemorates the birth of Jesus Christ, liturgically closing the Advent season and initiating the season of Christmastide, which lasts twelve days...
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 DayMemorial Day is a United States federal holiday observed on the last Monday of May. Formerly known as Decoration Day, it originated after the American Civil War to commemorate the fallen Union soldiers of the Civil War...
, Fourth of July and
Labor DayLabor Day is a United States federal holiday observed on the first Monday in September that celebrates the economic and social contributions of workers.-History:...
. 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, Accor 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, offering services to a private customer base for exclusivity. 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
apartmentAn apartment or flat is a self-contained housing unit that occupies only part of a building...
-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
kitchenA kitchen is a room or part of a room used for cooking and food preparation.In the West, a modern residential kitchen is typically equipped with a stove, a sink with hot and cold running water, a refrigerator and kitchen cabinets arranged according to a modular design. Many households have a...
s with a dining area,
dishwasherA dishwasher is a mechanical device for cleaning dishes and eating utensils. Dishwashers can be found in restaurants and private homes.Unlike manual dishwashing, which relies largely on physical scrubbing to remove soiling, the mechanical dishwasher cleans by spraying hot water, typically between ...
, televisions, DVD Players and more. It is not uncommon to have
washerA washing machine is a machine designed to wash laundry, such as clothing, towels and sheets...
s and
dryerA clothes dryer or tumble dryer is a household appliance that is used to remove moisture from a load of clothing and other textiles, generally shortly after they are cleaned in a washing machine....
s 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
restroomA bathroom is a room for bathing in containing a bathtub and/or a shower and optionally a toilet, a sink/hand basin/wash basin and possibly also a bidet....
. 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 resortA seaside resort is a resort, or resort town, located on the coast. Where a beach is the primary focus for tourists, it may be called a beach resort.- Overview :...
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
MexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
and
FloridaFlorida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
where almost every resort offers this style of accommodation.
The U.S. Federal Trade Commission provides consumers with information regarding timeshares.
Some individual timeshare owners also complain about the 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 marketThe page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
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. Most 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. There are two concepts that need to be understood. The type of donation process and the IRS implications of the donation.
First, very few charities accept timeshare donations. They must be able to convert the timeshare to cash. They do not want to become obligated as owners for the same annual bills that face all owners. Unless a charity can convert it to cash by resale, rent, or use, it is a liability instead of an asset. Those charities that do accept them perform in two ways. Most have the donor continue to hold title while they have an experienced broker sell the timeshare. This takes time and effort with a usually low cash offer so, unless it's a very valuable secondary market timeshare, they will reject it if they can't sell it within 45 days. The second is type of charity hard to find. The charity actually takes title into their own name without a resale, rent or use intended. Their cash conversion process is to charge an acceptance fee. They take on the obligation but usually ignore all bills and threats of collection until the resort decides to take back the deed.
The IRS says if the timeshare is sold by the charity within a 36 month time of donation the actual cash received in what can be an income deduction. If the timeshare is not sold a maximum of $5,000 can be deducted without an appraisal. To receive a higher appraisal an appraiser must do it. It must include actually sold timeshares with specific information only found on the sales contract or recorded deeds, must use replacement costs of land and improvements (resort prices) in the computation, and is not to use distressed sales as comparables.
Dr. Ken Rich 21:23, 28 September 2011 (UTC)
Timeshare Rentals
Depending on the terms of the timeshare contract, an owner may rent their week or interval to another party in exchange for payment to the owner.
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.
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.
See also
- Timeshare tour
- Vacation rental
Vacation rental is the renting out of a furnished apartment or house on a temporary basis to tourists as an alternative to a hotel. The term vacation rental is mainly used in the US. In Europe the term villa rental or villa holiday is preferred for rentals of detached houses in warm climates...
- List of house types
- Fractional ownership
In business, fractional ownership is a percentage share of an expensive asset. Shares are sold to individual owners. A fractional owner enjoys priorities and privileges, such as reduced rates, priority access on holidays and income sharing. Typically, a company manages the asset on behalf of the...
- Fractional financing
Fractional real estate ownership financing takes two forms: Traditional Timeshare and Larger Share Fractional OwnershipFractional mortgages for shares of 1/26 ownership or 2 weeks or less are considered timeshare financing, and is often provided initially by the project developers...
- Destination club
In a destination club, in exchange for a one-time, upfront, mostly refundable membership fee, and annual membership dues, a member gets access to a roster of luxury vacation homes around the world, which can be booked based on availability and reservation priorities, plus personalized services and...