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AN EVER EVOLVING INDUSTRY: TIMESHARE
By Reg Block

Timeshare, like every other product on the planet, has its upsides and downsides. Furthermore, there are many misconceptions about timeshare, and most people are confused about the real advantages and disadvantages of owning a timeshare.

The most significant plus to timeshare is; if you know how to make it work for you and you in fact do use the product consistently, the value is terrific. However, if you purchase a timeshare of any sort and don't know how to maximize its use -and then typically, as many do, fail to use it, it will probably become a source of disappointment and, in general, a waste of money. But then, isn't this true of every purchase?

......TIMESHARE, ONE OF THE FASTEST GROWING SEGMENTS IN THE VACATION INDUSTRY AND ......A MULTI-BILLION DOLLAR BUSINESS WORLDWIDE.

In this article I will; provide a brief, general background, future projections, how they work and, in the course; explore the pros and cons, endeavor to dispel some common myths, profile a number of fractional timeshare opportunities in the Caribbean and offer some advice on purchasing conventional timeshares. Hopefully, by the end of this article, the reader will have a better idea of; the benefits of ownership, what makes timeshare one of the fastest growing segments in the vacation industry and why it is a multi-billion dollar business worldwide.

A Brief History Lesson

Timeshare began over 40 years ago in Europe.

A French company developed the idea of timesharing at SuperDevoluy, a ski resort in the French Alps.

These types of "right-to-use" arrangements began to spring up in other parts of Europe, eventually taking hold in Hawaii, Florida and other parts of the world. By the early 70s the idea of deeded time share was being shaped by Innisfree Companies and the Hyatt, who, in 1973, began a development in Brockway Springs, Lake Tahoe.

The following year, Resorts Condominiums International (RCI) was established to facilitate timeshare owners' exchanges of weeks for different resorts the world over.

In the 1990s timeshare expanded to Eastern Europe and most of Asia, with Sheraton, Ramada, Hilton, Disney, Four Seasons, Ritz-Carlton, Radisson and Westin all offering timeshare ownership. The entry of these large companies into the timeshare industry, precipitated a boost to consumer confidence in this unique concept of vacation-ownership.

In the USA, where 45 percent of all timeshare owners live, the industry is organized and regulated by the American Resort Development Association (ARDA). Also, most Canadian timeshare companies submit to the Canadian Resort Development Association (CRDA) and the real estate act. While in Europe, the Organization for Timeshare in Europe (OTE), performs a similar role to that of ARDA. Furthermore, the implementation of consumer protection legislation has given consumers the confidence to purchase timeshare in foreign countries, including Mexico and the Caribbean.

A Bright Future

.............HOTEL ROOM RENTAL COSTS SHOULD MORE THAN DOUBLE IN THE NEXT TEN YEARS, PUTTING QUALITY VACATION ACCOMMODATION OUT OF THE RANGE FOR MANY BABY BOOMERS, ESPECIALLY THOSE ON FIXED INCOMES.

If the past is any indication of what will happen in the future, hotel room rental costs should more than double in the next ten years, putting quality vacation accommodation out of range for many baby boomers, especially those on fixed incomes. For this reason, among others, timeshare makes sense; the idea of locking in a significant portion of one's vacation costs at today's prices is appealing. Because of this, industry analysts paint a very bright future for timeshare, anticipating a doubling of revenues in the next ten years. Many feel that the influx of baby boomers into the vacation economy will drive an even steeper upward trend in accommodation costs.

This, of course, raises the issue of supply and demand: will there be enough product to meet the consumer demand? How will this influx of baby boomers affect the cost of hotel accommodation, let alone the price of purchasing a timeshare in years to come?

Hotels.com, in its 2007 report, analyzed 30,000 hotels in 1,500 locations, finding that prices paid for hotel rooms in most destinations increased significantly. For example, according to the report, Jerusalem saw an increase of 31percent in 2006; the United Kingdom, an increase of 16 percent in 2007; and Paris, Venice and Barcelona, an increase in excess of 10 percent. These upward trends, are beginning to make timeshare very attractive to vacation consumers and, in turn, ensuring brisk growth for the timeshare industry itself. However, the downside is; the longer you wait to get in, the more expensive it will be.

I interviewed a couple that just purchased their third timeshare; they told me that since buying the first one over 15 years ago they had spent no money on hotel rental accommodation and had gotten their value out of their timeshare many times over. The husband shared with me that he had paid around $6,000 for the first one and that the same thing today would cost him around around $40,000 at that particular resort.

To further verify this trend, I spoke with Tara Smith, Director of Point to Point Destinations, in Vancouver, British Columbia: she said, "The price of our timeshares has more than doubled within the last decade and, with the Olympics coming in 2010 and rising real estate prices, we expect to see a serious increase in our pricing over next few years."

The Mechanics Of Timeshare

Timeshare is a brilliant concept. Instead of having to buy an entire resort, hotel, villa or cottage, you simply purchase what you plan to use, and share in the yearly maintenance costs with other owners. Typically, a strata association or management company takes care of the details, while you, the timeshare owner, have partial ownership and the right to use the property for a certain period of time each year. This keeps your accommodation costs lower and allows you to stay in places that might otherwise be cost prohibitive.

At first, timeshare was essentially fractional, in the sense that you went to the same resort (or resort group) at the same time each year for a week a multiple of weeks. This is called the weekly system. Over time, consumers tired of going to the same place each and every year. In response, RCI was established to facilitate the exchange of weeks, allowing timeshare owners to use resorts all over the world. This exchange system, though still extant, has been further improved with a global points system that increases flexibility and eliminates the cumbersome uncertainty of exchanging weeks.

Here's how it works: many modern timeshare owners own RCI global points, (similar to the concept of airmiles)which is the currency that timeshare owners use to purchase vacation time at over 4,000 RCI-regulated four and five star resort properties, the world over. There are, of course, other groups of affiliates operating within exchange companies like Interval International, however, RCI is the largest exchange system and points purveyor in the world.

Fractional Timeshare For The High-end Market

THE DOWNSIDE TO FRACTIONAL OWNERSHIP IS THAT MAINTENANCE AND MANAGEMENT FEES CAN BE IN THE 10S OF THOUSANDS OF DOLLARS YEARLY.

Timeshare also targets the "high end" consumer in the $250,000 per year tax bracket range, or those with a net worth of $2.5 million and up. Typically, fractionals are marketed as an appreciating investment with a stronger equity position compared to lower priced conventional timeshares. Fractionals typically, but not all, involve ownership in the underlying land while most conventional timeshares do not.

The downside to fractional ownership is that maintenance and management fees can be 10s of thousands of dollars yearly, as opposed to conventional timeshares which usually have fees under a thousand dollars per year. Also, a much larger initial cash layout is required for fractional ownership than for conventional timeshare.

On the upside these multi-million dollar fractional club homes are; fully equipped, furnished and include local concierge, maid services and other amenities, like golf courses and docking facilities for yachts. While conventional timeshare, though clearly based on quality and value, typically involves condominiums of various sizes, rather than multi-million dollar homes.

Unlike conventional weekly exchange or points-based timeshares, these unique fractionals, originally, were not part of networks like RCI or Inverval International, rather they retained an exclusivity enjoyed only by the actual owners. However, with the introduction of elite membership clubs like, Exclusive Resorts, high end fractional timeshare owners can stay in any of the resorts affiliated with their club, whether in the Caribbean, Italy, Mexico, New York or London. Also, most fractional owners have the right to sell their yearly vacation weeks back to the management company, and in cases where there a points system is in effect, they can exchange their time with other fractional owners in other parts of the world.

A Few Examples Of Fractionals

It doesn't take too much poking around on the Internet to find scores of fractional ownerships for sale throughout the Caribbean. Depending upon the stage of development, location, quality and amenities, prices can vary greatly. Resorts that are in the pre-construction or developmental stage will often offer significant incentives to entice buyers: that usually means big savings.

Belize

For example; on the lower end of fractionals, Bella Maya Resort in Belize sells 1/12th shares which entitle owners up to one month vacation per year: on the web site, the advertised starting cost is $38,750. And owners are given the option to participate in a rental program, which can help offset the costs of the initial investment and ongoing fees. For buyers with deeper pockets, the resort offers full ownership starting at $375,000.

This four star resort features; designer-decorated, air conditioned two bedroom units, 24 hour reception, restaurant, bar, pool, store, mooring, dive center, airport transfer, Internet, cable TV and laundry services.

Bahamas

In the Bahamas there a numerous fractional opportunities. For example; February Point on Great Exuma, situated on a private 80-acre peninsula is an example of a high-end fractional. The resort offers 1/12th, 1/8th and 1/4 ownership in stunning two to five bedroom residences featuring; gourmet kitchens, private Infinity pools, power boats, a private beach, golf carts, golf membership, a concierge, a marina, a rental program and membership in Resort to Resort, an exclusive property exchange network.

However, to qualify for February Point, you'll need an annual income of no less than $250,000 for fractional ownership starting around $380,000. For those with a more extravagant appetite and commensurate financial ability, custom homes start at 1.8 million and the sky's the limit.

St. Lucia

If you are planning to purchase a fractional timeshare, St. Lucia is certainly worthy of consideration. Conde Naste Traveller Magazine readers voted St. Lucia one of the most beautiful islands in the Caribbean, with average temperatures in the mid-seventies to mid-eighties, low crime rates and a stable economy and government.

Calabash Cove, for example, offers fractional ownership subject to a 75 year leasehold agreement and reasonable maintenance fees. Units include; semi-detached one and two bedroom cottages of 97 to 107 square metres, and owners have access to hotel facilities, including concierge service, swimming pool, restaurant, library, music room and health spa. Pricing starts well over $100,000.

Advice On Purchasing Conventional Timeshare

For those with limited resources, high-end fractional timeshare is not the answer, however, conventional timeshare may be just what the doctor ordered. Depending upon the amount of vacation time you want to purchase and the location of your home properties, these affordable, less exclusive timeshares can start as low as $10,000, with yearly fees in the $500-$600 range.

Still, all conventional timeshares are not the same, and for that reason it is important to understand a few essential points. For one, some are based on the weekly system with the option to exchange weeks, while others are on a pure global points system. The weekly system tends to be less flexible, but works efficiently when used at your home properties, while the global points system, especially the one designed by RCI, seems to work better for use at multiple resorts and destinations worldwide.

Obviously, purchasing your timeshare in a stable country with strong consumer protection laws is essential. In some countries, timeshare is regulated by the real estate act: for example, British Columbia, Canada is highly regulated for the protection of the consumer, and resort properties must be clear title and held in trust by and arms-length attorney. In situations like this, especially where properties are part of a non-profit society, maintenance fees cannot increase without a majority vote among members. This ensures a fair, but gradual increase in maintenance fees. Within the Caribbean many islands have fine reputations within the Timeshare industry.

When purchasing your first timeshare, one should seek out and buy from an established, reputable developer who has been in business for many years. Look for timeshares with a strong member services department, dedicated to training owners in how to maximize the value of their timeshare. Conversely, one may shop online for re-marketed timeshares, but like everything, buyer beware and if it's too good to be true, it probably is. However, that doesn't mean there are not fabulous deals to be had. Always check the experiences of other timeshare owners at the development you are considering - a list should be made readily available to you upon request. If the developer is hesitant to provide such a list, you should be hesitant about buying from the developer.

On a final note: both fractional and conventional timeshare represents terrific value. There's no question about that. However, neither should be viewed as a way to to corner the real estate market, but rather as a way to access fantastic value in vacation accommodations that would otherwise be out of most people's financial range.

Author: Reg Block lives in Vancouver, Canada. He is a freelance journalist with Canada's largest publisher, Canwest Global, where he writes for the Lowermainland Division and the Wellness section of the Surrey Now Newspaper. Prior, Reg was Special Projects Manager with Common Ground Magazine, Canada's oldest natural health and environment magazine. Reg plans to settle in the Caribbean when Rachel has finished school and accomplished her figure skating goals.

Email : Reg Block

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