The timeshare industry gets a bad rap, and some of it is justified. It’s not unusual to receive an aggressive sales pitch designed to lure you into buying a place you can visit time and again, for a fraction of what you’d pay for a vacation home. But many timeshare owners soon find that the reality of owning a timeshare is a far cry from the dream they bought into. In fact, AARP reports that timeshare ownership ranks high on people’s lists of most regrettable financial decisions.
But as Consumer Reports notes, the timeshare industry has gone through a bit of a resurgence, particularly because major travel brands like Disney, Hilton, Hyatt, Starwood and The Four Seasons have put their own unique spin on the concept with “vacation clubs.”
Timeshares originated in the mid-1970s to help vacation property developers offset their exposure to rising interest rates and energy costs, as well as beat down excessive real estate supply. They were marketed as an opportunity for vacationers to own a piece of a resort they could call home purely for vacation time. Typically, timeshare sales lured vacationers staying at or near the timeshare property with offers of free cash, or free mini-vacations at the resort, simply for attending a brief presentation (which soon turned into an aggressive sales pitch).
Timeshare pitches are often spun like this: You’re going to vacation each year, so why not save some money by owning a share of the property you visit? As the property value of the timeshare resort increases, so will the value of your share. Eventually, you’ll own an asset (though the developer actually owns the property) that’s worth more than you paid.
Good deal, right? Meh.
As many timeshare owners soon came to realize, this is just another situation where if it sounds too good to be true, it probably is. First off, timeshare owners are on the hook for fees related to the property’s maintenance and upkeep — an average of $880 annually just three years ago, according to Consumer Reports — but have little to no control over when or how much fees increase. Despite their investment, they don’t own a physical unit; they own time at that location.
Besides that, “fixed-week” timeshare arrangements allow no flexibility for when or how a person can use their timeshare. Plus, there are so many timeshare units, and new ones being developed, that renting or selling a timeshare can be difficult. Forbes reports selling a timeshare at a loss can’t be written off on taxes, either. So, you’re really not winning in the end.
While the Federal Trade Commission warns consumers about the risks timeshares present, timeshare agreements are admittedly more consumer-friendly today than they once were. For example, “floating weeks” allow timeshare owners to choose when they would like to vacation. Many timeshares use “points-based vacation ownership,” which gives owners the flexibility to vacation when they want at any number of timeshare resorts (or “vacation clubs”) owned by the developer. Points can be banked so timeshare owners aren’t penalized for skipping a vacation every few years.
Potential timeshare owners can also skip the sales pitch and chat about potential ownership with sales reps online or by phone. However, The New York Times reports that because the timeshare industry took a huge hit in the wake of the financial crisis, some of its questionable sales tactics have made a comeback — including charging customer credit cards for the timeshare deposit at the start of a presentation before they’ve agreed to buy — and pressuring consumers to finance a timeshare purchase at ridiculous interest rates.
If you’re still intrigued by the idea of a timeshare or “vacation club,” consider these important factors before you open your wallet:
Knowledge is power. Knowing your options will enable you to make decisions that empower you to enjoy your money and time to the fullest without needlessly buying into false promises.