At some point, you’ve probably been offered a free steak dinner, theme park tickets or a similar “gift” in exchange for sitting through a timeshare presentation. It’s a tried-and-true tactic to get you before a high-pressure salesperson who delivers a pitch that’s tailored to appeal to your emotions so that you impulsively sign a deal before you leave. Over the years, the pitch hasn’t changed much. It goes something like this: Americans have so many vacation days that go unused, but you work hard and deserve an annual vacation. Why pay for a second home that sits vacant most of the year when you can split the cost of a vacation property with others?
Even if you make it through the entire presentation, though, you’re only getting a cursory glance at the multi-billion-dollar timeshare industry. The timeshare market, which began in the United States in the mid-1970s, has since ballooned to a $10.5 billion industry, with hundreds of resorts competing for your vacation dollars and doing so at a time when people have more affordable lodging alternatives than ever thanks to vacation rentals like Airbnb and VRBO.
Here’s a look at how COVID-19 has exposed problems with the vacation ownership market, plus three major trends we predict for the timeshare industry in coming years.
The concept of timeshares can be traced back to the 1960s when European families would pool resources to buy cottages that they could take turns using. By the 1970s, the concept of timeshares arrived in the United States, and vacation exchange companies emerged, allowing timeshare owners to trade properties and weeks with one another via an exchange market. By the 1980s, timeshares were booming, with big name hotel brands entering the market in the 1990s. Today, nearly 10 million people in the United States are timeshare owners.
The U.S. timeshare industry continues to steadily grow. In fact, the industry enjoyed its ninth consecutive year of growth in 2018, according to the most recent State of the Timeshare Industry report from the American Resort Development Association (ARDA). In a nutshell, the timeshare industry is a shared ownership model of vacation real estate, with joint owners having access to the property, typically in one-week allotments. That means one property could have as many as 52 joint owners.
The U.S. timeshare industry is valued at $10.5 billion, according to ARDA. By comparison, Major League Baseball is a $9 billion revenue industry, and the music industry is valued at $8 billion in revenue.
There are currently 1,582 timeshare resorts in the United States and 206,380 timeshare units, with an average of 130 units per resort. Of course, there are thousands more timeshare units in vacation destinations outside of the United States.
A variety of timeshare models exist, and you may also hear timeshares be referred to as “vacation clubs.”
One of the most common models is “timeshare ownership,” which allows travelers to access the unit one week out of every year. Additionally, companies sell fractional ownerships that make units available for more time every year, typically anywhere from two weeks to three months. In this model, the owner can choose how much stake they want in the property.
As you’re looking at a major company’s timeshare contract, take note of whether they offer a fixed or floating schedule. Fixed schedules allow owners to access their units at a “fixed” time each year, where a floating schedule gives timeshare owners more flexibility to choose when they access their vacation rental. Combinable terms allow timeshare owners to skip a week and add it on to the next year’s vacation time.
As resorts look to recoup losses from the pandemic and the timeshare industry begins to court new customers, here are three timeshare industry trends we expect to emerge over the next few years.
In addition to maintenance fees that tend to increase every year, timeshare owners can get hit with unexpected special assessments. These assessments are charged to cover unforeseen expenses at the resort and are often related to weather damage, or to cover resort upgrades. Due to travel restrictions amid COVID-19, we predict that more resorts will charge special assessments to recoup losses incurred during the pandemic. With all the fees factored in, your timeshare could be costing you $6,000 a year or more.
Timeshares aren’t just appealing to Baby Boomers. In fact, the demographics of today’s timeshare owners may surprise you: The average owner is just 40 years old, according to ARDA. About 61 percent are married or in a domestic partnership, and only 13 percent of timeshare owners earn $100,000 or more a year. Timeshares may be reinventing themselves to compete for the attention of Millennials and Gen Z, who opt for boutique hotels and Airbnb rentals over cookie-cutter resorts. Recognizing that Millennials and Gen Z tend to seek unique, Instagrammable vacation experiences, you can expect timeshare companies to begin offering member-exclusive experiences like concerts, sporting events, culinary tours, adventure outings and more.
The pandemic has taught us that flexibility is king. As timeshare companies look to appeal to a new generation of travelers, they’re realizing that they need to be much more flexible in their approach. Vacationing at the same Florida resort year after year isn’t something that resonates with younger travelers, who also don’t want to be tethered to a fixed-week vacation schedule. As a result, some timeshare companies are offering a network that includes hundreds of resorts and affiliated resort partners in the United States and around the world.
The pandemic could spell big trouble for the timeshare industry. For starters, timeshare companies have struggled to translate those high-pressure sales presentations into an online format (oftentimes, they target people who are already on vacation to attend the presentations, but travel was mostly on pause throughout 2020, limiting their recruitment pool).
In addition to seeing a decline in new sales, record numbers of people want out of their timeshares. The pandemic, for many timeshare owners, was a tipping point as they were paying for a vacation rental that they couldn’t use. The timeshare mortgage payment, coupled with escalating maintenance costs, became a financial burden that consumers no longer want to be saddled with, especially during a time of such economic uncertainty.
Finally, banks are tightening lending standards, which could make it even tougher for those who are actually interested in a timeshare to qualify for the financing.
Even as timeshare companies reinvent themselves to cater to a new generation of travelers, vacation ownership is far from a good deal. In addition to the high interest you pay on a mortgage for the timeshare, you’ll also fork over annual maintenance fees and occasional special assessments.
If you already own a timeshare, now may be the ideal time to look for a timeshare exit plan. With a team of expert advisors and in-house attorneys, Timeshare Termination Team aims to provide the safest, most trusted timeshare termination experience. Our You First Approach™ helps clients achieve a safe, legal and permanent timeshare contract exit. The first step is to contact us today to schedule a free consultation so that you can free yourself from the burden of timeshare ownership.
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