TIMESHARE

Timeshare -advice and links with a New Zealand emphasis

Accomodation in holiday resorts can be an expensive proposition, particularly when a family is involved. Timeshare allows this cost to be substantially reduced, while permitting a superior standard of accomodation.

This page provides links to useful timeshare resouces on the net, links to a few Australasian resorts (where on the web) and a guide for beginners considering timeshare purchase. The latter is based on our experiences and opinion only (for an additional view see the TUG article).

Timeshare Educational Links

Education and information links:

Exchange companies and resale/rental links:

 

Australaian and New Zealand resorts on the web

Australia

New Zealand

Club Paihia private rentals:

Timeshare Guide

Timeshare guide index


Rational for timeshare

In the past family holiday accomodation meant either relatively expensive rentals or purchase of a small apartment which was subsequently only utilised for a fraction of a year. Purchasing involved a relatively large capital outlay, while annual costs are also quite high.

By dividing holiday accomodation up into portions (typically each consisting of one week) it becomes possible to only purchase the portion of holiday accomodation required, while annual costs are also proportionally divided. Due to this it is possible to upgrade the accomodation to a higher quality resort with additional facilities and services, as well as professional management.

Over the last two decades timeshare exchange organisations have also created an easy mechanism for swapping of your week for equivalent accomodation elsewhere, potentially throughout the world.

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Timeshare "pitfalls"

The advantages of timeshare are numerous. However, as in any financial purchase or transaction the economic and personal reasons should be clearly calculated and evaluated. In most countries, when the concept of timeshare was first introduced it was sold at inflated prices to the wrong persons for the wrong reasons. High pressure sales tactics (often bordering on the semi-fraudulent) have left many purchasers with a large financial loss and a product they cannot effectively use.
( For a list of timeshare scams to avoid from timeshare.org.uk)

Typical problems include:

a) Overpricing (marketing and interest costs sometimes equating to 50-70% of selling cost)

b) Inadequately disclosed and escalating annual (maintenance) costs.

c) Poor resort location/facilities (ocasionally a converted nonprofitable resort or motel)

d) Promises of easy and superior exchanges at the period you require, which subsequently cannot be fulfilled.

e) Lack of legal titles, ownership or control of resort.

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Items to investigate before purchasing a timeshare.

a) Location/ resort/ time period.

The prime purpose of a timeshare is to"share" the required time at the resort you wish to regularly holiday at. Therefore your timeshare purchase should be at a location you would like to regularly return to, at a resort which has the facilities you require, a unit large enough to meet your present (and possible future) family needs, and at the time of the year you wish to holiday.

b) Maintenance fees.

Identify the annual fees (maintenance plus taxes) associated with the unit, as well as expected future fees. (New resorts often quote lower fees, however these are occasionally subsidised by the developer and often initially do not incorporate ongoing maintenance and refubishment requirements as the resort ages.)

If the annual fees and charges are roughly equivalent to the cost of renting equivalent quality accomodation in the area at the time, then there is no point in purchasing the timeshare (and effectively it has zero value - often the case with some of the poorer quality resorts in off-season weeks).

It should also be noted that annual fees are payable every year, regardless of whether the timeshare is "used". The arguement sometimes utilised that timeshare "locks in future holiday costs" is also spurious - future holiday costs are expected to increase with inflation, but so do annual charges.

c)Initial cost.

Financial projections utilised by timeshare salesman are allmost invariably incorrect.

The minimum annual cost to you of a timeshare purchase is the sum of the annual fees and the purchase price x the "forgone" bank interest rate. (i.e. the sum received on an annual basis if the purchase money had instead been invested in a bank account.)

If the "total annual cost" as calculated above is more than equivalent quality rental costs, then there is no economical justification to purchase. This also provides a ceiling on what is economically sensible for an initial valuation of a timeshare. Notwithstanding this however, if a purchaser wishes to holiday regularly at a particular resort, the guaranteed certainty of quality accomodation there may be worth a financial premium to them personally (but not generally to the public).

d)Resort ownership and control structure.

The ownership structure of the resort should be investigated, i.e. who owns the resort and the land, what ownership structure is employed. (lease, deed, right to use being examples - there are numerous variation according to a country's legal system). Be very wary of any structure which is not totally timeshare and does not involve full ownership of the resort and land, with an equivalent legal title in the purchaser's name. Care should also be exercised if buying outside of your home state/country as your legal rights can be compromised.

The control structure of the resort should be investigated, i.e. who controls the resort and how, and how is the owner represented. Be wary of any resort where control of the management and finances does not reside with the owners, as there is a potential for interest conflicts,

The "sales" status of the resort should also be checked. A resort only partially sold out after several years will still be substantially owned by the developer, with "conflicts of interest" potentials, and possible developer financial constraints leading at worse to bankruptcy - which will result in non resort completion, offloading of remaining units at deep discounts, and a prorata annual fee increase for remaining timehare unit holders to cover the developers shortfall.

Body corporate rules as specified in the "deed" should also be checked to ensure that expected facilities and equipment/furnishings are specified, as well as reasonable controls and booking structures; if not specified it could be easily changed.

Ownership of on-site facilities (e.g. swimming pools, tennis courts, grounds, lounges and other common areas) should also be checked. They should be owned by the owners in common, otherwise there is the potential for the facilities to be lost in the future.

Best and most safe arrangement in my opinion is a home country resort, fully developed, deeded with seperate individual titles, ownership of all resort facilities in common, with owners electing management committee.

e)Exchange requirements.

If purchasing for purposes of regularly exchanging elsewhere, be aware that exchange companies exchange "like for like". If you wish to exchange into popular areas at peak time periods in quality resorts, then you must exchange a unit of equivalent popularity and quality; otherwise you will not achieve your desired exchanges.

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Fixed and floating units

Timeshare units are often sold as fixed or floating weeks.

A fixed week is exactly that, a fixed time week every year (e.g. week 1 for a resort with a Friday changeover starts on the first Friday in every year). With a fixed week you are entitled to that time period every year (and often a specified unit as well), and cannot change it (without utilising an exchange company).

A floating week is one in which the right to a specific week is not specified (although a specific week may be mentioned on the title for legal purposes.) A specified procedure is utilised to divide up the weeks (usually laid down in the title deed, or decided by management committee). There are several possible variations; e.g. at my home resort applications for weeks are allocated 32 weeks before the start of the week - if more applications are received at this point than units available, then a ballot is held with those unsuccessful having to choose a time period with a shortfall of applications up to that point; subsequent requests being on a first come first serve basis for whatever is outstanding.

Many resorts with a high seasonal demand factor sell peak demand periods as fixed weeks and the balance as floating weeks. Others sell floating weeks within seasonal bands only. If you have school age children, can only holiday at peak time periods or are purchasing into an area with a high seasonal variation (e.g. ski resort), then it is recommended that you purchase a fixed week for the time period that you require. (This will usually be more expensive.) It is very unlikely that you will be able to exchange from a floating week which is off-peak into a peak week.

If you are very flexible with your holiday requirements, then floating weeks usually offer better initial value and will suffice for exchange into similar off-peak periods, as well as giving you more flexibility in your arrangements (as not tied to a fixed time period at your home resort).

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Unit size

Unit sizes are normally quoted as hotel, studio, one bedroom. two bedroom etc.

Hotel is just a hotel room, usually without cooking facilities.

Studio typically is a single room with kitchenette /lounge and a separate bathroom. Bed typically is a convertible settee (often very uncomfortable in my experience.)

One bedroom units typically consist of one bedroom, one bathroom and a common lounge/ kitchen/ dining area. Usually quoted as sleeping four, with a double bed in the bedroom and a convertible settee in the lounge. These are suitable for couples, and those with up to two small children.

Two bedroom units typically consist of two bedroom, two bathrooms (usually one as an en-suite), and a common lounge /kitchen /dining room. Usually quoted as sleeping six, usually with a double bed in the first bedroom, two singles in the second and the convertible settee in the lounge. These are suitable for larger families or up to four persons where more room and privacy preferred.

There are several variations on this theme with some resorts having larger units (three bedrooms etc.) One and two bedroom units are the most popular in terms of numbers built and availablity for exchange.

It should be noted that most resorts follow a rigorous policy of limiting occupation to a maximum of the quoted capacity, particularly if exchanging.

My recommendations are that if you have children a two bedroom unit is the minimum requirement; when the children are larger you will need the additional privacy and space available in a two bedroom unit, and even if there is only 1 or 2 children in the family, there will be periods when you wish additional friends or relatives to stay. One bedroom is really only suitable for couples. Hotel and studio units are not recommended as the fittings and space available is substantially less and equivalent accomodation is usually easily available more cheaply as rental or tour packages.

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Exchanging

A major advantage with timeshare is the facility, (through an exchange organisation) to exchange throughout the world.

Your ability to do so depends on a number of different factors.

The exchange system relies on owners of timeshare to "deposit" (gift) their weeks to a timeshare exchange organisation with the expectation of receiving an equivalent week elsewhere in return.

The key concept is "equivalent". Depending on the exchange organisation this is based on a number of weighted factors such as resort quality, resort location, unit size, seasonal demand factors, period in advance in which unit deposited. The major factor is "supply and demand" (which is a coarse marketplace summary of the above factors). This is sometimes summarised as "trading power". If depositing your unit for exchanging purposes it is unlikely that you will receive an exchange with a substantially higher trading power than the unit that you have deposited.

Peak time periods (particularly school holidays) in good resorts at popular locations will allways be in demand. However such weeks are in short supply; many are not deposited with exchange companies but rather used by owner, or rented out.

If purchasing a timeshare week primarily for exchange purposes it is important to assess the trading requirements (desirability) of the type of resort /time /area you normally wish to exchange into and ensure that your purchase has sufficient trading power to match same. When calculating the economics of purchasing for exchanging the cost of exchange company charges (annual fee and exchange fee) should be added to the total annual cost to you of the timeshare unit. For one week only this probably renders timesharing uneconomic.

When depositing for exchange it is also important to deposit your week early, preferably more than one year in advance to maximise trading power. Deposits of less than three months in advance of use date of week will have their exchange power substantially reduced (varies with exchange companies).

Due to misselling, particularly of floating weeks, a large number of timeshare owners have bought with the intention of exchanging to peak weeks, but due to the nature of their deposit will have insufficient trading power to do so. Thus a reasonable proportion of timeshare owners regularly cannot use their own weeks, deposit same with an exchange organisation and then find they cannot achieve an acceptable exchange, thus forfeiting their week.(Exchange deposits typically expire after two years if not utilised.)

Thus the timeshare exchange organisations have a large number of surplus weeks on their books, which are usually made available for those members able to travel at short notice, for very nominal fees, without the necessity for depositing a corresponding week of your own. (Sometimes termed "bonus weeks".)

For those with the time and flexibility to travel at short notice, and who prefer off-peak periods this can be a major financial advantage. It is possible to travel and vacation for nominal sums (typically one week in a resort costing roughly the same as a day in a hotel) for long periods of time. For those with the ability to utilise this (e.g. retired couples) timeshare purchase for the intention of gaining exchange company membership to utilise short notice additional weeks is an excellant financial investment.

It should be noted that the majority of timeshare exchange companies are commercial organisations, whose prime purpose is to maximise their profits, and thus charge what the market will bear. Many exchange companies insist on annual membership fees and an irrevocable deposit of your unit before considering an exchange, and thus subsequently have less incentive to procure your required exchange. ( In particular this applies to the largest exchange company RCI which compensates for this commercially by virtue of having the biggest inventory). For occasional local area exchanges smaller exchange companies are usually more economic; many having no membership charges or deposit requirements until an exchange is confirmed. Larger exchange companies tend to provide a better international service, or if multiple frequent exchanges are required, particularly during off-peak periods if you have reasonable flexibility time and/or location wise. For peak time periods and in areas where few timeshare resorts are available (e.g. larger cities) exchange companies have a poor historical record.

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Renting

As timeshare units are owned by individuals; renting of your week can be quite difficult (as no access to central marketing/ reservation system). Even with high value resorts and weeks it is normally not possible to privately rent out at equivalent area commercial accomodation rates.

Thus renting timeshare from an owner usually represents good value for the astute vacationer; this does not appear to be well known to the general public. In offpeak periods rentals can often be found at roughly, or only a little more, than the annual maintenance fee. Purchasing with the intention to rent is thus normally a non-viable proposition. Rentals can normally be found in local newspapers (holiday accomodation) on weekends, or on internet advertising sites (although many of the "free" advertising sites have a lot of overpriced rentals - if it is getting close to the time of use make an offer). (For my private rentals site)

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Selling

There is very little in the way of a secondary market for reselling timeshares. Many timeshares were also originally purchased for substantially more than their true economic worth, and there is a natural reluctance for the owner to take a loss. A number of off-peak lower quality timeshares also have little, if any, economic value at all. The resultant is that it can be extremely difficult to resell a timeshare.

If intending to resell a timeshare, a realistic evaluation of the true economic worth is required, and the timeshare priced accordingly. Even then selling can take a considerable time period. Advertisements should be placed in local newspapers, community noticeboards and internet free advertising sites. The resort concerned should also be advised so that any enquiries can be on-referred to you.

It should be noted that due to the number of "distressed" owners attempting to sell at unrealistic valuations a mini industry has sprung up to relieve them of further money by supposedly assisting sales and rentals. These typically involve an intial fee or charge of some description, following which nothing more is heard. Essentially if you are required to pay any money for any reason prior to receipts of funds from a successful sale, then the organisation should be avoided.

For those who wish to purchase timeshares, second hand purchases invariably give much better value than buying new from a developer. In New Zealand many resales are available at timeshareco.nz..

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Recommendations before purchasing a timeshare summarised

  1. Establish your vacation preferences and requirements.
  2. Establish your preferred home resort location. (Recommend in home country normally.)
  3. Establish your requirements in terms of unit size and facilities. (Recommend minimum two bedroom for families.)
  4. Establish your holiday date requirements, and choose whether fixed or floating is suitable based on your lifestyle.
  5. Review resorts available in selected area that meet the requirements selected above. (Initial information can be gained from RCI and Interval International websites.)
  6. Stay at selected resorts (utilise private rentals). Ensure that the resort and holiday experience meets your expectations.
  7. Establish preferred resorts ownership structure, control structure, maintenance fees etc. (Talk to owners and management when staying at resort.)
  8. If intending to exchange regularly ensure that the resort has good trading power. (Any time not "red" or peak has very poor trading power and should be avoided as a minimum, similarly be cautious if the resort is not 'gold crown' or equivalent quality status.)
  9. Having chosen a selection of preferred resorts and time periods establish the true economic value of the timeshare.
  10. Wait for private sales; make offers up to the economic value of the week as calculated.
  11. Allways use the appropriate lawyers for the property/ financial transfers to ensure security of unencumbered title (as in any property transaction).

As in any financial transaction purchase of a timeshare should be carefully evaluated to ensure it meets your requirements. If approached correctly timeshare offers good value higher quality holidays.

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