Financial look at the downturn in timesharing

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

The Most Interesting Internet IPO I've Seen This Year (MAR, P, WIFI)

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Even without it being written up, many of us have been talking about "vacation rentals", as opposed to owning timeshares, for quite a few years. It's only natural to talk about something you have to do try to recoup some maintenance fees on a portfolio of mostly-useless timeshares.

Dollars and sense-wise, very few timeshares cut it in today's market. That could explain the zero resale value of most (many) (some) tiemshares.

But, we all know that, don't we?

JMHO

[dougp26364 Senior Member Find all posts View Profile Close dougp26364]

As MF's climb out of reach for many average income families, the rental market will continue to grow. With the present economy and rate of deliquencies in MF's, I can see HOA's looking for an outlet to rent out unit weeks they've forclosed on, can't resell and desperately need some sort of income from to keep MF's from further escalation. I can also see developers who had a surplus of inventory before the market crash looking for an outlet to generate rental income to offset their share of MF's plus drive guests into their sales floors, qualified buyers or not, looking for more bargains and taking them up on gift cards or other freebies. Of course there are indivicual owners who's own situation has changed and they need to cover MF's for a couple of years while they hang on, either waiting for better days or until they can unload their own timeshares.

Like everything else in timeshare, I see this as cyclical. Right now it's the hottest thing off the press. When things turn around, assuming things will turn around, this will have been the latest fad. I look for it to be a fast growth market right now but as things become more stable it will level off, possibly even decline, as those who hung on return to what had been their normal patterns.

Of course this is going to depend upon how well HOA's and developers manage their resorts and thus, the escalation in MF's. I can't see the industry sustaining 5 to 10% increases in MF's year after year. Especially when the average income is either in decline from job loss or smaller than past increases combined with higher costs for benefits. For many years our yearly salary increases had been between 3% and 5%. These past few years we've been lucky to get 2% increase while the cost of our benefits have increased enough to offset that or, even cause a decline in net income.

Developers have a new problem on their hands. In 1998, they could compare the cost of owning vs renting a hotel room. Now they must be able to compare owning vs renting the very same condo they're trying to sell. Is more of an apples to apples comparison and, the cost of renting is approx. the same cost as owning, less the upfront cost of buying, which is approaching $40,000 for an average unit. Sure developers are desguising this by selling small points packages but, it shouldn't be to hard for even the average person to realize that those small points packages won't get them a full week and it's still cheaper to rent for a weekend than own enough points for a weekend.

Developers are either going to have to hang on, hoping for better times, which is what they appear to be doing or, they'll have to get more creative if they want to survive. My fear is the limit of creativeness is to artifically lower MF's to a point where developements aren't maintained as they should be. IMHO, Sunterra was a classic example of an underfunded timeshare developement. Epic and Ramada also fit that picture. Resorts declined, owners weren't happy, sales dropped off and they failed. Other developers that could be facing similar fates are Westgate and Festiva.

Right now cash is king. Developers who manage their resorts wisely will keep owners happy, keep deliquencies down and, buy out those who fail. Some will increase inventory not by building but by converting or aquisition of existing timeshares who are cash poor.

Where does this leave the true owners, those that paid thousands of dollars or took out very large loans at high interest rates? Well, I guess that leaves us just hanging on hoping for better days to return. Right now we still enjoy our ownership but don't find it as affordable as it was just 5 short years ago. The flexablity and abundance of availability for the locations we prefer (internal exchanges not major exchange company exchanges) has somewhat offset the cost of ownership vs renting but, as I said, in this market cash is king. As an owner, I don't feel in in a cash strong position. That leaves us making the best of a bad situation and just hanging on with the rest of the owners.

[Hostelling Senior Member Find all posts View Profile Close Hostelling]

I love the HomeAway.com web site. Map view for search and rental rates slide scale are great. Easier to find an extra week than at ebay.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

In other words, the snowball is rolling downhill.

In the meantime, some of the TS folks around Branson act like everything's just fine.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

When I couldn't get all the time they needed at a timeshare my neighbor turned to HomeAway.com & found a very nice rental house and a condo to fill the balance. In both cases the price was good but they said they missed the "resort feel" and found the property to be far less cared for than the timeshares they were used to. So the extra money we pay for maintenance & operations is noticeable and many will pay for it. It is different than just getting a house or rental condo in a complex. A competitor - yes. The same - no. Both have a market with some limited overlap IMO.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Individual anecdotes are interesting, but don't necessarily tell the big story.

[Ryne08 Senior Member Find all posts View Profile Close Ryne08]

Why should anyone now purchase a timeshare at full price when you can rent a vacation week for less than the maintenance fees?

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Why should anyone now purchase a timeshare at full price when you can rent a vacation week for less than the maintenance fees?

If I had a dollar for every time that's been posted the last few years, I could buy a full-priced Wastegate from Mr. Sleaze.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

If I had a dollar for every time that's been posted the last few years, I could buy a full-priced Wastegate from Mr. Sleaze.

And wouldn't THAT be a joy! Maybe you could get a deal even better than Perry M once did in the ill-fated Tower of Terror in LV....

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

And wouldn't THAT be a joy! Maybe you could get a deal even better than Perry M once did in the ill-fated Tower of Terror in LV....

Name dropper.