The Future of timeshare prices?

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Jya-Ning,

I think the Chinese will come in as an investor class. Think about it for a second. In how many places in the world can you think of Chinese merchants entering a specific geographic market, dominating local business and angering the local community for being too successful? I'll bet everyone reading this thread can think of a few.

As soon as some very creative people who have access to the Chinese market learn how to create an investment product that returns 25% in timesharing, money will come flooding into it.

What would be the appeal? Investment income based on real estate with a very low $$$ entry point for an investment hungry emerging middle class that has a 30% savings rate.

We Americans are spending way too much of our income on consumables rather than capital investments. Sooner or later, the Chinese will tire of US Treasury Bonds for their savings and will turn to real estate since it is tangible and has the potential of hedging against currency rate risk. Bonds are not protected from currency rate risk.

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

This has already been done at at least one resort that I know of- Wind in the Pines.

Perhaps MF could be linked with value such that Red weeks have a higher MF than Yellow/White. This may be "fair" also since the Red week owners have more of an investment to maintain and keep up. Why shouldn't they pay more? This would increase the value to less desirable weeks as they would have a lower MF. Of course, the owners of those Red weeks would raise H*LL

But if no one owns those less desirable weeks, those Red week owners will have to pay for the maintence anyway - or lose their investment

Thought?

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

As soon as some very creative people who have access to the Chinese market learn how to create an investment product that returns 25% in timesharing, money will come flooding into it.

Boca:

If you can find a way and prove it is same risk or lower than any REIT, the money will come today, no need to wait.



Jya-Ning

[cluemeister Member Find all posts View Profile Close cluemeister]

One huge advantage timeshares have over hotels is the space and household amenity advantage, i.e. kitchen, two bathrooms, etc. I think this gap is starting to diminish, as the huge explosion in hotel "suites" chains shows.

The dilemma will be when hotel chains jump into this market in a big way. Will it be cheaper for you or I to rent at a hotel like this, or pay a maintenance fee?

As an example for me, a regular hotel room in Vegas can be had for $70 a night (i.e. the Aladdin). My mf's at Polo Towers are $103 per night. BUT I get a 2 BR/2 Ba for that money. If hotels start offering kitchenettes, and a second bath/bedroom in lower price ranges, then it might not make sense to own a ts anymore in Vegas.

The other problem is many hotels don't have a life expectancy beyond 30 years, and they are then torn down. With so many timeshare owners, it would be very difficult to dissolve a timeshare, and almost impossible to authorize a special assessment that involved tearing down a building and starting over!

That's why I think fresh ts developments are always going to be there.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

One huge advantage timeshares have over hotels is the space and household amenity advantage, i.e. kitchen, two bathrooms, etc. I think this gap is starting to diminish, as the huge explosion in hotel "suites" chains shows.

The dilemma will be when hotel chains jump into this market in a big way. Will it be cheaper for you or I to rent at a hotel like this, or pay a maintenance fee?...

I've long maintained that the vacation condo market (which includes timeshares) is undervalued in the market as compared with hotel room rentals. I further believe that the internet is going to erode that difference. Savvy individuals, with patience to wait for the market turn, will benefit from that difference. I think that if you have a long term view and iinvest inproperties that provide a reasonable rate of return in the current market, you will beneift in the long run as the pricing difference is eroded. IOW, it's good to be long timeshares as long as you pick the right opportunities.

I further believe that Cendant has reached the same conclusion, and part of their corporate strategy is to position themselves as the leading source of vacation condo rentals. They will marry vacation condo rental business with their other hospitaility operations to create a one-stop shop for vacation travel needs.

Continuing that thought, I don't believe that RCI views II as their principal competitor. I believe that RCI views ResortQuest as their biggest competitor.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Boca:

If you can find a way and prove it is same risk or lower than any REIT, the money will come today, no need to wait.



Jya-Ning

The investment form will likely be a REIT for Timeshares.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

I've long maintained that the vacation condo market (which includes timeshares) is undervalued in the market as compared with hotel room rentals. I further believe that the internet is going to erode that difference. Savvy individuals, with patience to wait for the market turn, will benefit from that difference. I think that if you have a long term view and iinvest inproperties that provide a reasonable rate of return in the current market, you will beneift in the long run as the pricing difference is eroded. IOW, it's good to be long timeshares as long as you pick the right opportunities.

I further believe that Cendant has reached the same conclusion, and part of their corporate strategy is to position themselves as the leading source of vacation condo rentals. They will marry vacation condo rental business with their other hospitaility operations to create a one-stop shop for vacation travel needs.

Continuing that thought, I don't believe that RCI views II as their principal competitor. I believe that RCI views ResortQuest as their biggest competitor.

I completely agree with you. I have looked at ResortQuest very closely and they have a very solid business model for turning condos into rental properties very cost effectively.

RCI can get closer to this vision if they simply converted all weeks owners directly into points now.

What they ought to do is assign a point value to every week in the system based on their current trading power formula. Tell all owners what that trading power value is. Let them trade for anything they have enough trading power. And give them a choice, if there are extra points, they can just give them back. Or, they can use them elsewhere.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

[QUOTE=SilkRoad]

As a general rule yes. The value of the majority of ownership is far lower than the purchase price. The valuable times will have a good resale value but the 60-80% that isn't that desireable will depress the overall market average as people continue to dump it just to get out of ongoing fees.

That is one of the problems with the current timeshare model. Some weeks at many resort have little value. Some have argued they have negative value! A concept with which I'm inclined to agree.

What can be done? I don't know. Generally, MF are linked to square footage. Studios have lower MF than 1-BR, which in turn have a lower MF than a 2-BR. This happens because most people think of this a "fair". After all, a large unit probably does cost more maintain. But other models are also reasonable. Perhaps MF could be linked with value such that Red weeks have a higher MF than Yellow/White. This may be "fair" also since the Red week owners have more of an investment to maintain and keep up. Why shouldn't they pay more? This would increase the value to less desirable weeks as they would have a lower MF. Of course, the owners of those Red weeks would raise H*LL

But if no one owns those less desirable weeks, those Red week owners will have to pay for the maintence anyway - or lose their investment

Thought?

Point systems solve this problem by assigning maintenance fee costs per point. So, if a blue week has a value of 5000 points and a redweek has a value of 10000 points, the redweek will be paying twice as much as the blue week in maintenance fees.

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

Timeshares should be cheaper in daily costs than a suite at a hotel chain-even if the two are equal in size and in unit appointments. Remember we buy the timeshares and rent the hotel suites. Hotel chains should prefer selling timeshares vs renting units. They get their investment back with timeshares, plus a profit, plus a management fee and occupancy rates are not a worry. The only thing they lose is absolute control and sometimes not much of that.

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

Fees need to be tied to use value

[QUOTE=BocaBum99]

Point systems solve this problem by assigning maintenance fee costs per point. So, if a blue week has a value of 5000 points and a redweek has a value of 10000 points, the redweek will be paying twice as much as the blue week in maintenance fees.

Exactly. Which is one of the many reasons points based ownership for exchange protects resorts - especially those that have a majority of time in less than ideal seasons - is a superior model. It helps adjust the cost to reflect the fact that there are some periods that are far more valuable than others and gives the lower value time owners a reason to feel their ownership makes sense. It does push some additional expense to the high value times but, since they get more value out, paying more also makes sense for those owners.

Now if you are dealing with fixed weeks having eveyone pay the same is a big benefit to the high value time owners but leaves little value for the low time folks. Most likely the high value will end up paying anyway as they loose the ownership on the low end & have to make up those fees. The old days of RCI/II giving false value to that low time through trade ups is over and so is the free ride for the "one size fits all" payment model. The biggest problem is many resorts are locked into a fixed payment for all owners by state laws or the original documents. They are going to suffer, as Carolinian has noted many times, since they don't have the flexibility to alter that without owner approval (very tough to get) and the change away from the trade up model RCI/II used to embrace. Those resorts had better be creative and well managed or many will fail.

[CaliDave Super Moderator Find all posts View Profile Close CaliDave]

[quote=BocaBum99]

Point systems solve this problem by assigning maintenance fee costs per point. So, if a blue week has a value of 5000 points and a redweek has a value of 10000 points, the redweek will be paying twice as much as the blue week in maintenance fees.

HGVC is an all points system.. but MF's are not assigned by point values.
They are assigned by unit size