The Future of timeshare prices?

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

I'm wondering what people think will be the way of the future for timeshares?
no , not the points vs weeks discussions..

but the costs and pricing

I'm thinking 20 years in the future. When I can actually take multiple weeks off at a time.

Will timesharing slow down as the baby boomers start to die off?
Will we see even more of a glut of resales once that starts happening?
Will the timeshare stigma finally be gone and it will all be more mainstream?
Will the resale and developer pricing ever come together.. or at least get closer?
Will resale pricing always be depressed, except for only the finest resorts?



Dave

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

I don't foresee a major change coming. There will continue to be fluctuations based on market values created by supply and demand. As long as new resorts are developed, the stream going into the resale market will continue. The weeks that no one wants will continue to be give-aways. There are so many forces determining the desire for timeshares that they may continually counteract each other. The best way to guarantee ownership is to buy where you want when the price bottoms out at the resort you want. As always, one should have good knowledge of the resort management and avoid what could be future trouble.

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

I think the two most important macro level impacts to timesharing over the next 20 years will be:

a) more information diffusion will make it impossible for developers to charge more than a 25% premium over the resale price of a timeshare.

b) the Asian and especially the Chinese middle class will create tremendous demand for timeshares.

Because of this, timeshares will need a new valuation model. Discounted cash flows will be my guess of what wins out. And, a new investor class will enter the timeshare market. This will drive efficiencies in the current structure and operation of the industry. Buying and selling timeshares will be more like buying and selling stocks vs. real estate.

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

a) more information diffusion will make it impossible for developers to charge more than a 25% premium over the resale price of a timeshare.

I agree with this for US citizens.. but there are many foriegn travellers that are at least 20 years behind in information technology.

What happens to the Fairfield point systems that are sold developer for .11 cents and resale for .01 cent? Will they meet in the middle? Or do you just think we'll have less new developments?
It wouldn't be cost effective to build if developers took more than a 25% discount from today's pricing.

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

I agree with this for US citizens.. but there are many foriegn travellers that are at least 20 years behind in information technology.

What happens to the Fairfield point systems that are sold developer for .11 cents and resale for .01 cent? Will they meet in the middle? Or do you just think we'll have less new developments?
It wouldn't be cost effective to build if developers took more than a 25% discount from today's pricing.

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The reason that developers need to charge so much is because people don't know about timeshares and need to be sold on the spot after being lured in. Once there is a sufficient diffusion of information about timesharing to the world, then that hard sale will no longer be required.

The sales and marketing budgets would no longer need to be 50% of sales. It can trend down to a more reasonable 10-15%. When that happens, developers can still profit at drastically lower prices. When there is a real market for timeshares, then the resale prices will increase as well.

In my opinion, the Fairfield Fairshare Plus program should be replaced with a new and improved version that is drastically simplified. Fairfield is a sales company from top to bottom. Every important executive in Fairfield came out of sales. They are a sales driven company. Therefore, operational efficiency went out the door in favor of creating a program that maximizes the sales guys ability to sell a product. Hence, programs that help kill the resale market.

In the future, this will be counter productive as consumers will realize that artificially crippling a product by creating non-transferrable features that are only available when purchased from the developer is a product you want to stay away from.

If developer sales were closer in price to resale, they wouldn't have to cripple the product when sold to someone else.

Can you imagine buying a house and the developer telling you that when you sell it, the new owner can't use the sidewalks? That is ludicrous.

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

I agree with this for US citizens.. but there are many foriegn travellers that are at least 20 years behind in information technology.

It will only take 5-10 years for all major Asian countries to surpass the current US IT infrastructure.

Many countries like Korea and Japan are already way ahead of us.

In those and other Asian countries, education is far more important to their cultures than it is in the US. The internet is just another tool set that supports their cultural quest for superior education.

Their children are already far ahead of our students in math and sciences when they graduate from high school. Their improving internet infrastructure will only enhance that edge. After all, it's the most educated people who want better IT infrastructure.

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

The internet is dramatically affecting the timeshare business, and one of the biggest impacts is lubricating the resale market. As people find it easier to research the resale market and purchase resale, the pressure on developers to undercut the resale market will increase.

Thus, I boldly predict that new wrinkles will continue to be added to timeshare programs that will be available only to people who buy from the developer. Examples of things I expect to see (some of which are already occurring) include:

• Programs such as Worldmark might strip Prmier status from memberships if the membership is resold. (Obviously, they could only do that for new membership sales; existing premier memberships would retain resale rights).
  
• People who purchase from the developer will get elite membership status, which will allow them to reserve units earlier, get automatic upgrades, allow them to split weeks, etc. If additional resorts are added to the resort group, the elite members will get access to those new resorts, while non-elites (i.e, the resale purchasers) will be restricted to fixed basket of units in teh system at the time the original membership was purchased. (I know some systems are already doing this.)
  
• Super elite exchange status (such as RCI's Registry Collection) will only be available at participating resorts to owners who purchased through the developer.
  
• The primo-primo units at certain resorts will be set aside for the elite members. For example, at an ocean front resort, the corner units on the upper floors would be set aside for use by elite members with ocean front usage rights. Ocean front owners who are not elite members would not be placed in those units except on a space available basis at check-in.
  
• For hotel-branded or affiliated systems, convertability of points into the hotel's frequent traveler program will be limited to people who bought from the developer.
  
• Inflating transfer fees.
  
• For floating use resorts that have multiple unit categories (e.g., different view types), developers will make the right to select a view category be perquisite for elite members (i.e., those who boiught from the developer). The non-elites will be assigned to whatever units are available after the elites have makde their reservations.

I'm sure that I've only scratched the surface. But developers will come up with as many variations as they can to strip value from resales so that developer pricing can be justified. And I probably shouldn't go on because I don't want to give any developers reading this any more ideas!

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

Boca.. great thoughts

I'm trying to see the light at the end of the tunnel and justify the 300 weeks of timeshares I should have by then..lol..

Steve..
This sounds like the Mayan Palace business model.

I'm surprised more developers aren't doing this already.
As long as HGVC and Sunterra don't screw me retroactively. Those are two of the resort systems I will try to hold onto.

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

Steve..
This sounds like the Mayan Palace business model.

I'm surprised more developers aren't doing this already.
As long as HGVC and Sunterra don't screw me retroactively. Those are two of the resort systems I will try to hold onto.

Yeah - a lot of the ideas were taken from the Mayan.

Maybe Mayan is the vanguard. A Mayan owner might paraphrase Pogo - we have met the future and it is us.

But that's got to be the way things go. When the prospect can't get info on resales, the developer has an overwheling information advantage. But it's so easy and natural for people to go on the web now.

After we sat through our first sales presentation in 1999 (at the Marriott Kaua`i), I got on the web that night (via dial-up connection in those days) and found out about resales by the end of the same day we toured.

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

Resort issues may dominate

Will timesharing slow down as the baby boomers start to die off?

The low cost to enter the market on resale and inheritance will keep the youngin's in the game.

Will we see even more of a glut of resales once that starts happening?

The glut may be peaking over the next few years (see final thoughts below).

Will the timeshare stigma finally be gone and it will all be more mainstream?

As more and more resorts go upscale with either known travel names or build a following of their own the stigma will most likely disipate.

Will the resale and developer pricing ever come together.. or at least get closer?

It better or most developers will find they have built a product they cannot sell. The Internet has started to educate consumers and the old ways won't work much longer.

Will resale pricing always be depressed, except for only the finest resorts?

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.

Final note: A big problem that is starting to be seen is the aging of older resorts. The apartment/hotel conversions of 10-20 years ago may be nearing the end of life. The purpose built resorts are better off but are starting to need big investments to stay viable often requiring large special assessments. if too many owners bail out they could also end up disappearing. Far too many resorts are finding that nothing close to the needed amounts have been collected for the necessary repairs and improvements a 10-20 year old resort requires.

[SilkRoad Junior Member Find all posts View Profile Close SilkRoad]

[QUOTE=timeos2]
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?

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

I really have no idea what will happen to timeshares in the future. However, I think our children will not be satisfied cramming into a hotel room after being brought up on timesahres.

The funny thing is children that have come on vacations with us over the years, always call when their families are planning a vacation. They try to get a timeshare for their familie's trip.

It is hard to regress back to a hotel room once you have vacationed in a timeshare, especially if you have young children.

I am hoping that our children, and their friends will keep the timeshare industry alive, with or without any changes made to the industry over the years.

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

I really have no idea what will happen to timeshares in the future. However, I think our children will not be satisfied cramming into a hotel room after being brought up on timesahres.

The funny thing is children that have come on vacations with us over the years, always call when their families are planning a vacation. They try to get a timeshare for their familie's trip.

It is hard to regress back to a hotel room once you have vacationed in a timeshare, especially if you have young children.

I am hoping that our children, and their friends will keep the timeshare industry alive, with or without any changes made to the industry over the years.

Angela,

I completely agree with you on this point. When enough people understand that a timeshare is better than a hotel room for vacationing, then rental prices should adjust to where the "retail" rate of a timeshare in a given area will be higher than the hotel equivalent.

This requires broad diffusion of information only possible with the internet. When that happens, there will be strength in the timeshare rental market and stronger resale prices. Maintenance fees and taxes need to be kept under control. An investor class of timeshare owners will be the best thing to keep developers under control both from a price and a management point of view.

If an investor class emerges, then I believe timesharing will become a true mass market. If it doesn't, then some other vacation alternative will become dominant. Condo hotels and vacation clubs could win out. That's because if there is no investor class, then there could be a persistent condition where lots of rentals will be available for around the cost of maintenance. Only a stronger rental market can solve this problem.

[urple2 Senior Member Find all posts View Profile Close urple2]

Originally posted by BocaBum99
The reason that developers need to charge so much is because people don't know about timeshares and need to be sold on the spot after being lured in. Once there is a sufficient diffusion of information about timesharing to the world, then that hard sale will no longer be required.

This is a great conversation. I have often thought that if the Developers had a better way to present these timeshares, it would be better for everyone. Seeing these people standing on the corners, trying to bring people in with free show tickets, etc. just kills the class of the whole act.

There is nothing like pulling up to a wonderful looking resort, checking in and they say, "you need to see that person over there to get your parking pass..." just to find out their trying to sell yet another timeshare.

There could be money to be made, with a better game for selling Timeshares.


Bill

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

If you depend on rental market, you need big corp come in. Then you need tax law changes.

If you depends on resale market, you need more owners. People usually overvalue what they own because of special feeling, and can weather the good and bad time. Then you need SEC declares it is a part of investment tool, and ask the company and exchange company to open more their behavior, and report, and audit. Which will reduce a great deal of risk, then the retail and resell market will start to come in together. Then small regular people claim they are investors and really only behavior based on the market will jump in. Then it can really push the price higher.

Don't quite sure Chinese part. I will purchase TS in China if there is one on sale. I don't think I will fly 24 hr to US and stay at a Beach for 7 days. The big chain with more city resorts maybe. So the TS maybe booming around Asia, but may not be here. And it can be guarantee is by developers, not resell.

But as a lot of other area around the world, the TS law is not that well test, and a lot of place that can be misused by developer and exchange company. Even in US, the exchange company can get away a lot of things. So unless that changes, the open of internet will just expose the risk of owning TS.

None of that will happen easily, so it is disadvantage to TS in US particular.

I think at this moment, TS is very good for working people. For Retirees, they will really need to love traveling. At working people range, it is 2 weeks to 4 weeks vacation per year. So even if you play smart and use holidays, it give you 3 to 6 weeks. Or 42 days max. With point system, you can take few min trip, like Sat, Sun, Mon type or Fri, Sat, Sun type of deal. So you have potential 100 days to use. Also, a lot of chain is pushing to middle income family. The one on RCI sites says at 2003, about 6 to 7 M families owns TS, which is actually less than all families earn US$1M in a year. Total interval is 10.7M, which is less than 2 weeks. If they can push to all middle income level, it will increase the owners base by 3 folds. If the point system works well, each family commit say 3 weeks vacation in TS, it will create a needs for double the interval size than 2003 without increase the owner size. So, although the population will reduce, the sale should be able to substain.

So the developer will continue to build. The resell market will come out more selections. And the best to be a buyer.

Jya-Ning