When Jeff Soboleski took a trip to Orlando about 1 1/2 years ago, he knew there was going to be a catch, but he didn’t mind.
The trip was part of Ramada Inn’s vacation time-share resort promotion to bring in potential buyers. Although the Mt. Clemens, Mich., resident didn’t make a purchase, it wasn’t long before he bought a week in St. Martin and joined the growing ranks of time-share owners.
More than 1.7 million U.S. households and more than 4 million worldwide own a vacation interval, or time-share, according to the American Resort Development Association.
The industry posted $3 billion in sales last year, said Chris Larsen, the group’s spokesman, and had annual sales growth of more than 14 percent for the past six years.
With hospitality giants–Disney, Hilton, Hyatt, Ramada Inn, Embassy Suites and Marriott–part of the industry, Larsen predicts even more growth. Throw in the aging Baby Boomers and the echo boomers, and the industry’s future gets even brighter.
Average time-share owners are 49 years old, have $70,000 in annual income, are married, are highly educated and have children.
Time-sharing, in which individuals purchase the right to spend a specific amount of time every year at a specific place, began about 30 years ago.
But it didn’t catch on with U.S. consumers until the late 1970s, Larsen said.
The largest group of U.S. time-share resorts, 23.6 percent, are in Florida, American Resort Development Association statistics show. The rest of the nation’s time-shares are spread pretty evenly throughout most regions of the country.
“When considering buying a time-share, it’s a mistake to look at it like real estate that has appreciation,” Larsen said.
The average price of a time-share is $10,500 to own one week every year for the rest of the buyer’s life. Prices vary based on time of year, location and size of a time-share unit.
A two-bedroom unit averages about $8,125 for a week in the low season, $9,042 for the middle season and $13,000 for the high season.
Traditionally, buyers put down 10 percent, then pay the balance over the next seven years, Larsen said. Time-share owners also pay an annual maintenance fee that averages $350. That fee can be used to pay property taxes on the resort and for the general upkeep of the project, the unit and unit furnishings.
“Roughly 51 people share the ownership of a unit, so the upkeep and quality of the furnishings have to meet the standards of all 51 people,” Larsen said. And that, he added, can get expensive.
Using the average price of $10,500, an individual who put 10 percent down and paid the remainder in seven years at 8 percent interest, would pay nearly $17,300 for the time-share unit. The average $350 annual maintenance fee on a time-share held for 20 years adds another $7,000 to the price. That brings the total cost to $24,300, or about $1,200 per year, not including transportation and food costs. The numbers for any particular unit, of course, will vary depending on the price of a time-share, down payment, loan rates, possible maintenance fee increases and other factors.
There are two main types of time-sharing plans: deeded and non-deeded. With a deeded ownership, a buyer gets an ownership interest in a piece of real estate. A non-deeded plan means a buyer gets a lease, license or club membership that allows the individual to use the property for a specific amount of time each year for a stated number of years.
If someone wants to resell his or her time-share, there are a few options. Many resorts, particularly in Florida, will help owners resell their units, Larsen said. Owners also may want to contact the resort’s homeowners association to see if another time-share owner wants another week. However, resales typically go for 50 to 60 percent of their original value, he added.
“One of the challenges of the industry is that people don’t wake up and say, `I want to buy a time-share today,’ ” Larsen said.
So time-share resort and project owners often rely on promotional trips to attract buyers and sales.
Most time-share properties are affiliated with a time-share exchange program that allows participants to trade their weeks for time at another property.
“One complaint from time-share owners was, `I don’t want to come here every year for the rest of my life,’ ” said Jan Wyatt, vice president of marketing for Interval International Inc., a top vacation exchange company. The Miami company is affiliated with 1,800 resorts in more than 70 countries.
Vacation exchange programs were created to give time-share owners more flexibility.
Time-share owners looking to exchange their weeks deposit their time with an exchange program, then make a request for what site and week they are interested in getting in return.
Participants can reclaim their original weeks only if their specific request cannot be met or their deposited time has not been assigned to another time-sharer.
Participation comes at a cost. Annual membership fees to Interval International cost $68 in addition to a $104 fee for each domestic exchange and $124 for each international exchange. Indianapolis-based Resort Condominiums International, one of the top vacation exchange programs, charges $84 a year for membership, $118 for a domestic exchange and $155 for an international exchange.
The programs work on a fair exchange policy in which accommodations at one resort trade for similar accommodations at another resort.
TIME-SHARE LINGO
– Lockoff or lockout unit. This plan allows owners to occupy a portion of a unit and offer the rest for rental or for use by time-share owners involved in an exchange program.
– Fixed-unit, fixed-week deeded agreement. The purchaser receives a deed allowing the use of a specific condominium at a particular time every year forever. Benefits may include the tax advantages of homeownership, plus a voice in the management of a resort. The owner may rent, sell, exchange or bequeath the time-share time period.
– Right-to-use plan. Ownership of the property remains with the developer. The purchaser receives the right to use accommodations for a specified number of years, generally 10 to 50, after which all use rights return to the developer. These plans come in a variety of forms, often as club memberships.
– Fixed time plan. The unit is purchased for a specific week during the year. That week is reserved every year, subject to cancellation if an owner does not plan to use it in a given year.
– Floating time plan. Time-shares sold as floating time allow use of vacation accommodations within a certain season of the year, often within a three- to four-month period, such as spring or summer. The owner must reserve the desired vacation time in advance.
– Fractional ownership plan. This contract enables consumers to purchase a larger share of a vacation ownership unit, usually from five to 26 weeks.
– Biennial ownership. This also is known as alternate-year ownership. It allows use of a resort ownership unit every other year.
– American Resort Development Association
