What Financial Advisors Know About Timeshares
When it comes to the timeshare industry, the people who seem to experience all the negatives are the timeshare owners themselves. Timeshare owners are the ones that maintain the properties via maintenance fees and special assessments. Timeshare owners are also faced with the annual challenge of having to, use it themselves, rent it out (and try to make up the cost of maintenance fees), or sell it.
When it comes down to making personal use of a timeshare, the major battle for owners is getting the week/location/resort desired. Resorts are often oversold to timeshare owners and yet they have major revenue streaming in from the rental of timeshare units. When timeshare resorts rent units out to non-timeshare owners, this depletes the inventory, and in turn limits what timeshare owners have to choose from. Many resorts operate just like hotels today and this has taken away from much of the benefit of being a timeshare owner to begin with.
Trading companies like RCI & Interval International are also not helping with the inventory issue. Trading companies have also joined in on the profitable rental business and give access to their trades to those who don’t even own timeshares. Regardless of right or wrong, the availability of timeshares on the rental market has increased so much that timeshare owners are finding themselves with the leftovers.
When timeshare owners give up on booking a vacation for their own use, many look into the option of renting out their unit to others. The problem with timeshare owners renting out their own unit is that there is a specific amount of money that has to be collected in order for it to make sense. Every timeshare owner will have to charge more than or equal to what they pay in maintenance fees in order to break even or try to make a profit. However with resorts, trading companies and other travel clubs out there competing for the same business at incredibly competitive prices, it makes it very difficult for timeshare owners to successfully rent out their specific unit without losing money.
After discouraging attempts to use it, trade it, and rent it, many timeshare owners find that selling sounds like a fairly good idea. Unfortunately, what most timeshare owners find is that the “promise to be able to sell, if you ever decided you don’t want it anymore” has fallen very short of its word.
There are nearly 6 million timeshare owners in the world and it has taken nearly 50 years for the industry to sell that many memberships. Today however, there are 3.3 million timeshares for sale on the resale market. The inability to use memberships, and the difficulty in trading, combined with the frustrations of not being able to compete in the rental business has left over half of all timeshare owners in the world frustrated and looking for a way out of their contracts.
The over flooded resale market has made it nearly impossible for timeshare owners to be able to get out of their contracts. Timeshare owners also don’t have the ability to create an environment that was created for them when they purchased the unit to begin with. The timeshare sales pitch is certainly designed in a way that will get people to buy on the spot, and make it difficult to mimic on the resale side and leave people locked in a contract with no way out.
It is easy to see why timeshare owners cling to the advice of others for direction and help in the matter. Many timeshare owners look to their financial advisors for guidance on what to do. The truth is, if a financial advisor has any advice other than to stay away, chances are they don’t know much about the timeshare industry. And on the other hand if you already own a timeshare and decide to consult your financial advisor, the only reliable response would have to involve some sort of solution that gets you out of the contract.
Unfortunately, once you own a timeshare the financial commitment has already been made for the duration of the contract (which is typically perpetual).
Just remember, the most reliable advice is one that generates a solution. If your advisor provides you with a solution, that results in the continued ownership of a timeshare, than you may want to think twice about it. At the end of the day, if your advisor thinks you should continue owning one…you may want to try selling it to your advisor as well.
Filed Under: Timeshare Articles
