Illustration by Kip Aoki, Star-Bulletin
If you're in the market forBy David Evans
a timeshare, look to buy from an
individual owner instead of a developer
LAHAINA -- Michael Williams bought his two-bedroom Maui timeshare week through a resale broker for $4,500, about half the developer's original sale price.
"I was skeptical at first," said Williams, chief financial officer of a wood products company in Oregon. "It sounded too good to be true."
If you're thinking about buying a vacation timeshare, you can save thousands of dollars by purchasing from an individual timeshare owner, instead of a developer. That's one of the seven secrets of the timeshare industry.
"Buying directly from the developer is the most expensive way to purchase," said Randy Ragon, president of Maui-based Timeshare Resales Hawaii. "Marketing costs and profit must be retrieved at the buyer's expense."
Last year, U.S. timeshare developers sold more than $2 billion of timeshare units, according to the American Resort Development Association, the industry trade group. Almost 2 million U.S. families now own timeshares, which allow the owner to vacation for a certain period each year at the same resort condominium.
The average timeshare week sold last year for $10,000, according to ARDA.
Brokers like Ragon resell the same timeshares for 25 percent or more below developers' prices.
For an extra $177, a timeshare owner can arrange to trade his week for a week at a different vacation resort through Resort Condominiums International, the world's largest exchange company. More than 70 percent of U.S. timeshare owners have taken a vacation through a trade, an ARDA survey released in July found.
If you're going to swap anyway, brokers recommend buying the cheapest timeshare you can find that's tradable for weeks at resorts you'd like to exchange for.
Secret #2: Almost half of timeshare owners are "interested" in selling, according to the ARDA survey. The survey of 2,653 timeshare owners found that 46 percent were interested in selling their shares, including 22 percent who were "very interested."
The most common reasons for wanting to sell were lifestyle changes, not using the timeshare enough, wanting more vacation flexibility and not being able to afford it, according to the survey.
Secret #3: Timeshares won't necessarily cut vacation costs.
ARDA's study found that most of those who bought timeshares since 1990 don't believe they've saved money on their vacations. Of those who bought since 1995, 71 percent said they haven't saved money. Fifty-four percent of the pre-1990 buyers said their timeshares have produced savings.
Cynthia Huheey, chief operating officer of ARDA, said timeshare buyers "basically freeze the price of future vacations." What isn't frozen, however, are the annual maintenance fees, typically $300 to $600, which cover the cost of operating the facility.
Dawn Kelley, of Lubbock, Texas, complains that Dallas-based Silverleaf Resorts Inc. has raised its annual maintenance fee to $600 from $360 when her family bought one of its timeshare weeks in 1989. That 67 percent increase is about double the rate of inflation during the period. "That's the main reason it's up for sale," said Kelley, who teaches accounting at Texas Tech University.
Secret #4: Last year, 19 percent of U.S. timeshare weeks went unused, according to the ARDA study. At timeshare resorts in the Northeast, 27 percent of the weeks weren't used. Whether or not a timeshare is left empty, though, annual maintenance fees must be paid.
"I don't think you can make the leap that these people are dissatisfied," said ARDA's Huheey. The ARDA study found that 85 percent of owners were satisfied with their timeshares, including 55 percent "very satisfied."
Secret #5: Because so many timeshares go unused, it's possible to rent a unit for $400 to $800 a week. "We rent it so they can get enough money to pay their maintenance fees while they're waiting to sell," said Mario Collura, president of Tri-West, a Los Angeles-based timeshare broker.
Tri-West is holding its annual auction of more than 100 timeshares Sept. 28 at a Los Angeles hotel and over the Internet. Last year, 65 timeshares were sold at an average price of $1,917.
Secret #6: Sales and marketing costs for timeshares typically consume about 40 percent of the price of a unit, according to the ARDA study. That means developers spend about $4,000 to sell the average $10,000 timeshare. That's as much as four times their cost for a timeshare week.
Another industry study recently found that developers typically spend $185 just to attract a husband and wife to a sales presentation -- and most couples don't buy. That includes paying for such incentives as prizes, dinners and discounts on tourist attractions.
In Orlando, Fla., timeshare vendors have set up booths to snare vacationers for timeshare sales presentations. Timeshare developers pay the kiosk operators as much as $200 for each couple that shows up for a presentation, whether or not they buy, according to industry consultant John Simon of KPMG Consulting in Miami.
Secret #7: Some developers have recently been accused of engaging in improper sales practices, although the industry has outgrown much of the stigma of the 1970s and 1980s when some timeshare promoters went to jail for defrauding consumers.
Vacation Break USA Inc., a major timeshare developer in Fort Lauderdale, Fla., faces complaints filed by Vermont, Massachusetts, Washington and Connecticut that the company used deceptive marketing practices. In July, it agreed to pay a $25,000 fine to Maryland and give refunds to some customers to settle allegations that it marketed its timeshares improperly.
Time Share on the WebTimeshare Resales Hawaii
713-A Front St., Lahaina, HI 96761 800-426-1777.
Web site: http://maui.net/~timeshre (Has sales listings, information on Hawaii timeshares.)
Tri-West Real Estate
11965 Venice Blvd., #204, Los Angeles, CA 90066 800-423-6377.
Web site: http://www.triwest-timeshare.com (Auction will be carried live on this site. Has pricing info on thousands of timeshare developments.)
American Resort Development Association
(Timeshare developer's trade association)
1220 L St., Suite 500, Washington, D.C. 20005202-371-6700.
Web site: http://www.arda.org (Timeshare background.)