Timeshares: Should we buy one?

During our trip to Orlando, we stayed at a Hilton Grand Vacation Club Resort.  The price was right:  $330 for four nights.  It was the sort of resort that you would expect to pay at least $150 per night.  The catch?  Sit through a 90 minute timeshare presentation, of course.

If you haven't been through one of these, I'll try to recount the experience with as much detail as I can remember.  It's a remarkable sales presentation, with answers for every question/objection.  So, here's how it goes.

They start by sitting you down at a table with a salesperson who comes off as very unassuming, very friendly.  He breaks the ice with "getting to know you" sort of questions.  He tells you a bit about himself and how he got into this business.  He assures you that there is no pressure to buy, and that this isn't for everyone, but "two out of four people who walk in end up being club members."  Whether true of not (and I think not), the idea is to assure you that it's a good buy and lots of other people have seen that.

Once he begins the sales presentation, he starts by asking you where your dream vacation is.  He asks about the last couple of vacations that we have taken.  They are trying to get an idea of whether we take large annual vacations or several small weekend getaway type trips.  This way they know what angle to play up.  Of course, they don't tell you how much "membership" costs at this point.

Next, we watch a ten minute video of good looking people and cute kids having a great time on beaches, golf courses, ski lodges, etc.  The voiceover is right out of your favorite Tony Robbins infomercial.  The idea is simple.  Everyone is supposed to walk out thinking, "man, I want that life!"

We are taken into another room with pictures taken right out of the video we just sat through.  He leads us to the "Vacation Calculator" and asks me if we regularly take two weeks of vacation per year. 

"No," I tell him, "generally one, or we travel to places where we have friends we can stay with."

"Would you say you spend $200 per night?"

"No way, maybe a hundred."

"And we have inflation at 5%, is that okay?"

"No (again), I would put 3%"

"And how many years do you plan to vacation?  Should we say 30?"

"Sure."

He plugs in the numbers and the super computer spits out a number of thirty six thousand dollars and some change.  Now, I didn't have my financial calculator with me, so I couldn't do any time value calculations, but I figured they just did a future value calculation with the numbers we agreed to.  But when I got home, I found that $700 per year at 3% for 30 years give you a future value of $33,302.79.  Not thirty six and change.  But whatever.

So, the strategy is obvious.  We have already committed to spending $36,000 in vacations in our lifetimes.  If he could offer us lifetime vacations for less than that, it's a good deal, right?  We'll see.

The first plan the he shows us is around $30,000.  Not even close.  He tries to use the angle that it's less than the $36,000 that we will spend over our lifetimes.  Of course, the time value of money tells us that $36,000 over the next 30 years is likely less in value than $30,000 today.  And, of course, they have payment plans at convenient financing rates of 11.9%!

In fact, the net present value of the cash flows we agreed to is $20,388.35.  So, even if we really are going to spend $700 per year on hotels, increasing 3% per year for inflation for the next thirty years, the most we should pay today in lieu is $20,885.  The problem is that, in real life we don't necessarily take vacations every year, and either stay with friends, use points, or find great deals for the times that we do.

So, after we firmly explain that we are not interested, he brings his manager over.  The manager offers a package for around $14,000 that gives us points every other year.  The problem is that it's the same deal.  Half the benefits, half the cost.

We explain that we are saving to buy a house, and this just doesn't fit our budget.  The manager whips out his calculator and says, "if I told you you could add less than $70 per month to your mortgage, and take a vacation every year for the rest of your life, would you do it?"  I chuckled.  It's a pretty clever response.  There are two problems with it.  First, you end up paying for the stupid timeshare for the next thirty years.  Second, $14,000 amortized over 30 years at 6% is eighty four bucks, not less than seventy.

It's an interesting idea, but here are the things that I wonder about.

1. How much commission do the salespeople make per sale?  I asked a cab driver what he thought, and he told me that they make $3k when they sell a $15k timeshare.
2. If the timeshares a such a great deal for the buyer, how is it so profitable for sellers?  How do we know it's so profitable?  Well, between Hilton, Marriott, Trendwest, Shell Vacations, and Westin, I get calls and emails pretty frequently to come to a presentation with dinners, movie tickets and weekend getaways thrown in whether or not we buy.  If they're willing to throw that much worth of goods at us, they must be making enough on each sale to make it well worth it.  So, why is it SO profitable?
3. Are most buyers happy with their purchase?  I know two people at work who own timeshares and both seem happy with it.  But I wonder if it really is a good deal.  If I overpaid for a weekend at the Ritz-Carlton, I may be happy with it, but I still overpaid.

Comments

[Chris J]

Don't do it. I worked for T****west in 2004-2005, and the default rate on these is incredibly high (people don't want 'em and they just stop paying!). There is a big aftermarket for timeshare resales at a huge discount, so if you have your heart set on this, you absolutely must investigate buying "used", so to speak. If you buy now and decide you don't like it, you'll have a tough time selling it and will likely take a significant loss.

[frank]

Part of the profitability comes from their financing (at 11.9%). They get enough people to take out those loans and even with pretty high default rates, they are making some sweet coinage.
That being said, did you feel like it was a high pressure sales pitch? From the way you described it, I would say yes!

[Mark]

Timeshares caused a huge fight with an ex-GF of mine. She wanted to buy and I did not -- it ended up demonstrating a difference in how we would approach money. We broke up several months later.

I dislike timeshares because: (1) they are expensive and represent bad value; (2) unless you live nearby and wish to go to the same place year after year, it is inflexible (trading weeks is not always available); (3) the world is a big place and regular hotels in many places are alot cheaper than $100/night; (4) priceline and hotel website give incredible deals that are available only if you book less than 30 years in advance. Finally, ask TS owners. Many are unhappy with their purchase and are desperate to unload the thing. Buy used if you must. But I prefer travelling abroad, where you get experiences timeshares can never deliver by using local hotels not some big timeshare chain that happens to have a unit in Turkey miles, and months, from where you really want to be.

[lamoneyguy]

Good comments guys. Chris J, I'm glad to get the perspective of someone who worked for one of these guys. I was thinking about applying for a sales job on the weekend for a few months, just so I can write the book, "confessions of a timeshare salesman." Feel free to steal the idea if you wish. You obviously have a head start on me.

Frank, it never really felt high pressure. I guess the difference is that there was never any intimidation, or attempt to make us feel stupid. At least none that registered.

Mark, I agree with you. I have always been able to find good deals on hotels. Sometimes the cost if attending timeshare presentations, but still.

[James]

Thats a total nobrainer, timeshares are a BAD idea.

[Bronco]

Don't do it!

[Wes]

Kiplinger just posted a little blurb about unloading time shares:

http://www.kiplinger.com/magazine/archives/2007/03/timeshare.html

And a more detailed discussion here:
http://www.kiplinger.com/magazine/archives/2006/09/lowdown.html

[Will]

Hi,

You seem very astute,so I'll just jump in here, but first, a little background. I have worked in the timeshare industry for over
twelve years. I have worked for some of the major players in timeshare F--- F---- Resorts M------ Resorts Sp------- Resorts,S---yard P Resort & E--- Resorts. Form Front-end sales to back-end sales, also in management .
Here is the "Good the Bad and the Ugly on Timeshare ownership" If you are going to travel at least twice a year it's still a bad deal. Mainly because of the loaded front end cost, In a nutshell,this cost is high because of the need for the resort to cover sales commissions and marketing costs etc. Now the other aspects are Maintenance Fees(MF),and Special Assessment Fees. You are going to be paying(MF)yearly as long as you own your timeshare, also, if you for some reason can't, you could lose the timeshare, and still be responsible for paying for it. Assessments are periodic. A $600.per/yr MF over ten years is $6,000 over 30 yrs, $18,000. You were possibly told if you ever wanted to sell your timeshare you could,easy...right, yes,you could...However expect to take a loss here also. The reason is back to the beginning, you are buying a timeshare at a highly inflated retail costs because the resorts need to cover it's expenses. Most timeshare owners when attempting to sell their timeshare, go into shock when they are told the actual market resale value of their $10,000,$20,000 or more thousand dollar Red Week condo in Hawaii or Orlando or where ever is only worth a fraction of what they paid for it. You may think thats not a big deal many years down the road... I hope you are sitting down for this one,THIS WOULD BE THE CASE IF YOU TRIED TO SELL IT THE NEXT DAY!

As far as flexability is concerned,unless you own an expensive week in a high demand area it IS NOT EASY!
I'd like to say you are right in your conclusion when you stated "If I overpaid for a weekend at the Ritz-Carlton, I may be happy with it, but I still overpaid".
Since you'd be stuck with a timeshare, with yearly (MF)and perodic assesment costs, If someone asked what would you say..

In closing I'd like to state there is nothing like vacationing in great places and staying in luxury resorts, it's just fantastic, and yes,the resale timeshare market is a good place to look, for a timeshare, but also remember you are still getting the attached Maintenance Fee with your purchase, however we are the stuarts of our own money.
If you'd like to know how you can get to great 4 & 5 star luxury condos or villas, without any maintenance fees or assessment costs, with all the perks of timeshare, without owning a timeshare, just email mail me at will5000@bellsouth.net and I'll show you how to save a ton of money.
Happy vacationing,
Will

[Portland Money Guy]

Can't remember the exact math right now, but when I was pitched a timeshare, I remember figuring out the value of the "condo" -- figuring in how many other people I was sharing the place with.

The damn two-bedroom unit we'd have access to would have punched in as a $4.5 million purchase price. Did it look like a $4.5 million place? Hell no. Is there any two-bedroom unit anywhere in the world that would reasonably go for $4.5m? Not in my book.

So, clearly, it's an overpriced deal.

[lamoneyguy]

Will, your point of view as an insider is valued. The maintenance fee is not something that they even discussed. I'll be sure to ask about that next time we attend a presentation (and there will be a next time). By the way, you've got mail.

PMG, hello my brotha from anotha motha. They're pretty outrageous, but not quite $4.5 million outrageous. The asking price for a typical one week timeshare seems to be in the $30k ball park. Times 52 weeks gets you to around $1.5 million. Are any of these worth $1.5 million? Hell no! Not unless they were right along the Willamette or some craziness.

[Brian]

The timeshare presentation math is faulty in another way... they try compare the total amount you would spend over the next 30 years assuming the money you would have to pay for that is just sitting around doing nothing.

To more fairly compare, they should show life if u paid $30,000 to them for a lifetime of vacation versus you not paying $30,000 and keeping that money invested in the market a CD or whatever. With compound interest for your investment versus paying their 11% financing, you will never come out ahead with a new timeshare. You can see this little program I wrote to figure out life with a timeshare versus life without one :

http://mysite.verizon.net/brian_siu/timeshare/timeshare.html

[margie]

So...with all this said, would you recommend going on one of these trips to hear a presentation? Hilton called and was offering a really good deal but I would have to sit through a 2 hour presentation. We have three kids, and they said there was child care for them...just not sure. I hung up without taking them up on it. They told me I had to do it right then and there or loose the deal, but I see that you can go online and inquire about it, also.

[Will]

NICE JOB Brian!

Also, a Big Thanks to the LA MoneyGuy for this blog!

Brian,

Impressive, your program does simplify getting closer to a true cost breakdown over time for those thinking of purchasing a timeshare. Great Job!

Also:

To everyone responding to me wanting to know more about the inside workings of the timeshare industry because of this post, I'm writing my ebook/ephamplet as quickly as I can...which will be out soon. It will continue to give you more inside knowledge of the timeshare industry. If you need free advice/help before then, you could email me. But please remember, we are the stuarts of our own money so, take control of yours through knowledge.

My ebook/ephamplet will be available soon!

Will

will5000@bellsouth.net
for quick free advice/help

stazi9000@gmail
request for ebook/ephamplet

[Brian]

...in response to Margie's post... if u want the nice deals or freebies they offer, I find that it is usually worth it to go on the tour.

I find that if I tell them I know about how timeshares work and the resale market... and now just want to know the numbers (cost, interest rate, dues, etc.) and can tell them right away whether it makes sense... then they skip the "tour" and sit you down for their deal making.

I insist on just getting the numbers from them instead of listening to their math. I've used the program I wrote in the presentation sometimes... other times, I've used it enough already that I know in my head what the cost of the timeshare has to roughly be in order for it to make any financial sense. At that point, I just tell them that based on their numbers, it won't work for me. They'll lower the price and again the numbers won't work (they never will). When it's that absolute, they have nothing left to say. I'm usually out between 15-45 minutes, so I can recommend going if u are looking for a good deal.

[Al Long]

Try looking at EBAY for timeshare resales, you'll be shocked that timeshares go for a few hundred dollars. It's really interesting. Just type in TIMESHARES in EBAY search.

[Al Long]

Actually I just checked EBAY, you can buy timeshares like in Florida for under $100, some you can buy for literally $1.

[Fred]

Hi,

I do not know where people are claiming to stay at resorts and traveling for $100 per night????? I would also ask why in the world would anyone be even cheaper to spend 2 hours of their vacation at a presentation for the same room they so desperately want at discount. You get what you pay for I not only sell timeshare but I own it and if anybody can convince me that timeshare that I paid $15k for eight years ago when I only had one son and now have two and only paying $977 a year for maintenance how else could I get a two or three bedroom beach front property without my timeshare? Please if you are going to be cheap and think anybody even a single person can stay at a reputable place for $100 you might also like wearing free Marlboro T-shirts, and go to all you can eat buffets. True travelers understand this its about quality and going to places in comfort. If you wish to share a bathroom, stay in 2 star places sure spend $100 great. Priceline and such are for last minute travelers who do not mind staying in the broom closet. Have you ever read the reviews on those cheap sites? Let me tell you a bit about my travel luxury, first class, inside Naples, Paris, Bermuda and Los Cabos all prime properties two or three bedrooms. I would have spent $3500 minimum a week for my family. I guess you dont bring your kids or you would have to put them on the floor in one room. Dream on. Perhaps kids were too expensive for you to have to its cheaper for you to put on your Marlboro free t-shirt and spend your time at the presentations. Oh one last thing, where in the world do you think hotels only go up 3% a year???? Sure sure after 9-11 they dropped to $175 a night in most areas, and are back up at least in NYC to $500 per night easy...but again you probably would prefer JFK airport for $150 and take the bus in. If your going to justify publicly do you think because you regretted not buying justifying your loss helps anyone? It works and its common intellegence cruch your numbers while we are exploring the world first class!

[Fred]

Yes yes, you can buy an older unit that is NOT point based for less those are outdated point systems are great worldwide travel anytime anyplace....visit my site www.impactexecs.com for either a point based system or a lifetime membership at excess inventories. But please my posting above then go to www.impactexecs.com

[Jim P.]

I agree with those who posted the comments about the outrageous total cost of the units if the costs of all the weeks are totaled. Also, remember to include the cost of the annual maintenance. The annual maintenance costs varied widely from development to development but take a consrevative number of $800 per year per week of ownership and you get a number in excess of $40,000 per unit per year for maintenance/cleaning/utilities/common area shared costs. Then multiply that number by number of units in these developments and it is staggering how much the annual fees total. And don't forget that doesn't include any special assessments if some actual work has to be done.

[don]

Thanks for the comments Wes...My wife are I were considering sitting in on a timeshare presentation just to get the free honolulu trip, but after reading these comments it's not worth my time. I agree with your math Wes. I also don't need the psychological tactics to tell me I can afford when at the current time I'm putting two kids through college.

Thanks again

Thanks Again

[Will]

Hi Guys,

Tis is A Must Read:

This is the Timeshare Alternative, and it's the real thing!! After I did my research and looked at what the program offered, I got somewhat interested at first. Why somewhat? Well, because I've been doing this long enough to know where the weaknesses in this type program would be.

The weakness would be in the fulfillment department. So, knowing this, but also knowing that if a travel company could ever really minimize the number of requests not being met, it could cause a SIGNIFICANT UPSET in the timeshare industry! I went through the motions of joining the program to get inside. I knew this was the only way to get real answers. I mean, I knew more about timeshare than the guys that introduced me to the company, however, no disrespect to them, I had an advantage.

Anyway, after basically stumping them with certain questions that I knew unless you were a timeshare professional you couldn't answer, this lead to them to do a three-way introduction call to the CEO of the company, who, of course, is a timeshare pro...Finally!! A timeshare veteran the CEO, with a military background, he even attended Yale University. First, we did the formalities, and for real timeshare pros, that's like a light mental boxing match to establish respect. Well, it was a tie. I knew since he is the CEO of the company, it was time to draw blood. I went straight for the jugular. I told him I'd sold this type program back in the 90's and people liked the aspect of getting luxury condos and villas with all the perks of timeshare without buying into a timeshare; however, I said, fulfillment has always been the weakness in this type program. Why is your program any better? I knew their was really only one answer,(A strong realationship with a major, experienced condo, villa unit provider)and they do have one...I checked, with 20 years in the condo/villa acquisitions business.Anyway,the CEO did not hesitate and answered with respect to my knowledge. He said you know nothing is perfect, but this program started with the knowledge of fulfillment issues in mind also that people needed an alternative to timeshare and they had researched many programs and developed this one. Also, he said that this company continuously acquires vast resort inventories per-day. They have thousands of luxury condos and villas available to members per-day. He said if anyone can get the "hard-to-get" locations, they can, through exclusive resort connections and relationships developed spanning over twenty years . He also stated if a member occasionally can't get the exact resort they want, if at their time of booking they would choose a second comparable resort in the same area, that would solve many of the non-fulfillment issues but largly they try and do go beyond the expectations of clients daily.

Honestly, guys, if he had said anything other than that,ie, "nothings perfect" explaining the companys acquisition connections,I would have just written him, and the company, off right then and there. ButI knew if a company fix or lower the non-fulfillment issue that the TIMESHARE industry may have to share it's crown. He did gain my respect... for that day.
I continued to dig into the company and wanted to talk to any owners,of the program of course, most companies don't allow this..but I got a break with one of the guy I mentioned earlier, he owned. I asked him and he was estatic about the companys customer service and how nice the resort was he planned to vist. Meanwhile the company established a customer testimonial line.
I was ready for that, heres why, you must understand real timeshare pros develop a keen sense of body language and voice inflections...trust me on that one. If they don't they could starve. I wanted to see what other people that used the program thought, and so I called their customer testimonial line…YOU BETTER BELIEVE I WAS LISTENING FOR THE ACTORS…But, I was surprised … I actually believed the people on the phone!! So, without any further suspense…Meet the "TIMESHARE DESTROYER" Program!!

This is the "Timeshare Destroyer Program" It's Hot and being
bought up quickly!! This is the "REAL DEAL" in luxury resort discounts,and real people are
buying it up!!Call this number.. No one will come on the phone, just listen: 1-503-445-8573 (OPT) 1-4 SEE WHY THIS IS HOT!!!
The BIG BUZZ in the AIR is HERE! REAL PEOPLE ARE USING THIS PROGRAM RIGHT NOW AND SAVING TRUCK LOADS OF THEIR MONEY…Leaving OVER PRICED TIMESHARES IN THE DUST!!!

GLOBAL RESORTS NETWORK www.globalresortsnetwork.com

5000 resorts WORLD WIDE!!
To browse the resort registry

Login: Resort
Password: lookfor

secure page: wparsons
see their agreement

My website www.fastwebbz.com "Gives the nuts and bolts of the program".

Will

[dcm5150]

Interesting comments.

I bought a timeshare on eBay a few years ago. Basically because we have kids and want to go to DisneyWorld. We also wanted a room with 2 bedrooms at a reasonably nice resort. Well, checking the places such as Residence Inn and some other suite hotels it was going to cost somewhere around $2200 - $2500 for a week. So I looked at Marriott timeshares (because its a brand you can trust with flexible weeks and such, not Joes Timeshares of Florida which you can find for VERY cheap) and bought one for about $7k. With my calculations its going to pay for itself in about 5 - 7 visits. Yes, the question does come up.

Also, just visited the Sunterra Resort in Lake Tahoe. What they were selling was around $30K - which comes up to about $1.5 million for the unit (as someone previouslu posted) and about half are lake view. If you check real estate in Lake Tahoe (even without Lake view) that's actually not THAT bad of a deal. (Of course the maintenance fees are another story)

[greg]

Is Sunrerra's program with points at $15,000. for 5000 points and ability to use Club Select and getting 8000 points for depositing other timeshare owned any better?
Thanks

[greg]

Is Sunrerra's program with points at $15,000. for 5000 points and ability to use Club Select and getting 8000 points for depositing other timeshare owned any better?
Thanks

[will]

Hi Greg,

As far as points are concerned, I've sold them for resorts that used the points system...BE SURE (if you are going to buy a timeshare points based system) that you are GETTING ENOUGH POINTS to get the kind of accommodations you want, IN THE SEASON YOU WANT...

One trick resorts use is the old "Get you involved with Points, at a low price" trick, then when you try and get cretin
resorts during high demand seasons and unit sizes; ie, a 2 or 3 bdrm unit, you can't. Because you don't have enough points to get to the resort during that season... But don't dispair, they may call you or email mail you at some time and tell you, "Oops, your rep. made a big mistake and didn't sell you enough points to get that 2 or 3 bdrm unit you wanted in high demand season". But of course, they'll do you a big favor and be willing to sell you more!!...

"We are the stuarts of our own money".

PS... If you buy more points your maintenance fee may go up some.

Happy vacationing,

Will