Buying a timeshare? Get your calculations right…

Off late many users post regarding a dilemma regarding time share memberships. Hence, we decided to highlight a few points regarding how time share works, how its best to handle existing memberships and is it really worth buying time share memberships.

What is a timeshare?

In layman’s words, timeshare is basically a holiday exchange where in a company who owns resorts decides to sell you one week in one year for your use. The resort company then has a tie-up with holiday exchange company wherein the said member could exchange his or her week and holiday at another resort.

Here is a simple example:

There is a XYZ Resort in Orlando, Florida.  Now the hotel / resort has say 100 rooms. What it now does is it will have 100 rooms X 52 weeks. Usually a couple of weeks are for maintenance. Hence, their salable / usable weeks are around 50 weeks. The rooms again have various sizes. Like a studio room which is usually for 2 adults. 1 bedroom for 4 adults and 2 bedroom for 6 adults.  Also some resorts many have bigger room sizes. Kids may be accommodated additionally depending on resort policies.

So now what happens is that the resort now sells these 100 rooms on week basis. So now it can get close to 100X50 = 5000 members to buy their resort rooms.

They usually price the week starting at anywhere between $5000-10000 or even more based on location and the higher end is not limited again due to the location and the type of resort you are buying as well as the week which you buy. Yes, the weeks are usually classified by the possible tourist inflow and are classified as lean weeks / regular weeks / prime weeks and super prime weeks. Super prime is usually the year end / new year beginning week. The rates are lowest for lean week / studio room and increase as your season / week changes and the room type changes.

Ok I understand I get a week at a resort, but I would not like to go again and again to the same hotel / resort in the same week.

Yes, that’s where the resort exchange companies come in to picture. There are quite a few resort exchange companies and each resort usually has a tie-up with one of these resort exchange companies. What happens is that if you do not plan to go to the resort in a year, you can “deposit” your week with the exchange company and in return take from them another available week at another resort or location. In this example, like you have your studio room – week no 40 at XYZ Resort in Orlando, Florida you could deposit this week and then get a vacation – studio room week no 45 at ABC Resort in Zurich, Switzerland. The room size can also be changed based on availability. These companies then charge an exchange fee for their services. Some resorts might also ask for an additional fee also known as utility charges for members of other resorts visiting their resorts.

Great, I could travel around the world at different resorts and save a lot of money as I need to pay just a one time fee.

Well thats not completely right. There is a one time fee + there are ongoing charges that need to be paid every year. You need to pay for

  1. Maintenance Charges – to the company from whom you have purchased the timeshare
  2. Membership fees to exchange company
  3. Exchange Fees (incase you wish to go to some other resort than in which you have purchased your timeshare)
  4. Utility / Additional Charges to the visiting resort
  5. Loss on interest on your investment. 
  6. Any other unknown charges / fees that may be taken from time to time.

Then do I really save money by buying a timeshare? Is it not cheaper to directly buy a room and stay for as many days as one wants

Well most timeshare companies market the timeshare as a preventive investment for probable future increase in rates thus capping your costs for vacation stay in the long run. Though this is really not true in many cases. Lets take an example and see if you really save money by buying a time share.

There is a Resort X in India where you wish to take a vacation. The cost of the room for one week is Rs. 42000($750-800) per room including breakfast. If you take the same room via a time share here is the breakup of costs as per the time share company

What they mention is you simply pay exchange fees / extra charges of Rs. 5000-10000 ($100-200) for the week but here would be the actual costing for the room

  1. Initial Investment Interest. Say you have invested Rs. 500000 for buying the timeshare – interest at 7% would be – Rs. 30000 ($600)
  2. Maintenance you pay your home resort – per year – Rs. 5000-10000($100-200)
  3. Exchange Fees : Rs. 5000-10000($100-200)
  4. Utility Charges / Other Fees : Varies from resort to resort but mostly in the range of anywhere from $50-100 or even more per week
  5. Membership fees charged by exchange company annually : around $50

Hence, ultimately for enjoying one week at the resort you are spending close to $900-1150 while you could get the same week at $600 directly! 

Oh then from what you have posted above its useless to buy a timeshare. I end up paying a lot of extra money.

Well, this figure varies from time to time and resort to resort. One first needs to create a list of possible vacations they might take in the coming years and work out the costing for rooms at each resort. Total that up with say additional increase of 10% each year for safety purposes. Then take a call. Sometimes timeshares also offer extra bonus weeks, extra rooms, bigger rooms and so on and by combining all this you might be able to save money. 

What are the other things I need to take care while buying a time share?

As discussed earlier too there is a one time cost + there are charges to be paid every year. Get a list of current charges that need to be paid annually.  Further, also check the number of years the timeshare membership is valid (usually around 10-15-25 and 33 year plans are sold) and the number of years the exchange company membership is valid. Both are independent and for exchange company you need to buy membership to avail exchange facility. Also as timeshare have most of the resorts away from the main city. Further, you need to take the vacation when its available. You need to decide well in advance where you wish to go and try to get a vacation as early as possible because most of the times rooms are hard to find. Also though at some resorts you get discounted meals, there are no free meals like you incase you buy directly there are multiple offers like free breakfast, free airport pickup / drops etc. 

Overall, timeshare can be a great experience, the thing is you should not buy it with an intention that it would save money. Costing might be same or even more than what you would pay but its a different kind of vacation experience which you are ready to try out. Its like if given a choice you would stay elsewhere but by investing some money you are trying out a different level of vacation experience. 

What do you think regarding timeshares? Share your experience regarding your timeshare good or bad and help other users plan whether to buy a timeshare or not.

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