Economics Of Owning A Timeshare

This is a guest post written by The Timeshare Guru. He has previously written ‘Benefits Of Owning A Timeshare‘, ‘Complete Guide To Renting Timeshare Properties On The Cheap‘ & ‘An Introduction To Timeshare Offers‘. If you like those posts or this post please check out his site. 

One of the reasons that timeshares have such an awful reputation is that they are simply not transparent. They lure your into to attend a timeshare presentation and make broad statements of being able to travel around the world in luxurious accommodations for a fraction of the cost. They make these broad statements and then pressure you to make a significant financial commitment during this 2-hour presentation for a financial commitment that can last a lifetime and even beyond.

While a lot of the broad statements are half-truths or partial truths, one of the major issues with timeshares is the lack of transparency. I am trying to fix this major issue by explaining the systems and showing readers how to maximize timeshares.

Timeshare Transparency

In order to do so, I think one of the best things that I can do is to show readers how I use one of my timeshares. I currently own a 2-bedroom unit at the Hyatt Beach House in Key West, Florida. I HAVE NEVER BEEN TO THIS RESORT AND I LIKELY WILL NEVER GO!

It’s hard to imagine purchasing a timeshare or owning a timeshare in a destination that I have never been and may never go, but the truth is that I bought this Hyatt timeshare solely for the points.  Click here for an overview of the Hyatt system in case you are interested in learning more.I purchased my Hyatt timeshare on the resale market in 2007, just before the recession. I purchased this unit for about $6,500. During the 5+ years following the recessions, weeks like mine were selling for $1.00 or possibly a little more but way less than what I paid. A similar week purchased from the developer were selling for somewhere around $25,000. Compared to the developer pricing, I got a discount but definitely did not purchase at the very bottom of the market.

My Hyatt Week

The Hyatt system is a hybrid system where I can use my week or exchange my week into points. As I said, I never use my week and likely never will as the points provide me a tremendous amount of value. For my week, I receive 2,000 Hyatt Residence Club points. Hyatt can trade through their internal system or through Interval International. Knowing whether a particular timeshare trades through RCI or Interval International is intensely important as I think that the best value is actually exchanging your unit through these external exchanges. Internal exchanges do provide some value but I think that the external exchanges can be the most advantageous.

External Exchanges With Hyatt

With Hyatt, if you elect to convert your week into points, you can transfer them into Interval International or make an internal exchange. For my particular week, I pay approximately $1,200 per year for maintenance fees. When I originally purchased my week in 2007, I was paying about $900 per year so it has been a decent jump in fees. This seems like a decent amount of money for one week but through exchanges, I can get almost 4 weeks of vacation. Here is how I do it. As I mentioned, I receive 2,000 Hyatt Residence Club points. These convert 1 to 1 to Interval International points. Here is the exchange chart for Interval International:

As you can see, they have three different seasons. Generally, I would ignore yellow and green as these are low demand areas and generally will be at times and resorts that you will not likely to go. There are some exceptions but almost all my exchanged weeks are “red” weeks.

For families, a 1 or 2 bedroom is likely needed as these are generally fairly large and far surpass a hotel room. A 1 bedroom unit is generally bigger than most “suites” that I have received in hotels. Truthfully, many studio units are actually bigger than a lot of “suites” that I have received through Marriott and Hyatt hotels as I have held top tier status of both of these chains. For couples, studio units are very spacious especially if you are comparing it to a hotel room. Since most DoC readers are likely points fanatics like I am, for this post, I will use Studio units as they are the best comparison to a hotel room.

Four Weeks Of Vacation With One Timeshare Week

By doing some quick math, (2000 / 430 = 4.65), you can see that I can get over 4 weeks in a studio for my one Hyatt week. Exchange fees are expensive so you need to factor this in to see how much a week will cost.

As I mentioned, I pay $1,200 in maintenance fees per year and it cost $179 per week to exchange. Therefore, it costs me approximately $479 per week. $1200 / 4 = $300 per week plus $179 per week for an exchange fee. Therefore, it costs me approximately $68 per night for vacations in a studio unit. $68 for night for most hotels is generally pretty good but it can be an absolute steal for great resorts and during prime seasons.

Comparison To Retail Rates

For example, this year, I am mostly using my timeshare weeks for ski vacations. I currently have reserved three ski weeks in Park City in a studio unit. I have a studio reserved at the Marriott Summit Watch (directly on Main Street) in mid-December, a week at the Marriott Summit Watch in January on the tail end of the Sundance Film Festival and Spring break at the Westgate Park City at the base of the Canyons ski resort (ski-in/ ski-out). These are three very high demand weeks at very high quality resorts.

Retail rates for these weeks are as follows:

  • Marriott Summit Watch (mid-December): Approximately $2,300 for the week
  • Marriott Summit Watch (January – February week): Approximately $3,300
  • Westgate Park City (Mid-March): Approximately $3,300.

Essentially, for this year, I am paying about $479 per week for the above weeks while the going retail rates are 5-8x more.
Can I get the same weeks year after year? Probably not. Can I get the same value year after year? Probably not as well but I would say that I comfortably pay approximately $500 per week for resorts where the current retail rates are around $2,000.

Conclusion

In order to get these weeks, there are various tips and tricks. I generally put in a request as far as possible into the future (about 2 years) and pick multiple destinations that I would like to travel. These can be ski weeks, Caribbean or Mexican weeks, Hawaii weeks, urban weeks (Boston, New York, etc.), Disney weeks or any other destination that has high quality resorts that I would like to visit. I have been doing this for about 10 years since my original purchase and some years, I do better than others in terms of value as compared to retail rates but I almost always get outsized value from the use of my timeshare. I travel multiple times per year so I know that I will use it.

Some years, timeshares do not fit into my schedule as availability is an issue or flights (almost always free due to frequent flyer miles) do not work out properly. In those years, I can simply bank my points to use the next year provided I make that decision early enough in the process.

Again, I say this constantly but timeshares are not for everyone. For me, they work great. For now, with my family, I need larger units where even hotel suites are not spacious enough for my family of four so during some years, I do not get 4 plus weeks but I still generally 2-3 weeks in a 1 bedroom unit which can be very comfortable for a family of four. As you can see, I have ignored the initial cost of the timeshare in my overall analysis. Some will likely fault me for this but I think that even if you included it in my analysis, it would only take a couple of years to recoup your investment provided that you are able to reserve high valued weeks.

My goal is to provide more transparency to a system that preys on unverified promises. Do you own a timeshare and do you get similar value? What have been some of your best exchanges? Let me know what questions readers have so I can provide additional information. As usual, thanks to Will and the Doctor of Credit team for their ongoing support!

Note from Will: Big thanks again to The Time Share Guru for this series of posts. If you haven’t already, check out their site.

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Mike
Mike

I bought my timeshares from owners who wanted out got Wyndham points for 2500 that they paid 54000 for . I used to have vacation home and a rv I spent my time off working on them. No its not an investment but when I’m off I can do what I want because some else is fixing the place and I have a full kitchen to use my kids have there own room. I hate hotel rooms for me resale timeshare is great!

Will
Will

Trying to get out of one I bought four years ago and have never used due to career demands.
Was never billed maintenance fees, only monthly mortgage. Now discovered owe four years of maintenance fees. How do I dissolve and get out of contract?

bnabill
bnabill

Read the fine print on TS contracts. Perpetual means the contract continues after you die and remains the responsibility of your estate. Your heirs will be paying the fees until they die, etc. RUN, RUN, RUN from them. We were lucky enough to get someone to take our red week for free, but we were willing to pay for them up to $1000 to take it.

The Timeshare Guru

There can be different types of timeshares. Some are right to use which expire sometime in the future. Some are clubs where there could be mechanisms to get out. Some actually have a resale market where you can always likely get out (likely won’t make money). Some people can actually maximize them so giving them to you heirs is actually a nice perk since it can force you to go on vacation where it can be cost prohibitive many times.

You do need to read the fine print as you need to understand what you are agreeing to.

Abelian Grape
Abelian Grape

I just wanted to say that I enjoy these articles, and look forward to more — particularly on how/where to buy in the secondary market. I’m not sure a timeshare would fit my vacation style (even at a purchase price of $0), but I appreciate knowing what options are out there:

The Timeshare Guru

Thank you for the support. Additional posts will be coming!

Gladys
Gladys

We purchased both our time shares on EBay for $1 several years ago at resorts in Mexico and Palm Springs. We use our weeks every year and use the getaways on II and RCI to add additional weeks at prime locations in shoulder season for $300 per week. Thanks for your blog! Time share ownership can be great if you are an informed buyer and have some flexibility

The Timeshare Guru

I definitely agree. It sounds like you are doing well with your ownership.

Kathryn
Kathryn

I 100% agree with this article. I own 2 Hilton Timeshares that is also a points based system. I also have never stayed at either one (they are in Vegas and Orlando). What I have done is stayed In Hawaii, Aruba, New York City, and even at Disney Timeshares. It ends up being way cheaper than if I had to pay for the rooms. This article is on point with how I operate with my timeshares. I am also a super planner so the 2 years planning is nothing for me. I know that I have taken a lot of trips that wouldn’t have been feasible without the timeshare exchange.

AB
AB

My read:
1. Only buy a timeshare in a resale market and only then during a major recession.
2. Only buy a time share if you can take 4 weeks of vacation a year.
3. Only buy a time share if your average night while on vacation exceeds $68 plus 3% compounded annually per night.

The sticking point for me is #2.

The Timeshare Guru

Your takeaway is not my intention.

1. Buying a timeshare during a recession can be a great opportunity since the market completely dries up. However, there are many times where you can purchase at little to no cost or at a cost that may make financial sense.

2. It really depends on your vacation style. I have used my one week for one week of vacation in a 2 bedroom condo. Essentially I paid about $1500 for that one week but the other alternatives were vastly more expensive. The point is that you can maximize one week and turn it into multiple weeks of vacation.

3. I would say that this is somewhat correct. I use miles and points for a lot of travel but they do not always work out and if they don’t, I’m stuck paying cash. Finding high quality hotels for $68 per night is very difficult. I generally only travel in 4 and 5 star properties where $68 per night is almost unheard of unless for the rare opportunities.

AB
AB

Very true but it’s still pretty easy for me to mass accrue Hilton points. We went to Oahu (the Hilton on Prince Kuhio) last summer for 400K points that I earned over the year without churning a single credit card. My Surpass card gets me Diamond status which lead me to be upgraded to a suite for those 10 nights (would have run us around $1800 cash). Total room cost: $0 direct — and at a point earning average of 0.2cpp for me, $800 indirectly. That’s $80 a night without having to worry about all the hoops to jump through.

An alternative we looked at was an AirBnB rental that would have been $937 over that same timeframe.

That’s about the longest vacation we can take in a year — except when I was on Sabbatical. But at that point I spent 3 months in East Africa and the Middle East, where you can get very outsized Hilton value (5K/night or 4K average after the free night at a full service Hilton — a full 30 nights cost us 120K at the Ramses Hilton!) so TS still isn’t for me.

Charles
Charles

This is a really good article that explains the options quite well. We own a timeshare:

1. Bought for $1 on the resell market
2. Average nightly cost comes to about $70/night for a 1 bedroom (similar to his econ analysis above)
3. We’ve been to Scotland, Hawaii, Gatlinburg and Williamsburg on this.
4. My parents have owned timeshares for decades and really loved them and it did make sense financially. We went to the same beach vacation every year and it was a lot of fun.

However, in today’s timeshare market. I think very few people should consider buying one unless one is very wealthy or one is willing to bay on the resale market and learn the hobby.

Timeshare exchange is somewhat complicated and unless one is willing to learn the hobby – they are likely to be extremely frustrated. I’m stunned by the for sale prices of these timeshares. We did a timeshare presentation in Gatlinburg to get 2 free nights and Holiday Inn Vacation Club initially offered a package that was $60,000. I can’t imagine that people would pay that – but clearly people do. Granted, if one is very wealthy – it’s not a big deal. I think this is sad though since many middle income people are paying those kinds of prices.

As a footnote – one reason we like the timeshare option is that they come with full kitchens. I get that lots of people don’t like to cook on vacation. However, people with dietary issues find eating all the time quite difficult.

The Timeshare Guru

My goal is to try to simplify timeshare exchange and show people how it is done. It is complicated and there is sparse information out there on this subject so hopefully more people can understand it and use it a travel option.

I have been to a bunch of these timeshares presentations recently and the prices that they charge are pure criminal. It upsets me that this is what is being pitched to people and people actually pay this. For those that do pay those fees, timeshares almost never can make financial sense since the upfront fee is so large and generally not able to be recouped.

Having a kitchen on vacation is fantastic. We don’t always want to cook but it is very helpful for snacks, reheating meals, beverages, smoothies / blended drinks, etc. I personally generally use it for breakfast so instead of paying the prices for a resort breakfast ($20-$45 per person), we go out and buy some breakfast food for a fraction of the cost.

MH
MH

Travel Hackers don’t let friends buy timeshares!!!

Miles and points, Miles and Points, Miles and Points

Keep repeating as needed!

NinjaX
NinjaX

yea. you keep thinking that after Chase UR blows up in your face. good luck everyone. we all need it.

bugle
bugle
Maria
Maria

+1.