Thursday, 20 June 2013

The Economics of Timeshare

How does this make sense? From: REMAXRICK
Subject: Re: Economics of timeshare
Date: 07 April 1999 01:56

It doesn't make sense. If the annual maintenance fee is $300 to $400 and the exchange fee is about $150, why would I want to pay $10,000 for the privilege of going through this hassle every time I want to go on vacation? However, I would consider a time share at $1,500 to $2,500 with an annual maintenance of $150 or so if the weeks were floating and they could be easily exchanged. What do you think?


Reply:


Thanks for your grumble. I won't take issue with your dollar figures because I am not an expert in dollars. However, I am sure you are confused by something. For myself, based in the UK, these are my figures in UK pounds:


1. Package Tour Self Catering Option

Cresta Holidays Jan-Dec 1999 brochure for Spain and Portugal. Hacienda Beach Apartments. 2 rooms sleeping up to six: living room with 2 single sofa beds, 2 rooms with twin beds, bathroom and shower room, oven, washing machine, satellite tv & phone. Price includes return flights, self catering accommodation based on 2 adults and 2 children under age 11, 14 nights. Price £1570 (ignores any flight supplements)


2. Five Star Hotel Option

Cadogan Holidays Collection for 1999. Four Seasons Country Club, Marbella. Based on 4 persons share 2 room apartment. Flights from Gatwick. No child reductions available. Directly phoned quotation for 2 weeks in May, total £3352 excluding insurances, includes basic group car hire for duration. Car hire is available locally for around £350 for 2 weeks. (Tel 01703 828313 - Cadogan)


3. The Timeshare Exchange Option

Timeshare at Crown Resorts , Self catering, sleep 6 accommodation, luxury standard guaranteed.
Bear in mind that timeshare costs you to buy into it. I include a capital charge to do my calculations, based on a capital cost for 2 weeks (i.e. purchase price) 4,000.
If I had left that capital to appreciate in a deposit account for 10 years, here's what I might get back at 6% which can be expressed as an annual capital charge. (If I rented a holiday from the examples above, I would not get any interest on the money I give to them, so I am being generous to myself to put the figure of 340 below)


Capital charge (after 7 years of owning) £340
Maintenance fee (2 x per week 180) £360
Air fares, say £600
Holiday Insurances £50
Exchange fees (approximately) £160
RCI membership fee, say £45
Airport/resort taxi transfers £35
Total £1590


When I'm staying at my own timeshare resort I don't have the exchange fees to pay so that saves £45 + £160 (=£205), making it the most cost effective option of the given choices above. I could have saved even more by buying second hand and reducing the capital charge. Second hand timeshares are not like second hand cars. The units are refurbished and upgraded regularly, and if they are not, then the likes of RCI and II will be dropping them from their exchange schemes.

If timeshare still seems a poor partner compared to a package deal on the price alone, look deeper and find many more advantages.

More Advantages of Timeshare
A young family with children know what it is like to try to keep clothes clean. Washing machines are often found in timeshare resorts, saving the haul and hassle of taking washing to a launderette.

Package deals often include meals, but at what standard? In the Mediterranean area I used to suffer from numerous tummy upsets, which have disappeared now that I cater for myself. I can eat when I want, not when I am instructed. I can dress for meals how I like, not how others expect me to. And if, like me, you have children who are fussy about foreign food options, you can give them what they want when they want it. Lollies from the unit's fridge, something fast from the microwave, or roasts from the unit's oven. A package deal in an hotel would be hard pressed to beat these opportunities. Eating out is an option to timesharers just as it is an option to package dealers. In fact, package dealers often eat out when their meals have been included in the price, either because they want a change of scenery or because the hotel food is inappropriate for them (i.e. they can't stand it).

There are a few answers to your query of why the hassle (what hassle?) is worth it. After all this, I am beginning to think of myself as a timeshare tout! Heaven forbid.

Alan Winter.

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