Timeshare
A timeshare is a vacation property ownership arrangement where multiple individuals purchase the rights to use a single property for designated periods. This model allows owners to share both the costs and enjoyment of a property, which can range from large resort complexes to smaller, standalone homes, often located in popular travel destinations. The timeshare industry originated in Europe during the 1960s and made its debut in the United States with the construction of the first hotel-condominium timeshare in Hawaii. Ownership typically comes in two forms: deeded, where buyers own a fraction of the property, and non-deeded, where they lease usage rights for a specific timeframe.
While timeshares can offer predictable vacation experiences and potential cost savings compared to annual hotel stays, they come with significant drawbacks, including annual fees, low resale value, and difficulties in exiting contracts. As consumer wariness about timeshare agreements increases, the market faces challenges, especially with the rise of alternatives like vacation rental platforms. Overall, potential buyers should carefully consider both the benefits and pitfalls of timeshare ownership before making a decision.
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Timeshare
A timeshare is a vacation property ownership scheme where multiple parties purchase allotments of usage in a single physical property. In most versions of this scheme, a management company builds, maintains, and sells shares in a property to buyers who wish to spend a given amount of time at that property. Ultimately, numerous parties purchase a share of each individual timeshare and split the time they spend there among themselves. Timeshares can vary significantly in terms of appearance and size. While some are part of large hotel-like complexes, others may be individual structures about the size of a small single-family home. Timeshares are most often found in major resort areas and other popular travel destinations. Despite their advantages, however, purchasing a timeshare can be a risky endeavor because of their generally low value on the resale market and the many fees involved in the ownership of timeshare properties.
Background
The timeshare industry first emerged in Europe in the 1960s. In 1963, Alexander Nette and Dr. Guido Renggli founded a Switzerland-based company called Hotel und Appartementhaus Immobilien Anlage AG (Hapimag). Through this company, they purchased several resort properties and sold them as part of a "right to use" share program. In doing so, Hapimag established itself as the world's first timeshare company. Several years later, Paul Doumier of the Société des Grands Travaux de Marseille created his own timeshare concept for the development company's SuperDévoluy ski resort in the French Alps. In marketing his product, Doumier famously emphasized the idea that "it was cheaper to buy the hotel than to rent the room."
Timeshares debuted in the United States when the Hilton Hale Kaanapali, the first American hotel-condominium timeshare, was constructed on the Hawaiian island of Maui in 1965. The Kauai Kailani on the Hawaiian island of Kauai subsequently became the first non-hotel condominium timeshare sold in the United States in 1969. Innisfree Companies—a developer out of Sausalito, California—began operating the United States' first deeded timeshare program in 1973 at their Brockway Springs property in Lake Tahoe, California. Florida's Sanibel Beach Club became the first successful American purpose-built interval ownership resort the next year.
The 1970s also saw the beginnings of the timeshare exchange industry, which is structured around helping timeshare owners trade stays at different resorts. One of the first and most influential companies in this industry was Resort Condominiums International (RCI). Founded by Christel and Jon DeHaan in 1974, RCI and the industry as a whole focused on orchestrating trade among timeshare owners as a way of increasing the overall value of timeshares and boosting timeshare sales across the board. This approach proved to be beneficial for developers and consumers alike. Thanks to RCI and other exchange companies, timeshare sales increased significantly through the 1980s and beyond. Timeshares became so popular, in fact, that many major hotel chains began implementing the timeshare model themselves in the 1990s. In the twenty-first century, there are thousands of timeshare properties located in various countries, and millions of active timeshare owners. However, consumers have grown increasingly wary of timeshare contracts, which are nearly impossible to extricate oneself from as they are fraught with legal complications.
Overview
Timeshare ownership differs from typical property ownership in many ways. Most importantly, timeshare ownership is a form of fractional ownership, which means that the buyer shares ownership of a property with other people. For example, if a person purchases one week at a given timeshare property, they technically own a 1/52 share of that property. Timeshare ownership also differs from traditional property ownership in that timeshare owners are not permitted to improve or change their timeshare. This is the responsibility of the timeshare's management company. The management company is also responsible for establishing and enforcing the timeshare rules, such as how many people can stay in a unit.
There are two main types of timeshare ownership—deeded and non-deeded. Deeded ownership means that the buyer physically owns a fraction of their timeshare. In this case, the buyer retains property ownership even if the developer goes bankrupt. With non-deeded ownership, the buyer only leases the rights to use the timeshare for a certain amount of time each year for a specified number of years. In this case, the buyer would automatically lose the right to use their timeshare if the developer declared bankruptcy. There are also fixed-week, floating, and points club timeshares. With a fixed-week timeshare, the owner only holds the right to use the property for the same week every year. In a floating timeshare, the buyer can use their property at any time within a specified period. Points club timeshares allow the buyer to stay at different properties by using points they purchase from the club or accumulate from buying into a particular property.
There are many potential advantages to owning a timeshare. By purchasing a timeshare, buyers can ensure that they will always have a place to stay at the destination of their choice and that they will always have the ability to set the dates of their vacation in advance. Sometimes, timeshare owners can also trade or sell their time to other people. With certain timeshare companies, owners can even spend their time at different locations instead of just one specific unit in one place. Because management companies are responsible for maintenance and other matters, timeshare owners are free from obligations like hiring groundskeepers or paying property taxes. Timeshare owners can even benefit from long-term cost savings over renting hotel rooms year after year.
Still, there are also some substantial disadvantages to owning a timeshare. Although timeshare owners are not responsible for doing any maintenance, they have to pay various annual fees that can increase over time. In addition, such fees must be paid whether the owner uses their timeshare or not. Failure to pay annual fees can result in foreclosure. Timeshares can also be challenging to sell on the secondary market because so many are available for purchase. Worse, this means that even if a buyer manages to sell their timeshare, they will likely have to take a financial loss. Further, timeshare contracts are notoriously predatory and challenging to get out of and terminate. Many seek legal representation when trying to cut ties with their timeshares and timeshare management companies. Timeshares have received an overwhelmingly negative perception in the media. Finally, with the rise of property rental companies, such as Airbnb, the timeshare market has become increasingly obsolete and has made traditional vacationing, which the timeshare market thrived on, an outdated concept.
Bibliography
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