Evolution of Timeshare
Timeshare first arose in the 1960’s in Switzerland, by Alexander Nette’s desire for rent-free holidays every year. After the acquisition of several resort properties which were sold in a “right to use” share program as opposed to deeded real estate, he came up with a catchy slogan that advised people “it was cheaper to buy the hotel than to rent the room”, and it caught on.
In 1970’s America, the timeshare concept quickly caught on especially in Florida where a small number of real estate developers, who were experiencing difficulties in selling their full ownership condominium properties in a down economy, began to pursue the new model of interval sales which changed the world of vacationing, as it was then known.
In 1974 RCI (Resort Condominiums International) was formed by Christel and Jon DeHaan. They cleverly figured that if timeshare owners were able to trade their week for a week somewhere else, it would increase the perceived value of the product and more people would buy. This proved correct and since then exchange groups have been formed all over the world.
Over the subsequent years following the emergence of timeshare, various new systems have been created such as the Points System or Fractional Ownership to give the consumer ‘flexibility’ and more choice of holiday options. Schemes are sold as a way to upgrade customers where as in reality, this is another way for resorts to increase their sales by pressuring clients to upgrade or buy more points. This in itself would be fine, if clients were not told false statements in order to clinch the deal.
Although nowadays timeshare has a bad reputation, it isn’t always deserved. There are happy customers who have returned to their timeshare property year on year and have made use of their purchase with no complaints at all. The general consensus is that it is not usually the timeshare property itself that is the problem, but rather the way that it was sold to the consumer, and the conditions under which they sign a contract. This has led to unforeseen expenses and binding conditions in a contract that is very difficult to escape from.
The Different Types of Holiday Ownership
Deeded vs. Right to Use Contracts
There are quite a few differences in types of timeshare ownership. One major difference is between deeded and right to use contracts.
Deeded contracts are sold as real property. The use of the resort is divided into week long periods with which the owner may do whatever they desire: Use his or her week, rent his or her week, give it away, leave it to his or her heirs, or sell the week to another prospective buyer. The owner is also liable for his or her portion of real estate taxes (if the timeshare property is in certain countries such as America), which usually are collected with the maintenance fees.
With right-to-use contracts, a purchaser has the right to use the property in accordance with the contract, but at some point the contract ends and all rights revert to the property owner. In other words, a right-to-use contract grants the right to use the resort for a specific number of years. However an issue raised by the recent Spanish Supreme Court Ruling is that many right-to-use contracts have been sold in perpetuity (the definition of which includes ownerships lasting longer than 50 years), meaning that there is no end date and as such have ruled such contracts null and void.
Vacation Ownership Programs – These are points based systems which have been adopted by companies with multiple resorts and include major hotel chains such as Accor, Hilton and Marriot. They offer either deeded or right to use shares to their members with rights to use the resorts services, which lasts for a certain number of years.
Vacation Clubs – These are a newer variation on the timeshare model. Instead of buying the rights to a specific unit, vacation club members pay an upfront sum to purchase a number of “points” which can be redeemed for different vacations each year. Yearly maintenance fees still apply.
Some companies may own units in multiple resorts in different locations, offering services to a private customer base for a sense of “exclusivity”. Some clubs consist only of individual weeks at other developer’s resorts. Vacation clubs cater to a wider range of economic backgrounds and income levels.
This kind of timeshare is only for a particular week or certain days of the year. The resort sells the particular unit of time, say a week or weeks of the year to the person who is willing to buy it. The rest of the year, other owners in a similar fashion utilize it.
Sometimes timeshare units are sold as floating weeks. The ownership will be specific on how many weeks the owner owns and from which weeks the owner may select for the owner’s stay. An example of this may be a floating summer week where the owner may request any week during the summer season, generally weeks 21 through 35. The weeks when schools may still be in session would not be so high in demand. Some floating contracts exclude major holidays so they may be sold as fixed weeks.
A floating timeshare is also only for a particular period of fixed time, but there is no specification of dates. Say the owner is eligible to stay for a week of summer, it can be defined by the owner, which week of summer he would like to holiday. This can be considered an advantage over fixed week timeshare but only if there is availability!!!
Resort-based points programs are also sold as deeded and as right to use. Points programs annually give the owner an amount of points equal to the level of ownership. The owner in a points program can then use these points to make travel arrangements within the resort group. Many points programs are affiliated with large resort groups offering a large selection of options for holiday destinations.
Many resort point programs provide flexibility from the traditional week stay. As well as full or multiple week stays, a points program member may often request fractional weeks. The number of points required to stay at the resort will vary based on a points chart. The points chart will allow for factors such as:
- Popularity of the resort
- Size of the accommodations
- Number of nights
- Popularity of the season
Although Fractional Ownership is branded in such a way to disassociate the concept from the stigma of timeshare, many people still confuse it with timeshare. The term Fractional Ownership refers to a property that has several owners. It is both similar and different from “traditional” timeshare:
Number of Owners per Unit
Timeshare is designed to have fifty-two owners per unit. Fractional properties generally have between four and sixteen owners per unit. Ultimately both concepts are for a shared holiday unit.
Ranges of Owner Vacation use per Year
Timeshare owners usually purchase one week of use per year or sometimes a package of two weeks. Fractional owners enjoy from about three to twelve weeks of vacation use per year.
Differences in the Unique Selling Proposition of Fractional Ownership vs. Timeshare
Timeshare is marketed as a smart, cheaper option to hotel stays and holiday rentals. It is also a way to insulate buyers against inflation in the future cost of vacations. Timeshare makes the concept of private holiday accommodation possible for people who would otherwise have been unable to afford to purchase a holiday home.
Fractional ownership is offered as a smart, cheaper option to whole ownership. Clients only buy the amount of vacation use that they can realistically enjoy and pay only a fraction of the purchase price and annual upkeep. In some instances, fractional ownership enables purchasers to own a higher quality property than would have been possible with whole ownership. Or, fractional ownership makes possible the acquisition of multiple vacation homes at dissimilar destination resorts.
It is a common belief that with Fractional Ownership you get title deeds to the property, and with Timeshare you only get a “right to use”. This is not entirely true as it is possible to buy a timeshare property and receive the registered title deeds to your share. What some people don’t realise is that with Fractional Ownership schemes, their deeds can be registered in the name of a company, which only gives you the right to use the property.
Those who contact their resorts to enquire about options for selling or cancelling their timeshare ownerships are often convinced to upgrade (costing yet more money) their timeshare into Fractional Ownership. Ultimately owners have simply bought more of the same and their wallet will have taken yet another hit!