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« Fact for the Day | Main | Bagatelle »

January 14, 2007

Time Sharing

Donald Pittenger writes:

Dear Blowhards --

I'm blogging at around 7,500 feet above sea level. Out the large window to my left I see part of the mountain where I'm perched. It's covered by a pine forest and three feet of snow.

Below the mountain, about a thousand feet down, stretches a plain with snow-covered agricultural fields and a couple of growing towns. Beyond are more mountains, but I can't see them just now due to low clouds.

If I walked out the door and over to a window opposite the elevator bank, I'd probably catch a glimpse of Lake Tahoe.

I am at a time-share condo complex called The Ridge near the Heavenly ski area, a few miles south of the lake.

We're here because my wife likes to ski and also is an admitted borderline time-share junkie. Some folks are true junkies: I've met a few.

Me? I'm a time-share skeptic.

I suppose that's because resorts in general and time-share condos in particular are a poor fit for my tastes and circumstances. But they are very popular because they do fit other people's tastes and circumstances -- or seem to at the time they get reeled in during a sales hotbox.

In the course of things, I've had the "opportunity" to sit in on a few time-share sales sessions.

Often the first thing thrown at you is a video. I hate such videos. They waste my time and make me feel so controlled.

The videos typically play up a glamourous resort lifestyle. The actors are good looking, the skies are sunny. Pools are lounged by. Exercise machines are operated by smiling, hard-bodied, perspiration-free mid-thirtysomethings.

The voiceover croons that you could be here, doing this, doing that.

Then the lights come up. Perhaps you might be shown architectural models of the forthcoming project. Or for an existing place, you would get to walk through some model units.

Then comes the sales session where you experience one-on-one or one-on-a-few interactions with a sales rep.

Let me be clear. Time-share resort-style condos are just fine for some folks.

What kind of folks?

  • People who like resorts

  • People who really enjoy being in a specific area

  • People under 50 who buy

The first item requires no additional explanation. If resorts are your vacation switch-flipper, you're in.

And there are folks who vacation in the same area every year. Fifty years ago this might have been the Catskills or Poconos. Now the list is longer -- maybe Las Vegas, Los Cabos or Hawaii. Perhaps the building where they stay varies, but By God the area is where they're goin'.

My wife has a Vegas time-share as well as the one here at Tahoe, so that's where we go for one week each every year. True, condos can be "traded," but that takes at least a little effort and she's happy with her two Nevada sites. In any case, we go to lots of other places as well.

The under-50 factor has to do with economics. A non-unusual price for a time-share is $20,000. The buyer can expect an annual maintenance fee: let's call it $500. And what will he get if he sells? -- probably less than the purchase price (that's what I keep hearing, anyway).

What goes through my mind while the sales rep is spieling away is something like this. Lemme see. For a seven-night annual occupancy the maintenance fee comes to about $70 a night; I can stay in an inexpensive motel for that amount. At my age, I'd be doing well to squeeze out 15 years of condo use; that's 105 nights. For a $20,000 purchase price, that works out to $190 per night. Combining the two, the nightly cost is $260, which will get me a pretty spiffy hotel room.

Not included in this calculation are the effects of future inflation and the sale price of the condo, both of which will tend to lower the nightly cost. Nor are points-based occupancy schemes. And of course non-economic considerations are excluded.

Nevertheless, the economic message I give myself is that the older you are, the less economic sense buying a time-share condo makes. Conversely, the more years you can spread the initial cost over, the lower the nightly cost becomes. So buy when you're comparatively young.

Despite the logic of my analysis, I see a lot of retirement-age attendees at time-share sales sessions. I hope dollars and cents are the least of their priorities.

Later,

Donald

posted by Donald at January 14, 2007




Comments

I have a friend (an architect and a shrewd businesswoman: she buys, remodel and rents out residential properties in NY, NJ and Philly) - about 50, I'd say, judging by the age of her son (she doesn't look it).
She and her husband own a timeshare they are very happy with. But the business model sounds different from what you describe.
The Co has long list of luxury apartments worldwide; every year the member has to pay fixed maintenance and can choose a week (or 2-3; depends on a share level) anywhere in the world, minding certain application timelines. The maintenance is not refundable if the member didn't use his annual benefit.
Last year due to some health problems my friend didn't use their 2nd week; in mid-December she offered me to use it and pay her back the maintenance fee (excellent deal, from my perspective). The choice, for last minute Xmas/New Year week vacation, was: Cyprus, Malta, Paris, London, Myrtle Beach, San-Francisco and some other places I don't remember.

I'd say this system, with such variety, seems worth the expence.

Posted by: Tatyana on January 14, 2007 7:27 PM



Time shares may make the most economic sense for young people, but they're also the most likely to change their vacation preferences over the years.

Peter

Posted by: Peter on January 14, 2007 7:51 PM



In addition to your economic analysis, you should probably add a consideration of the time-value of money. $20,000 spent today is worth a whole bunch more than $500 spent each year over the next twenty years, so your amortized cost per year should be much higher.

Having recently gone to a time-share resort (Walt Disney World Resorts), I can say that I sort of see the attraction, but couldn't get past exactly the costs you mention.

Posted by: Doug Sundseth on January 15, 2007 12:58 PM






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