Timeshares vs. Vacation Ownership

Vacation ownership is often a broad term used to sell more consumers the idea of timeshare properties. It sounds more credible and perceives timeshares as a financial investment, even though investment opportunities are typically the last thing they provide. Since vacation ownership is sometimes another term for timeshares, sales teams use it in their pitches. The word "ownership" seems to make clients feel more confident about the deal they're on the fence about making.

Timeshares, aka vacation ownership, can offer access to amazing destinations worldwide. Still, many vacationers have mixed emotions regarding this aspect due to not wanting to spend much time at a tourist-packed destination. That is especially true during certain seasons. While another plus is that you don't have to perform maintenance work for timeshares, they do include yearly maintenance fees at a continuously increasing price. Eventually, ownership over these fractional vacation properties can become a hefty financial obligation that is challenging to plan for as a property owner.

What Is the Difference Between a Timeshare and Vacation Ownership?

Timeshare and vacation ownership share many similarities, but critical differences set them apart. A timeshare is a purchase agreement for a fixed period of time, typically one week of use, in a unit of accommodation, such as a condo or villa. On the other hand, vacation ownership is a long-term form of ownership that allows the owner to use a unit, typically for a one-year period. Vacation ownership is usually associated with a resort or club. It provides a more flexible use than a timeshare, allowing for multiple weeks of use or the ability to bank or borrow unused time.

What Are the Pros and Cons of Timeshares?

One of the most significant advantages of owning a timeshare is the cost savings associated with it. Timeshare owners can often book their vacation accommodations at a significant discount compared to booking through a travel agent or online service. Additionally, timeshares offer a predictable and consistent vacation experience, as the unit is usually maintained to the same high standards each year. On the other hand, timeshare owners must pay annual dues and fees, and the unit is generally only available for a fixed period each year. Additionally, the resale value of a timeshare is often quite low, with most owners unable to recoup their initial investment cost.

What Are the Pros and Cons of Vacation Ownership?

Vacation ownership has many advantages over timeshares. Owners have more flexibility in using the unit, with the ability to use multiple weeks each year, bank or borrow unused time, or exchange their unit for another in a different location. Vacation ownership also often offers a greater degree of privacy and higher-end amenities than timeshares. On the other hand, vacation ownership is more expensive than timeshares, with initial costs often running several times higher. Additionally, vacation ownership typically requires a higher level of commitment, as the unit must be maintained and the annual dues and fees paid in order to keep the unit in good condition.

Vacation Clubs

One of the reasons some sales teams refer to timeshare properties as vacation ownership is that it easily confuses them with vacation clubs. Doing so makes avid travelers and prospective owners feel like they're making a sound investment instead of throwing their money down the drain.

With a vacation club membership, members buy points that they then use later to purchase vacations at certain resorts around the world that are a part of the club's affiliation. However, there's a catch. It can be hard to find availability if you want to spend a vacation at a popular time period of the year. Vacation clubs can provide more options than traditional timeshares. The long list of destinations and the chance to book as many rooms as possible is a big plus for vacation club members with growing families.

Certain vacation clubs and their terms may allow members to save the points they don't use for one year and roll them over to the next. However, this isn't always the case; sometimes, it may come as a fee. Like timeshare properties, vacation clubs can come with a long list of expenses like annual dues, management fees, and other facility fees. These fees are also not set in stone and prone to increase each year. That is why some members feel that vacation clubs slowly take more and more money from them. While vacation club membership looks appealing initially, the feeling fades away quickly.

Travel Clubs vs. Vacation Clubs

With so many variations of vacationing programs, it can be tricky to discern the fundamental differences. One common grey area is the steep difference between travel and vacation club memberships. Though similar in many ways, a travel club usually provides members with more of an all-around experience. For example, in most travel clubs, it is customary for members to receive accommodations such as discounted airfare, car rental, and access to a particular hotel operator.

On the other hand, vacation club membership usually involves an exclusive focus on resort experiences. The management company does not cover your travel or way of getting there. Much like travel clubs, membership in vacation clubs differs depending on the parent company. However, if you're more into someone doing the entirety of planning for your vacation, a membership to a travel club is probably one of the better ownership options.

What Is Fractional Ownership?

Fractional ownership is a method in which several unrelated parties can share and mitigate the risk of ownership of a high-value tangible asset, usually a jet, yacht, or piece of resort real estate like traditional timeshares. You're essentially sharing the time spent at your unit with other people who also get to use the same space at different times. Hence the name timeshare.

Fractional properties entail the following aspects:

  • A right to use policy under timeshare law
  • Reserved week(s) at your vacation home/resort property
  • Increased yearly maintenance fees due to more time spent at your unit and generally higher-end features and amenities
  • The possibility for exchange either internally or externally through a third-party exchange company

There are two ways to own equity within fractional ownership: shared deeded ownership or shared leased ownership.

Shared deeded ownership or "fee-simple" agreements give the buyer a share of ownership. The World Tourism Organization states that around 90 percent of timeshares are fee-simple or shared deeded ownership. Shared leased ownership – or right-to-use contracts – allows the buyer to use the property for a predefined period. That is different from shared deeded ownership in that you don't own any portion of the property. Ownership reverts to the original owner at the end of your term.

Shared Deeded Ownership Interest

According to Investopedia.com, a shared deeded timeshare gives each buyer partial equity in the physical property. For example, a timeshare unit sold in one-week increments can technically have 52 owners per unit. That's to say: buying one week in this particular resort condominium unit would result in a one-fifty-second (1/52) ownership interest. These types of ownership are often held in perpetuity and willed to one's estate upon passing.

Shared Leased Ownership Interest

Shared leased ownership interest allows the owners the right to a specific vacation property for a fixed-week timeshare or floating-week timeshare each year. With shared leased ownership, the timeshare company still holds the deeded title to the property. A leased agreement will expire, and owners will retain ownership perpetually.

Timeshare Exchange

Sales teams try to make timeshare ownership look attractive by telling their clients that they can trade with other owners to access different resorts and vacation clubs. That happens through exchange programs. Exchange programs provide customers with a third option between the pros and cons of timeshares and vacation clubs.

It all begins when the owners deposit their fixed week and/or floating week of the year that they own for a different week or location of equal value. A point system calculates the value of the timeshare weeks and their worth in terms of other resorts and vacation periods. As a result, it creates a catastrophe of owners seeking more points solely because the timeshare industry told them they had to get that next best vacation.

After the exchange companies find an equivalent match, owners can make the swap. The catch is that this all comes at a steep price. Exchange companies usually charge a hefty fee just for travelers to sign up for their program. Though specific properties may make it seem like they have the best deals available, you're only losing more money in the long run. However, some owners are fortunate enough that the resort developer will cover these costs for their first year.

What Are Timeshare Maintenance Fees?

With timeshare units, added costs are hiding everywhere. The resort management company will send you an invoice for additional expenses known last the yearly maintenance fees. The property developer or management group will collect these annual fees to cover various resources for maintenance, such as upkeep, service, and preservation around the property. The worst part? These fees tend to increase year after year.

The most important aspect to understand as a timeshare owner is that there is no option to make sure your annual maintenance fees won't increase. You do not have ultimate authority and cannot ensure that costs will not rise over the next decade of continually owning your timeshare. That means that 15 years from now, your timeshare's annual fee could be increasingly higher than it was in the beginning when you first purchased your timeshare.

Rising costs are the exact problem that many timeshare owners are currently facing. Having signed up for a timeshare thinking the maintenance fee was a flat rate every year until year two or three came along, the cost has increased exponentially for inadequate maintenance services. Experts in the travel industry say it's cheaper just to rent a hotel room for two weeks every year rather than own a timeshare and pay these yearly maintenance fees.

Does Vacation Ownership Require Maintenance Fees?

Yes, vacation ownership requires maintenance fees which are paid annually and cover the cost of upkeep of the resort.

FAQs

What Is the Best Vacation Ownership Program?

While they do exist, moral vacation ownership and timeshare companies are hard to spot. It's stressed that any owner interested in fractional ownership properties must do extensive research. Many timeshare vacation ownership programs hurt owners rather than help them. For instance, many owners are given a list of so-called benefits during a high-pressure sales pitch before they sign up. It isn't until a few months later, or when owners use the unit, that they realize these benefits are nowhere to be found and/or offered.

Are Timeshares and Vacation Ownership Regulated?

Yes, the Federal Trade Commission (FTC) and state laws regulate timeshares and vacation ownership. The FTC has a variety of rules and regulations in place to protect consumers from unfair or deceptive practices related to timeshares and vacation ownership. Additionally, many states have laws regulating the sale of timeshares and vacation ownership.

Are Timeshares and Vacation Ownership a Good Investment?

Timeshares and vacation ownership can be a good investment for those who plan on using the property regularly and are able to take advantage of discounts and specials offered. However, those who are not regular users or unable to take advantage of discounts and specials may find that timeshares and vacation ownership do not offer a good return on their investment. Additionally, maintenance fees and other timeshares and vacation ownership costs can add up over time.

How Do I Cancel My Timeshare?

Some owners attempt to put up their timeshare for sale. The problem with this is the timeshare resale market is a tough niche to break into. When most consumers go through a timeshare purchase, it's usually not with a previous buyer. Most of the time, it's with a timeshare resort or club that has found a way to get them in for a sales presentation on their timeshare programs. Not many vacationers buy from previous owners, so putting your timeshare up for sale is challenging in the vacation industry.

One of the worst ways an owner can attempt to exit their timeshare is to stop paying for it. Most owners don't realize that timeshare clubs and resorts are treated like real estate. If you stop making payments, the management company will make collection efforts on you, potentially ending in foreclosure. That only hurts you more in the long run.

The most effective solution to getting rid of your timeshare is to find a legitimate timeshare cancellation team to help terminate your timeshare agreement. This way, you can seek third-party assistance rather than just trying to take on the cancellation yourself. The staff you sign up with will be able to help communicate with resorts and their properties to help you exit whichever program you were left stranded in. Looking for a cancellation team that offers industry experience and a 100% money-back guarantee is essential. In this course of action, if they do not cancel your timeshare within an agreed-upon period, you receive all of your money back.

Summary

Timeshare ownership can be very misleading. Staff members of timeshare resorts love to connect emotionally with their potential clients, but it's not always an honest relationship. Amid their sales pitch, the difference between owning a timeshare and vacation ownership often gets blurred.

If you're trying to enter the timeshare resale market, you must remember just how hard of a time you might have due to limited buyers. Putting your unit up for sale can take years to finalize, and its initial quality standards will only suffer. Your best option for terminating your agreement with a resort is to find a cancellation team with excellent customer service. Paying money for a cancellation service isn't fun, but continuously paying for vacation time you never get to use is much worse.


*Wesley Financial Group, LLC, and its affiliates, successors, or assigns are not lawyers or a law firm and do not engage in the practice of law or provide legal advice or legal representation. All information, software, services, and comments provided on this site are for informational and self-help purposes only and not intended to substitute for professional advice, legal or otherwise.

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