Knowledge About Timeshare Resale Business
Having seen the whole cycle of the timeshare industry, (my first timeshare development was RCI Number 78; they are now up to about 3,100) it has been interesting to see the entire evolution of the business.
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Since the product is so sound, it has withstood assaults by the scammers and marginal developers. It has reached maturity to the point that the major timeshare players from here on will be the Hiltons, Marriotts, Hyatts, etc. Timesharing works! Most people who own them love them. Not everyone, however, can keep them forever.
While the developers were pumping out virtually millions of new timeshares, no attention was paid to what happens when someone wants to or must resell them. Just now a method of resales is beginning to happen. Unfortunately it is way overdue. Prices fall in a market vacuum and when there was no system, people would try to sell their timeshares, fail, drop the price and fail again. What would stocks and bonds be worth if there were no New York Stock Exchange? The result was such that the pricing of timeshare resales fell to ridiculously low levels. Most resales now are priced at about a quarter of replacement value (75% off). Let’s face it. Timeshare resales represent one of the greatest consumer values anywhere today.
Does that mean that the public paid too much for the timeshares they bought from the developers? Not really. In my many years in the business there have been very few timeshare developers who really made a lot of money. Anyone developing a new project today must price it way up there just to recover his or her investment and hopefully make a reasonable profit. For one thing the cost of selling new product is very high. Remember all those free gifts you got when you went to the timeshare presentation? Guess what? They weren’t free. The cost was in the price. About half the price of new product went to sales and marketing costs. The second major factor was financing. The people who made the real money in timesharing were the lenders. The hotel chains do not have such high marketing costs due to economies of scale. Further, they in most cases do their own financing. If you have priced such product, you will find that it still goes for two to three times that of resales.
Unfortunately, some of the left over scammers from the original business saw another great opportunity, that of preying on the timeshare owners who needed to sell. The system was simple. They would call the owners of timeshares and say that they had their timeshares sold for a lot of money and would consummate the transaction as soon as they had received $350 or $500 or $3,000 up front. Needless to say, as soon as they had enough money, they would close down and move on to the next county where they would start the process over. They were hard to catch although some progress has been made recently and some of them (way too few) are now in prison. The simple solution for you to this problem is to just not pay front sales fees. You will be right most all of the time. The payment of nominal advertising fees is of course legitimate. Just as you would place an ad in the newspaper (doesn’t work for timeshare resales), some specialty advertising is necessary if you want to attempt to sell the timeshare yourself. Once you are over $100 for such services you are probably paying too much. As an example, one legitimate resale broker holds auctions. He charges up front for the auction hall and advertising because the auctioneer charges him those same fees.
People such as us saw a need to provide a legitimate method of resales. This timeshare sub-industry is just now in its infancy. So what will happen next? We have already seen it. As the resale industry becomes more efficient, it will exert more and more upward price pressure and the prices will go up! We have seen a major impact in the resorts in which we are involved. Most of the really low priced timeshares have already resold. It’s like harvesting apples. You shake the tree and pick up the apples. The next time you have to shake the tree harder. As the prices go up, two things will happen. The sellers will not have to take such a big loss and the buyers will not get such good deals. It seems that the public is starting to understand this. We have seen a great upsurge in the business in just the last few months.
As we tell potential sellers, as long as you are using the timeshare, renting it or otherwise achieving value out of it, there is no real downside to hanging on to it until the prices rise. On the other hand, if you are getting no use out of it, it’s like the retail business where the first markdown is the least costly. Whereas the price will go up, it’s highly unlikely it will go up faster than the buildup of homeowner’s dues and taxes. As a result, it’s better to just take your lumps and sell it as soon as you can.
On the other hand, if you are a potential buyer, don’t wait around! You can either obtain a timeshare now at these ridiculously low prices or you can wait and pay more later for the same thing. Your call.