The TV news, newspapers and even chit chat at the local pub all concern the current global crisis affecting inflation; put another way the cost of living. Simply looking at the latest UK figures, The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.2% in the 12 months to June 2022, up from 7.9% in May. The annual rate was below 1.2% from April 2020.
So in just 2 ½ years inflation has risen six fold, higher inflation means higher prices across the board. Simply looking at household energy, according to the BBC, energy bills for a typical household will rise to £3,549 a year on 1 October, when a new price cap is introduced. Petrol, food and other essentials are not far behind.
As if to highlight the point, on 31st Aug, the Daily Mail website led with a leader article coupled with the photo below:
Whilst in a utopian society there would be an expectation that wages would rise at least by the rate of inflation, this simply won’t happen. Higher wages simply pour more fuel on the inflation bonfire and so a vicious cycle emerges, higher wages, higher prices, higher prices, higher wages and so the cycle continues.
You may well be asking “what on earth has all this got to do with timeshare?” let us try to explain.
Timeshare the business
It must be remembered that a timeshare resort is just like any other hospitality accommodation area, be it a hotel, luxury lodge, bed and breakfast or even camping and caravan sites, operating these venues costs money. The Sur in English a weekly Spanish newspaper, covering the Andalucia region of Spain, recently reported that the cost of hotel accommodation has this year risen by 21% in Malaga province bringing the average room single night rate to €111. This for the most part was attributed to energy rises.
Hotels in Malaga province paid an average price for electricity per kilowatt hour in the previous year of 0.0923 Euros. In April 2022 the figure had risen to 0.2715 Euros per kilowatt hour, with peaks of 0.33 Euros kw/h, which is an “alarming rise” of 247.63%. Timeshare resorts in Malaga province, or for that matter Spain in general, will no doubt experience similar energy rises.
A hotel can raise room rates to keep in line with rising costs, so will a timeshare resort, but in the form of the annual maintenance fee charge. With rising costs, not just energy, the 2022 cost of running a resort has increased dramatically, would it be stupid of us to assume that recouping these costs will not be reflected in the 2023 maintenance bills? We don’t think so. Although we lumped timeshare in with all other areas of the overnight stay hospitality industry, there is a vast difference.
If a hotel decides to raise its room rate and if the price becomes unaffordable, simple, don’t book a room at that hotel, find a cheaper one. If a timeshare developer decides to hike maintenance fees, tough, as an owner you are contractually bound to pay. Failure to pay at best may mean loss of ownership, at worst, legal recovery action.
What gives?
In times of rampant inflation where domestic corners need to be cut, the first casualty is the luxury non essential items. New anything, when the current items are perfectly serviceable are kept and don’t get replaced on a whim. Maybe one less round of golf a week. In the final analysis, whilst desirable, and in many cases necessary, the annual holiday may have to go too. It doesn’t stop with the accommodation cost, air fares are rising due to fuel costs, food and beverage costs are rising too.
As if to illustrate a point, the author holidayed in Spain in October last year. In a local bar the cost of a bottle of beer was €1.50. Having just returned from the same area, the same bar, the same beer, but this year the cost was €2.50, that’s a 166% rise!
The lock downs created by the pandemic together with the associated travel bans put the brakes firmly on holidays. When over we saw a bounce back with the “run for the sun”. Many travel pundits attribute this to a knee jerk reaction rather than a sustainable pattern, factor in the potential 2023 costs and associated price rises and we think that for many families the annual holiday will either be trimmed down or put on the back burner until affordable. Whilst at TCA we try to be apolitical, we must also consider the ongoing conflict between Ukraine and Russia and the potential short to medium term impact on all sorts of costs and prices, not least of which, energy.
The prognosis for timeshare
It’s a well known fact that timeshare in Europe is on a slippery slope. If selling new timeshare was still happening, one has to ask why did the mighty Diamond Resorts shut their entire European sales division in 2017. Why did Club la Costa follow suit in 2020? Maybe they saw the writing on the wall. If normal folk are finding it hard to scrape the pennies together for an annual break, what chance is there of finding a spare £20,000 or so to buy into timeshare?
Maintenance fees are now the lifeblood of timeshare resorts. We have reported in the past that virtually all timeshare resorts now allow external bookings from the various online platforms, but if the impact of inflation has the effect on holidays as we touched on above, then this revenue cannot be counted on, whereas maintenance fees can.
An already too clear pattern is that maintenance fees will rise each year and whilst owning a timeshare there is no way of avoiding these. If it follows that if less people holiday, the onsite facilities also suffer. Fewer takings in the bars, restaurants and supermarkets, if these are franchised will the franchisee pull out due to poor profits? If owner operated, then in house profits are once again impacted, not a particularly rosy prognosis.
An early Christmas present nobody wants
It has never failed to amaze us that most timeshare developers send out their maintenance bills just before Christmas. Under normal circumstances Christmas is one of the most expensive times of year for us all, this year with all the price rises, who knows what the cost will be.
We think it can be stated that 2023 maintenance bills will be larger than those of 2022. The corporate accountants have to second guess what the costs to run the resorts, and all the “walking overheads” at head office will be, arrive at a figure then add a margin for safety. It would be a very brave accountant to reckon that 2023 will cost less than 2022, from this, expect a hike.
With new timeshare sales in Europe not happening and the possibility of holidays becoming unaffordable luxuries, the maintenance fee is the saviour, the knight in shining armour who will save the day, possibly.
TCA comment
Unfortunately there is not a lot of comment to be made. Inflation and rising costs are a facet of life, albeit this time, in certain areas, the impact seems greater. It goes without saying if commodities such as holidays become unaffordable then unfortunate as it maybe it’s something we all have to accept.
With timeshare ownership if flights and other holiday related expenditure mean that in 2023 your holiday may have to, as we said earlier, be placed on the back burner, this will not alleviate the maintenance fee. Just because you can’t afford a holiday, that’s not the developers problem. You signed on the dotted line and contractually agreed to pay the annual maintenance fee, so pay up.
TCA are not suggesting for one moment that you dispose of your timeshare, if that’s even possible, but the reality is to get out of paying maintenance fees you need to get out of the ownership. With bills being posted within the next couple of months or so, if getting out seems the only way forward then you need to act fast.
Finally, getting out may need specialist help, be warned there are more rogues on the peripheral of timeshare than good guys, if you need help, give us a call.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk