Wow, that is a powerful headline, that needs substantiating, so substantiate we will. First off we need to go back in time to the early days of timeshare and look at the product that did work. Fixed week timeshare certainly worked, at least for the timeshare owner, for the developer, well that’s a different matter and one we will look at later.
We will use a simple explanation of fixed week timeshare using a single apartment. The year is divided into weeks so we start with 52. Most developers retained two weeks for repairs and maintenance so we have 50 weeks left to sell, this is the maximum number of timeshare weeks that can be sold. From this it may be established that there can only be a total number of possible owners. Each owner was allocated a fixed apartment and a fixed week, at a fixed resort, all very simple a guaranteed holiday in a guaranteed apartment at a guaranteed time.
The fixed week product and developer problems
For sure, against development costs there could have been a substantial front end profit by selling fixed weeks, however, that’s where the cash cow runs out of the field. From then on in developer income is driven totally by the requirement to pay annual maintenance fees. From these fees the entire expenses of running the business including utility costs, maintenance, staff, tax etc must be paid. Soon it became obvious that 2 and 2 had stopped making 4.
Floating week system creates another problem
Developers tried counter measures to bolster profits such as the move from fixed weeks to floating weeks, that far from worked. To get the ball rolling, the first job was to divide the year into seasons which were given colours, red for high season, white or mid season and blue for off season. Naturally buying red would cost more than blue. Roughly speaking, each colour had about 16 weeks, the flexibility of floating weeks allowed owners to choose when to go within the season, all good so far? Not really.
In a summer resort, out of the 16 week slot, parents with children have a 6 week window during school holidays and guess who wants to jump on those first? Another problem is that red week owners can use white and blue seasons as well, white owners can use blue also, so now we can start to see booking problems rearing their ugly head.
The red, white and blue mathematically caused a problem because of the cross season usage. Using seasons and weeks this is the picture that emerges, below shows the possible weeks that may be used by each season owner:
- Blue – 16 weeks only
- White – 32 weeks
- Red – All year
By bringing in seasons it allowed the developer to sell weeks for more money, not only because of the actual season but the greater flexibility available to red and white buyers, enter the beginning of over selling.
All in all, whilst this attempt was made to improve on fixed weeks, the floating system was doomed to failure because rather than improve availability it compounded the problem because the same apartment could be sold greater than 50 times, upshot, availability problems entered the system.
Points, the developers’ saviour
So having established that with the old fashioned way of selling and buying timeshare, even with small tweaks such as floating, big profits were out of reach. Something was needed to divorce the number of consumers from the actual available inventory, enter points.
Points may be likened to the digital currency of timeshare, again, simple to understand, you buy points then exchange them for holidays. The better the resort, the better the season will naturally cost more or require a further number of points to get where and when you want. Unlike a fixed week product where a finite number of timeshare owners are a predetermined fact, points have no such limitations. Instead of one owner owning one week, technically with points that same one week can theoretically be sold thousands of times over.
Over selling of points is the primary cause of availability problems, which in itself, apart from maintenance costs, is the largest area of complaint from points based timeshare owners. Simply putting “Timeshare Availability Problems” into Google shows a page count of around 6,000,000 emphasising this is by no means a small problem.
Factor in the now massive profit over development cost and the number of massively expanded maintenance fee payers and you can see why we state that points’ are the developers’ saviour, the cash cow has returned to the field.
How do developers get away with it?
The simple off the cuff answers is they do because they can. With the exception of Spain, no other country has introduced legislation to prevent what can only be described as blatant profiteering created by overselling. Arguably, points will work providing you are prepared to go somewhere you don’t want to go at a time you don’t want to go, because there will always be availability somewhere, but that’s not what you purchased points for.
You purchased in Orlando so you can take the kids to the theme parks during school summer holidays, strangely, every time you go to book, there is no availability. For sure, if you want to take the kids to Orlando in January you may just find some availability.
So far, simple maths proves a point but there is one more damaging factor to bring into the mix and that is virtually every timeshare resort is now available to book online either with the developer direct, or through the online booking platforms. So if we have already established that points owners have paid a not inconsiderable amount for the privilege of joining the “club” and have an expectation to go where they want when they want and can’t, how can it be justified to dilute availability further by selling holidays to outsiders, non club members?
TCA comment
Maybe timeshare was a good product in the old days, maybe it worked well for owners but fast forward to today and it’s a train wreck of a product. To say its slipped off the rails would be an understatement, more like a total derailment.
TCA can think of no other holiday related product where this happens, why? Because all other products have a finite limit. To begin with, no other holiday product demands an investment in the tens of thousands, whether it be flights to get there or the hotel when you arrive, all these holidays and components are pay as you go. Availability issues are not unique to timeshare, for sure you may not be able to book your first hotel choice, but you haven’t paid upwards of £20,000 for the privilege of being turned away. Equally, the maintenance fee for using a hotel is inclusive in the room rate which is the same for virtually all timeshare alternatives.
In its current form, timeshare doesn’t work but more importantly can’t work. The design of the product makes it flawed, the greed of the developers simply exacerbates the problem and of greatest importance is that fact that today’s’ holidaymaker has so many better value choice options all presented on a pay as you go basis.
No ridiculous upfront costs, no high pressure sales, no long term tie in contracts, no annual requirement to pay maintenance fees, when all you really want is simply a couple of weeks away with the family, where you want, when you want. If timeshare adjusts to the business model that the modern holiday maker wants, then it may stand a chance of survival, but more than like it will end up going the same way as dinosaurs, although we doubt it will end up as an exhibit in the British Museum department of palaeontology!
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