The Number 1 True Costs of Owning a Timeshare

The Number 1 True Costs of Owning a Timeshare

Owning a timeshare may appear to be an attractive investment, offering the promise of luxurious vacations and exclusive amenities. However, beneath the glossy brochure lies a web of hidden costs and financial burdens that can turn the dream of owning a timeshare into a nightmare.

This blog delves into The Number 1 True Costs of Owning a Timeshare, providing factual evidence and real-life examples to shed light on the financial implications for buyers.

Initial Purchase Price and Financing

The first and most apparent cost of owning a timeshare is the initial purchase price. Timeshares are often sold at premium prices, with some luxury properties demanding six-figure sums.

Buyers are sometimes lured into making impulsive decisions due to high-pressure sales tactics, leading them to sign contracts without fully comprehending the long-term financial commitments.

According to the American Resort Development Association (ARDA), the average price of a weekly timeshare interval is $24,140. This is one of The Number 1 True Costs of Owning a Timeshare that no sales person will tell you while they are doing the wonderful presentation.

The sales representative may emphasize that this cost is spread over several years, making it appear more manageable. However, when considering interest rates and financing charges, the total cost could escalate to $30,000 or more, making it a considerable financial undertaking.

Compare that to the $355,700 average price of a condo in May 2022 (via Bankrate). If 52 people owned or shared these properties, as is the case with timeshares, each share would only amount to about $6,840 — a far cry from the more than $24,140 you shell out for your 1/52 portion of a timeshare.

Annual Maintenance Fees

One of the most significant and recurring costs associated with timeshare ownership is the annual maintenance fee.

This fee is charged to cover property maintenance, management, and amenities. It is important to note that maintenance fees are subject to increase over time, which can exacerbate the financial burden for timeshare owners.

According to the American Resort Development Association (ARDA), the average annual maintenance fee for a timeshare was around $1,000 in 2020. Up 36% from 2010, when the average annual maintenance fee was $731.

Over a decade of ownership, these fees alone could add up to well over $10,000, substantially increasing the overall cost of ownership.

Special Assessments

In addition to regular maintenance fees, timeshare owners may face unexpected special assessments. These assessments are levied to cover unforeseen repairs, renovations, or upgrades to the resort property.

Special assessments can be particularly burdensome as they are often charged on short notice and can amount to thousands of dollars.

In the aftermath of natural disasters such as hurricanes or earthquakes, timeshare resorts may require substantial renovations. In such cases, owners may be hit with significant special assessments, causing further financial strain.

Exchange Fees and Membership Costs

Many timeshare owners join exchange programs that allow them to swap their allocated weeks for stays at other resorts worldwide. However, accessing these programs often incurs exchange fees and membership costs, adding to the overall expense of timeshare ownership.

Joining an exchange program can cost several hundred dollars annually, and each exchange may require an additional fee, ranging from $100 to $200 per transaction. For owners who frequently utilize exchange programs to diversify their vacation experiences, these costs can accumulate quickly.

Depreciating Value

Unlike many real estate investments, timeshares tend to lose value over time. While some resort developers claim that their properties appreciate, the reality is that the resale market is flooded with available timeshares, leading to decreased demand and plummeting prices. Basically this is The Number 1 True Costs of Owning a Timeshare, your dream vacation “place” its just going down in value.

At the time of this writing, July 26, 2023, 268 timeshares were listed on ebay with an asking price of $1.

These timeshares included the finest resorts (Hilton Grand, Westin, Wyndham, Disney) in the most desirable locations (Kauai, Cancun, Grand Caymen, Las Vegas, California, Florida).  This drastic depreciation leaves owners with significant losses when they sell their timeshare, but for many owners, taking the loss is a better option than continuing to the annual fees.

Timeshare Resorts’ Profits and Revenues

Despite the financial hardships faced by many timeshare owners, timeshare resorts continue to thrive and generate substantial profits. These profits come from various sources, which contribute to the industry’s resilience.

1. Sales Revenue

The primary source of revenue for timeshare resorts is the sale of timeshare units. Resorts entice potential buyers with promises of a luxurious vacation lifestyle and often employ aggressive sales tactics to secure sales.

In the United States, the timeshare industry generated $10.5 billion in sales in 2022, according to ARDA. The sales revenue is bolstered by the demand from eager buyers seeking an escape to idyllic destinations.

2. Annual Maintenance Fees

Timeshare resorts collect significant revenue from annual maintenance fees paid by owners.

These fees are not only meant to cover property upkeep but also serve as a steady income stream for the resorts. With millions of timeshare owners worldwide, the collective sum of maintenance fees can amount to billions of dollars in revenue for the industry annually.

3. Rental and Exchange Fees

Resorts often allow timeshare owners to rent out their units when they are unable to use them. Rental fees, along with exchange program charges, contribute to the resorts’ bottom line. Rental fees for timeshare units can vary, but even a modest rental fee of $200 per week can generate substantial revenue for the resort, especially when multiplied across numerous units.

Conclusion

Owning a timeshare entails far more than the initial purchase price, and the true costs can be daunting and financially burdensome.

Annual maintenance fees, special assessments, exchange program expenses, and the risk of depreciating value all contribute to the overall financial burden borne by timeshare owners. Despite these challenges, timeshare resorts continue to thrive, earning significant profits and revenue from sales, maintenance fees, and rental/exchange programs.

Prospective timeshare buyers should carefully consider all aspects and costs before making a commitment, ensuring they are fully aware of the long-term financial implications of timeshare ownership.