Timeshare Value …. Myth
As someone with a strong background in accounting, I always assumed I inherently understood the definition of the word “value.” Now, I readily concede that the word “value” can, depending on its usage and context, represent several meanings and variations. When used as a verb, one can, for instance “value” something as nebulous as a “moral percept.” As a noun, things of “value” can, and often do, reference monetary significance, but can also apply to matters of emotional “value.” Therefore, it may be somewhat understandable that when one references the value of a product, like a timeshare interest, that attempts to embrace qualities of real estate and/or lifestyle, such as a multiple-location resort, that value can become a more elusive concept, perhaps a little more difficult to comprehensively nail down. Indeed, the “value” of a vacation experience becomes less quantifiable by a fixed number since, arguably, “beauty is in the eyes of the beholder!”
Balderdash! Poppycock! Hogwash! Propaganda propagated by the timeshare industry to diffuse and deflect the common criticism that their products lack actual resale value! Yes, of course the term “value” can have different meanings depending on the context. However, in this arena we are not speaking of subjective niceties, we are addressing the issue of what can one anticipate receiving in cold, hard coin of the realm when one needs to unload a no-longer-wanted timeshare!
The Value of a Timeshare
Value is easy to define in this context. In its optimal state, it’s a monetary term, readily quantifiable and easy to calculate – a solid method of comparison allowing us to measure results. Yet, it’s a concept that remains malleable and, therefore, able to be spun by those who stand to benefit from the deliberate manipulation of an otherwise straightforward economic term. Of course we speak, when referencing a commodity such as a timeshare interest, of its resale value, since by definition no other derivation has any realistic significance. We all know of the term “one man’s trash is another’s treasure,” but what we clearly reference when speaking of the value of a timeshare interest is more along the lines of: “what can I get for my interest when the time comes (as the time surely must come in all instances of timeshare ownership) that I need to sell the darn thing?!”
Speak all you wish of the “value” of a good massage, or the inherent “value” of a fine painting, but even these softer examples have their own specialized, respective marketplaces where one can purchase a much-needed massage or painting. Indeed, in speaking of value, we know inherently that supply and demand play a major role in determining value (and yes, of course we are speaking of market value as the true measure of “value”, the only one that counts when all is said and done).
Our fine painting may have a significant resale value, particularly if it’s an original by a well-known artist (limited supply, high demand). In fact, when that well-known artist passes on, the value of his or her work increases. Why? Because no more artistic works can be created by that artist. Supply has been permanently frozen, while demand for his/her remaining originals increases.
So, how does this pertain to timeshares? Supply is relatively stable, although new resorts do come on the market. Demand, as well, remains relatively constant. So then, how is one to place a market value on one’s timeshare? Obviously, the marketplace will set a value; however, in the timeshare game the resale value is artificially repressed, to say the least! There are two major factors operating to repress the value, and neither of these is directly related to our normal supply and demand quantification. Supply and demand are still factors to be considered, to be sure, as additional value can be found in geographic areas where lodging is in relatively short supply – on exotic islands or ski villages during season, for instance.
What Is Suppressing Timeshare Resale Values?
As to the two main reasons for the depressed values of timeshare interests: one is the intentional suppression of resales by the resort developers – who are on public record stating that a healthy resale market is a threat to their business model – and the other is the continual rise of annual maintenance fees. I’ve written somewhat extensively in prior articles (“The Unconscionable Suppression of the Timeshare Resale Market” in particular) on the first prong, and have touched upon the second in other writings on this site as well.
As to the direct correlation between rising maintenance fees and depressed resale prices, I’d offer the following analysis, along with an exercise my readers can easily do to make their own analysis. It’s fair to state, initially, that the concept of a gorgeous, well-appointed resort in a desirable vacation area being devoid of value is counterintuitive. However, if during this exercise we establish that the value (cost) of the total vacation experience, factoring in the resort, its location, amenities, etc., is roughly equal to the current annual maintenance fee, then the market value of the resort ownership unit must be zero or reasonably close to zero. How did I reach that conclusion?
If you can book a comparable vacation resort experience on a one-time only basis for the same amount as your annual maintenance fees, who would want to “own” an interest with a built-in annual maintenance fee and added difficulties booking said interest at his or her vacation sweet spot? Why not just jump on the internet 30 days before your vacation and book via Expedia, Travelocity, etc., with no more fears of upward bound assessments, no more lifelong financial obligation?
Try this exercise!
Grab your last annual maintenance fee bill and note the amount. Then, pick your next travel window and comparable destination (or even the same location you previously visited), and go online to see what you can book this vacation package for on an open market. If your comparison test leads you to the conclusion that your cost will essentially be the same as your annual fees, then you’ll undoubtedly conclude that there is little reason to incur an upfront purchase cost to have a similar vacation experience, particularly when factoring in the relative ease of booking through a travel website and the benefit of avoiding recurring and increasing annual costs, booking hassles, etc.
Based on the above process, if the test proves valid, you must conclude that expending a significant up-front cost to purchase a timeshare is not money well spent. Further, your timeshare interest, from a practical standpoint, most likely has no positive resale value and may arguably be a negative asset.
It is little surprise, then, that timeshare developers, and their respective sales forces, want to talk about the “value” of the vacation experience. To this argument, I repeat: Hogwash!
Michael D. Finn, Esq.
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