Travel spending has been on the rise in recent years. Despite the fact that we’re still wrangling with a global epidemic (sans lockdowns, at least!) and inflation is at an all-time high, people are traveling more than ever.
Maybe we’re looking for an escape because the world feels pretty heavy right now. Some have realized that experiences are far more important than material things. More people than ever are working remotely, giving them the ability to travel even more.
Whatever the reasoning, a little over half of all Americans are planning to travel for leisure (aka vacay time!) in the next several months.
There’s a mismatch, though. While more people than ever are traveling, inflation is the number one concern impacting travel plans. In other words, we’re planning more vacations, but we’re trying to do it for less money.
Related: Best Budget Travel Destinations
Trying to save money on travel is certainly not new. However, searching for deals and snagging atypically low travel prices has become priority #1 for tons of consumers. It affects every decision involved in travel, even the choice of the destination itself. 9 times out of 10, a person is going to choose the cheaper option if everything else involved is mostly the same.
Getting more bang for your buck also impacts the type of lodging. Obviously, if you’re trying to save some cash, you’re not likely to book that luxury resort with a high price tag. Folks are looking for economical alternatives. For a lot of people, this can mean vacation rentals through sites like AirBnB or Vrbo.
But there is another alternative lingering out there: timeshares. And apparently, they’ve been making a comeback thanks to millennials and Gen Z.
Timeshares Are Still Going Strong
Let’s back up for a minute. Yes, I am talking about timeshares, those resorts that sell use rights instead of actual units. The ones our parents and grandparents have been complaining about for decades, thanks to aggressive sales tactics, inescapable contracts, and hefty financial obligations.
As it turns out, the timeshare industry has changed a little over the years. Some companies have adopted a more inclusive program model. They allow members to take advantage of travel experiences and activities, personalized concierge services, and a variety of dining options. There are fewer pushy sales presentations, and more first-rate customer service.
But as some things change, plenty of things stay the same.
Timeshares still basically operate in the same way. Some timeshare programs sell chunks of time at their properties, and members (sometimes called “owners”) are given the opportunity to use that time at the vacation property each year. Other programs operate on a points system, where they give members a number of points to redeem toward a stay. Either way, “owners” don’t really “own” any property. And those inescapable contracts and hefty financial obligations are definitely still hanging around.
The Real Costs of Timeshares
When you purchase a timeshare, you throw down a good chunk of change for the ownership. Most of us will have to finance that purchase – I mean, who has $20k sitting around for frivolous purchases? – which means extra costs in the form of interest.
But then, you start getting hit with all kinds of fees. You’re looking at yearly maintenance fees: insurance premiums, real estate taxes, cleaning, repairs, and other operating expenses. It all gets rolled together, and the members are required to pay it annually. Some companies require club fees, too.
You’re required to pay these maintenance fees each year. Even if you didn’t use your timeshare all year, you’re still on the hook for the fees.
Timeshares Are Not a Financial Investment
A financial investment is an asset that you put money into, with the expectation that you will see a return on your money. The hope is that your investment will increase in value, generate income, or both.
Regardless of what a salesperson says, a timeshare is unlikely to do either of these things. The average cost of timeshares sold by developers has risen over time, but this does not mean that the value of timeshares has increased.
Timeshares almost always lose value as soon as you take ownership – much like a new car immediately depreciates once you drive it off the lot. On the resale market, you’ll find timeshares selling for 10 percent or less than what the owner originally paid.
They Are Hard to Get Rid Of
Speaking of the resale market, you’re going to find it incredibly difficult to sell a timeshare. There are already a ton of unhappy owners trying to offload their timeshares, and many of them sell for not much more than a few dollars.
Of course, that’s the easier alternative when trying to get rid of a timeshare. Actually getting out of a timeshare agreement by cancellation is nearly impossible. Most people are unable to do this without incurring fees, hurting their credit score, or having to go to court.
There are timeshare attorneys and whole timeshare contract resolution companies out there. That alone should tell you just how difficult it can be to get rid of a timeshare.
Timeshares Are Not Liquid
Because timeshares lose value and are super hard to get rid of, this adds up to a lack of liquidity. Liquid assets are things that can be converted into cash within a short amount of time, with little or no loss of value. Stocks and ETFs are good examples of fairly liquid assets.
Timeshares are the opposite of liquid assets. They’re less liquid than traditional real estate. You will likely never recover your initial investment if you sell, and you will never recoup the yearly maintenance fees. Regardless of the timeshare’s location, you’ll be lucky to make any money from the sale at all.
Instead of Saving Money, You’ll End Up Spending a Lot More
If you’re looking at timeshares as a way to save money, you might want to look elsewhere. After you add up your initial investment, any interest from financing it, and all the maintenance fees, you’re looking at spending a lot more for 1/52 of a unit (because you get to use it for a week) than just booking hotels would have cost. For example, let’s say you paid $20,000 (the average) for a timeshare, and we’ll make it simple and pretend you didn’t have to finance it.
On top of that, you’re going to pay around $650 a year for maintenance fees, regardless of if you use it or not. After 10 years, you’ve spent $26,500 for 10 weeks of vacation. That’s $2,650 per week or about $442 per night for six nights. After 20 years, you’ve spent $33,000, or $1,650 a week and $275 per night.
If you manage to hang on to it for 30 years, you’re looking at $39,500, or about $1,317 a week and $219 a night. And that’s whether or not you’re still young enough and in good enough health to go on vacation every year.
Are Timeshares Ever Worth It?
The evidence against timeshares is pretty easy to see, right? However, there are people who are satisfied with their timeshares. Timeshares can be worth it, if you know what you’re getting into and you buy smart.
- Go into timeshare ownership knowing everything I’ve already mentioned. Don’t expect a return on investment, know the annual fees up front, etc. This can help cut down on disappointment down the road.
- Research the difference between fixed-week or points-based ownership to understand which one works best for you and your travel style. Fixed-week timeshares mean going to the same place at the same time each year, while points are much more flexible.
- Never buy a timeshare “retail.” All those owners desperate to get out of annual fees are selling “used” timeshares for a couple of dollars. Take advantage of it to save tens of thousands of dollars. You’re less likely to balk at an $800 annual fee when you’re not paying off a big loan on top of it.
- Only purchase a timeshare if you vacation regularly. You’ll pay those fees each year, even if you don’t use it. And while renting it out to someone else is an option, it’s not nearly as easy as a salesperson makes it sound during their pitch.
Related: Blow Away Your Post-Vacation Blues
