Rethinking Timeshares

WHEN LYNDA BETTCHER visits her daughter in New York City this August, she and her husband will stay in a one-bedroom suite at the four-star Affinia Dumont hotel, complete with a living room, a kitchen and a bathroom fully stocked with Aveda products. The cost? Orbitz.com and the hotel's web site advertise rates from $312 to $519 a night, but the Bettchers' nightly rate will be just $287.

Their deal: They purchased a timeshare. Timeshares — which are basically vacation condos used for a specific period of time each year — aren't typically praised for their cost savings. The industry has long been slammed for its high-pressure sales tactics and exorbitant prices and fees. In 2002, consumers paid an average $14,500 to purchase a timeshare week, according to a 2003 report (the latest available) by RCI, a timeshare-services company. And that doesn't include the annual maintenance fees that often run as high as $1,000, paid whether you use the timeshare that year or not.

But the industry has been evolving, and thanks to new sales strategies and a robust secondary market, there's absolutely no need to pay thousands of dollars upfront. You're also no longer tied to one week in a specific locale. With points programs, for example, you can now choose from properties located world-wide, provided you have the number of points necessary to redeem for your location, time and length of stay.

Here's how Bettcher got her deal: Earlier this year, the 55-year-old teacher from Portsmouth, N.H., purchased a 30,000-annual-points package for the one-time cost of $1,000 on Holidaygroup.com, a timeshare resale marketplace, and eBay. The annual maintenance fee for the package is $600, which makes her total outlay for the first year $1,600. (Each year afterward, the family will only pay $600 whether they actually use their 30,000 points or not.) For this year's vacation, Bettcher redeemed the points for two separate stays at the Affinia Dumont, one three-night stay in early August and the other a four-night stay later that month. She then rented out the three-night stay for $450, bringing the family's timeshare expenses this year down to $1,150. Next year, should the Bettchers decide to rent out part of their redeemed points again, their vacation may cost close to nothing.

Granted, there are setbacks to this arrangement. For one, points need to be redeemed well in advance should the Bettchers have their heart set on a specific time and location. And if some time in the future they find themselves unable to use up their points and cannot rent out the timeshare, the $600 maintenance fee will still be due.

Needless to say, timeshares aren't for everyone. Before you buy, you need to research a myriad of packages and locations. And ideally you should have the ability to plan your vacations at least a year in advance.

Here's how to make timeshares work for you:

Know What You're Getting Into
Timeshares should not be considered an investment. In fact, folks who buy timeshares directly from resorts — that typically happens after a sponsored "tour," which may or may not include a discounted hotel stay or other freebies (breakfast, for example) — should never expect to recoup their original cost if they sell, says Ted Toal, a fee-only Certified Financial Planner (CFP) in Annapolis, Md. "The purchase price, especially if you buy new, is inflated," he says. "Most people then finance it — and then have maintenance. The truth is, you can never expect to recover that price."

And you shouldn't always assume that a timeshare will be cheaper than staying at an equivalent hotel. Scott Leonard, a fee-only CFP in Redondo Beach, Calif., and a timeshare owner through the Marriott's Vacation Clubs program, estimates that his $1,300 annual maintenance fee is comparable — if not more expensive — than what his family would pay if they stayed at a regular hotel. Still, timeshares work out better for his family. "We have three young kids, so we don't want a hotel room. We want the kitchen and family room," he explains.

Don't Buy Direct
With as much as 50% of a timeshare's price going to cover developers' marketing costs, timeshare prices are seriously inflated, explains Bill Rogers, founder of the Timeshare Users Group, or TUG, an online community where people can exchange, trade or simply share information about timeshares.

You can find much better deals on the resale market, namely at web sites like tug2.net, RedWeek.com and eBay, where owners post timeshares for sale, rent and exchange.

Consider this: the average price for a timeshare week (or the equivalent points package) at the Hilton Grand Vacations Clubs, for example, was $24,000, according to a 2005 Bear Sterns report on the timeshares industry. RedWeek.com currently features Hilton resales for $12,000 or less.

Negotiate
The good news: The resale market is booming. On its web site, TUG recently featured nearly 1,900 "for sale" ads for timeshares in the U.S. and abroad. RedWeek.com has more than 5,000 ads. A recent search on eBay yielded nearly 900 results.

Give yourself time to find a location or program you like. Then, negotiate. "Most sellers are pretty desperate and they want to drop [their timeshares]," says Toal.

Bettcher, who has been buying and selling timeshares for the past eight years, advises buyers to be patient. "You should pay what you want to spend, not necessarily what the person is asking," she says. If they don't agree to your price, let it go. In time, the right deal will come along.

The best time to negotiate is late fall, according to Bettcher. "Most fees are due on the first of the year, so start looking in October or November. That's when [owners] are getting anxious to sell and are willing to drop their price," she says.

Rent Instead
Renting is a great way to try timeshares without the responsibilities of ownership. "If I were to do timeshares today, rather than buy I'd rent from owners," says TUG's Rogers.

To get the best deal, especially if you're headed to a popular destination, start your search early. John Locher, vice president of RedWeek.com, recommends starting a minimum of two months in advance.

If you're uncomfortable dealing directly with the timeshare owner — after all, you'll be expected to send the money in advance to someone you've likely never met — consider using a "vacation escrow" service. RedWeek.com, for example, uses the escrow services of First American Title Insurance. You'll pay an extra $100.