Dear bigwigs and not so bigwigs, I hope that at least one of you answers this letter, even anonymously.
Here’s the question: Why do timeshares in the secondary market have such low value compared with the original purchase price?
Let us assume that Joe and Mary purchase one of your timeshares for $20,000. They use it annually and pay all the maintenance fees, even when you increase them. 10 years go by and they don’t want it any longer. They are disheartened to find out that similar timeshares have only managed to sell for $1,500.
Joe and Mary will now do one of three things; a) they’ll fall prey to a scammer who will promise that they can sell it for $20,000 because its real estate, for a $6,000 upfront fee, b) stop paying the annual fees and be faced with a foreclosure and everything that goes along with it when you start legal proceedings or c) end up selling the timeshare for only $1,500. All three of these options will have the effect of negating the positive experiences Joe and Mary have had vacationing and you can bet that they will not be recommending timeshare to anyone.
You, on the other hand could have offered to buy back Joe and Mary’s timeshare for $15,000 (actually you could buy it back for $20,000, but I’m feeling generous today) and turn around and sell it the following day for $30,000 as that is what you’re charging now. There has been no depreciation on the timeshare because Joe and Mary faithfully paid what you billed them every year and you maintained the unit and the resort...you did, didn’t you?
Joe and Mary will not fall prey to any scammers now, because there’s no need for them to even exist. Joe and Mary feel good about their purchase and their years of vacationing at timeshare resorts and are likely to recommend this way if vacationing to their friends and family.
Why don’t you do this???
7 comments:
Because the "real estate" portion of the $20,000 purchase was never worth anywhere near $20,000. Surely you understand Timeshare doesn't sell itself - someone has to pay for all the free gifts! Everytime somebody has the cheek to go to a presentation and waste the sales representative's time and walk out with a "free gift" but not purchasing they are adding to the marketing costs of timeshare. Also, we have to pay big commissions to our sales staff when they do sign people up. Selling Timeshare is a very expensive exercise - even more so now do-gooders like you keep telling people not to buy - we now have even more free loaders taking the gifts and walking out without paying a cent. That is where most of your $20,000 purchase goes! After marketing, commissions and of course profit (we aren't a charity) it would have been $5,000 or less that actually went towards the 'real estate' SO YOU SHOULD'NT EXPECT us to pay $15,000 to buy it back. And even if we did saying we resell it at $30,000 is very misleading - as we will have all those marketing and commissions to pay again to be able to sell it. Much easier for us to spend $5,000 on new 'real estate' than go through repurchasing process.
Well, Mr. Timeshare - you just gave a bunch of good reasons why timeshares are a bad deal. Too much overhead in the price of the product, and no residual value. Thanks for the explanation.
John, I thought the exact same thing
Thats actually not fully true , as a large majority of sales probably over 50% are to existing customers buying more therefore the Marketing costs are a fraction of the first time buyer .So Mr Timeshare how do you answer this issue .
Yes there is more profit in upgrading existing members compared to gaining new members but still a lot of free gifts given to people who don't buy more.
I work for a small "mom and pop" timeshare in New Orleans. Unfortunately sales for fixed week ownership is not what used to be. We offer a deed back program for a fee but would never buy back a week because the likelihood of the week selling is very low.
I also preach to my owners that a timeshare in not an investment property. It is a vacation investment and only has value as long as it is being utilized. As soon as the owner no longer has use for it, the value goes down. I find most owners who are listing their weeks for $1,500 and less are desperate to get out of paying maintenance fees. With all of these low cost weeks on the secondary market, it is extremely hard for a sales department at a small timeshare to move the inventory. If we could get rid of our inventory, maybe the Developer would start to consider buying back.
Thanks for your insight. It is a complex issue and there is no easy solution that will fit all developers or owners.
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