We break down the cost of a timeshare membership so you can see where your money really goes.
What you are paying for
A timeshare membership may be presented in a wide variety of flattering ways. The two main selling points that most buyers report as having convinced them are:
- Guaranteed high quality. Members could look forward to always having high standard holiday accommodation for the duration of their contracts
- Exclusivity. A timeshare purchase granted access to resorts that were not available to the general holidaymaking public
More on the two above points later.
What most modern timeshare contracts boil down to is the buyer agreeing to book with a certain ‘hotel’/’group of hotels’ every year for the duration of the agreement. The buyer pays the property owners an agreed sum of money in advance, and then every year pays the fee to rent this holiday accommodation at more or less the rate a non member pays for the same standard (often in the same hotel).
The buyer also commits to paying for those annual holidays whether they use them or not. If they want to change their holiday pattern in any way, there are usually extra fees to pay.
What does it cost?
The average cost of one week of timeshare is currently $24,140 (£19, 059). The average annual maintenance cost is over $1200 (£960).
There is also an annual fee for being a member of an exchange company, without which you would be staying in the same room, for the same week every year. Currently this annual fee is $109 (£90).
There are additional fees if you want to change the time of year, size of apartment or destination. It costs extra in many cases even to swap for a smaller apartment, less desirable destination or less popular time of year.
If you want to let someone else use your week, you have to pay a further $109 to do so.
RCI, the largest exchange company is representative of the other two (Interval International and 7Across). Their fees are listed here
What it should cost?
Greg Wilson, CEO of European Consumer Claims explains: “There are several ways of looking at this question. The most intuitive is to look at the cost of the apartment involved and divide the cost by 52. In my estimation as well as the experts who work for my organisation, an average timeshare apartment is worth around $300,000 (£240,000). It is being sold for more than 5 times that when you multiply the average membership week cost by 52.
“By that measure, the apartment could be timeshared for under $5,800 (£4500) per week. And the members would have actual ownership of a property with a resale value likely to be more than they paid for it, depending on how much later they sold it.
“Maintenance costs should logically be a great deal less too. regular timeshare owners are paying around $62,400 (£49,000) annually to maintain an apartment worth around $300,000. We conservatively estimate the real maintenance cost to be a maximum of 10% of that.
“The other way of looking at this question is to see at the situation from the resort’s perspective. They are guaranteeing themselves business for many years in advance by entering into a contract that commits a customer to using their services.
“It gives them the right to put ‘rental’ (annual fee) prices up at will. It also obliges the customer to pay when they don’t use the services, such as during COVID.
“That is a highly desirable deal for the accommodation providers. And if you were looking at the situation for the first time from a business perspective, you would have to say that these kind of major concessions from the buyer ought to justify considerable discount rather than extra cost. Speaking personally, I wouldn’t even consider making that kind of commitment to a hotel brand unless I was getting discounts of 60% or more on regular prices.”
Why the difference?
‘Because they can‘, is the short version of why timeshare companies charge so much more than the product warrants.
Timeshare is a testament to the frightening power of well executed, highly-refined sales techniques. Nobody goes looking to buy a timeshare in the same way they do, a car or a house. Most other high expense products or services we buy make some kind of financial sense, whereas when someone buys a timeshare they are spending a lot of money to buy something that goes firmly against their best interests.
If you were to set up a timeshare showroom, and rely on (for example) TV adverts to bring in customers wanting to buy memberships, you would be waiting a long time.
To put it another way, people don’t buy timeshares, they need to be actively sold.
In order to make the model work, expensive marketing programs have to bring prospects to intense sales presentations. A former sales manager from Club La Costa World currently working at ECC puts the cost per presentation at around $1015 (£800). With a typical timeshare deck 20% closing rate, that makes Customer Acquisition costs approximately $5075 (£4000). A further 22% of the total price is paid in commissions to the salesperson and his managers.
So out of the average $24,140 price, $10,385 is the amount the buyer unknowingly pays to be sold something they otherwise would never buy. If we then subtract the $5800 figure worked out by Greg Wilson above from the figure we are left with a healthy profit of $7955 (£6279) for the resort. The expensive marketing and high pressure sales will apparently support this extra 33% as profit for the resort owners.
The reasons for the staggering £18,340 difference in price between what timeshare should cost and what it does cost, are, in summary:
- Huge marketing costs (needed to entice prospects to attend presentations)
- Inflated sales commissions (because it is so difficult to sell)
- Enormous profits for the resort developers
Feel cheated?
There are very few timeshare resorts that remain exclusive in 2024. You can stay in practically every resort through sites like Booking.com without being a timeshare member. And the claims of higher quality dissolve when you realise that equally high standard hotels and condos are available on all booking sites. Including the very same timeshare resorts.
If you believe you have been mis-sold and want to explore your options regarding what to do about it, get in touch with our team at Timeshare Advice Centre.
