Timeshare market is booming, but they’re not for everyone

My partner and I recently spent two hours touring the Newport Coast Villas, hundreds of two-bedroom timeshare units in Spanish-style structures that cascade down hillsides toward the sea near Newport Beach.

For prices starting at $21,900, we could buy a week here in perpetuity, our Marriott salesman, Todd Granato, told us. If this paradise didn’t suit us, we could trade our week for another at hundreds of other timeshare resorts or use frequent-guest points to buy vacation packages at Marriotts around the globe.

In the long run, considering inflation, Granato said, buying a timeshare beats renting hotel rooms. Besides, he added, “would you rather pay Marriott’s mortgage or your own?”

It was a disarmingly soft sell. Yet I wasn’t persuaded.

I figured Marriott would get to use our $21,900 right away, leaving us to benefit from it gradually and on their terms. What if we couldn’t trade for the week and place we wanted or if Marriott made it harder to redeem our points? What if we needed to sell our timeshare?

I must be missing something. Or perhaps I’m paranoid. Because Americans are snapping up timeshares at a frantic pace and, two recent surveys found, most owners seem pleased with their purchases.

Annual sales of timeshares in the U.S. more than tripled in the last decade to $5.5 billion, according to a 2003 study prepared for an industry group by Ragatz Associates, an international consulting and market research firm based in Eugene, Ore.

“The velocity of sales is dramatic,” said Ed Kinney, vice president of corporate affairs and brand awareness for Marriott Vacation Club International, which develops timeshares, also known as “vacation ownership,” for the corporation.

Since 1984, according to Kinney, Marriott’s annual timeshare sales have soared from $5.8 million to $1.2 billion last year, making it the largest such developer worldwide. Disney, Hilton, Hyatt and other big hoteliers followed Marriott into the market, lending credibility to a once-suspect venture known for high-pressure salespeople and even fraud.

Owners like timeshares because they can use them in a flexible way and are guaranteed quality lodging, according to Ragatz Associates’ survey of 1,857 members of a timeshare exchange company. In the same survey, 84% said they were satisfied with their purchase, 10% dissatisfied and 6% were neutral. In another survey this year, by PricewaterhouseCoopers, 77% of owners said they were satisfied.

Still, vocal groups of owners complain they either can’t trade for the weeks they want or take a big loss when reselling their shares, if they can even find a buyer. Many turn to the Internet.

On one site, www.redweek.com, I recently found more than a dozen Newport Coast Villa owners ready to relinquish their week-in-perpetuity for $12,000 to $20,500. (One downside: Marriott says it won’t award frequent-guest points to units resold through a third party rather than by Marriott.)

Resold timeshares can be a good deal, said Ed Perkins, a longtime consumer travel advocate, because “you get the same thing for a fraction of the cost.” Make sure the seller is not in arrears on fees or taxes.

Whether a timeshare makes sense depends on your finances and vacation habits, experts say.

As an example: If you can’t afford to spend more than $2,600 a year on vacations now, you may not want to buy a timeshare week for $14,500, which Ragatz found was the average price of a timeshare in the U.S. in 2002. That’s because the annual loan payments, even at 7% for seven years, would run more than $2,600. If you pay cash, you’ll still take years to break even.

If you go to the same place each year, a timeshare can be convenient. Pick one you like, fancy or not. But if you hope to trade your week for Presidents Day in Vail, Colo., or Christmas in Hawaii, ante up for a time and place that is equally desirable.

“The power of your exchange depends solely on what you put into the system, not what you want to get out of it,” cautioned Lisa Ann Schreier, a saleswoman for AmeriSuites Vacation Club at Calypso Cay in Kissimmee, Fla., who is writing a book of advice for timeshare buyers.

Evaluating a timeshare offer is complicated; laws vary by state. Because scams still happen, it’s wise to thoroughly research the company. Among questions you may want to ask:

* Do I get a deed? This usually entitles you to will the timeshare to heirs; it may or may not afford certain tax breaks associated with owning real estate. Marriott offered deeds at Newport Coast Villas. By contrast, “timeshare use” doesn’t give you title, just a license or membership. “Nine times out of 10, I’d ask for a deed,” Schreier said.

* Floating or fixed week? Your week may be sold by the season, not by date, meaning you’ll have to book a time each year. Newport Coast Villas was offering certain holiday weeks by date, the rest by season.

* What are the fees? Timeshares typically carry maintenance fees that may include property taxes. The average fee in the U.S. in 2003 was $385 a year for a week of timeshare, Ragatz found. Expect the fee to go up over time.

Exchanging weeks may also cost you. The company that handles Marriott timeshares charges $79 and up for annual memberships, plus $121 or more per week traded.

* Is there a vacation points program? Some timeshares award points that you can redeem for air-hotel packages or even cruises. Check out redemption rules. Marriott raised award requirements in 1989, then lowered most in 2001.

* How do I finance this? Not through the timeshare developer, if you can help it. Schreier said her office recently was offering 15.9% interest on seven-year loans. She said it was high to cover good and bad credit risks.

Take out a home-equity loan, charge it on a miles-earning credit card (then pay it off pronto) or at least try to bargain.

“Ask if the interest rate is negotiable,” Schreier said. “I’m stunned people don’t ask that.”

Above all, she urged: Keep a grip on your common sense, no matter how persuasive the salesperson seems.

Jane Engle welcomes comments but can’t respond individually to letters and calls. Write Travel Insider, Los Angeles Times, 202 W. 1st St., L.A., CA 90012, or e-mail jane.engle@latimes.com.