Time Share Exchanges Take Baggage Out of Ownership
Sam and Kim Craig were newlyweds when they decided to buy a time share in Las Vegas five years ago.
Since then, they’ve used it exactly twice, once for just a weekend.
But they’ve also swapped it for weeks at Lake Tahoe and skiing at Vail, Colo. After their two children were born, the Craigs, who moved from San Jose, Calif., to Raleigh, N.C., traded it for weeks at Hilton Head, S.C., and in the North Carolina mountains.
The Craigs are among 4 million households that own time shares, a number that has more than doubled since 1990. About 1.8 million of those owners reside in the United States, where the industry has recovered from its troubled infancy in the 1970s. In all, people in 190 countries own time shares.
Much of the credit for the industry’s growth goes to two exchange companies which, for the past 24 years, have helped time share owners swap weeks they own in one place for different weeks somewhere else.
“That became the number-one reason people bought the product,” said Ed McMullen of Orlando, Fla., a time-share developer for 21 years who helped Marriott and Hilton enter the market and now chairs the industry group American Resort Development Assn.
For most travelers, the time-share industry represents the pushy salesmen who use high-pressure sales practices in an attempt to lure potential buyers. Although 90 percent of those who sit through a sales pitch walk away without buying anything, there’s the other 10 percent.
The Craigs were in that group. During one of their occasional trips to Las Vegas, a resort asked if they’d listen to a pitch for owning a week of lodging there, every year.
“They got us in the door with the free show tickets,” Kim Craig, 36, recalled.
The Craigs, both accountants, hesitated to sign a contract, so the developer sweetened the offer with more free tickets. The couple signed the next day, paying a one-time price of $8,000 for a week every year in a one-bedroom condominium in the Ramada Suites Grand Flamingo resort off the Strip.
Those who own a time share interval, usually a week, and are knowledgeable and flexible can maximize its trading power and enjoy lodging at thousands of resorts worldwide for a fraction of the cost of a comparable hotel stay.
For instance, a time share week in a two-bedroom unit in Orlando, Fla., may cost $12,000, which gives the owner the right to use it for one week every year for 20 years, 30 years, or forever, depending on the deed. (Many weeks are deeded in perpetuity and are handed down to heirs).
Spread over 20 years, that’s $600 a year, plus about another $400 in annual maintenance fees. Staying in comparable accommodations likely would cost twice as much.
“I like the fact that I know I’m going to take a nice vacation every year,” Kim Craig said.
Time shares are available in every U.S. state and 90 nations, from sunny Caribbean resorts to busy midtown Manhattan. They range in price from $20,000 or more per week for a three-bedroom condo in high season, to as little as $6,000 for a week in a studio during the off-season.
Last year, 42% of the time shares owned in the United States were exchanged, ARDA statistics show. Only 39% were used by the households that owned them.
The larger of the two exchange companies, Indianapolis-based Resort Condominiums International Inc., arranged 1.8 million exchanges last year, or nearly one for each of its 2.3 million members, through a network of 3,200 affiliated resorts. The other company, Miami-based Interval International, has 850,000 members. RCI members cannot exchange through Interval, but about 50 resorts are affiliated with both companies.
“The idea of the exchange was really to fulfill that consumer need of bringing variety and flexibility to a product that otherwise would have been rather stale,” said Cristel DeHaan, a former owner of RCI, which is now owned by Cendant Corp., of Stamford, Conn., the franchiser of the Ramada, Days Inn and Howard Johnson lodging brands.
The relationship between the resorts and the exchange companies is very simple, she said. “One could not exist without the other.”
In RCI’s recently opened, $28-million call center in Indianapolis, 700 “vacation counselors” are at work handling 90,000 calls per week. In addition to incoming calls, the counselors call members to solicit condo space that’s in demand but not yet offered.
An RCI exchange works like this: Members place their time-share week into a pool managed by RCI and choose a week of comparable value deposited by another member. The company says 60% of its members’ vacation requests are filled within 24 hours.
Members can give up their time-share space, and request a different one, as much as two years or as little as two weeks in advance.
The savvy ones learn early on how the system works.
“We do try to plan our vacation a year ahead of time, so we can get the destination we want,” Kim Craig said. “The thing with the trading, you have to do it early. You can do it later, but then you have to be flexible.”
For the service, RCI charges members $78 per year, plus exchange fees of $110 domestic, $145 international. Members aren’t responsible if the time they’ve given up isn’t taken by someone else.
RCI tries to keep the property full by offering special deals to members on unused units; typically $149 for three nights or $299 for a week.
Even then, not all of the membership’s time share space is claimed, providing a pool of unused condominium time that RCI is making available to nonmembers who want to sample the time-share market. Beginning in August, the space will be marketed through Internet auctioneer Onsale Inc. (www.onsale.com).
Developers also rent out their own unsold space at rock-bottom rates to get potential buyers onto the property. One of the largest, Sunterra Resorts, sells a two-bedroom condo at Cypress Pointe less than a mile from Walt Disney World in Orlando for $444 a week in September. The catch: guests must take a 90-minute “tour” where they’ll get a sales pitch.
Those represent two of the ways the industry is trying to capture more of the aging baby boomers who are placing premiums on their leisure time as rewards for the hard work they’ve put into their careers.
“We have this huge public that’s earning more than they ever have in their life and who may be approaching semiretirement,” said John Reinhardt, RCI’s senior vice president of global resorts sales and service. “We’re dealing with a different and changing population.”
In more ways than one. The demographics of time share owners are changing, said Dick Ragatz, an industry researcher since the 1970s who sold his consulting business to RCI two years ago.
Time shares originally were marketed as vacation retreats to middle-income consumers who couldn’t afford a second home. The arrival of major brands such as Disney and Marriott since the mid-1980s improved the industry’s image, but also raised the rates. As a result, those in the $35,000-$60,000 annual income group are being priced out of upscale developments.
Ragatz said there’s more room for budget-class developments.
“The market’s going to be broadened,” Ragatz said from his office in Eugene, Ore. Also, “I think we’re going to be marketing more to singles than in the past.”
