Timeshare news is all the rage right now, with a lot of positive signs for the industry. As long as economic conditions stay rosy and consumers can afford to purchase vacation packages, the industry should see solid growth into 2023.
The Key to Successfully Buying a Timeshare
When you buy a timeshare, you’re not actually purchasing real estate or even a vacation package like an airline ticket, but instead a contract that allows you to use a certain resort in a specific location for a specific period of time. This is a unique type of agreement and you need to understand it well before making any decisions.
Many consumers who are considering a timeshare purchase have a misconception about what they’re actually buying. This may be because the industry uses language like “vacation ownership” that makes it sound like you’re buying a vacation in the same way you might own real estate or a rental property. However, this terminology is misleading and you should always do your research to make sure you understand what you’re getting into before committing to the deal.
One of the best resources you can find for researching what you’re getting into is your local real estate market, or a website that specializes in timeshares such as the Timeshare Crusader, Redweek, and other consumer-friendly sources that will help you research the specific resort you’re thinking about buying.
During the recent recession, some resorts were forced to raise their fees. This caused a big surge in timeshare prices. Then, when the economy rebounded, prices went back down.
Aside from the cost of attracting new customers, companies like Marriott Vacations Worldwide generate their revenue through financing, so they have to keep interest rates low for as long as possible. That means that when interest rates start to rise, they’ll have to pay more money to borrow it and that can have a negative impact on their margins.
Another concern is that if the economy gets worse, they’ll have to raise prices again in order to entice buyers to buy their products. This could negatively affect consumer spending and stock prices.
Fortunately, some of the most popular timeshare brands have strong balance sheets and don’t need to worry about raising prices much. For example, Travel + Leisure has a robust hotel portfolio with over 245 locations across a variety of desirable destinations.
This makes it difficult for competitors to poach customers. That’s why Travel + Leisure is able to offer a high dividend yield to shareholders.
The company also has a large portfolio of revolving credit lines that are used to finance the timeshares and other expenses, which is another source of revenue. Unlike their peers, Travel + Leisure doesn’t have a large amount of debt so they can keep interest rates low while still generating a reasonable profit margin on the timeshares themselves.
In addition to offering a broad range of vacation products and a robust catalog of locations, the key strength of the timeshare industry is its ability to generate revenue from financing. Its revolving lines of credit provide steady income, while its delinquency and default rates are below the levels seen during the great financial crisis.
