Does Higher Inflation Help Timeshare Ownership?

The word of the day, or rather of the year, is inflation. With inflation over 8 percent, it is impacting every area of our lives from rising gas prices to groceries and mortgage payments. But does higher inflation impact timeshares?

A case can be made that higher inflation helps timeshare ownership, and for that claim we can look to the leader of the largest timeshare company in the world, Michael Brown of Wyndham.

Explaining How Inflation Helps the Value Proposition

Mr. Brown is the CEO of Travel + Leisure, the mother company of Wyndham Destinations, Club Wyndham, WorldMark and the rest of the brands that come under its domain. 

Since Travel + Leisure is a publicly traded company, during an earnings call on April 28 Brown addressed the issue by stating “we see rising inflation as a net positive for our business model,” adding that “rising hotel and vacation home rental rates create an even more compelling value proposition for our customers.”

He went on to explain his point by saying “a seven-night stay this July in two hotel rooms in close proximity to Disney currently cost approximately $6,000, including fees. Contrast that with our flagship Club Wyndham Bonnet Creek Resort in Orlando, where our owners pay a $1,600 annual maintenance fee to stay during high season in a spacious 2-bedroom condominium.”

The explanation does not take into account the initial purchase prices of the timeshares, but Brown maintains that 80 percent of their owners have paid off their timeshare. So they are currently vacationing for the cost of their maintenance fees.

According to this comparison, timeshare resales are an even better value, but we’ll discuss that later on. For now, Brown is reiterating the benefit that has long been a staple of timeshare sales teams across the world, that a timeshare purchase today hedges against rising accommodation costs in the future.

What About Those Maintenance Fees?

The industry has maintained for decades that buying a timeshare today locks in costs at the present rate, allowing owners to travel in future years for what they paid today for their ownership. It’s here you’re probably saying “yeah, but what about those maintenance fees?”

According to the American Resort Development Association, the average annual maintenance fee has hovered around $1,000 for the last five years, moving from $980 in 2017 to about $1090 today, increasing $10 from last year. Going back to 2013, when the average annual fee was reportedly $822, maintenance fees have increased roughly 3.5% annually.

These are averages and, as Brown noted, fees for high season at Bonnet Creek are higher than these averages. Fees for the timeshares with major hospitality brands could be higher, depending on the level owned, and fees for the smaller, more independent resorts could be lower.

And, contrary to popular opinion, not all resorts hike their annual fees every year. In fact, keeping the rates as low as possible is, ironically, one of the reasons older resorts can end up with amenities in poor condition and turn to outside companies for help to solve their financial problems.

Admittedly, these averages do not fully take into account the impact of the historic inflation surge which began late last year. Updated annual fee numbers are expected in late June/early July.

The Real Issue

The real question is the comparison to the cost of today’s hotel and vacation rentals and how this makes timeshares look to possible buyers assessing vacation costs. Using Brown’s example, the obvious answer is yes, timeshares are a much better option. But is this true in areas other than peak season Orlando?

A sample of hotel costs at vacation hot spots across the country for seven nights in mid-July seem to validate the assumption:

• Myrtle Beach, SC – starting from $1284 (inclusive of 48% online discount at a 3-star hotel if you can get it). Most are above $1,600 and regularly over $2,000 for the more desirable resorts.
• Ocean City, MD – all over $1,600 for 3-star to as much as $6,000.
• Panama City Beach, FL – $1,780 and up, with the vast majority over $2,000. (don’t make me have to mention the 2-stars !?!).
• Cape Cod, MA - $1,250 with a 44% online discount for a 2-star hotel (There, I did it). Expect over $2,000 for the others across the peninsula.
• Las Vegas, NV – here is where you can get some deals, when the temperature outside equals the surface of the sun. 4-star hotels in the $700-900 range.

I could go on and on, but by now you get the point. Remember that these prices are for standard hotel rooms, not the multi-room condos with kitchens and expanded living space that are most often associated with timeshare and that Brown described earlier.

Are Resales a Better Hedge Against Inflation?

Here is where the comparison really takes shape. Brown even gave the caveat that his comparison held weight partly because of the number of owners who had paid off their timeshares. For many other owners, that is not the case and they are making loan payments, with interest, in addition to their annual fees.

With the average price of a new timeshare bought at the resort currently over $22,000 according to ARDA, that adds $1,000 a year prorated over 22 years of ownership to the annual costs, not including interest payments. Still better than some of those hotel costs, but not as good as a resale.

Timeshares on the resale market go for 50-60% less than resort prices on average, sometimes discounted even further, because of sales costs at the resort. The resort has sales and marketing costs and commissions baked into their prices, which inflate those prices similar to the way a car dealership structures new car sales. They recoup those costs through the prices charged at the resort.

Those costs do not exist on the resale market, because it is existing owners who are selling their timeshare or points package. So, taking the average sale prices and reducing it by 60%, you have a resale price at $8,800, with many timeshares even lower.

Prorating the resale price over the same 22-year ownership period breaks down to $400 a year. Combined with the average annual fee, it would be about $1,490 for your annual vacation. Better than the $2,000+ prices for most decent hotels and, remember, you’re getting a condo instead of a hotel room.

Those hotel prices are only going to get more expensive as the extended impact of inflation really settles in. On the other hand, timeshare sales are doing very well across the brands such as Wyndham and taking some of the pressure off companies to hike fees across the board. Some had already lifted their fees late last year, but not enough to exceed the current inflation figures.

Resale prices tend to stagnate, even compared to resorts in active sales that lift their prices. Disney has been increasing their prices for the last year at certain resorts such as Disney Old Key West, which is now $200 per point through Disney. Conversely, resale prices are available at $110-120 per point.

The timeshare secondary market remains the best place to buy timeshares in the face of high inflation. If you have questions about a specific resort or timeshare, or need more general information about how timeshares work, call us on 877-624-6889 or leave us a message here. One of our licensed agents will reach out to you as soon as they can.