- With travel at a near standstill due the coronavirus outbreak, timeshare owners may be having second thoughts about their purchases.
- Here are the best ways to get out without getting burned.
Taking a trip? Not likely right now.
With tourism at a near standstill, making a long-term commitment to an annual vacation spot may have seemed like a better idea before a global pandemic restricted travel and caused a sudden spike in unemployment, leaving many Americans with less disposable income.
Now some owners of timeshares, who are often Baby Boomers and considered high-risk for contracting Covid-19, want out of their units and the financial obligation.
But that isn't always so easy.
While there are different models, most timeshare owners buy either a fraction of real estate at a vacation destination or points they can use at a property. In every case, there are annual maintenance fees that accompany the purchase of a unit for the lifetime of the contract.
Further, many owners finance their timeshare, rather than pay for it outright, which means there may be loan payments in addition to yearly fees. For timeshare loans, the overall delinquency rate was 12.8% in 2019 compared to less than 4% for traditional mortgage loans.
In 2019, the price of typical timeshare with a week's worth of vacation time was $22,942 plus maintenance fees of about $1,000 a year.
Pre-pandemic, timeshare ownership had been on the rise. In the last five years, sales volume increased 5% a year, on average.
Major resorts and developers, such as Marriott Vacations Worldwide, Disney and Club Wyndham, have also been building more and more units with 865 timeshares added in 2019, up from 588 in 2018. Another 643 units were planned for 2020, according to the latest data from the American Resort Development Association, a trade group that represents the timeshare industry.
Last year, Marriott Vacations Worldwide announced the construction of a new property with 24 two-bedroom villas in Costa Rica and a second in Bali.
"We are full steam ahead," said Ed Kinney, a global vice president for the company, which includes the Sheraton, Westin, Ritz-Carlton and St. Regis brands. "We've been really happy with how quickly we've been able to respond and the willingness of our guests to return to our properties."
And yet, before the coronavirus crisis, as much as 85% timeshare owners regretted their purchase, according to one study. That number is only increasing during the pandemic, said Mike Kennedy, the CEO of KOALA, a vacation rental site that specializes in timeshares.
"Timeshares are great if you are going to travel and use them, if not, they are a massive burden," he said.
Ask for a break: Depending on the terms of your contract, you may be able to rent your timeshare for a year or two while you are not using it or defer payments. "Start by calling your developer or go to the resort and ask what the options are," advised Jason Gamel, CEO of the American Resort Development Association.
Plan a post-pandemic vacation: Many of the major timeshare companies waived reservation and cancellation fees due to Covid-19 so owners who didn't use their timeshare in 2020 can bank their points and double up in 2021.
Take a road trip: If you aren't going to use your timeshare in Hawaii, for example, consider exchanging, or trading it for a destination within driving distance, such as Williamsburg, Virginia or the Rocky Mountains, Gamel suggested. Units often come with a fully equipped kitchen, separate bedrooms and a living area, which make them particularly attractive for social distancing from other resort guests.
Transfer the property to your brother or best friend: One of the biggest selling points of a timeshare is that they can be passed on or gifted to a friend or family member and that's still the case. Someone in your circle may be interested in picking up the annual payments in exchange for a dedicated vacation.
Look into hardship assistance: If you are experiencing severe financial strain due to Covid and cannot cover the costs, reach out to the developer or lender for help, Gamel advised. "They may work with you to defer payments or reduce the level of ownership to reduce the payment or financial liability."
If you want out entirely, the easiest way is to see if your developer or resort operator will take or buy back the timeshare at no cost. Some will even offer maintenance-free usage for a few years in return.
Alternatively, you can sell it yourself on a site like the Timeshare Users Group or hire a timeshare resale company to help unload the property for a fee. For owners who still owe money on their loan, this is one of the few ways to recoup some losses, particularly if the unit is in a desirable vacation destination like Florida.
However, there has been an influx of scammers targeting owners that are not able to use their timeshare due to the pandemic, according to Gordon Newton, author of The Consumer's Guide to Timeshare Exit.
If you are looking into hiring a third party, check the Better Business Bureau to verify they have a trusted track record, he said.
The American Resort Development Association also oversees responsibleexit.com, which gives owners a number of vetted, and many times free, exit options.