How the hell does it work? From Hapimag to Global Great Hotels

A seemingly odd title for an article on vacation ownership but a common phrase uttered from owners’ mouths. After extensive research it seems that many holiday ownership clients have absolutely no clue how their product works.

Odd, you think, since they have often spent so much money on timeshare, but it’s true. In their defence, however, it seems that many people have been members of several holiday clubs in their lifetimes of being owners, in fact, the average is 3 clubs or organisations, so no wonder they’re confused.

timeshare

Today, we’re going to take an objective look, for a change, at timeshare and holiday ownership.

I don’t know about you, but certainly when I have been on a presentation be it for a timeshare or a vacation club, I have been bamboozled with information and pieces of paper. It all seems very straightforward at the time, but by the time I’ve got home, I have either lost the pieces of paper with all sorts of intricate diagrams on, or indeed forgotten what was said and nothing in the paperwork seems to string it together.

Today, we seek to clarify the complicated and smooth out the wrinkles of the industry in order to look at a coherent system and perhaps pick at the bones of reality.

There are a lot of blurred lines between timeshare and vacation ownership which now has various different options including fractional ownership. We are going to look at each of them in detail, from thence we can see the similarities and differences but first, we must separate them.

History

Timeshare originated, interestingly, in France. Many people think its America, but in fact the concept of timesharing started either in Switzerland or France, depending on your interpretation of the word, “timeshare”. Basically, in 1963 a duo called Alexander Nette and Dr Guido Renggli formed a company where they acquired properties to sell on a “right to use” basis, on the premise that you could holiday rent-free. At around the same time in 1964 Paul Doumier created his own idea of timesharing at his company’s ski resort in the French Alpes, famously quoting at the time “it is cheaper to buy the hotel than to rent the room” of course, starting the first rent versus own pitch which is still used in timeshare and holiday ownership today.

America was indeed hot on the heels of this success, and the first hotel-condominium timeshare was created on Maui, Hawaii in 1965 called the Hilton Hale Kaanapali. By 1969 a company called Vacation Internationale was formed, and began selling timeshare weeks on a right to use basis from their Kauai Kailani hotel. They then introduced a points system in 1974. However, in 1973 Brockway Springs in Lake Tahoe had developed a new arm of “timeshare” which provided for deeded properties. The idea was that this was a serious investment which could be marketed to bankers. Meanwhile in Florida the first purpose built timeshare resort called Sanibel Beach Club was created and indeed, sold out within 18 months.

Then came the creation of the exchange programmes. Resorts Condominiums International (RCI) by Christel and Jon DeHaan in 1974. Their thinking behind it was more than just for timeshare owners to be able to exchange and go to other resorts, their thinking behind it was that this would add value to peoples’ timeshares. RCI continues to thrive and now has 6,300 affiliated resorts worldwide.

Unlike the rumours that one heard at the time, that Interval International was started by Christel DeHaan out of spite after she and Jon divorced (aren’t rumours terrible?!) the reality is that Interval International, RCI’s rival, was created by Thomas J Davis Jr and Mario Rodriguez in 1976 and marketed as RCI’s better quality older brother.

Both these elements added to the popularity of timeshare certainly in America in the 1980s. By the 1990s as the industry continued to grow, well-known and trusted hotel companies also became involved such as Marriott, Disney, Ritz-Carlton, Hilton and Hyatt. Despite different experiences in Europe, timeshare in America continues to soar, and today there are 8.5 million timeshare owners worldwide.

All this history is just great, but what we need to do now is get down to the crux of what timeshare is and how it has evolved, confusing the hell out of many of its owners.

What is timeshare?

Timeshare is essentially an agreement between several joint owners who have the right to use the holiday property at an allotted time. Traditional timeshare meant that this was a specific property at a specific time on a specific resort. The benefits over whole ownership are that you are not solely responsible for the maintenance and upkeep costs. Timeshare owners pay a proportionate purchase price and then an on-going maintenance fee.

Contracts

Now it’s time to buckle up, as this is where it starts to get complicated. One of the big problems has been, certainly in the understanding of timeshare, the differences in the contracts. It depends on whether you have bought in the US or Europe as there are essentially two different types of contract: deeded and right to use. A deeded contract, mainly only found in the US, means that you own a physical slice of the pie, and in these contracts there are no end dates. Right to use is just that and usually has a finite finish to it, although in Europe, there is more of a mash-up of these contracts, and right to use in perpetuity is most common. This means that you have the right to use the property for life or on an 80 year rolling lease.

Why timeshare?

Something that often gets very lost is why people bought their timeshare in the first place.  In this article we are not focusing on the complaints about it. There are enough of those. We are dissecting the differences and dispelling grey areas. Why did people buy and why do they continue to buy? Because, let’s just put it out there, timeshare is a brilliant idea. It allows people who can’t afford to buy a luxury holiday home outright to enjoy the usage of one for one or two weeks of the year. It is luxury. It allows us to holiday in apartments, not just hotel rooms. It allows us to holiday in Disney, in Marriott, in Hilton, in luxury lodges with hot tubs and saunas…the list is endless. Indeed, after speaking to many timeshare owners, it is really only the ones who don’t understand their product that are dissatisfied. Quite frankly, again, certainly with the advent of the internet, it is only those voices we hear. The thousands of owners who are just getting on and enjoying lovely holidays several times a year? One doesn’t hear their voices on the internet, as they are quite happy!

What are the other options and why are we so confused?

In short, we shouldn’t be confused. A timeshare is a specific period of time in a specific resort. A vacation or holiday club is where a group of people share access to various resorts and properties in a specified portfolio. This cannot be a deeded contract, as with holiday club you can only have a right of use or access.

Let’s get to the crux: timeshare has a bad reputation so even if the contract and product IS a timeshare, companies know that bad reputation exists, and call it a holiday club so as to not scare people away. But underneath its clothes, it’s a timeshare, so naturally, half the people who own a deeded timeshare THINK they own a holiday club product! But in reality they own a timeshare!

Take Disney for example, they purport to be a “Vacation Club” but in reality, when you buy a Disney product, you get a deeded contract, so therefore you actually own a timeshare.

The benefits of belonging to a vacation club mean that you have more choice and flexibility: you aren’t tied to a specific location, and have the choice of various properties of differing shapes and sizes. You aren’t tied to a specific time and have the flexibility to choose your time. You can also access differing sizes of accommodation to suit your needs at the time. However the downsides include no guarantees of availability, vacation clubs do tend to be more expensive and have higher maintenance fees and you don’t own a deeded contract (which doesn’t apply in Europe anyway).

That’s the basics. It’s clear to see why people have got so confused.

However, it doesn’t end there:

Floating weeks

Really, the first “upgrade” fixed week traditional timeshare had. Instead of purchasing a specific week number, owners purchased in a specific calendar season. The calendar was broken into low, mid, high and peak and so you purchased at the time of year you needed to holiday. Merging into the holiday club idea, this evolved to incorporate multi-property companies meaning you could holiday in your colour band and a variety of properties. However, unlike holiday clubs, certainly in the US if you purchased a floating week, you still got a deeded contract, so in that way, you still had traditional timeshare.

Back to holiday clubs:

Points

As things hotted up, points were introduced. Some sceptics think the reason behind this was that traditional timeshare resorts had sold out of inventory, so they had no more traditional weeks to sell…Points offered even more flexibility, certainly in the short term, as weeks were equal to so many points depending on where they were based (demand of the property in question), at what time the year and in what size accommodation. People then ceded their weeks to points and continued to pay a maintenance fee on them. You then used your points as currency, “buying” your holiday with your points. The flexibility came as you could “spend” as many points as you had access to on higher times of the year, larger sized accommodation and higher demand resorts or of course the opposite way round, maximising your points. You could also bank points, just like weeks, purchase more, bring them forward, all depending on your needs. Perfect. The ultimate in flexibility. Yes and no. It really depends on the type of points system you’re in. Should you have the more traditional system where you still have your week at your home resort, certainly in America you had a deeded timeshare. However, and this is where we come back to the holiday club, a lot of people just bought points to start off with, and the problem a lot of people came up against was RCI changing the goalposts on how much resorts would cost to access. People ended up having to purchase more points even to access their original home resort, as of course, once you have ceded your week to points, that’s it. A week is a week is a week. Its 7 days no matter what happens, but what is a point? And that became the problem for some people.

Companies of note for excellent points schemes, and indeed, they have various schemes, all with excellent reputations, are the Marriott Vacation Club, Disney Vacation Club, Wyndham Vacation Ownership and Hilton Grand Vacation Club.

Travel clubs

Not to be confused with holiday clubs (or vacation clubs), travel clubs are something slightly different. They often come in “packages” and offer incentives on all sorts of aspects of travel from car hire to flights to accommodation. You buy a certain “package” that often lasts around 5 years. This is a more temporary arrangement and allows you to access various aspects of timeshare accommodation without actually owning anything.

Shared and whole ownership (fractional and condo hotel)

This is yet another option which has become all the more popular in recent years. Shared and/or whole ownership allows owners to purchase a larger slice of the pie, such a quarter or eight share. It gives more weeks’ holiday as you have a much higher trading power.  Fractional ownership tends to be in higher-end properties allowing in some cases, unlimited weeks’ holiday. One of the main features of fractional ownership is the rental side, and indeed, it is actually considered as an investment whereas timeshare was always considered as an “investment in your holidays”. Shared ownership does come with higher maintenance fees as you own more time, but these are often offset against the level of rental owners receive.

There are various companies of note to mention at this juncture, because it’s one of the most modern and popular options today. Take Marriott for example, they released their “Grand Residences by Marriott” back in 2001 and offer, interestingly, just 2 destinations:  Mayfair in London and Lake Tahoe in California. Clearly, since real estate, certainly in Mayfair, is some of the most expensive in the world, the condo hotel option is marketed instead of buying a second home. It offers the choice of usage by owners or their friends and family, or rental (although it’s worded as though you may have to do this yourself). As a member of the club, Marriott also offer you entry into various prestigious members’ clubs in London, which, one could imagine for the sort of person buying into this sort of scheme, would be incredibly useful.

Another good one is Hyatt. Interestingly, it changed its name in terms of fractional ownership to the “Hyatt Residence Club” (what is it with “residence”?!) and, would you believe it, it’s owned by Interval International and that is no bad thing in terms of trading power for exchange (think about it). The nice thing about Hyatt is the quality and accessibility and availability of accommodation within their organisation. However, not too much is mentioned about rentals…

Four Seasons is also recommended as is Global Great Hotels, however, they’re a little bit different again having created what they call “real estate periods”.

Real estate periods

Interestingly, Global Great Hotels is a hotel company, so something slightly different from the traditional timeshare above, although in the same league as your Marriotts and Hyatts of this World. Basically real estate periods take the best of all the elements of timeshare and holiday club ownership we have mentioned from timeshare it takes the quality of the accommodation, and from the holiday club idea, it takes the flexibility and combine them with the rental investment side of fractionals and condo hotels.

How does it work? In simple terms, because, thankfully, the product is simple, owners buy one or more products (or real estate periods). They can then opt to use them or ask the company to rent them out for them for a return. They are welcome to rent them out themselves, but the majority of the owners take advantage of the company doing it for them. This system is easier, it seems, than the others we’ve looked at as owners can opt to have the whole rental aspect managed for them. Then, depending on the level of ownership, some clients are entitled to unlimited free holidays. On top of that, Global Great Hotels is not only an investment company, but a huge travel agent in its own right, so customers (just like the travel club idea) have access to the whole of the travel agency spectrum and their own, personalised, travel agency programme and concierge. In short, they have the benefits of all the above systems in one, progressive product: real estate periods.

Have we found holiday ownership nirvana? Quite possibly!

Clearer than before? Hopefully!