Timeshares and Fractional Ownership How Condos and HOAs Fit In

Timeshares are a mystery to many. What are they really? An investment? A vacation club? Some combination of both that affords an opportunity to have an ‘insider’ vacation with the vague sense of property ownership? The product often seems more like marketing than life planning or real estate. 

The Timeshare Story

According to the website of American Resort Development Association (ARDA.org), which is the national trade organization for the timeshare industry, timeshares were born in the mid-1970s as a result of overbuilding in the condominium industry. The banks that funded these developments were seeking ways to turn excess supply into profitable projects. 

Resorts Condominiums International (RCI) entered the industry in 1974 as the first exchange company, adding a level of flexibility in both time and location. The next improvement to the timeshare system was floating alternatives, which freed owners from being locked into a specific week or unit. Today’s standard of points programs added even more flexibility. Marriott entered the business in 1984, the first hospitality brand to do so. And so-called fractionals and private residence clubs were introduced in the 1990s.

Today, the timeshare industry is an $8.6 billion business. There are more than 1,547 timeshare resorts in the United States, containing 200,720 units and averaging 130 units per resort. Globally, there are more than 5,000 timeshare resorts spread across 121 countries. Timeshare owners average 47 years of age – 68 percent are married, and around 11 percent of owners earn $100,000 or more per year. More than 46 percent of these owners are first-time buyers – and that percentage has been increasing annually, reversing a trend of existing owners purchasing new or additional units. The timeshare industry provides 511,782 full- and part-time jobs, and accounts for $28.1 billion in income and wages, as well as $10.2 billion in tax revenues. 

What Is a Timeshare?

When you buy a timeshare, what exactly are you buying? Is it real estate? Well, it might be...or it might not be. Samantha Sheeber, a co-managing and lead transactional partner with Starr Associates, a New York City-based law firm active in the timeshare industry, says that “[A timeshare] is the guaranteed right to a vacation home for a period of time that you are able to use for a number of years going forward. It can take many different forms. It can be funded as a deeded interest in a condo unit, 1/52nd interest in that unit, which would be a fee interest.”

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