NEW YORK (Reuters) - Timeshare is not quite the investment that Patricia Uhler had hoped it would be.
While companies like Wyndham Worldwide Corp, Starwood Hotels & Resorts Worldwide Inc and Marriott International Inc are doing great business around the world selling timeshare, Uhler has not been so fortunate.
Finding that she has less time and money for vacations than she expected, and with combined maintenance fees climbing to nearly $1,200 a year, Uhler has sought to sell two weeks of timeshare that she had hoped would be a nice investment in prime resort real estate.
But in her six-month effort to sell a week at a resort in Myrtle Beach, South Carolina, and another week at a property near Walt Disney World in Orlando, Florida, the mother of two has encountered dubious brokers and the realization that most of her money is probably gone.
Buyers on the timeshare resale market are scarce, and experts say sellers are lucky to get 10 percent of the original price. It could be even less: timeshares are routinely offered for sale on auction site eBay starting at 1 cent.
VACATION NOT INVESTMENT
The problem for many buyers like Uhler is they believe timeshare is a slice of real estate, which they hope will increase in value. High-pressure, glitzy sales pitches can add to the confusion.
In fact, they have no ownership of the underlying property. Rather, they’re buying only the right to use it -- typically, a one- or two-bedroom apartment -- for a set amount of time each year. The industry is quick to point out that timeshare is a pre-paid vacation, not an investment.
The slump in the U.S. real estate market has made things even harder for people, like Uhler, whose timeshares are in the United States. But the resale difficulties are worldwide.
“Timeshare is a kind of stupid, complicated thing to get involved in,” said Briton Annie Galvin, who owns two weeks at a development in Stratford-upon-Avon, William Shakespeare’s birthplace.
“We can’t sell it even if we find an idiot to buy it,” said the substitute school teacher from Northwood, Middlesex, who bought the weeks for a total of about $5,000 seven years ago. “We realize that we’ve lost our investment.”
With a generation of adults approaching retirement and looking to kick back, sales of new U.S. timeshares -- the world’s biggest market -- have nearly doubled over the last five years.
U.S. sales hit $10 billion in 2006, about five times the rate a decade earlier, according to the American Resort Development Association, the industry’s leading trade group. About 4 percent of U.S. households own timeshares.
In Europe, more than 1.4 million people own timeshare, with annual sales of over $1.5 billion, according to trade group Organization for Timeshare in Europe.
Wyndham Worldwide Corp is the market leader in the United States, while Starwood, Marriott, and Walt Disney Co are also major players here. Wyndham, Starwood and Marriott also have timeshare resorts overseas, where the market is more fragmented.
Big lodging companies are counting on timeshare for growth, as the slowing U.S. economy threatens to put an end to the boom in the hotel business. The Dow Jones U.S. Hotels index has fallen 32 percent drop since hitting an all-time high in July.
Harry Taylor, secretary general of The Association of Timeshare Owners Committees, which is based in Birmingham, Britain, said reselling timeshare is fraught with difficulty. “It’s a very poor marketplace,” he said.
Some people are even trying to give their timeshare away in order to get out from paying the annual maintenance fees, Taylor said.
“When they’ve signed, they’ve signed it for perpetuity -- you know, forever,” said Taylor. “If they die, it goes to the son. He’s got to pay it. There’s no exit policy.”
The never-ending maintenance fees and the slowing U.S. economy has pushed more timeshare than usual onto the resale market, said Ed Hastry, who runs the Maryland Timeshare Owners Association in the United States. He said it is the worst market for timeshare sellers that he’s seen since he started following the industry in 1988.
But for others, the glut translates into opportunity.
“This is the time of year when you get your best deals, because the fees are due,” said Fran Korwek, who has bought several weeks of timeshare in Florida on the resale market. He said he bought the weeks for less than 10 percent of their retail value.
Leading timeshare site RedWeek.com (www.redweek.com/), which helps owners sell as well as rent their units, is finding that the developing rental market is attracting some buyers.
“We see a growing number of individuals who buy timeshare and rent them,” said John Locher, RedWeek’s vice president of marketing and sales. “It becomes a bit of a business for them.”
The desperation of resellers like Galvin has opened the door to con men, looking to exploit the hopes for big money from the murky resale market.
“It is a huge area of fraud,” said Peter van der Mark, secretary general of the Organisation for Timeshares in Europe, a trade group.
The typical scam involves an alleged timeshare broker, claiming to have found a buyer willing to pay a good price for the owner’s timeshare. The broker says he needs an upfront fee to arrange the transaction, which then never materializes.
The timeshare industry recognizes that a hobbled and fraud-ridden resale market could give the industry a bad reputation and eventually hit sales at new resorts.
The Organisation for Timeshares in Europe said it is working with authorities and has helped shut down more than 40 fraudulent timeshare brokers in Europe.
Howard Nussbaum, the president of the American Resort Development Association, likened the resale market to the used car market of the 1960s, where unscrupulous salesmen could fleece naive consumers. He says the industry is working to create more regulation and standards for the market.
“The health of the resale market is very important to us,” said Nussbaum. “We have a dog in the fight.”
He advises consumers looking to sell their timeshare to contact their developer or his association for help in finding reputable timeshare brokers.
Uhler, who lives in Sykesville, Maryland, and has her own driver education business, paid $1,200 for the week in Myrtle Beach three years ago and $2,500 for the Orlando timeshare, a year ago.
She can expect “very, very, very little” for her weeks, according to Hastry of the Maryland Timeshare Owners Association, who is helping Uhler sell her timeshare.
Uhler, who bought the weeks as an investment and has never used them, said she has been approached by companies asking for upfront fees as high as $1,800.
“I’ve talked to a lot of different companies that sell timeshare, but they all want money upfront,” Uhler said. “I didn’t realize the deceivingness of it.”
Reporting by Chris Reiter; Editing by Eddie Evans
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