The most dreaded bill for timeshare owners typically arrives in late November each year. Maintenance Fees are akin to paying taxes - no one likes paying them, but it’s a part of owning a timeshare. However, this years maintenance fee bill could be unlike any other.
Why will this year be any different?
One word - inflation.
2022 has been a record year of price increases and has tested markets like never before. In this article, we will analyze how 2022 will likely be a record year for increases in timeshare maintenance fees.
US Inflation from July 2002 to Present (by month)
What are timeshare maintenance fees?
Timeshare maintenance fees are the fees paid annually to the Homeowners Association that manages the respective timeshare resort. These fees are often comprised of property taxes, insurance costs, club dues, and funds to properly manage the resort and maintain good working condition (also known as upkeep).
These fees are often paid annually, but some timeshare companies will charge their owners monthly payments and may even include additional charges like “program fees” which can be used to cover the cost of operating the reservation system.
How much do timeshare maintenance fees go up?
Timeshare maintenance fees are often excessive compared to the dues of simply owning a condiminum. According to the American Resort Development Association (ARDA) the average maintenance fees for a timeshare in 2018 were $1,000 and increased 2% between 2017 and 2018. In contrast, according to a 2017 report by Trulia, the average maintenance fee paid for HOAs which included condominiums was $3,972 per year.
What’s not mentioned by ARDA is that timeshare owners pay a hefty premium over what market norms are.
Let’s do the math -
By ARDA’s own report, timeshare owners received 7 nights of usage for $1,000. That means their average cost per night in fees was around $142.85. This included different unit types and destinations, and was the average. Whereas a property owner (condominium, single-family home, etc.) paid an $3,972 for the year (or 365 days of usage). The average cost per night to own a property outright is around $10.88.
Why do timeshare owners pay a premium?
Most timeshare developers maintain control of HOAs for their resorts and vote to self-manage properties. They usually charge a 10% fee for managing the HOA, so the old adage that your timeshare developer doesn’t profit from maintenance fees is materially false in almost all cases.
In the latest 10-Q report from Travel+Leisure (TNL), the largest timeshare developer by market share, the company publicly stated that property manangement fees (excluding taxes) were $95,000,000. This is a quarterly report. That means for just three months the company made $95,000,000 for managing their network of resorts’ HOAs.
Meanwhile, ARDA is downplaying the reality - timeshare owners face are paying an increasingly exorbinant amount for what was initially sold as an inflation proof alternative to hotels.
In our assessment of maintenance fee inflation year over year, the actual increase is closer to 4% ¹(not the 2% ARDA reported). This is especially true for larger timeshare companies (nicer resorts, bigger management fees, and premium locations are all factors that drive up costs). The largest timeshare company in the world offers a Multi-Site Vacation Ownership Interest (VOI) Plan that in theory should have beat inflation by blending costs, but even this plan hasn’t outperformed the inflation rate in the US.
Why do timeshare owners pay so much?
There are zero rules, regulations, or laws in place nationally to force the historic disclosure of HOA fees at the national level. Therefore prospective buyers have no data to analyze and are easily misled by high-pressure sales tactics.
To make matters worse, there is a trend that shows major timeshare developers (publicly traded companies) supplement sluggish sales with increased HOA revenues. Not to be cynical, but the job of any CEO is to make as much money as possible for their shareholders, they have zero fiduciary responsibility to the timeshare owner.
2022 Maintenance Fees will likely see major increases
The perfect recipe for disaster - inflation at record highs, sluggish timeshare sales, and the actual decision maker (timeshare company CEOs and their team of Finance MBAs) having a conflict-of-interest - will likely lead to the highest increases in timeshare maintenance fees in modern times. We expect that the financial burden placed on timeshare owners from 2022, will increase the already mass exodus of timeshare owners from their timeshares.
This burden will make it even more difficult for dissatisfied timeshare owners to get out of their unwanted timeshare contracts. Timeshare developers will dig in and fight to make it harder to get out.
While it’s accurate that this year was likely more expensive to maintain any real property, it’s also clear that timeshare developers are profiteering from HOA management contracts. Time will tell, but 2022 will be a year to remember for timeshare owners.
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- Using historical data that we acquired, we analyzed the largest Multi-site Vacation Ownership Interest Plan (MVOI) and have seen increases that are in excess of inflation rates in the United States.