Not your grandfather’s time share 
Brand name hotels have improved the industry’s image for boomers

JEFFREY SELINGO
June 8, 2007

Like many other potential time-share owners, Candace Gilbert was hooked first by the freebie. On regular visits to a Hilton hotel in Hawaii, Mrs. Gilbert and her husband Jim, were offered resort credits for attending sales presentations to buy a stale at a Hilton time-share property.

“We started doing that in 2000, just for the free meal.” Mrs. Gilbert said.

At the time, the couple, who are from Austin, Tex., were considering buying a vacation home in Hawaii. But after looking for awhile, Mr. Gilbert, who is 65 and retired, decided he didn’t want the headaches of maintaining a second home, and Mrs. Gilbert didn’t want to be stuck vacationing in the same place every year. What’s more, said Mrs. Gilbert, 53, “the houses we were looking at were a million-plus and they weren’t even on a beach.”

So last June, armed with knowledge gleaned from attending numerous time-share pitches over the years, the gilberts bought a two-week share at a Hilton property on the Big Island of Hawaii. Recently, they bought another week at a yet-to-be-completed Hilton resort on Oahu.

As the prices of second homes move out of reach for many Americans, older couples like the Gilberts are buying time shares as an alternative. Baby boomers account for about half of the time-share buyers, according to the American Resort Development Association, a trade group in Washington.

Long known for its high pressure sales tactics, the industry has attracted many soon-to-be retirees with new products that avoid the term “time share” in favour of “vacation club” or “fractional ownership,” and offer more flexible options for owners. At the same time, the industry’s image of here-today, bankrupt tomorrow, has changed: the biggest companies in the time-share market are now well-known hotel brands, including Hilton, Marriott and Starwood, which combined account for one-third of U.S. time-share sales.

“The hotel companies have legitimized the industry,” said Bill Rogers, founder of the Time Share Users Group, which operates the website tug2.net. “Marriott cannot afford to have unhappy people, and they’re still going to be around in 20 years.”

Not only do the hotel companies offer more variety than traditional time shares by often building their vacation properties next to existing hotels with spas, fitness centres and restaurants, but they have also eliminated a major flaw of traditional time shares: a fixed week at a fixed location.

“Boomers like to travel,” said Mr. Rogers, himself one at 55. “They don’t want to be stuck going to one location year after year.”

While each hotel group operates its vacation clubs differently, they generally work like this: People buy a particular week at a property, with a week worth a certain number of points, depending on the size of the unit and the season. The owner can either use the week at the home resort or use the points at another property. Because of the flexibility, the Gilberts plan to leverage their three weeks of ownership into eight weeks of free stays at Hilton properties in Hawaii, England and Scotland.

“We can really stretch what we own,” Mrs. Gilbert said. For instance, she has figured out that her two-week, two-bedroom property on the Big Island in the “platinum” season is worth six to eight weeks at a Hilton-affiliated resort in Breckenridge, Colo., in the low season. The Gilberts declined to say how much they paid for their three weeks in Hawaii. Even though most boomers cannot afford to buy second homes in popular destinations like Hawaii, time shares in such places are still affordable for many buyers, said Howard Nusbaum, president and chief executive officer of the American Resort Development Association.

That is because many time share companies offer a range of prices. Marriott, for instance, has four vacation products: at the low end, Horizons by Marriott Vacation club, where week ranges from $7,900 (U.S.) to $18,000, to the high end, the Ritz-Carlton Club, where a minimum three-week purchase ranges from $146,000 to $840,000.

Places like the Ritz-Carlton Club not only attract well-off retirees who can’t quite afford a second home in a popular destination, but are also magnets for what Mr. Nusbaum calls the “rational rich.”

“Rather than pay $3-million for a house in Vail, they pay $300,000 for a vacation club and the sheets are cleaned, the garbage is taken out,” he said. “The last thing the rich want is more stuff to take care of.”

But unlike second homes, which typically appreciate the longer they are held, time share prices drop over time. Buying a time share second hand is often cheaper than buying one from a developer, which must factor marketing costs into the price. “People have to understand that the value comes from use, not appreciation,” Mr. Nusbaum said.

Howard Beswick recently sold one of the five weeks he owns at the Manhattan Club, a share on West 56th Street in New York City, for $20,000, only $1,000 more than he paid for it about five years ago. “The value just doesn’t keep up with rising home prices,” said Mr. Beswick, 61, who lives on Long Island and bought the share because he couldn’t afford to buy a gateway in the city.

The Manhattan Club was one of the first time shares in New York when it opened in 1997. Since then, Hilton, Starwood and Marriott have opened similar clubs in cities, including Boston, New York and San Francisco, to appeal particularly to retirees interested in the cultural activities and restaurants that cities offer.

The urban clubs often have even more flexible ownership plans than other vacation club resorts. For instance, For instance, at the St. Regis Residence Club on the eighth and ninth floors of the St. Regis Hotel on Fifth Avenue, memberships for the 22 studios and one- or two-bedroom apartments are sold in 28-day increments . Only one full week has to be used in its entirety, though, while the remaining 21 days can be reserved by the night.

“New York is not your traditional vacation destination,” said David Matheson, a spokesman for Starwood Vacation Ownership, which operates the St. Regis Residence clubs. “However, there is a huge market within that area who may live in the suberbs who may want to come in for theatre and dinner.”

That is how Mr. Beswick, an insurance broker, uses the Manhattan Club. He owns the last week of the year, so he often invites his friends or family into the city to watch the ball drop on New Year’s Eve. Other times, he takes a night to go to Broadway or gives a night to family members.

“My son and sister are there today,” Mr. Beswick said recently. “They wanted to go shopping, so I called last week and they said I could have Wednesday or Thursday.”

That is the one downside of fractional ownership, Mr. Beswick said. “Sometimes I want to go in and they are booked,” he said. “If I owned an apartment, it’s mine.”