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BACK IN AUGUST, Adam Grossman wrote a thought-provoking article about regret. He offered six strategies to minimize the chances you’ll end up kicking yourself for a choice you made. That got me thinking about the financial decision I most regret.
I bought a timeshare.
I know this admission will generate strong reactions in the personal finance community. I’d like to claim the ignorance of youth, but I was in my early 50s. I’d like to blame my wife, but it was mostly my doing. Maybe we—or should I say I?—were intoxicated with the beauty of the Hawaiian Islands. Who isn’t?
But the real blame belongs to an organization so unlikely that it requires explanation. The real reason we bought a timeshare: The CFA Institute—the organization for Chartered Financial Analysts—made me do it.
I traveled extensively throughout my career. My colleagues emphasized the importance of picking one hotel chain and then maximizing the benefits of its rewards program. I spent more than 1,000 nights at various Marriott properties. I learned the rules on how to get the most out of my many nights away from home. I am now a lifetime “titanium” member. The benefits I accumulated have provided my family with a number of memorable vacations.
In 2009, we had a wonderful stay at the Ko Olina Marriott on Oahu. The hotel was great, the scenery beautiful and the weather spectacular. We toured the whole island and loved it. We were offered 10,000 Marriott points if we would tour the Marriott Vacation Club timeshares just around the cove. It would take less than an hour and we were promised no hard sell. Still, I wasn’t interested and ignored the offer for most of the trip.
But on our second-to-last day, we were swimming in the cove next to our hotel. There was another couple, about our age, swimming nearby, and they engaged us in conversation. The husband said they were from Wisconsin and they had just bought a timeshare. He extolled its benefits, saying what a bargain it was. He also said it was the most valuable property that Marriott owned and could easily be traded for destinations around the world.
I listened to him, asking questions about how it worked and how hard it would be to sell. He again pointed to the value of the Hawaiian property. He seemed pretty good with numbers, so I asked what he did for a living. He said he was a finance professor at a well-known state university in the Midwest. His specialty: developing and teaching the Chartered Financial Analyst, or CFA, curriculum.
That was all it took. I was pretty familiar with the CFA designation and how rigorous it was. If someone who taught the CFA thought this particular timeshare was one good deal, well, who was I to contradict him? We signed up to take the tour the next morning, our last day in Hawaii. The property was beautiful and the salespeople offered an every-other-year option that cost $19,000, which we could afford. We convinced ourselves we could use it to host a family vacation somewhere warm every other winter. The deal was good for one day only. We signed up.
We used it for a family vacation in Aruba the following year. There were fees for the location exchange, but not too bad. Since we were new at this, we waited too long to book. We got a nice apartment, but it was located above the building’s noisy air conditioners and didn’t have a view. We learned that you had to reserve beach chairs and water gear each day, which meant you had to be up with the sun to get in line. We quickly realized there was a lot of education required to manage the timeshare system successfully.
And then there was the yearly maintenance fee. It started around $900 and grew to more than $1,200. We paid this every year, not just the years we had access to our timeshare. Timeshares also impose deadlines to use it or lose it. Trying to organize our three families got harder. We met nice people, who did it every year, knew all the ropes and loved it. They navigated the system to their benefit. But it just wasn’t the way we vacationed. It took only a few years for the regret to start building. At least Marriott allowed you to trade your week for points, which could be used later.
After a few years, I started to look into selling, but learned it was almost impossible. There were too many units on sale at a steep discount to our purchase price. And the value of the Hawaii property was not what we were led to believe—there were too many units available. After a few years, I started to wonder about the friendly CFA professor. Could he have been a plant, luring innocent tourists with the CFA designation? I’ll never know.
I kept researching how to sell. Last fall, I became aware of a Marriott program to buy back units. I called and the representative made an instant offer. It was about 20% of the purchase price. It took four months, but I was able to sell the unit just before the pandemic hit and I didn’t have to make the 2020 maintenance payment.
To be sure, many people make timeshares work for their families and love it. If you’re willing to put in the time to learn and navigate the rules, you can no doubt have some great vacations in beautiful places. I would carefully research the timeshare program’s rules and check out the secondary market to get a discounted price.
That said, if you ever find yourself swimming in an idyllic tropical cove and are approached by a CFA instructor, take my advice: Swim the other way.
Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. Rick enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. His previous articles include Much Appreciated, Victims of the Virus and Refi or Not. Follow Rick on Twitter @RConnor609.
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First things first, you do not need to buy a timeshare, it’s totally optional. That being said, the way the timeshare sales people tell you is that you are going to take a vacation and you are going to have to stay somewhere and that is going to cost you some money and would it not make more sense to pay for the vacation lodging up front and secure that price in perpetuity rather than pay as you go and cost you a lot more. Makes sense until they hit you with the cost of their product of the moment which is usually 20K-30K for one week.
The timeshare market has changed from the early days when you purchased a week in one location and were stuck with that particular week at that particular location. Then came RCI which converted the week to points which were exchangeable for other weeks in other locations. This is what the industry has settled on as the standard and is used by all timeshare companies. So, what you buy are points exchangeable for time where and when you want it. The points are backed by the actual piece of property you buy. For instance, I own one week at the Flamingo in Las Vegas. I have never stayed there, but have used the points to stay in Hawaii, Myrtle Beach, and next week in Miami Beach.
So, what I am describing is for Hilton Grand Vacation Club (HGVC), but others by Marriot, Wyndham, Hyatt, etc. are similar. I like Hilton because I can use my HHonors points along with my HGVC points. Explain that later.
Anyway, the basics are this. You are joining a club, not unlike a country club, where you must first pay an initiation fee (the purchase price) and then a yearly membership fee (the maintenance fees). The kicker is the initiation fee (purchase price). It’s hard for me at least to part with 20-30K. But 1.5K is more like it. So, I join the club for 1.5K (purchase price) and then pay the yearly maintenance fees. So, it works out I get to stay for 7 days at some fairly ritzy resorts where the rooms are $300 a day for a total of the annual maintenance fees of about $800. Having stayed 3 times so far, I have recouped my initial 1.5K investment which I still own. My plan is when my wife and I get tired of doing it, we will just give it to our kids and let them use it, sell it, or whatever. It’s real property and is treated as such.
Well, so how do you buy them for 1.5K? On the resale market. Buyers quickly learn that their purchase is worth about 1/10 of what they paid for it and you can buy them direct from the owners just for that amount. Go to http://www.myresortnetwork.com and look at the listings. Check the HGVC at the Flamingo as an example. You will see several listings for $1500 for 3400 points for one week in the gold season.
One thing to keep in mind is the point/maintenance fee ratio. Some resorts, particularly the ones in Hawaii have higher maintenance fees and those of let’s say Las Vegas or Myrtle Beach, so it pays to buy the ones with the lower maintenance fees because that is what you have to pay every year. It doesn’t make any difference, because you can always stay in Hawaii without actually owning it there.
Look for offerings directly available from owners, they are usually cheaper than the ones through brokers.
I had a friend who was a CFA. When he traveled he liked to stay at Motel 6. If you’d have talked to him, he probably wouldn’t have recommended a timeshare! // Having been to Hawaii and seeing all the timeshare offers, if I was ever going to buy one, that would be the place. It’s amazing there.
Many years my Father told me “there is no deal so great that it cannot wait another day”. You should have waited another day before you said “yes”. My experience with vacation club sales pitches is every time I said “no” they would get someone else to try to sell me and that person would offer an even better deal. And I still don’t bite!
I remember going with my Mom and Dad on one of these timeshare promotional visits. My dad ignored the sales pitch and was just there for the free stay and small gifts. Lesson learned.
“I started to wonder about the friendly CFA professor. Could he have been a plant, luring innocent tourists with the CFA designation? I’ll never know.”
Any King of Queens fans here? Great episode when Doug and Carrie did the timeshare weekend and met that oh-so-friendly couple…lol. Those writers didn’t make that stuff up – I definitely wouldn’t put it past the timeshare folks to seed the surroundings.
Thanks for sharing this lesson that will help others. Good advice about checking out the secondary market before buying new. Are properties heavily discounted? Are they priced at close to new? There’s information there.
Thank you Richard for the informative article, which strikes very familiar as 1) I’m a timeshare owner, and 2) I’m specifically familiar with the Ko Olina property, which IMO is actually outstanding. Writing because I don’t think you should be too hard on yourself, as you may have been closer to having a “net benefit” from timeshare ownership that you think, and I’ll use myself as an example. We purchased timeshare “points” more than 15 years ago, after initially thinking we (my wife and I only at the time) would NEVER be “timeshare people”. But with the birth of our first, and having a meeting in Orlando, we both realized we were going to be making regular trips to Disney from here on out. The similarities with your situation were in the need to pretty meticulous advance planning, especially when there are multiple families involved. I’ve been fortunate as we have several family members who actually enjoy this planning, and we’ve benefited greatly by consolidating points and booking early. The points vs property thing is maybe a bit different with Disney, but we’ve been all over the map (including Ko Olina) with our “base” points, and compared to paying per trip I think our annual dues + points payment has been markedly less than paying either rack or discounted rates. Maybe Disney ended up as an outlier, as I know their resale market tends to be very healthy (we’ve never thought of reselling, but I know quite a few that have purchased additional points), but will a lot of planning I think we have ended up comfortably ahead value-wise, but much more importantly we’ve enjoyed a number of great family vacations. Lastly, no, I’m not an employee of Disney! It’s just worked out well for us.
Normally it’s bad to sell low, but when you’ve made a mistake it’s often difficult to acknowledge it and move on. Kudos on moving on.
You can buy a lot of hotel rooms for $19,000 and there’s no $1,200 per year maintenance fee.
We bought a timeshare on Maui in 2000 at what was then Embassy Vacation Resorts, later purchased by Diamond Resorts. We live in California, so it’s one reasonable flight to get there, and we go almost every year. We still love the property and, because Maui weeks are desirable, we’ve been able to trade over the years to Kauai, New York, Tahoe, Cabo San Lucas, Newport Coast, and Carlsbad.
So we’ve really enjoyed it, and we bought it long enough ago that the actual purchase price wasn’t that bad. However, if I had known in 2000 how easy it would be to book lodging anywhere we want to go (Red Week, VRBO, Airbnb, hotel rewards programs, etc.), I wouldn’t have bothered. So, I wouldn’t do it all over again, but I also wouldn’t say we regret it, ether.