Timeshare Resale -- Lower Cost, Lower Security?

Timeshare companies could take a lesson from the online resale market.

Mar 26, 2014 at 3:33PM

Resorts and timeshare companies are increasingly finding that they have to compete with timeshare owners to make sales. Yet few resort companies seem to recognize the threat that online timeshare resale outlets pose.

Steve Luba, communications director for BuyATimeshare.com, a timeshare resale website that allows owners to advertise and sell their packages, said the percentage of new timeshare owners who bought their packages on the resale market rather than direct from the resorts climbed from 17% in 2010 to 32% in 2012. He pulled those figures from reports published by the American Resort Developers Association.

The leader

Marriott (NASDAQ:MAR), however, is evolving into the e-commerce age ahead of its peers.

In an effort to capture some of the revenue that would otherwise go to third-party sites like Redweek.com, Marriott is eliminating marketing overhead in offering vacation ownership online through its MarriottVacationClub.com domain and providing a platform for existing owners looking to offload their product.

Marriott can capture some revenue from resale activity on its site while providing added value and a greater sense of security to buyers and marketability to sellers.

The company also has a chance to help owners maintain the value of their timeshare products by selling new and the equivalent of certified pre-owned packages itself – limiting the resale of its timeshare product on deeply discounted third-party sites. Buyers will most likely find better buys elsewhere. But they won't get the Marriott seal of approval or sense of security that comes with buying a timeshare resale through the resort company.

Why pay full price?

Other timeshare and vacation ownership companies should follow Marriott's lead. If they're going to survive, resorts will need to rethink how they market and sell vacation ownership.

"They release their quarterly reports and they all say that their marketing costs were 50% to 55%," Luba said.

That means the real value of the vacation ownership is much lower – no more than half the original purchase price.

Consumers treat big box stores like showrooms and buy their flat screen TVs online after they check them out in person. And there's no reason for resort companies to expect anything different from their customers.

"We have anecdotal stories of people being on their timeshare tours and looking up resale offers," Luba said. "They show it to the rep and say, 'If you're going to charge us $20,000, why am I seeing it here for $5,000?'"

Most timeshare owners who sell their packages through resale sites are willing to take a loss, either because they've already extracted the value from it or because they're not using their packages and don't want to keep paying the annual maintenance fees. That's one reason savvy buyers can find deep discounts online.

Timeshare industry's self-esteem issue

Another reason is the old-fashioned model timeshare companies use to market their product – giving away free stays and major enticements and then paying hefty commissions to the sales staff.

"The majority of the industry has always focused on timeshares as a sold product, not a sought product," Luba said.

Timeshare companies need to quit thinking no one wants their product without a serious sales pitch.

Websites like BuyATimeshare.com, Redweek.com, TimeshareResaleUSA.com and others are multiplying. And they're proving that consumers are actively seeking vacation ownership products.

"If you don't believe it, just Google 'buy a timeshare,'" Luba said.

It's something more and more people are doing these days. Luba researches buyer intent online and has seen a dramatic increase since 2010 in the number of people searching for a timeshare resale.

"No one is going to look for something like 'timeshares for sale' unless they're interested," he said.

Amanda Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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