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What is a Timeshare: Everything you Need to Know about it

Considering the average hotel unit cost per day for a consumer is likely to grow at 4% annually between 2006 and 2015, timeshares may look like good bargains. But with escalating costs of travel, food and local sightseeing, and Indians planning to increase their travel spend by 17% in 2015 for a holiday, is buying a membership to a vacation rental with a lot of fine print to read into, a good deal after all? By Manju Latha Kalanidhi

If only saying #ChaloNiklo for a weekend trip with friends or an annual family vacation was as easy as it looks in the cab company advert! The holiday season with the Dusshera, Diwali and Christmas season is almost here and is dotted with long weekends that coincide with school vacations. Although the whole idea of booking tickets, making online reservations at hotels etc along with the exorbitant costs looks daunting, the Indian traveler seems to be surging ahead. A research done by UK-based global travel search engine Skyscanner in 2015 revealed that Indian travelers are at the top of rankings of the world’s most experimental travelers. Indians have searched for over 230 different countries around the world till June 2015 and are making plans to visit countries like Ireland, Sweden, Greece, Japan etc.

However, the intrepid Indian travelers are acutely aware of the rising costs of travel, stay, food, sightseeing etc. and decide to do something to be able to take at least three holidays a year, but still not feel the pinch at the end of the year. A Trip Advisor ‘TripBarometer’ study of March 2015 says Indians are increasing their travel spend by 17% this year. In their quest to find a way to pursue their passion, some gravitate towards timeshare vacations, both that offer Indian and international destinations.

What exactly is a timeshare?

In the Indian context, a timeshare is a property – typically a hotel or a luxury resort – in which multiple parties hold rights to use the property, and each sharer/ member is allotted a period of time (about one week, almost the same time every year in a fixed package and one week of their choice in floater package) in which they may use the property. A membership costs about Rs 1 lakh upwards and the annual maintenance costs about Rs 10,000 upwards depending on which package you are with the timeshare company. One can also sell the share to others if they are not keen on holding it. The member, however, holds no claim to ownership of the property. Sterling Holiday Resorts, Club Mahindra, Country Club etc are among the wellknown ones in India.

According to Ramesh Ramanathan, chairman of All India Resort Development Association (AIRDA), the timeshare market has been growing at 20% compound annual growth rate (CAGR) over the last several years. Increasing transparency and improving consumer satisfaction are among the industry’s priorities, he said in an interview to a national newspaper.

Many travel lovers assume that a membership like this will make their travel plans easier as they already have a list of destinations to choose from and the main cost – the accommodation – has already been paid for. Great thought indeed! Except that in reality, the rooms are not always available at the dates they want. If they want to go for an impromptu holiday, they may or may not get to stay there as it is full. However, there are also travelistas who swear by such packaged holidays that one can take at the same time of the year.

Research revelations

Interestingly, e-Travel Marketing India’s research shows that good holiday deals are an important motivation for customers to go online. About 36% consumers make unplanned trips if offered a discount.

According to a 2013 report by Ramakrishna Kongalla, Assistant Professor at Indian Institute of Tourism & Travel Management, Gwalior, only 0.069% of the travel markets are members of timeshare companies. However, the demand for timeshare products in India is likely to grow at 16% annually from 2006 to 2015 by supply growth of 12% annually over the same period. The average unit cost per day for a consumer is likely to grow at 4% annually between 2006 and 2015 compared to 5-8% for a pure hotel product, he states.

Currently India boasts of about 40 timeshare companies, 80 resorts, 20 lakh memberships. According to AIRDA’s report, the reason why timeshares are yet to catch up is because of steep annual maintenance charges.

Word of caution

The Timeshare Consumer Association UK, a body that claims to give ‘friendly independent advice from timeshare experts’ mentions it in big font: “Timeshare is not a financial investment”. Definitely an eye-opener who perceive it as an investment, and not as an indulgence!

Let’s do the math!

Hotel rates in five-star properties range between Rs 10,000 and Rs 12,000 a day, or Rs 70,000 to Rs 85,000 a week. If a timeshare member pays Rs 2.5 to Rs 3 lakh for a membership and avails of 30 holidays of seven days each for 30 years, the cost falls to Rs 10,000 a week’s holiday in a year, which is a fraction of what you pay otherwise. But how many members manage to take a holiday every year? What are the other costs and catches here?

A call to Club Mahindra revealed that the current packages begin at Rs 3.37 lakh for a family of four and the minimum down payment is Rs 50,550 and a few monthly installments depending on number of years you have opted for to pay the remaining amount. Your membership begins after you meet the minimum payment as specified. The annual maintenance charges are around Rs 13,000 upwards based on the package you have opted for. There is a nominal gift charge of Rs 1,100 if you pass it to a non-family member. The sales manager clarified that the company does not refund the money if you are not happy with it though it can be transferred to a family member without much hassle. And no, one can never look at it as a ‘share’ to make profit from, he added. Although the website says there is cancellation charge of Rs 1,700 if you don’t use your confirmed week, the sales personnel said there is no such ‘fine’.

Still not very sure of it

Kalyani Krishna, a homemaker in Chennai and married to a professor in IIT Chennai, talks of her experience with a timeshare vacation. “We bought Zest Mahindra Holiday Package in 2008, valid for a period of 10 years. We paid Rs 80,000 hoping to take a holiday every year and the agent promised us that the company is on the road to expansion and would be soon coming up with resorts in North and Eastern India. In the first couple of years, we travelled to Kodaikanal and Ooty and loved the experience. The rooms are beautiful, on par with five star hotels. The service is friendly.

Although you enjoy one week stay in the resort without paying anything towards room rent, eating food at the facility and also hiring travel services might cost a bomb. With the company failing to open up new resorts, we are stuck with only five destinations to travel. However, they are prompt in collecting ‘maintenance charges’ every year.

In our package, we are entitled to avail the facility only in certain months of the year. The travel timetable we opted for suits my professor husband as it coincides with his vacation. We couldn’t go around much in the last three years due to personal commitments, but we can always carry forward our holiday to the next year.

On the brighter side, you can actually transfer your holidays to friends and family. It is a great gifting idea for a newly married couple or to your parents looking for a getaway. If you want to pay less for one week of ‘on par’ five star hotel accommodation every year and relax, these packages work. The trick to save more money is to try out local cuisine and local cabs.”

Suits me fine

Smriti Lamech, a journalist, and her travel- loving family comprising her husband and two children below 12 believes timeshare rentals definitely protect you against inflation. “The properties are by and large well maintained and well staffed. Food and transport are not part of the package and that is made clear when you buy the package. It seems unreasonable to expect more – but then that is the desi consumer for you – unmitigated greed. Food at any resort is expensive because that is what they make their money on. And resorts by definition are outside city limits – how else do you relax in the midst of a forest or on a secluded beach? Obviously one needs to plan in advance like you do for timeshare vacations across the globe. That said, there are often cancellations and we’ve got lucky.”

Ahead of its time

“Timeshare concept is a novel way to enjoy a holiday, especially at a time when Indians are changing their approach towards leisure tourism. However, the biggest challenge is that one has to plan this seven-day holiday almost a year in advance which is simply not possible in the Indian context. Also our vacations are guided by our children’s academic schedules and hence there is overbooking at the destinations. People end up going to places which they hardly know of or because they have paid for the timeshare option and hence don’t want their options to lapse. I think international options are also limited and hence people prefer packaged tours which are well timed, very well packaged and provide greater value for money,” says Ramaswamy, senior manager at a financial services company.

Better deals elsewhere

Suresh Sadagopan, a travel lover and a Certified Finance Planner and Registered Investment Adviser of Ladder7 Financial Advisories, Mumbai, has been holding a membership with a timeshare company since 2007. While he confesses he enjoyed memorable holidays with his wife and child for the initial four or five years, but now he finds that there are better vacation deals one can get online. “The travel market is competitive. Several airline companies are now putting together air travel+ hotel packages (with five stars) at great prices. Even food and local sightseeing is a part of some of these packages and that’s when you feel the pinch of having a timeshare as you are forced to stay there as you’ve already shelled out your fee for the year.” He recently holidayed with a Yatra package and felt the deals were good compared to his timeshare that he still holds.

“Lack of choice is also another factor that puts me off many times. I want to go to Munnar this monsoon but I am left with going to Junagadh only. I find that while my timeshare’s rooms are really well designed with great views and amenities, the resorts don’t give much choice in food. I mean the food is also good, but it is too elaborate and rich. I am not sure I want to eat a buffet at every meal during all the seven days of my stay. I would have liked to eat a simple khichdi and done with. The place I stayed did not provide such simple options.

Timeshare concept is a novel way to enjoy a holiday, especially at a time when Indians are changing their approach towards leisure tourism

In Munnar, he often was tempted to check out local Kerala cuisine but the resort was so far that he was mostly confined to the resort as there were no places to eat in the vicinity because of its distance from the city. If my timeshare company took note of such things, I am sure holidays will be more economical and I would recommend it to others too.” He adds, “I would never suggest you consider it as an investment that can fetch profits later.”

Pankaaj Maalde a finance advisor from Mumbai, also resonate the thought, “You should go for timeshare rentals if you are the kind who wants to laze around and just relax – eat, read a book, swim in the pool, go for a spa massage etc – as they provide all these in one campus. But if you want to go sightseeing and stay outdoors, the timeshares may not be a smart idea. Forget about it being an investment, I don’t think one even saves money. It’s just an easy way to have a holiday every year at the same time without much hassle.”

Final word

Then there are travel hacks (those who passionately pursue travel with the idea of having fun while getting maximum bang for their buck with great deals) who scoff at the very idea of holidaying with a brand. They believe in landing at your destination and roughing it out, checking out things and relishing local places and flavours.

So, the verdict is that timeshares may not be for people who love variety, diversity and local flavors in their holidays.

What they tell you and what you need to check

They say: Enjoy holidays for next 25 years or 99 years

Check: Will you be around by that time? Will the company be around at that time? Will rules remain the same with changing governments?

They say: Holidays that stay immune to inflation

Check: Yes holiday may stay immune, but the price of flying, train, fuel, local transport, food etc varies. So does an unchanged room tariff really make a big difference to your holiday price?

They say: Pay once and enjoy every year with an annual maintenance fee

Check: If the annual holidays you are getting are with the annual fee that you are paying. You need to pay the annual fee even if you have not holidayed the last three years.

They say: Get your holidays at the same time of the year?

Check: You have to decide your holiday schedule you sign up. But in five years, are you sure your schedule will allow you to take a vacation exactly between August 1 to August 9? With a growing family and schedules, is that possible ten years from when you paid? Going to Srinagar in summer is good. But if next holiday is at Jaipur and you have to choose the same days in summer again, it’s a flop idea.

They say: You can choose your holidays whenever you want

Check: Are the rooms available during your stay? Is it available at the place you want? With hotels and resorts coming up with competitive rates and discount offers, is your time share rental really cheap now?

They say: You can transfer the time share to a friend or a family as a gift

Check: Is your newly-wed sister in a position to shell out hugely for the food in the resort. Assuming it is expensive, is the resort near enough to go out and eat or does one have to hire a cab for three hours to do that? A timeshare member said he hasn’t got a single enquiry for buying up the timeshare which he put up in an e-commerce portal six months ago.

They say: It’s a great investment for future

Check: Financial advisors say timeshares are not worth selling as you rarely make any profit. Consider it if you love holidaying and are aware of all the risks involved. Don’t buy it as a means to earn more in future.

Written By:Manju Latha Kalanidhi

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