The summer months may have sand, warm waves, and a nice sea breeze, but these are the things of wind-blistered midwinter fancies. For those who want a small piece of paradise throughout the coldest months of the year, timeshare vs. vacation club can seem like heaven.
Part-ownership in a resort is promoted through timeshares and vacation clubs. Benefits such as scuba diving, horseback riding, and wine tasting are typical examples of this. A feeling of stability comes with the opportunity to return year after year; your next vacation is never far away.
A guaranteed trip is nice, but timeshares may be pricey and come with a lot of stipulations. Do timeshares and vacation clubs ever make financial sense? Well, it depends. Keep reading to break down the difference between a timeshare and vacation club and learn how each works.
What Is a Timeshare?
Buying a timeshare entails purchasing a block of time in a hotel or resort unit, or condo. Timeshare owners must also pay yearly maintenance costs and the timeshare’s purchase price, which is generally financed via a payment plan. These fees often rise each year. As the condo and resort age, the owners may also be on the hook for extensive repairs or maintenance bills.
A timeshare plan’s vacation term may be set or flexible, but the resort stays constant.
The owner of a fixed timeshare plan has the right to utilize the unit for the same number of weeks each year for the duration of the program. Plan durations range from one year to as long as one’s whole life.
Types of Timeshares
Floating plans, fractional ownership, and biennial ownership are examples of variable timeshare plans.
When it comes to floating plans, the owners reserve the unit in advance for a specific period, usually a season.
Fractional ownership is when you own a percentage of a holiday home. You may only utilize it for a portion of the whole vacation period.
On the other hand, owners who purchase a property on a biennial basis are entitled to use it for vacation purposes every other year.
As expensive as it is to buy a timeshare property, most are not sound investments. Unless the owners can resell their timeshares, they seldom go for more than the original purchase price.
Owners of timeshares may be required to first sell their property to the timeshare company, which may do so for a small fee.
What Is a Vacation Club?
Members of vacation clubs acquire points, which they then redeem for vacation time at resorts part of the club’s network. High-season trips and popular resorts cost more money and fill up faster than those taken in the off-season or at a less popular time of year.
Vacation clubs, on the other hand, provide a broader range of options than standard timeshares. A vacation club may accommodate a growing family whose need for beds will expand over time or a couple whose elder children are preparing to leave the nest, in addition to providing a variety of places.
Members of vacation clubs may be able to save or borrow points from years they don’t use them, depending on the conditions of the club. Vacation clubs, like timeshares, may impose yearly dues or administration costs that rise over time.
Timeshare vs. Vacation Club: Is It Cost-Effective?
Having a timeshare or a membership in a vacation club limits the sorts of vacations you may take—as well as when you can take them. A fixed-week timeshare requires you to commit to, say, the Bahamas during the first week of February every year if you’re thinking about it.
Membership in a vacation club gives you a little more freedom, but you’re still limited by the number of points you have and have to keep paying the annual maintenance charges. As a vacation club member, you are locked into taking the same sort of trip every year, no matter how much money you have saved up over the years.
Memberships in timeshares and vacation clubs are the most cost-effective in the long run, but they come with a significant initial outlay.
As an example, imagine paying $200 each night for a week in a hotel. A one-week vacation every year would have cost you $14,000 over ten years. In comparison, a timeshare at the same property may cost upfront of $8,000 and have yearly maintenance costs of $550.
You’d have spent $13,500 after ten years, or $500 less than you’d have paid for regular trips. It turns out that over 30 years, the timeshare turns out to be a considerably better deal: you would have spent just $24,500 for your annual holidays at the resort rather than $42,000 at the hotel.
If you’re interested, you’ll want to check out these timeshare resorts for some great offers.
What Are the Costs of a Timeshare?
If you still think this is a bargain, don’t forget about the slew of expenses that come along with them. To begin, expect to pay an average of $22,000 or more upfront.
A loan will be necessary if you don’t have the cash on hand; nonetheless, this is something you should avoid doing in the first place. However, banks will not lend you money to buy a timeshare. Why? Because they can’t take your vacation time if you fail on your loan!
However, do not be alarmed. Your new colleagues at the timeshare firm will save the day by providing you with an easy option to fund your life-changing purchase!. They may charge exorbitant interest rates because they know you have limited choices for financing—typically 14 to 20 percent. The problem is that they’re the only ones in town, so you’re stuck with them.
Extra charges after the original transaction may come as a surprise. Annually, unavoidable maintenance expenses amount to $980, and they’re rising at a rate of around 4%.
There are also HOA dues, exchange costs (if you don’t have enough points to get the beach apartment you want), and “special assessments” for renovations to your property. Total cost may deplete your bank account faster than that Nigerian prince texting you for money with all of those extras attached.
In this example, let’s suppose your original timeshare purchase costs $22,000, and your annual maintenance fees total $980. Your timeshare allows you a maximum of 70 nights of stay over the following ten years (seven days and six nights each week). It’s important to be very mindful of your finances when investing in a timeshare. The effect of a timeshare foreclosure on credit report can be very grave if you neglect it.
The Costs of Vacation Clubs
These limitations take on a high emotional cost to your trip. And that’s before you factor in the monetary value.
Clubs make a big deal out of their “discounts,” then slap hundreds of dollars in fees and upgrades on their members afterward. It’s critical to be aware of all of the expenses, both visible and invisible, associated with vacation and travel clubs.
Initial Purchase
The expense of timeshares has already been addressed, so we’ll move on to the topic of club memberships. Memberships in certain low-cost vacation clubs start at roughly $5,000. So far, so good—until you consider that the typical American vacation only costs around $2,037 per person.
In addition, most nightclubs charge a premium. It costs between $20,000 and $30,000 to become a member. You may expect to pay anything from $100,000 to $1 million for a premium membership.
It’s cheaper to join a travel club than a vacation club (between $2,500 and $20,000). But first, just because they’re not expensive doesn’t imply they’re worth your money. Second, while you’ll save money, you’ll forfeit your private vacation.
When traveling with other club members, keep in mind that you’ll be eligible for group discounts. Do you want your holiday enjoyment to be contingent on whether a random person wears a speedo or not?
Membership Dues
Many payments are associated with timeshare ownership, although membership dues are seldom one of them. There is no comparison between vacation and travel clubs and traditional tour operators in this regard.
Despite having a “lifetime” membership (or a 30-year, 5-year, or whatever), you must pay a membership fee each year. From $1,000 to $15,000 is possible.
Real Estate Investment or Hotel Stay?
If you’re someone who’s a fan of yearly vacations to the same spot, then a vacation club or a timeshare might be a good idea.
Hopefully, our guide has shed some light on the timeshare vs. vacation club comparison and characteristics. As always, if you have a financial advisor, this is the kind of potential purchase you’ll want to discuss beforehand.
And, if you enjoyed reading our article, then you’ll want to check out our additional tips and strategies. All of those (and many more) will be available to you in our real estate and finance section.
