There are very few products which cause as much debate as Timeshare – maybe in the financial products world you can find an analogy with ULIP or LIC policies !! Let me try to describe in this post what Timeshare is and whether it is an investment that is worth considering. Before starting off let me state upfront that this will potentially be of use to people who are fond of travel and want to holiday at least 1-2 weeks in a year.
The basic concept of Timeshare is simple – a company builds a resort with different types of unit sizes and sells it to the public at large, normally in a minimum lot of 1 week. There is an initial price you pay depending on the unit size and the season of your week. Typical unit sizes are Studio, 1 bedroom and 2 bedroom. The seasons are Red, White and Blue in the decreasing order of popularity. The price will obviously be the highest for a 2BR unit week in the Red season etc. When you buy the Timeshare week, it entitles you to using that week for a period of time in the future, normally 25 years or 33 years.
Apart from the one time costs, there is a annual maintenance charge that you will need to pay for the entire duration of the agreement. For a top end Timeshare company such as Mahindra or Karma Resorts, a studio apartment in the Red week can cost as much as 5 lacs plus along with an AMC of about 20000 per year. That will seem like a whole lot of money and rightly so. Let us see what you get in return.
- You can use your week at your home resort every year. This can be in the week you own or some other week which is available.
- If your company has other resorts in the country or outside it then you will be able to use your week in those too, subject to availability.
- It is possible to exchange your week for going to a resort not owned by your company. This can be done by becoming a member of RCI and paying some exchange fee. So you may own a week in Mahindra Manali and may be able to exchange it through RCI for a resort in Canada or Australia. There are RCI fees and exchange fees for foreign resorts are about 9500 but on the whole, it opens up the whole world for you.
- The quality of the resorts from good companies are top notch. These are 4 or 5 star properties and spending a week with your family there will be worthwhile. The units normally have cooking arrangements so it is possible to economize a bit on eating out during the period of your vacation.
- Note that this is very different from the normal travel we do which is 2-3 days at one place and spent largely on sight seeing.
- The very nature of Timeshare ensures you need to plan ahead – this is helpful in creating your own plans and the family can look forward to the vacations with a sense of excitement.
- You need not go every year and can club two weeks if you want to take a longer holiday but in a more infrequent fashion.
- In case you prefer shorter holidays it is possible to opt for RCI points, where you can choose the number of days and exchange accordingly.
So what are the cons apart from the obvious expense issue? Well, for one this is only suited to people and families who are keen on vacations in a regular manner. If you do not enjoy travel then this is likely to prove not very useful for you. Also, if you want to view things through the financial prism always, then you will find this to be expensive. A back of the envelope calculation will show the following:-
- 500000 a year can earn about 35000 in conservative instruments.
- With AMC, RCI and exchange fees you are spending another 35000 a year.
- In today’s rates even the best resorts in India can be hired for a week at cheaper rates. However, this may well change quite soon.
The point however is flexibility that you get with these memberships. For example, you can get a bonus week in Bali for a 2 Bedroom unit at 20000. Just imagine the cost of a 6 member family going for a week there. There are other benefits such as cruise vacations which turn out to be a lot cheaper than it would otherwise.
At the end of the day it is not a financial issue but a lifestyle issue. The benefit of a high end vacation, year after year, when your family has growing children cannot be overstated. They will have a great time with Games, swimming pool and other activities. We found it quite safe to leave them in the resorts when they were a little grown up.
Will I recommend a Timeshare from a good company – absolutely. I do not think their can be a better investment for your travel and lifestyle needs.