Exchanging Hawaiian Time
Even Hawaii residents are looking into timeshares in the Islands as a new way to travel. But are they right for you?
Photo by Robert Sheetz/Courtesy of All Island Timeshare Rentals The sandy beach in front of the Ko Olina Resort area consists of four manmade lagoons. Here, even local residents have purchased timeshares. |
The timeshare industry has grown, and more people are turning to timeshares as a different way to take a vacation. But for the uninitiated, the world of timeshares is a mystery. What are they? How do they work? Are they a real estate investment or a travel opportunity? Is a timeshare right for you?
Hawaii’s timeshare industry is answering to visitors—and locals—who are asking for more options in how they spend their vacations. Across the Islands, more than 5,000 Hawaii residents have literally bought “Hawaiian time” by owning timeshare properties in the state, according to the American Resort Development Association (ARDA).
The basic premise of timeshare is simple. You, along with fellow owners, share the use and costs of running a vacation accommodation. Each investor owns at least one week of time per year.
The timeshare concept was originally created in Europe in the 1960s. A ski resort developer in the French Alps innovatively marketed his resort by encouraging guests to “stop renting a room” and instead “buy the hotel.” The developer was successful in increasing occupancy and the idea spread.
Over the decades, timeshares have become a home-away-from-home for 4.1 million families. Timeshares range in size, from small studios to three- and four-bedroom condos. They normally include all the conveniences of home: a fully equipped kitchen with a dining area, dishwasher, televisions, washer and dryer, VCRs and more. It is not uncommon for luxury timeshares to offer a workout room, pool, golf course, salon, spa and other amenities.
If you already live in Hawaii—why bother buying a timeshare here, too?
For Hal and Sandi Steinhoff of Kapolei, it was all about the game. “Every year my family comes into town for the Pro Bowl,” Sandi says. “We were always trying to find a condo in Waikiki, but February is just such a busy time of year. Sometimes we had to get two hotel rooms because the condo units were always the first to go.”
Instead of duking it out in Waikiki, the Steinhoffs purchased a timeshare within five miles of their home at the Marriott’s Ko Olina Beach Club. “Every year we reserve the week before the Pro Bowl,” Hal says. “We all get together and stay there during the week when the football players are around the area. It’s a lot of fun.”
Hawaii’s timeshare industry is the fourth largest in the nation. The Department of Business, Economic Development and Tourism recorded that, in 2005, the number of timeshare units increased by more than 15 percent compared to 2004. The number of Oahu timeshares increased 26 percent to 1,422 units, Maui timeshares rose 23 percent to 1,720 units, Kauai timeshare units increased 4 percent to 2,090 units and Hawaii increased 19 percent to 1,592 units. Hawaii’s timeshare industry has hit nearly $300 million in annual sales.
Across the nation nearly 50 percent of recent buyers purchased their timeshares within 400 miles of their homes, ARDA reports, perhaps suggesting that people are becoming more interested in vacationing closer to home.
This was true for the Steinoffs, who, although they own a second timeshare in Orlando, Fla., are especially fond of Ko Olina. “The big benefit is that we don’t have to worry about going far to enjoy our vacation,” Hal says. “It’s close to our home; we don’t have to fly anywhere. When we get to the resort area, we feel like we’re away from everything.”
Proximity is one reason to buy a timeshare here; value is another. Typically, the timeshare week (one through 52) you own influences the value of your unit and your chances of trading it for another destination. Hawaii is an exception to the rule. “Everyone wants to come to Hawaii,” says Douglas Lupton, RRP, founder of All Islands Timeshare Resales. “Owning a timeshare in Hawaii puts you in the driver’s seat in the exchange system. You have what everybody else wants.”
Photo by Robert Sheetz/Courtesy of All Island Timeshare Rentals High-end timeshares, such as Ko Olina Resort, often include luxury amenities such as outdoor dining, walking paths, spa treatments, golf courses and other services. |
In much the same way that hotels rate the times of the year as “peak season” and “off season,” most timeshare resorts color code the year’s three seasons, according to demand. For instance, red weeks are hot, high-demand times. Conversely, white or blue weeks are cooler, less popular periods.
“All of Hawaii is red time,” says Sonya Kunz, operations manager of Hawaii Timeshare Exchange. “Owners of a red-week timeshare can request the prime times at popular destinations when exchanging with others. If someone on the Mainland is trying to deposit their week with us, their week has to be a red time, too, for it to be a fair exchange.”
Currently, Hawaii Timeshare Exchange’s request list for the Islands is two years out. “Right now we’re booking all the way up to 2010 and we have a huge wait list,” she says.
In short, owners of Hawaii timeshares can request any of the 52 weeks of the year, and can easily exchange their time for any destination in the world.
Lupton notes another reason that a Hawaii timeshare may be a wise asset: the steady hike in room rates. At the end of 2007, the average room rate on all islands increased to $308, up 8 percent over December 2006.
Lupton argues that “there’s a line … and if it’s crossed over, people will shop other destinations. And I think we’ve just crossed over. However, it doesn’t necessarily impact the timeshare industry, except it fortifies the value of owning rather than renting.”
He explains that, unlike hotel rooms, timeshares offer a great amount of flexibility. Owners can elect to: 1) stay at their resort during their scheduled week; 2) rent out their week to recoup on maintenance fees; 3) give their week as a gift to friends and family; or 4) exchange their week to stay at one of the of other resorts worldwide.
Vacation vs. Investment
According to the experts, timeshares are not investments for profit and should be viewed as an enjoyable, luxury purchase. “We have owners at Lawai Beach Resort who own anywhere between four to 8 weeks because they know they’re going to come here every year to get away from the winter on the Mainland,” Kunz says. “It’s not an investment for them, it’s just a getaway.”
In 2005, the ARDA reported that the average national timeshare price was $16,278. The annual maintenance fee per unit was $471. The median income of timeshare buyers was $81,000. Some of Hawaii’s most lavish resort timeshares are in the $120,000 range.
Timeshares should not be considered an investment or a source of profit, because when a timeshare is bought directly from a developer, it loses much of its value (as does an automobile) at resale. “It’s a different marketplace,” explains Lupton. “When you buy from the developer, you’re often offered some incentives and perks that will encourage you to buy. When you try to sell your timeshare, those benefits usually don’t follow the sale.”
There’s also more competition in the resale market, and financing is more difficult, both of which drive down the resale values.
The three most basic criteria to use to determine if a timeshare is right for you are: |
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Photo by Robert Sheetz/Courtesy of All Island Timeshare Rentals Along Ko Olina’s beachside, visitors can enjoy private cabanas, grassy areas and shade.
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The Different Types of Timeshares
Deeds, Leaseholds and Right-to-Use
There are three major types of timeshare ownership—deeded, leasehold deeded and right-to-use contracts. A deeded timeshare is true property ownership, with the deed recorded with the county. You may sell, rent or will the property. A deeded timeshare functions just like a home. You own the property forever.
Leasehold deeds are common and offer ownership for a fixed period of time, after which the ownership reverts to the property owner. Occasionally, leasehold deeds are offered in perpetuity; however, many do not convey ownership of the land but merely the unit.
With right-to-use, you have the right to use the property, but at some point the contract ends and all rights revert to the property owner.
Fixed-Week Ownership
The most basic timeshare unit is a fixed week; the resort has a calendar enumerating each week of the year. Your deed will allow you to use a unit for a single specified week. For example, week 26 normally includes the Fourth of July holiday. If you owned week 26, you would use that week every year.
Floating
Floating weeks are more flexible than fixed weeks, as they normally “float” through an entire season. For example, you might purchase a floating summer week that allows you to request any week during weeks 22 through 36. Some floating contracts exclude weeks with major holidays, which are instead sold as fixed weeks.
Rotating
In an attempt to give all owners a chance for the best times of the year, the weeks are rotated through the calendar. One year you may have use of week 35, then week 36 the next year and week 37 the year after that. This method gives each owner a fair opportunity for prime weeks, but it is not flexible.
Vacation Clubs
Vacation clubs often own timeshare units in multiple resorts in different locations. They cater toa wide range of economic backgrounds and income levels. Club members may reserve vacation time at any of the club’s resorts, based on availability.
“Most clubs sell you a right-to-use, not a deeded interest in the real estate,” Lupton says. “Your name is not on the trust in any way; you just have a right to use the development entity’s owned timeshare units.”
Points Programs
If your timeshare runs on a points-based program, every year you’ll receive a number of points equal to the value of your timeshare ownership. You can use the point “currency” to make travel arrangements within, and sometimes outside of, the resort group. Most point programs are affiliated with large resort groups, offering a wide selection of destination options. Many resort point programs provide flexibility from the traditional week’s stay.
You can request fractional weeks as well as full or multiple-week stays. The number of points required to stay at the resort varies based on the following factors:
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You can use your points within your resort group, or you can use them with exchange companies and go anywhere.
The two major international exchange companies—Interval International and Resort Condominiums International (RCI)—have more than 7,000 resorts.
You can also exchange your timeshare with smaller independent exchange companies. Dial an Exchange, Trading Places, Hawaii Timeshare Exchange, Platinum Interchange, The San Francisco Exchange, Timex and Redweek.com are the main independent exchange companies.
Some timeshares that run on a points-based system offer owners points that can be exchanged for airline tickets, hotels, car rentals, travel packages, golf programs, cruises, amusement park tickets and more.
“The point system might sound a little confusing, but it works, especially for those who have timeshare in Hawaii,” Lupton says. “You get more point value for your Hawaii ownership. A week’s worth of Hawaii points can often buy you two weeks somewhere that’s less in demand.”
Buying Considerations
When looking to buy a timeshare, there are two main markets to consider—direct from a developer (primary) and resale (secondary). Primary timeshares are usually available through developers that subdivide properties into timeshare intervals. The secondary, or resale, market comes into play if you purchase from a developer and later need to sell the timeshare.
“Many people are electing to buy on the secondary market rather than the primary market,” Lupton says. “Resale is attractive because the cost doesn’t include the developer’s markup.”
Lupton attributes much of the growth in the resale market to visiting baby boomers. “People are looking to retire if they want to visit Hawaii often and own real estate in the state, a timeshare is a good answer.”
“In the ’70s, when visitors ccame to Hawaii, they bought jewelry and art. Today, one of the dominant purchases is timeshare,” says Lupton. “It’s lasting, it has merit and it has usefulness.”
Aimee Harris is a freelance writer who lives in Manoa and writes when it rains.
