For nearly a decade, Mina and Ray Feldman have been escaping the brutal Michigan winters by jetting off to Puerto Vallarta, Mexico. This year, the Farmingham Hills couple decided to spring for a time share in the resort city. They found a promising unit at the Sheraton Buganvilias Resort on eBay and steeled themselves for a bidding war.
As it turns out, they didn't need to. The only bidders, the Feldmans snagged their new annual weeklong getaway for a price Mina calls "laughable." Their winning bid? $1.
- Will you ever retire? Check your numbers
Anyone who's been reading the travel section lately can recite the latest headline-stealing vacation deals, whether they're $29 flights or free hotel nights. But even these are being put to shame by the eye-popping markdowns cropping up in the vacation-ownership market.
There are plenty more $1 time-share deals besides the one the Feldmans snagged (not counting those tricky maintenance and transfer fees, of course). And the time share's more stylish sibling, the fractional share, isn't faring much better, with the average price per fractional share down $19,000 in 2008.
"No one wants this inventory on their books," says Mark Lunt, a hospitality adviser with Ernst & Young. "It's absolutely correct to say there are bargains out there right now."
Certainly, no part of the real estate industry came though the economic downturn unscathed. But compared with the 40% plunge in sales suffered by the vacation-ownership industry last year, the anemic home market looks positively cheery.
The problem for developments like time shares and fractionals, says Lunt, is the "double whammy." On one side, the credit crunch has squeezed companies' ability to provide financing. On the other, the sputtering travel industry has dried up the pipeline of would-be buyers, since most developments are associated with resorts whose visitors are a huge source of new recruits. What's more, distressed companies have tried to make up ground by raising annual fees, causing some owners to head for the door, even if they have to dump their property for pennies. And many big players are pulling out of the industry or going bankrupt, causing some to wonder whether the shared-ownership model can survive.
Still, not everyone thinks the vacation-ownership market is in a death spiral. Here's an update on how some of the most popular vacation-ownership options work and how they're faring now.
Time shares
Not surprisingly, the model that has taken the worst hits is that Rodney Dangerfield of vacation ownership, the time share. These properties, which typically give owners deeded ownership of one week at a specific resort, began to pop up more than three decades ago; as big hotel brands ramped up their presence, the market gained momentum. But when the recent downturn brought the industry to a screeching halt, the big players announced drastic pullbacks. Would-be buyers are finding financing practically nonexistent, and many current owners are having trouble paying their annual fees. According to Aspen National Collections, which collects late payments, maintenance-fee defaults have increased by more than 10% over the past year.A lot of these overwhelmed owners are turning to eBay or online classifieds to try to unload their shares. While some in the industry suggest approaching these listings with extreme caution -- Howard Nusbaum, the president of the American Resort Development Association, likens them to "buying a used car out of the newspaper" -- others take a more positive view. "For buyers, it's never been better," says Brian Rogers, the owner of online community Timeshare Users Group. Rogers suggests plenty of due diligence, including contacting the resort in question to verify ownership and checking that all back fees have been paid.
Those still on the fence can test-drive a time share, thanks to the industry's fast-growing rental business. Developers are beefing up their rental programs with unsold inventory, says Nusbaum, while rental postings at RedWeek.com, a site that connects owners with travelers looking to buy or rent, jumped 30% during the first half of 2009. For strapped owners, renting could even lead to an unexpected sale. Joanne Regnault, a retiree from Kill Devil Hills, N.C., experienced this firsthand when she rented out her one-bedroom time share on Block Island, R.I. Although the unit wasn't listed for sale, the renters called Regnault right after their vacation, asking if she'd consider parting with her time share permanently.
In fact, they were so smitten with the property that they didn't even bother to negotiate, leaping at Regnault's $10,500 asking price.
Bottom line: Tough to sell, bargain for buyers.
