How Do Timeshares Work?

Timeshares involve owning vacation time in a resort or form of holiday accommodation where you share the ownership of that accommodation with other vacationers. Timeshare owners purchase the use of time in a resort unit and, along with the other owners of that resort, are able to vacation in fabulous locations with luxury accommodation for a fraction of the overall cost.

A timeshare is the same concept as owning a vacation home but only paying for the time that you would actually stay in that home, without having to buy the entire vacation home. That's the short answer when asking yourself "how do timeshares work?".

The timeshare concept is also about pre-paid vacations, meaning that an owner has paid for the multiple use of that unit at the outset. Even when factoring in annual maintenance fees, the overall cost of a timeshare vacation in that unit is less expensive than paying for a stay in a similar hotel on an annual basis.

For those consumers who may not have heard of the term timeshare, or others who may vaguely know of timeshares but just don't understand much about them and are wondering how do timeshares work, then you'll want to read on.

How do Timeshares Work Financially? A Cost Comparison

According to figures from the American Resort Development Association, a family of four which takes a one-week vacation will spend an average of $3,000 per week if they stay in a hotel and eat out three meals a day. Over 20 years, that's $60,000 spent on vacations.

Compare that to a family which buys a timeshare for $5,000 (which is the average price of timeshare resales on the secondary market) and includes the average maintenance fees which would total $14,000 (at $700 per year on average over 20 years). At $19,000, the timeshare owner is vacationing for about one-third the price of a hotel stay over the course of 20 years.

Making a Timeshare Work for Your Budget

The keys to successfully answering the question of how do timeshares work are finding a timeshare resort or program that fits your vacation needs and using your timeshare on an annual basis.

Some owners purchase a timeshare on the spot in an emotion-driven decision at the resort when they haven't thought through the process. The concept is great, but they haven't stopped to think about how they vacation or what their needs are going forward. Therefore, they buy a timeshare from the resort and pay way more than they would have if they had researched their options online in the resale market.

Buying a timeshare resale is the real secret to the industry because it saves at least 50-60% off the cost of a timeshare bought at the resort, not to mention the interest rates charged through financing options provided through the resort.

How Timeshares Work – The Points System

So far, in exploring how timeshares work, we've only described the concept of a standard timeshare week - which is a deeded ownership week and is considered a real estate transaction.

Timeshare can also operate on a points system, whereby the owner purchases an allotment of points and can use those points for various durations of vacation time - often through a Club product such as Marriott Vacation Club or Disney Vacation Club.

Points function as a type of vacation currency. For example, if you purchase 3,500 points with Marriott Vacation Club, you can use those points to spend a week at a Marriott timeshare or split them into smaller allotments for more frequent, shorter stays.

The timeshare points programs can provide the type of flexibility that standard weeks may not be able to offer. However, that's where the exchange companies can help.

How Timeshares Work - Timeshare Exchange

The concept of exchanging a timeshare week is nearly as old as the industry itself, which goes back over 40 years in the United States. The three major companies are RCI, Interval International and 7Across which, combined, service nearly six million timeshare owners around the world.

Usually, owners can take the use of their timeshare and do what's called "bank" the week into a pool of weeks held by the exchange company. Once you bank your week, you're given a value for that week and can use the value to compare against other weeks available to use in the pool. Once you've found a comparable week matching the value of the one you've banked, you can book the use of that week to complete the exchange.

This is how a timeshare owner can take vacations at various locations around the world and not have to travel to their home resort year after year if they so choose. While many timeshare providers offer internal exchanges within their network of timeshare resorts, such as the larger hospitality brands like Hilton and Wyndham, the exchange companies offer a much more robust global program.

Because of the different programs offered by the timeshare exchange companies, you may be able to convert the use of your week into points and take advantage of the same kind of flexibility offered by resort points programs, all while maintaining the ownership of your week.

Timeshare exchange companies are also becoming more diversified, offering members the option to exchange their weeks for cruises, group tours and other vacation products. Keep in mind that most exchange companies, with the exception of 7Across, charge annual membership fees. All of them charge a transaction fee to complete the exchange.

Making a Timeshare Work for You - The Bottom Line

When looking at a timeshare vacation option, first establish the destination where you want to vacation, then the timeshare resort you want to stay in, and finally the time of year to vacation. These are individual decisions that need to be discussed and established prior to finding a timeshare for sale or starting any negotiation to purchase a timeshare because they will affect the price.

The price can sometimes be a sliding scale, as the more desirable locations in the top timeshare programs during peak season will cost more to enter into than other, less popular destinations. One mistake commonly made is that an owner thinks they can purchase a less expensive, off-peak week at a more obscure resort and automatically exchange that week for, say, a Christmas week in Hawaii. Doesn't usually work that way.

Timeshares are all about vacations, so use the same decision-making methods you would use with timeshare vacations that you would use when planning any travel-related event. Where do you want to go, when, for how long and at which resort? Then, you can go to a resale marketplace such as BuyaTimeshare.com and search out the options to purchase that particular week at the resort.

Once you have purchased the week, then you may want to look into exchange companies and choose the company which gives you the best selection of alternative destinations that you'd like to visit when not traveling to your home resort. It really can be that easy.

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