Is timeshare ownership an investment product?

Abstract

In this paper the question addressed is, ’Is timeshare ownership an investment product?‘ After some discussion, the conclusion is that the purchaser outlays funds for economic benefit, thus timeshare fits well within the definition of an investment product. The paper also adds to the literature in that it advances the discussion regarding the risks associated with timeshare and the methodology applied in timeshare valuation. As investment is based on the notion of risk and return, thus the risks associated with timeshare are discussed first. There follows an analysis conducted from a consumer's perspective which considers the viability of investing in timeshare versus simply renting a holiday unit for one week per year. The notion that the purchase of timeshare can lock in at least a portion of vacation expenses to today's rates is tested. The case is based on real figures taken from an offer made on a particular timeshare resort from a popular timeshare location and tourist destination. The viability from an economic perspective of investing in these timeshare investments was not supported by the analysis. The scenario that a capital gain could make up the shortfall was considered, but it was demonstrated that this was not probable in the cases presented. Based on the cases discussed, three aspects are highlighted in the paper as contributing to the costs of ownership of timeshare. They are the cost of sales, maintenance costs and exit costs. If the industry were able to take up the challenge of reducing these costs in particular, it is likely that investment in timeshare would be more feasible and attract a wider market.