Understanding Timeshare Points

There are a lot of folks who own timeshares. And there are a lot of folks who still do not completely understand the timeshare point system and how it works. Here is a great article about timeshares and how they operate and how to make the most of your timeshare points.

"Over the years, timeshare has evolved into a multi-billion dollar industry.  This growth is a result of the fact that timeshare solved, and continues to solve, a basic and important problem. You see, before timeshare existed, it was normal for families of 4, 5 or 6 to cram into one little 380 square foot hotel room, sharing one bathroom, one TV, two double beds and a roll-away bed.  Needless to say, this was vacationing in very tight quarters, and wasn’t much fun.  There were no washers & dryers, dining rooms, living rooms, microwave ovens, stoves, ovens or any of the other creature comforts of a true home away from home.

With timeshare, this problem was solved… and families loved it.  So much so, that in some years, worldwide annual timeshare sales have topped $10 billion. For the first time, families could purchase a resort-style condominium, with fabulous resort amenities, in a size that would actually fit their needs.  For example, a family of 4 could purchase a 2-bedroom resort condo, where some units had over 1,000 square feet or more.  When compared to that old cramped 380 square foot hotel room; timeshare was revolutionary. 

In addition to increased space, timeshare condos offered amenities like washers & dryers, ironing boards with irons, dishwashers, full kitchens, living rooms, dining rooms, furnished balconies, Jacuzzi tubs, microwave ovens, and more.  The resorts themselves were designed with families in mind as well, with amenities like luxurious swimming pools, golf courses, tennis courts, yoga and other classes, hot tubs, game rooms and more; which made vacationing more convenient, and enjoyable.  Families were also saving money on one of the most expensive things on vacation… food.  Previously, there was no option but to eat out every day.  That gets expensive!  Many timeshare condos have full kitchens and full-sized refrigerators, allowing the option of cooking some meals in the condo, and eating left overs.  Snacks at night, orange juice, coffee and cereal in the mornings… you get the idea.

Nothing stays the same forever, and timeshare was no exception.  As peoples lifestyles changed, so did the way they like to vacation.  In the old days, families vacationed one week at a time, and most families got two weeks’ vacation per year.  Accordingly, timeshare was sold in a manner that was called ‘fixed time’.  This meant that a family purchased the size unit they wanted, and also the exact week in which they wanted to vacation each year.  So, that family of 4 would not only have to purchase a 2-Bedroom unit, but they would have to specify they wanted week 21, which was the second Saturday in June each year.  That was their unit, and that was when they could use it.  If they could not use it, they could give it to a family member to use, or face losing it that year.  Either way, they were required to pay their annual maintenance fee to the resort. 

While that seems pretty inflexible in today's world, back then it was more flexible than anything else out there, and certainly better than a cramped 380 square foot hotel room. As time went on, owners realized that they really didn’t want to have to return to the same place, at the same time, year after year.  It was then that the exchange companies were born.  The first one was RCI (Resort Condominiums International).  The concept of exchange was sound and simple.  An owner had a week, but wanted to go somewhere else.  The exchange company got busy affiliating hundreds (and now thousands) of other resorts, creating an exchange network.  What a novel concept; owners could select from inventory deposited by other owners, and they could (for a fee) reserve a unit in a different place and different time.  Then the exchange company would get control of their inventory and allow another exchange company member to use it, again, for a fee.  Anyway, it worked… for a while anyway.

The next hurdle came when owners wanted to exchange their week, but the selection of available inventory was not robust enough to provide an adequate choice.  That’s when the concept called ‘Deposit First’ was invented.  It was a simple concept.  Imagine a bunch of owners standing around a swimming pool, each holding their inventory in their hand, and looking into the proverbial ‘inventory pool’ not seeing any real choices.  That was bad for business, and needed to be changed.  They couldn’t have every owner holding onto their week until they saw something they liked, and only then deposit their inventory.  The rules were then changed to force owners to deposit their inventory first, before being allowed to make an exchange request.  This solved the problem of not having enough inventory in the inventory pool from which to choose.

The next issue, and really one of the biggest ones, was determining the ‘actual value’ of an owner’s week.  This was very important, and was a big problem.  Think about it for a minute.  Resort developers wanted the inventory in their resort to carry the highest exchange value possible in order to promote sales.  If they had inventory that was rated as ‘low value’ by the exchange company, the owner’s exchange ability was negatively affected, and that meant the developer couldn’t sell the week for as much as one rated with a higher exchange value.  For example, resorts in Florida were, for the longest time, all rated at the top of the chart, which was called ‘Red Time’.  RCI had three colors to represent week values; High value (Red), mid value (Blue) and low value weeks (White).  Simple, yes, but oh so inadequate.  This meant that an owner that had a 2-bedroom unit in Orlando in October (very low season in the traditional travel industry) received the highest trading power (Red), and could virtually get whatever they wanted.  While an owner that had a 3-bedroom unit in Vail, Colorado, in May (mud season), had less trading power, and was beat out by the Florida owner.  This was a real inequity, and it plagued the industry for many, many years.

The obvious solution was to come up with a way to value each timeshare week on a level playing field.  The answer was a points matrix that assigned a point value to a wide range of relevant categories.  The end result would be a point value that was more in line with the real exchange value of each week.  Even so, the resort developers fought against this for years.  You see, this meant that they could no longer sell weeks that clearly had inferior exchange power for the same price as ones with higher exchange power.  In short, they were now selling the exchange, not the week itself, as they knew (as did the prospective buyer) that people wanted to exchange their weeks more than using what they purchased.

Well, it took many years, but RCI finally came around to making the change to points.  RCI created a proprietary points matrix (which only they knew… kind of like a Google algorithm in today's day and age), and assigned a point value to a variety of categories that included things like:

•    Week owned
•    Unit Size
•    Season (High, Shoulder, Low etc.)
•    Resort rating
•    Owner reviews
•    Demand from other owners
•    When the week was banked
•    And others

When all categories were added up, a point value was placed on the week, establishing a much more level playing field for all owners.  Developers… well they had to actually start telling people that the 2-bedroom unit they are buying in October in Orlando is worth 30,000 points vs. the same 2-bedroom unit in July, which might be worth 48,000 points.  While these are only examples, the ‘point’ is clear (pun intended).  Developers were no longer able to sell these two units for the same price.  The industry benefited, and so did the owners.

This overview is only a general outline of the history of the timeshare industry, and how and why points systems were developed.  There is much more detail on the progression from fixed weeks to points, as well as progressions in new and better points schemes, but we’ll leave that for another time.

At the end of the day, the timeshare industry, while having changed significantly since its early days, is alive and well, and doing billions of dollars in annual revenues.  It is a good product, and still offers a good value for money, and provides owners with a diversity that still cannot be achieved by staying in that 380 (ok, maybe now 400) square foot hotel room."

Tucker MarCom