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Travelers increasingly resorting to timeshares

SHEILA Eberhardt kicked off the year with a weeklong vacation in Ocean City and then headed to Old Town in Alexandria, Va., in February.

She dashed over to Williamsburg, Va., in March. In April, she invited a grandson and his buddies to spend a week in Savannah, Ga., before returning to Williamsburg for another week.

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In June, she sent three of her seven children to visit a sister in Hawaii.

"It seems like I'm a millionaire," she said.

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She's not.

Eberhardt is a 70-year-old retired schoolteacher from Annapolis who has owned timeshares since the mid-1980s.

Timeshares traditionally have been a mistrusted segment of the tourism industry, and with good reason. Buyers were committed to one location for a single week with little or no flexibility.

The industry has worked to change that during the past few years, experts said, by developing a more elaborate exchange system to allow timeshare owners to vacation at various destinations. Also, the entry of large hotel chains such as Marriott International Inc. have helped the industry boost its credibility.

For example, a timeshare owner who has purchased a week at a specific resort often can trade that time for a vacation at another resort owned by the same company. Timeshare owners also can join independent exchange networks for an annual fee. That membership allows them to visit resorts throughout the world by trading their timeshare points for other locations.

As a result, timeshares grew steadily in number last year despite an overall weakness in the tourism-and-travel sector of the economy.

While the rest of the tourism industry struggled in the aftermath of the Sept. 11, 2001, terrorist attacks and the long-running economic slump, sales of timeshares in the United States grew by 14 percent last year to $5.5 billion, according to industry figures.

Studies show that their popularity is based, in part, on the fact that people have become more sophisticated about using their timeshares, much like Eberhardt.

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Consumers often buy timeshares to ensure a vacation for themselves each year. They typically buy a slice of time in a particular development and then pay annual maintenance fees for their share. Taxes and other costs also must be paid.

In the past, owners often allowed their time to go unused, but no longer. But the increased practice of trading or lending a timeshare to friends and family members has made it possible that an owner gets full value for his or her investment.

"People who experience the product love it, and they want the discipline of taking a vacation that owning a timeshare creates," said Howard Nusbaum, president of the American Resort Development Association, the industry's trade group. "They want to have that great vacation experience. They don't want it to go to waste."

The average purchase price for a timeshare is $14,800, according to a study this year by Ragatz Associates, an Oregon-based research and consulting firm to the leisure travel industry. The average annual maintenance fee is $382, Ragatz found.

Fast depreciation

To be sure, potential buyers should understand that owning a timeshare is not the same as purchasing a second home. Resale value plummets once the timeshare is sold, primarily because so many are on the market, experts said.

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"Some people come in with the idea that it is an investment, and we have to educate them about the fact that timeshares are highly illiquid. You're not getting out of it [financially] what you put in it," said Henry Becker of Baltimore-Washington Financial Advisors in Ellicott City.

Experts agree that owners trying to sell timeshares can expect to get back 50 cents to 70 cents on the dollar. Despite the potential for loss, people sell timeshares, often using the Internet. As a result, about 15 percent of American timeshare buyers purchased them through resale last year.

Other drawbacks of buying a timeshare, as listed by a coalition of timeshares owners called Timeshare User's Group (www.tug2.net), include:

Paying the annual maintenance fee, which can increase during the lifetime of the resort, whether you use it or not.

Being obligated to pay additional special assessments arising from unexpected costs of maintaining or repairing the resort.

Having to plan vacations up to one year in advance to reserve a popular week or to obtain a good exchange week.

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Dealing with the cost and interaction with exchange companies. It's often not the straightforward process advertised.

Some experts said timeshares can be a good way to allocate your vacation budget, Becker said. They work best for people who prefer larger rooms, who vacation at least once a year and who can afford the yearly maintenance fees and taxes.

Experts say that potential buyers should be careful when purchasing a timeshare. For example, they say don't buy a timeshare so far from home that the price of airline tickets discourages frequent visits.

For families who like to vacation together, joint ownership also spreads the cost, experts said. Becker, the youngest of nine children, has thought about that option. He has considered buying a timeshare in South Carolina with some of his siblings.

"We all like to travel and could meet at the beach," he said.

Timeshare fortunes have risen despite the sluggish economy because the industry has bowed to consumer demand for flexibility.

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Today, new timeshare formats incorporate points, floating time and options to buy vacation time every other year, in addition to the original format of purchasing fixed weeks. Older, hard-sell tactics aren't as common, experts said.

Appeal of points

The new points-based systems are especially appealing to buyers, experts said. During the past two years, points-based timeshares emerged as the most common purchase plan, growing to 43 percent of all purchases from developers, according to Ragatz Associates.

Points earned by buying a one-week timeshare might be redeemed at hotels, for cruises and on airfare from the alliances that resort owners have made within the travel industry. That makes owning a timeshare more attractive to families that might not want to be tied to one location.

"It's more like buying currency," said Adam D. Schwartz, director of communications at the Orlando-based Fairfield Resorts. "The thrust behind offering points instead of just a deed was that people could decide when, where and what way they would vacation."

A person who buys a week during the peak season in the Fairfield Ocean Boulevard in Myrtle Beach, for example, pays 224,000 points (around $21,500). The buyer may choose to use those points for multiple weekend vacations at other company properties or resorts within the exchange network throughout the year.

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Lance and Donna Krotzer, of Gibsonburg, Ohio, bought into the timeshare idea five years ago while visiting Ocean City. They liked the look and feel of a local resort. But since buying a unit at the Fairfield Ocean City at the Coconut Malorie for about $10,000, they have visited Williamsburg, Atlanta and Myrtle Beach, S.C. "The advantage of having a timeshare is that you take longer vacations. Otherwise, I don't think we would have stayed for more than a couple days at those cities," said Donna Krotzer, a 54-year-old medical technologist.

Eberhardt, the retired Annapolis schoolteacher, accumulated 1 million points by selling and exchanging various timeshare ownerships - her points total about $55,000. She pays $350 a month in maintenance fees for her properties. In return, she's able to do a fair amount of globetrotting despite being on a fixed income.

She started buying timeshares so she could leave her children an inheritance. Eberhardt also needed a tax break after she sold her family home to move into an apartment - interest paid on timeshare financing can be tax-deductible for some people.

"I was a widow on a fixed income. I thought that this was the best thing I could do for them," she said of her children.

But she has become an expert at purchasing and trading. Unlike other people who caution against buying on the first day of a presentation on timeshares, she said an informed buyer can find the best bargain at that early stage.

"You should pressure them to give you what you want by offering a bigger down payment or something else. That's the moment to do it," she said.

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Jay and Veronica Stull of Baltimore needed a year to digest the information they received about buying a unit in Aruba through Marriott Vacation Club International. They had heard plenty about scams in the industry but felt safe buying from a well-known company. The couple needed time to figure out how to finance the $16,500 purchase price.

In late July, the couple took their first trip to their two-bedroom suite in Marriott's Aruba Ocean Club. They figured that the location, highly coveted among vacationers, would help them snare other good vacation spots during exchanges in future years.

"It's like having gold when others have silver," said Jay Stull, a managing partner at GIS Integrated Solutions LLC, a Baltimore firm that produces computerized maps. "Everyone is willing to trade with you. With Marriott's network, you can basically go anywhere in the world."

The Stulls see it as a good investment because they'll be able to limit travel expenses. Inflation might drive up resort rents and hotel rates over the years. The Stulls will pay for maintenance fees and any other assessments.

"We plan to enjoy Aruba for a while," Jay Stull said, "then travel all over the world."

Timeshare tips

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Tips to consider before buying a timeshare:

Buy because you plan to use it.

Choose a vacation that fits your lifestyle.

Visit a timeshare resort on your next vacation or take a tour of a local resort.

Read all documents carefully and understand what type of product you are being offered.

Look for signs of good management, such as well-maintained facilities and resort amenities, good housekeeping and friendly service.

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Verify the resort's affiliation with an exchange company, and learn about the resort's internal exchange policies and member benefits.

If you are purchasing primarily to take advantage of the exchange benefit, buy the most desireable unit in the most popular season or the largest points package you can afford, as this will provide greater exchange flexibility.

Source: American Resort Development Association Most popular timeshares

Top 10 U.S. cities visited by Marylanders with timeshares:| 1. Orlando, Fla.

2. Hilton Head, S.C.

3. Williamsburg, Va.

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4. The Poconos, Pa.

5. Atlantic City, N.J.

6. Las Vegas, Nev.

7. Palm Springs and Palm Desert, Calif.

8. Virginia Beach, Va.

9. Fort Lauderdale, Fla.

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10. The Palm Beaches, Fla.

Source: Marriott Vacation Club International


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