While seniors have been traditionally marketing to as a premium customer and sales prospect for timeshare resorts, some cultural and financial shifts have impacted the success rate for resorts, marketing to Americans aged 65 years or older. The long-term nature of a timeshare contract, combined with increased costs of retirement, lower return on traditional savings such as investments and annuities, have resulted in stagnated sales to seniors. Older buyers are more aware of the financial implications and obstacles to exiting a timeshare contract, should they find it to be more expensive than their limited retirement budget can manage.
This shift is an important one. The timeshare model is based on selling the fractional ownership opportunity, with a long-term perspective. They want to lock in consumers who are healthy enough to travel, and who are comfortable with navigating the complex system of points, trading time at other partner resorts, and those that are willing to remain in their contract for ten, or twenty years. The longer you stay in your contract, the greater the return on investment, for resorts. Seniors today, are skeptical of costs that can complicate personal finances, when they are on a fixed retirement income.
Like many industries, timeshares have made a strong pivot and invested time and money to learn more about marketing the travel opportunity to a younger audience.
Disposable Income Lower but Young Adults Are More Compelled to Travel Internationally
Adults aged 25 to 35 years, are of particular interest right now, to the timeshare industry. Typically, adults in this age range have a lower amount of disposable income. Problems including student debt, the high cost of rent (depending on the region where they live) and other financial commitments mean that the average millennial and generation “Y” adult, has less savings and more monthly expenses, which has precluded them from being a focus for timeshare sales.
Interestingly however, the timeshare industry has learned that while these consumers lack equity, they often have good to excellent credit. They are also not daunted by the idea of signing a contract that is perceived as making international travel more affordable. Vacation time is something we all enjoy, but young adults have a greater drive to travel internationally, to exotic destinations before they ‘settle down’ and get married, or have children. And they are already accustomed to financing their needs with long-term lending for vehicles, educational needs and more. That makes them a prime target for both lending to buy a timeshare, and for long-term timeshare contracts.
This is how the University of Massachusetts Amherst described the millennial and generation “Y’ market segment and opportunity for timeshare sales conversions:
“The research shows that in terms of vacationing, while Millennials are much different from the Baby Boomers (55+), they share a lot of common characteristics with the younger side of the Generation X’ers. Millennials have less disposable income than their older counterparts, although this does not stop them wanting to vacation further away, with Europe as a key desired destination. As a matter of fact, the study found that Millennial non-owners are significantly more likely to consider buying a timeshare in Europe than Gen X’ers. Financial issues play heavily into the way Millennials already vacation—trips of shorter distances are definitely a better fit based around both their annual vacation allowance (via work) and their budget constraints, as they also seek vacations with value.”
The report also indicated that an estimated 62% of millennials have expressed interest in owning a timeshare in the near future. But here is where you really get an idea of how strong the sales pitch is going to be for young American adults.
“While the presence of larger, branded companies as a result of recent consolidation may have improved the reputation of the industry, it inevitably raised the bar for new entrants to break into the industry. Legacy resorts pose another concern for the industry. How to best address the challenges of these older HOA-controlled single-site resorts and provide a solution as an industry ranks high on the industry priority list. While the majority of Millennial owners are open to purchasing more timeshare, among non-owners that percentage remains relatively low (17 percent).
Research shows that even though the next generation of consumers is different in many ways from the older generations, their love for travel 4 Source: www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-millennial-consumer/ (Accessed August 27, 2015) remain the same—they actually travel more often and farther away. These special characteristics of the younger generation, coupled with their love for value, dovetail nicely with the shared vacation ownership product. How to evolve the timeshare product to meet the changing consumer needs, how to reach out to this group of consumers and introduce the timeshare lifestyle to them, and how to position the industry as a whole are among the main challenges facing the vacation ownership industry today. Successfully addressing these issues will be critical in the industry’s continued growth.”
Already we are noting the shift in marketing. The timeshare industry has for a long time, marketed the opportunity to adults close to retirement, pitching it as the perfect affordable travel solution for seniors. A quick scan of timeshare advertising, shows healthy and happy seniors enjoying the amenities of a beautiful beach, or luxury resort. Now, we’re seeing advertising that focuses on traveling with friends, or partners and a younger timeshare market is being targeted, positioning a timeshare contract as a passport to the affordable travel that millennials and young adults want most.
You May Not Own a House; But They’d Like You to ‘Own’ a Timeshare
One of the biggest concerns that consumer advocates have about this shift, are the consequences for young adults who do buy into the timeshare vacation contract. Sure, they have many more years to enjoy the use of a timeshare, and that is one of the advantages that is being marketed heavily to this consumer segment. But what young adults are not considering, is the length of time of the contract as an opportunity to pay even more, for their timeshare use.
Liquidity is a challenge for young adults, who typically do not have cash savings to be able to pay for the purchase of a timeshare outright. That makes them a prime target for two reasons; first, they are willing to finance and given debt vs. asset ratio issues, they may or may not qualify for capital lending through banks. This makes them susceptible to high-interest lending that is provided as a ‘service’ by resorts. It’s another lucrative way for them to increase revenues and land a new contract holder.
The second consideration for young adults, is the rising cost of timeshare ownership over time. For instance, while the opportunity to own a timeshare can be tailored cost wise, by the sales representative, your contract is no guarantee that it will remain that affordable. In fact, most industry experts estimate conservatively, that the long-term costs of timeshare ownership can increase by as much as 40% in as little as five to ten years after the contract has been endorsed.
Take that affordable rate you are currently being offered and add 40% to it. Is it still affordable, or would it present financial difficulties in the future? These are the questions and calculations that young American adults need to be making before they sign a timeshare contract.
Buying a timeshare before other priorities, can become a significant financial obstacle. Did you know that when qualifying for a mortgage, your timeshare and payments are viewed as a monthly expense and liability? Banks and lending institutions do not look at timeshare ownership as an investment, or an asset property; instead, they view it as an additional cost that can impair a first-time home buyers ability to make mortgage payments and pay for property upkeep.
If you are planning to buy your first home or condominium, and you don’t have a large cash down payment to assure lenders, you can anticipate that your monthly expenses (including timeshare fees and maintenance obligations) can be a factor that lower your chances of getting approved for a mortgage. A home is an important asset; a timeshare is never considered an asset (no matter what the sales representative tells you).
Beware of Changes in Lifestyle and Priorities
If you are a single professional under the age of forty, it can be hard to predict how your life and needs can change rapidly, shifting your priorities. For instance, if you get married and have a child, the additional expenses of owning a timeshare can quickly become unmanageable. If you move for a career opportunity, traveling to your timeshare or flying, can double or even triple in price, adding an extra expense that was not part of the original equation.
Things can change that quickly, for young adults. Priorities shift as you establish yourself in your career, and personal finances. Every week at Aconsumercredit™, we talk to many young Americans who bought a timeshare as little as 1-2 years ago, who are already struggling with increased maintenance fees, or the dreaded large assessment fees (particularly after the 2017 hurricane season). Even a slight shift in fees to an already tight financial budget, can create real hardship for young Americans.
Our advice to buyers under the age of 40, is to consider your finances and future priorities, and do the math. There are better ways to enjoy affordable vacations, without all the red-tape and constraints that come with a legally binding timeshare contract. If you are thinking of buying, do some quick calculations on the affordability threshold; how much more could your timeshare cost you in the future? Do you have room in your budget to navigate these changes in expense, without creating other problems with your personal finances?
If you have purchased a timeshare recently, and want to explore options to negotiate your release with the resort, we can help. We have over twelve years of experience helping consumers find a legal, effective pathway to negotiate release directly with the resort. And if we cannot help you successfully earn that release in twelve-months or sooner, we are committed to returning our service fee to you.
Start today by calling for a free, no-obligation review of your current timeshare agreement. Our team will outline your legal options (including a free fraudulent sale review) to determine the best method to approach your resort, with a request to release your contract.
If you want out of your timeshare, and you are not making any progress with your timeshare resort, call us at 1-800-587-EXIT. We can help.