Cost Benefit Analysis of a Timeshare Resort Property

An evaluation like this depends on your individual circumstances and lifestyle. For a couple, with a growing family, who take regular, scheduled vacations it can save tens of thousands of dollars over the lifetime of the investment. For others, who don’t fit this demographic it can still be a wise decision but one you need to think about. Especially if your lifestyle is such that you find it hard to schedule vacations in advance.

But consider a family with two children who sometimes holiday with others. Like the children’s grandparents. Ideal for this family would be a two-bedroom, dual entrance, lockout beach unit at a resort in say Florida or maybe you trade your vacation week.

A lockout unit is one where you can close off one portion of the condominium. As the condominium has dual entrances, for the years your family is vacationing alone, you can close off one bedroom, a bathroom and mini kitchen area to create a self contained unit. You can then rent it out and recoup some, or all of your annual costs.

Now, back to our cost benefit analysis. You can buy a two-bedroom, two and a half bathroom, beachfront timeshare at a resort in Florida for under $20,000. The accommodations are spacious and will comfortably house four adults and two children. More if necessary, so the kids can bring friends. Many timeshare condos are like architect-designed homes with comfortable separate lounge areas, gourmet style kitchens and Jacuzzis.

Analysis

Purchase Price $17,000.00
Costs $ 600.00
TOTAL PRICE $17,600.00

For the purpose of the exercise let’s assume the entire amount is borrowed at an interest rate of 7%. Remember that even if we pay cash we would have to allow a similar amount for the lost opportunity cost of money that is no longer available. Let’s also say it is for a deeded (Real Property) condominium and we are going to depreciate the asset fifty percent over the coming twenty years adding a further $425.00/annum

Annual cost

Interest or opportunity cost of money $1,190.00
Depreciation $ 425.00
Annual fees $ 600.00
TOTAL ANNUAL COST $2,215.00

For the exercise we are going to assume this family vacations with two other adults and the children every year. In assessing the wisdom of this purchase we are also going to ignore travel costs because they have to be paid on any vacation. We will offset the lack of flexibility that comes with ownership over renting with the benefits of spaciousness and the standard of appointments timeshare offers. It is also offset by the timeshare exchanges that open access for owners, at no additional cost, to resorts throughout the world.

Now the cost of accommodation at a first class resort in Florida, during high season, is currently running at about $160 per room. Each room can accommodate two adults and, with roll out beds, two children. This brings the total cost of accommodation for a seven day stay, for four adults and two children, to $2,240.00. Slightly more than the timeshare option. Certainly not enough to influence a major decision though.

But, if vacation inflation creeps along at say 3 or 4% per annum, a very conservative figure, that same week in ten years will cost close to $3,300.00, while our families’ outgoings are fixed at $1,812.00. A saving of nearly 80%. Now a timeshare property really makes sense. Apart from the other benefits, timeshare ownership stops vacation inflation.