Monday, December 05, 2005
Hurricanes Can Afflict Timeshare Owners
Hurricane Charley blew the roofs off 110 apartments of the South Seas Plantation Resort on Captiva Island, Fla., ruining drywall, appliances, furniture -- and many vacation plans.
That devastated neighborhood is a time-share community, one of the 1,590 resorts in the U.S. in which people purchase vacation units by the week. Florida has 366 time-share resorts with 27,700 units and about one million owners, according to Scott Berman, partner with the hospitality-and-leisure consulting group of PricewaterhouseCoopers in Miami. Sorting out the damage after a hurricane is difficult enough for individual homeowners, but, for the time-share industry, complications can multiply as fast as the pile of soggy mattresses in the South Seas parking lot.
Last year's four hurricanes -- Charley, Frances, Ivan and Jeanne -- affected more than 25% of the nation's time-share communities, from losses of power to complete losses, says a spokesperson for Resort Condominiums Inc. (RCI), Parsippany, N.J., the country's largest time-share trading company. While many in the resort-rich Orlando area suffered only short power outages and uprooted trees, at least 60 time-share resorts, primarily in Florida, were so damaged they were still closed by the end of October, and about half of those, including South Seas, won't open again until sometime in 2005.
Paying for Repairs
When you buy a time share, you buy the right to use an apartment, condo or villa in a vacation resort for one week or longer for a period of time or in perpetuity. According to the American Resort Development Association (ARDA), a Washington, D.C., trade group, the average price for the use of a U.S. time-share unit is $14,500 a week. Weeks in peak seasons (December through April in Florida, for example) cost more than those in less popular times. Each owner also pays local real-estate taxes, and annual maintenance fees, to cover upkeep, insurance and emergency reserves. The ARDA reports that annual maintenance fees average $385 for each week owned. Most time-share resorts are now built or managed by major hotel companies, such as Hilton, Marriott and Starwood.
"Owning a time share is like owning a summer home," says Richard Thrall, an investigator for the state of Florida's Office of TimeShares in Orlando. "If the property is damaged and can't be used during the week you've purchased, you're essentially out of luck." But you still have to pay your share of the insurance deductible, maintenance fees and any special assessment for uncovered repairs, just like the other fractional owners, including those who did get to use the unit this year.
This year timing is everything. Dick Conklin, a free-lance writer who lives in the Florida
Keys, says he and his wife bought two weeks -- one in November and one in June -- at the Daytona Resort & Club, Daytona Beach, in 1981, for $3,000 apiece. When their kids grew up, they swapped for two apartments in November for Thanksgiving family reunions. "This year we were following the Weather Channel to see what might happen," Mr. Conklin says.
What happened was devastating. Daytona Resort & Club manager Jody Hughes says Hurricane Frances blew off most of the six-story apartment building's roof and caved in sliding-glass doors on many of the 34 units. The carpeting got soaked, the air-conditioning system went out, and the phones still weren't working right two months later. As of November 1, only 10 units were habitable -- and Mr. Conklin scooped up one for Thanksgiving week. Just this summer, Mr. Conklin says, he and other owners paid a special assessment of $250 per unit-week for new furnishings and remodeling. Ms. Hughes says she hopes that the recently collected assessment monies and the apartment building's insurance will be enough to cover all repairs.
A Northbrook, Ill., time-share owner, who asked that her name not be used, says it's uncertain whether she and her family will be able to use the two-bedroom South Seas apartment next year that they've occupied for two weeks every spring since the mid-1980s. In a letter to the resort's 6,000 time-share owners, Harry Griggs, who manages the property for the Hilton Grand Vacations Company, says that only the walls are standing for most units and that the grounds are littered with fallen trees and "any furniture that had fabric on it, including all that new furniture we had just installed."
Insurance will cover all but a $100,000 deductible that will be prorated among the time-share resorts' seven homeowners associations. But repairs have been slow to come because so many other resorts and private homeowners in the Captiva Island-Sanibel area are competing for the same construction workers and materials. Like Ms. Hughes, Mr. Griggs says he hopes the resort's insurance and reserves will cover all damage without asking time-share owners to pay a special assessment.
In these circumstances, time-share rules create opportunities for some and disappointment for others. More than half of the nation's three million time-share owners don't use their units themselves but instead trade their weeks for vacations elsewhere. As a result, owners who fortunately "banked" their units before the hurricanes hit will be able to take their vacations somewhere without penalty. But many members have confirmed reservations in resorts with no roofs or air conditioning. They're stuck unless they purchased insurance from the companies that arrange the exchanges.
The Retrade and Resale Outlook
RCI and the other large time-share-exchange company, Interval International in Miami, scrambled to find alternative accommodations for insured members and offering "retrades" into unaffected resorts at reduced rates for members who didn't buy insurance.
In the short term, says Lori Card-King, vice president of quality assurance at Interval, the hurricanes haven't diminished the number of requests from Interval's members for future Florida vacations. "Everyone seems to feel it's fairly remote that so many storms will happen again," she says.
The long-term impact is less certain. Susan Martin-Burns, office manager for South Seas Sanibel and Captiva Properties Real Estate, says time-share prices at the South Seas Resort range from $12,000 to $75,000 for a week, depending on the time of year, and that they haven't dropped since the hurricanes. ARDA president Howard Nussbaum says that some people might even consider buying time shares in affected resorts, figuring that "they've just been refurbished with insurance money."
Prospective owners should keep in mind that time-share resales are notoriously difficult -- the Timeshare Users Group says that about 500,000 are for sale at any one time -- and owners lucky enough to sell recoup about half of what they paid. Unit weeks were recently available at Daytona Resort & Club for as little as $500. The Thanksgiving week Mr. Conklin bought for $3,000 was listed at the "bargain rate" of $1,000.
A deeper concern, says Mr. Nussbaum, is whether some of the affected resorts should be rebuilt at all. "It could be that the best use for the real estate under a 30-year-old resort leveled by a catastrophe is for something else," he says. In any case, he says, the hurricanes are a wake-up call to the industry: "Every time-share owner and owners' association should be reviewing their documents to determine how well owners are protected by insurance and what kind of vote is needed to determine if and how a resort will rebuild."
The group of time-share owners most immediately affected by the hurricanes, of course, was those using their units in August or September when the storms hit. David Matheson, vice president for corporate affairs for Starwood Vacation Ownership in Orlando, says his company tried to warn off owners heading for the four Florida resorts they manage. "But we had people checking in anyway, saying that this was their vacation time. When storms were approaching our properties on Hutchinson Island and in Port St. Lucie, we convinced some owners to move inland, to our resorts in Orlando. Then we distributed flashlights and bottled water to the rest."
"A lot of people told us it was the most exciting vacation they ever had," Mr. Matheson says.
That devastated neighborhood is a time-share community, one of the 1,590 resorts in the U.S. in which people purchase vacation units by the week. Florida has 366 time-share resorts with 27,700 units and about one million owners, according to Scott Berman, partner with the hospitality-and-leisure consulting group of PricewaterhouseCoopers in Miami. Sorting out the damage after a hurricane is difficult enough for individual homeowners, but, for the time-share industry, complications can multiply as fast as the pile of soggy mattresses in the South Seas parking lot.
Last year's four hurricanes -- Charley, Frances, Ivan and Jeanne -- affected more than 25% of the nation's time-share communities, from losses of power to complete losses, says a spokesperson for Resort Condominiums Inc. (RCI), Parsippany, N.J., the country's largest time-share trading company. While many in the resort-rich Orlando area suffered only short power outages and uprooted trees, at least 60 time-share resorts, primarily in Florida, were so damaged they were still closed by the end of October, and about half of those, including South Seas, won't open again until sometime in 2005.
Paying for Repairs
When you buy a time share, you buy the right to use an apartment, condo or villa in a vacation resort for one week or longer for a period of time or in perpetuity. According to the American Resort Development Association (ARDA), a Washington, D.C., trade group, the average price for the use of a U.S. time-share unit is $14,500 a week. Weeks in peak seasons (December through April in Florida, for example) cost more than those in less popular times. Each owner also pays local real-estate taxes, and annual maintenance fees, to cover upkeep, insurance and emergency reserves. The ARDA reports that annual maintenance fees average $385 for each week owned. Most time-share resorts are now built or managed by major hotel companies, such as Hilton, Marriott and Starwood.
"Owning a time share is like owning a summer home," says Richard Thrall, an investigator for the state of Florida's Office of TimeShares in Orlando. "If the property is damaged and can't be used during the week you've purchased, you're essentially out of luck." But you still have to pay your share of the insurance deductible, maintenance fees and any special assessment for uncovered repairs, just like the other fractional owners, including those who did get to use the unit this year.
This year timing is everything. Dick Conklin, a free-lance writer who lives in the Florida
Keys, says he and his wife bought two weeks -- one in November and one in June -- at the Daytona Resort & Club, Daytona Beach, in 1981, for $3,000 apiece. When their kids grew up, they swapped for two apartments in November for Thanksgiving family reunions. "This year we were following the Weather Channel to see what might happen," Mr. Conklin says.
What happened was devastating. Daytona Resort & Club manager Jody Hughes says Hurricane Frances blew off most of the six-story apartment building's roof and caved in sliding-glass doors on many of the 34 units. The carpeting got soaked, the air-conditioning system went out, and the phones still weren't working right two months later. As of November 1, only 10 units were habitable -- and Mr. Conklin scooped up one for Thanksgiving week. Just this summer, Mr. Conklin says, he and other owners paid a special assessment of $250 per unit-week for new furnishings and remodeling. Ms. Hughes says she hopes that the recently collected assessment monies and the apartment building's insurance will be enough to cover all repairs.
A Northbrook, Ill., time-share owner, who asked that her name not be used, says it's uncertain whether she and her family will be able to use the two-bedroom South Seas apartment next year that they've occupied for two weeks every spring since the mid-1980s. In a letter to the resort's 6,000 time-share owners, Harry Griggs, who manages the property for the Hilton Grand Vacations Company, says that only the walls are standing for most units and that the grounds are littered with fallen trees and "any furniture that had fabric on it, including all that new furniture we had just installed."
Insurance will cover all but a $100,000 deductible that will be prorated among the time-share resorts' seven homeowners associations. But repairs have been slow to come because so many other resorts and private homeowners in the Captiva Island-Sanibel area are competing for the same construction workers and materials. Like Ms. Hughes, Mr. Griggs says he hopes the resort's insurance and reserves will cover all damage without asking time-share owners to pay a special assessment.
In these circumstances, time-share rules create opportunities for some and disappointment for others. More than half of the nation's three million time-share owners don't use their units themselves but instead trade their weeks for vacations elsewhere. As a result, owners who fortunately "banked" their units before the hurricanes hit will be able to take their vacations somewhere without penalty. But many members have confirmed reservations in resorts with no roofs or air conditioning. They're stuck unless they purchased insurance from the companies that arrange the exchanges.
The Retrade and Resale Outlook
RCI and the other large time-share-exchange company, Interval International in Miami, scrambled to find alternative accommodations for insured members and offering "retrades" into unaffected resorts at reduced rates for members who didn't buy insurance.
In the short term, says Lori Card-King, vice president of quality assurance at Interval, the hurricanes haven't diminished the number of requests from Interval's members for future Florida vacations. "Everyone seems to feel it's fairly remote that so many storms will happen again," she says.
The long-term impact is less certain. Susan Martin-Burns, office manager for South Seas Sanibel and Captiva Properties Real Estate, says time-share prices at the South Seas Resort range from $12,000 to $75,000 for a week, depending on the time of year, and that they haven't dropped since the hurricanes. ARDA president Howard Nussbaum says that some people might even consider buying time shares in affected resorts, figuring that "they've just been refurbished with insurance money."
Prospective owners should keep in mind that time-share resales are notoriously difficult -- the Timeshare Users Group says that about 500,000 are for sale at any one time -- and owners lucky enough to sell recoup about half of what they paid. Unit weeks were recently available at Daytona Resort & Club for as little as $500. The Thanksgiving week Mr. Conklin bought for $3,000 was listed at the "bargain rate" of $1,000.
A deeper concern, says Mr. Nussbaum, is whether some of the affected resorts should be rebuilt at all. "It could be that the best use for the real estate under a 30-year-old resort leveled by a catastrophe is for something else," he says. In any case, he says, the hurricanes are a wake-up call to the industry: "Every time-share owner and owners' association should be reviewing their documents to determine how well owners are protected by insurance and what kind of vote is needed to determine if and how a resort will rebuild."
The group of time-share owners most immediately affected by the hurricanes, of course, was those using their units in August or September when the storms hit. David Matheson, vice president for corporate affairs for Starwood Vacation Ownership in Orlando, says his company tried to warn off owners heading for the four Florida resorts they manage. "But we had people checking in anyway, saying that this was their vacation time. When storms were approaching our properties on Hutchinson Island and in Port St. Lucie, we convinced some owners to move inland, to our resorts in Orlando. Then we distributed flashlights and bottled water to the rest."
"A lot of people told us it was the most exciting vacation they ever had," Mr. Matheson says.
# posted by John @ 10:00 AM 
