Timeshares don’t stand still
The numbers driving the expansion of timeshares in Hawaii come down to a bit of simple math.
Developers of a hotel need to put all the money forward at once, for everything from grading and permits to infrastructure and vertical construction, Hospitality Advisors President and CEO Joseph Toy said.
But timeshares — such as Kings’ Land, Hilton Grand Vacations’ latest development at the Waikoloa Beach Resort — can be phased in.
“The hotel development is a lot more risk for developers,” Toy said. “You don’t start to generate revenue until it’s open.”
Hotels might also take four to five years to stabilize financially. The construction process, from acquiring land, to getting permits, to finishing construction used to take about a decade. That process now is closer to six years, Toy said.
Timeshares are different. For one, the development period is about four to six years.
“You can have a large piece of property, but phase in development over time,” he said. “You control your risk a little more. You can presale. You have more liquidity.”
The timeshare market in Hawaii took off on Kauai, following Hurricane Iniki in 1992. The other islands lagged through the end of the decade, but are catching up now. Hawaii Island still has the fewest timeshares, with 1,382 units. Oahu has 2,529, Kauai 2,397 and Maui 3,876. All of the timeshares here are located in West Hawaii, said Daniel Dinell, Vice President of Regional Marketing for Hilton Grand Vacations and the Hawaii chair for the American Resort Development Association, which represents timeshare projects.
Timeshares make up 13.6 percent of all vacation rentals units, which also includes condos and hotel rooms, available across the state, Toy said.
A few things set timeshares apart from just booking a hotel room or condo, Toy said.
“It’s a prepaid vacation,” he said. “It’s the trade feature as well — either exchanging your timeshare rights for that year to stay either within the brand” or staying at other timeshare properties.
Andrea Lievens, a Kona real estate agent who also ressells timeshares at The Bay Club, the original timeshare development at the Waikoloa Beach Resort, said timeshares appeal to families by offering more space than a hotel room at a fixed price they can count on each year. Timeshares are especially good for groups with multiple families traveling together. The Bay Club’s villas have two bedrooms, plus couches that fold out to accommodate more travelers.
Timeshares are more kid-friendly than many vacation rental homes, Lievens said, because individual owners of vacation homes may worry about the liability they assume if small children stay at a property with a pool, for example.
Some of the other timeshares on the Waikoloa resort property, which are owned by Hilton Grand Vacations, even offer timeshare owners access to the Hilton’s amenities, Dinell said.
Owning a timeshare may not be for everyone, but for the right kind of traveler, it can be a really good fit, he said.
“In the timeshare world, you get more than simply a hotel room,” Dinell said. “People like that. You get a second home without owning outright. How many weeks are you actually going to use your vacation home? It’s very aspirational in terms of owning a place and enjoying spacious living.”
Lievens offered a bit of perspective on the costs between purchasing a timeshare, especially at the reduced rates seen for resales, and a condo at a similar property. The Bay Club timeshare resales cost $3,000 to $14,000 for a week’s stay each year, plus maintenance fees of about $1,100 to $1,500 annually. The club offers the option of staying every other year, for weekly costs of $1,500 to $7,000. Condos in the resort can run $350,000 or higher. When new, in the 1980s, The Bay Club units were selling for $25,000 to $38,000, Lievens said.
Statewide, the average weekly cost is about $50,000, Toy said. More expensive properties — two- to three-bedroom beachside villas — drive up that average, he said, adding a week interval, as the industry phrases a stay at a timeshare, could cost about $20,000.
People with children and honeymooners, generally from the West Coast, are likeliest to buy timeshares in Hawaii, although Lievens and Toy said the Asian market is growing. A villa, with two bedrooms, a spacious living room and a kitchen many West Hawaii renters might envy, especially appeals to travelers from Japan, where their homes might not be as large as the timeshare, Lievens said.
Timeshare owners tend to hold on to the property for about 10 to 15 years, she said. Sometimes they sell to their children, but not always. When that happens, the unit goes on the resale market, and at The Bay Club, the only timeshares Lievens resells, other owners often tend to purchase the new open week.
Dinell said Hawaii Island is a good place for the timeshare industry to keep growing. Hawaii Island has room for large parcels of land to be slowly developed in gradual increments. Waikiki does not, and construction there tends to be vertical, meaning high-rise buildings that have to be completed before visitors can begin using the units.
“The story for Hawaii Island is one of sustainable development,” Dinell said, adding the construction is good for carpenters, electricians and other building trades.
The work will be steady, too, he said.
“You’re not going to have big surges,” he said. “The timeshare development, from a developer’s perspective, is very attractive. You can build it as you need it. If your sales slow down, you build less quickly.”
Although timeshares show a sticker price in dollars, the timeshare industry has converted to a points system that awards a certain number of days at a particular property. If the timeshare owner has a one-week share in a two-bedroom unit, they might be able to get nine or 10 days at the same property in a one-bedroom unit. Dinell said Hawaii owners, because they pay a premium to purchase here, can leverage their points toward longer stays at less in-demand locales elsewhere.
One other thing appeals to vacationers considering a timeshare here, he added.
“We have very little seasonality,” Dinell said. “People can come to Hawaii pretty much year-round.”