Vacation Rentals, Timeshares, and the State of the Industry

vacation rentals, timeshares, and the state of the vacation industry

Could the vacation rental industry, driven by the rise of services like AirBNB, Vacasa, and HomeAway, stunt the growth of the timeshare sector for good?

It’s an interesting question, one that we’ve seen posed a few times before across the internet – particularly from this intriguing piece from Brett Hershman for Benzinga, an investor-focused financial news and commentary site.

The premise of Hershman’s article – not-so-subtly entitled “Will Short-Term Rentals Kill the Timeshare Industry?” – is that the increasing prevalence and popularity of short-term vacation rental options may be enough to stymie the long-term growth of the timeshare market.

His reasoning comes down to many of the complaints that we frequently see lodged against the timeshare industry by other writers, as well as our own contacts and clients within the industry: That they are overly expensive, onerous to use, and, in time, extremely difficult to “get out of.”

Cliff Johnson, a Vacasa executive that Hershman interviews for the piece, sums it up quite succinctly:  

“I believe many people have been burned by timeshares in the past or know someone who has, so the industry has taken on a negative connotation. I also think people inherently think of timeshares as a restriction on their travel, and today's travelers value as much freedom as possible.”

In contrast, Johnson points to the versatility and ease of use of vacation rentals as giving them a substantial leg up over timeshare options. Given the rise of app culture and the well-documented desire for increased flexibility and freedom among millennial consumers, his reasoning makes sense.

By the Numbers: Private Vacation Rentals Vs. Timeshares

But does the data actually suggest that we’re reaching a major tipping point for the vacation ownership and vacation rental markets? Or will they continue to co-exist, as they do at present?

It depends where you look! When it comes to value, both the vacation rental and timeshare markets are surging. According to the ARDA International Foundation (AIF), the timeshare industry’s revenue has climbed just about every year since the mid-1970s (with the only exceptions coming during the financial crisis of 2008/2009), recently coming in at highs of more than $8 billion.

Similarly, we are in a boom time for the private vacation rental industry; Phocuswright notes that private accommodation grew 11% in 2016, “nearly twice as fast as the total U.S. travel market.” And, according to Phocuswright, the private accommodation sector is projected to be worth $36.6 billion by the end of 2018.

Another comparison point worthy of scrutiny may be the demographics of the timeshare and vacation rental sectors. For instance, ARDA notes that the average age of a timeshare owner is 47; and, as writer Robert Shaw noted for SeekingAlpha not too long ago, the majority of timeshare sales seem to come on the backs of existing owners. In other words, the primary customer base for timeshares is old and only getting older – and, in many ways, the industry’s consumer-unfriendly practices have caused it to “eat its own young,” potentially stunting its capacity for future growth.

In contrast, vacation marketing resource Skift notes that the “18-44 demographic accounts for the strongest growth in the [private accommodation] sector;” Skift also suggests that the market penetration ceiling is higher for the vacation rental market, with some industry experts even arguing that “the market has no ending, none at all.”

Are Vacation Rentals Up to Snuff?

Now, with all of this being said, it’s important to recognize that the vacation rental market is not without its own fair share of pitfalls and potential danger spots for consumers!

As with all costly purchases, when finding a suitable vacation rental opportunity, the onus is still on the buyer to thoroughly research and vet their options and remember the guiding principle of “caveat emptor” – or, “buyer beware!”

Specifically, as consumer advocate Christopher Elliott notes in this great USA Today column, the vacation rental market may play host to some scammers, who list rental properties, request fees upfront, and then disappear as soon as they’re paid – leaving the consumer not only poorer, but without a viable place to stay!

Elliott’s words of wisdom when it comes to spotting a vacation rental scam? As he writes (emphasis his):

“Typically, if a rental costs 20% less than comparable units in the area, you might be falling for a scam. Never, ever wire money.”

Even among rental properties that are real and accessible, Elliott warns that consumers adopt a position of wariness and consider that “vacation rentals are a hit-or-miss proposition” and that, unlike hotels or well-maintained timeshare resorts, “there are no industry standards” when it comes to private homes or condos.

Indeed, Elliott explains, every house or apartment and owner may adopt different quality standards when it comes to how clean or well-stocked their rental is for your visit; while some major vacation rental brands are adopting stricter inspection, presentation, and quality standards for their offerings, he warns consumers to take nothing – including the location of a unit, or the presence of basic amenities – for granted, and to “research the rental as if you're buying it,” urging:

“Look for the red flags. Do business with someone you trust — either an owner you personally know or a brand you trust. Otherwise, there's no telling what might await you.”

A Competition Worth Watching

So, in summary? We have one industry ascendant, and another, potentially, on the brink of stagnation or decline, given the age of its customer pool and the overall rates of dissatisfaction that consumers hold toward it. But the shared vacation ownership industry is nothing if not resilient, and the long-term viability (and product quality) of the private vacation rental sector still remains to be tested.

While we can’t determine a definitive victor yet, we believe that, for developers, investors, and consumers, this is a horse-race well worth watching in the years ahead; as technology and consumer preferences continue to adapt and change, we could just be viewing a battle for the future of vacationing as we know it.

Led by Attorney Michael D. Finn with 45 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don't hesitate to drop us a line with any questions or concerns.


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