Timeshare Points

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The concept of a timeshare ‘point’ is an interesting one. If you’ve read any of these blogs, you know by now that the ‘points’ system was created in order to circumvent certain innate restrictions on timeshare sales created by the necessity of recording deeds as a matter of public record. This public disclosure effectively prevented developers from selling a given unit more than 52 times in the average case. Thus, once a given resort was sold out, the developer had no choice but to build new facilities in order to keep on selling.
 
Undeterred, the developers, particularly Diamond Resorts International and Wyndham, came up with a brilliant alternative. Market the timeshare not a specified location, but rather as a generic ‘ownership’ interest in all of their resorts. This concept, on the surface, can be made to sound far more appealing than a single deeded interest in a specified unit to which one must return time after time. Indeed, they are selling vacationownership, not timeshares. Posh, opulent destinations all over the world. 
 
Thus, this was a brilliant marketing coup. And voila, in the ultimate serendipity for the developer, they are now free to overbook with impunity, selling the same ‘point’s interests in the same resorts again and  again, because the developer doesn’t have to record deeds anymore.  No building required. Some dissembling, perhaps, but no building.
 

Now, for a moment, try to imagine these points as a kind of currency. After all, that’s how they’re being touted. So now, many or most developers have gone to the points system. There even exists points ‘exchanges’ or ‘networks’, concepts implying a free market trading environment where points are bought and sold at arm’s length like other investment securities with intrinsic value. But this notion is fundamentally flawed, for reasons discussed hereafter.

Initially, RCI, Interval, and other points exchange networks,   unlike an actual exchange network in investment securities, do not trade interchangeable ‘points’ given through other developers.  Thus, there exists no financial mechanism to convert the value of a Wyndham point to that of an Interval, Diamond, or Silverleaf ‘point’.

There are several reasons for this, but two of the most important for the purposes of a would-be buyer are: 1. The value of a point with a given developer is almost completely arbitrary, and thus cannot be commoditized, and 2. They lack positive innate value, i.e., they involve a liability component (financing costs and annual dues) that approximates or exceeds the value of whatever benefit that they confer.

This is apparent from the fine print of RCI’s disclosure statement, revealing the following:

Network privileges may be suspended, terminated or denied, or a Confirmed Exchanged cancelled at the Network Administrator’s sole discretion if a Member’s Vacation Ownership Expenses or other charges have not been paid when due.

Thus, unlike other investment securities, which are generally bought and paid for, you must continue to pay for your points. If you don’t, you’ll simply lose them. 

There are a number of unofficial ‘exchanges’, run by third parties, which purport to broker RCI and other points like stocks and bonds. These carry no sanctioning by RCI or any other entity of any kind, and are generally rife with fraud.

Another piece of information from the RCI disclosure statement:

Because vacation exchange is used intermittently as an adjunct to Vacation Ownership, potential Vacation Owners should select a Resort that best meets their ongoing vacation needs. A Member’s decision to purchase Vacation Ownership should be based primarily upon the benefits to be gained from the ownership, use and enjoyment of the Vacation Ownership and not upon the anticipated benefits of the RCI Points Exchange Program. RCI is not responsible for the financial viability or the quality of accommodations, facilities, amenities, management and services at any Resort, Inventory provider or Points Partner.

In other words, the points don’t represent an ‘investment’, properly speaking. Nor are the points necessarily going to get one anywhere else in the ‘network’, so he or she should really like the ‘host’ resort. But even with respect to the ‘host’ resort:

 
Finally, and perhaps most damningly, the very reason for the invention of the  ‘points’ system involved the inability to overbook. Needless to say, the practice of selling potentially unlimited points in a finite number of resort units is incredibly dilutionary. It’s like minting money  arbitrarily, with no backing, no standard to adhere to. Or issuing unlimited stock backed by a company’s limited assets.  
 
That is why the ten thousand points you bought just a few years ago can’t get you to Maui anymore. Heck, you can’t even get to Hoboken. And at the rate they’re selling them, in a year or two you’ll be lucky to get to the outhouse.

 

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