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The Timeshare Agreement (First part)

May 30, 2013
The Timeshare Agreement (First part)

This field of the tourist industry has been incorporated as a strong support to guarantee a flow of captive visitors, but it also shows a series of particular problems and circumstances which make it unique in its type, due to its aggressive sale and in some occasions fraudulent that harm the image of our Country, as well as by its legal regulation, which is not characterized for responding or protecting efficiently the rights of the consumers of this service, also called compartidarios.

The timeshare originates as a procedure to commercialize any real estate property destined to lodge tourists for vacation periods and consists essentially, in dividing the use of a unit, generally by weeks, in such a manner that there are 52 periods of use per room and per year, wherein the costs are divided between the compartidarios and these are the ones who absorb in the part that each represents, the operation, preservation and maintenance costs of the asset in question, in addition of paying the price of a membership.

The timeshare is in a nutshell the acquisition of a personal right to be able to reserve accommodations or future lodgment, in any hotel or tourist condominium, in a season or in particular conditions, this is, for a discounted fixed price (membership) and an annual maintenance fee, the use and enjoyment is acquired of a vacation period per year, normally on a weekly basis, to be enjoyed during a determinate number of years (normally from 20 to 30), in a unit with capacity for two, four, six or more persons.

At the beginning, the Timeshare was a result from the fragmentation of the ownership of condominiums or residences in tourist places and in other cases, as a financial solution for some hotels with little success. The timeshare originated in Europe, mainly Switzerland wherein in the year of 1963 the company Hapímag starts its first Timeshare Project with the purpose of assuring to its clients rooms available in the main tourist resorts of Europe especially in Spain.

In 1966 a group of Japanese investors promoted a Project named Japan Villa Club, its success was so outright that it now has 300 tourist centers and 250,000 members.

Subsequently Mr. John H. Dehaan exports the idea to the United States of America and becomes one of the pioneers of this modality. By 1969 United States of America, starts its first Project in Kavikailari, Hawai. In 1972 this concept was developed in Bird Rock Falls in North Carolina and in 1973 another resort starts in Lake Tahoe, California.

With the entrance of the United States into this market, the timeshare sales worldwide grew in the order of 500% going from 10 million dollars in 1970 to more than 500 million dollars for sales in 1995.

At the end of the 80's, this new modality of lodging had extended in several countries of the world, including Canada, Australia, Asia, South Africa, the Caribbean, Mexico, Israel and countries from Eastern Europe.

For the year 2011 worldwide, the data of the timeshare industry reported the following, there are 7,315 tourist resorts, which have a little more than 8.9 million users and sales were reported for 14.7 Billion Dollars, as well as a total of 28 million 866 thousand tourists traveling through this vacation modality. It is important to highlight that worldwide in the Timeshare System the counties and states of the following regions have presence, North America (Canada and the United States of America), Latin America (including Mexico) and the Caribbean; Asia and South Pacific, Europe and Africa and the Middle East.

The Timeshare in Mexico

In Mexico, the concept of Timeshare is also of a particular relevance. In fact, currently after the United States wherein this modality was developed and multiplied, Mexico is the second country in the world in the development and marketing of projects of this type.

In Mexico, the first projects appear in 1970, by 1974, the operation of the first timeshare Project starts, but it is not until the 80's when the industry actually starts to develop and with a systematic procedure to commercialize any real estate property. By 1987 180 tourist condominiums were operating under this modality.

From 1974, year in which the operation of the first timeshare Project started in Mexico until the year of 1996, 359 tourist programs have operated under this modality, for the year of 2000 there were 311 active tourist resorts and for the year of 2011 there are 456 registered.

The penetration of the timeshare in the tourist offer, is so important, that if we compare the offer of traditional hotel lodgment and the Timeshare lodgment, we have that the Timeshare, represents 42 % of the Lodgment offer of tourist quality of Mexico. In the same manner the lodgment offer of tourist quality through timeshare in the main tourist destinations of the country is the following:

  • Los Cabos, 79.5 %
  • Puerto Vallarta / Nuevo Vallarta, 66.8 %
  • Mazatlán, 63.4 %
  • Cancún / Riviera Maya, 35.0 %
  • Manzanillo, 19.2 %
  • Acapulco, 18.7 %
  • Ixtapa / Zihuatanejo, 18.6 %
  • Cozumel, 18.1%

Important data of the Timeshare in Mexico reported through the end of 2011:

  • The Timeshare reflected an Annual growth of 9 % against 7 % worldwide.
  • Investment greater than 1,100 Million Dollars.
  • More than 1 Million and half of National and Foreign tourists.
  • Creation of 450 thousand Direct and Indirect Jobs, which represents 22% of the total jobs within the tourist sector.• Annual Sales greater than 3,890 million Dollars.
  • One Million 340 thousand compartidarios, that represent 20 % worldwide, in its majority foreigners.
  • 429 Resorts, equal to 40 % of the offer in the sphere of Latin America.
  • Annual Occupation of 80%.
  • Average Stay of 8 Days.

This great growth, was the cause that boosted the Authorities, Developers, Marketers and Operators to establish a regulatory framework, having as fundamental purpose harmonizing the rights and obligations of the parties that intervene in this field, and that at the same time, become an important element to improve the service, through the establishment of guarantees and quality standards in this system, unfortunately the consumers or compartidarios have not participated directly in these processes and have not been represented satisfactorily in the same.

Carlos Román Hernández
Managing Partner.