1. The History and Development of the "Timeshare Ownership" Business Model Worldwide
In 1946, to address the post-World War II holiday demand in the United Kingdom, Fred Pontin, Bill Butlin, and the Warner brothers conceived the idea of expanding their holiday camp operations. Over time, their business model for camps and resorts became a prototype for the modern all-inclusive resort industry. This model quickly expanded as air travel became cheaper, more accessible, and the number of people willing or eager to travel for leisure grew rapidly.
It was in this public market that the model known as “timeshare” officially emerged in 1963. Originating in Switzerland under the name “timeshare,” this business model was thoroughly researched and quickly adopted in the United States, later returning to develop in Europe (Scotland) in 1975. Within five years, timeshare resorts surged across the market, with major growth observed in European destinations, particularly in Spain.
From a marketing perspective, timeshare ownership is a distinct product compared to traditional vacation packages or holiday deals. The model is advertised as offering appealing services that standard all-inclusive vacations do not, such as top-tier quality, premium vacation services, self-catering accommodations in accessible locations, serene settings, guaranteed security, and the promise that once purchased, the vacation product “is always yours.” However, this concept was relatively new and not well understood by buyers, leading to initially low sales despite large-scale marketing efforts.
By the 1980s, large-scale business operations began developing in major resorts in Spain, leveraging psychological tactics to attract buyers. Concurrently, sales from the timeshare business model began to surge, demonstrating its potential as a promising market segment. However, this period also saw an increase in complaints and reports of misleading sales practices, which spread across Europe and other countries, prompting governments to establish regulatory frameworks to protect buyers in this high-risk transaction model.
2. Overview of the Timeshare Business Model and Current Issues Faced by Buyers
According to international legal dictionaries, “timeshare” refers to a form of shared ownership – typically of vacation or recreational real estate – where the owner has the right to use the property for a specific period each year. This definition is based on viewing timeshare as a form of shared property ownership. However, this approach has become outdated with the global trend of not considering timeshare as a real estate ownership form. Alternatively, timeshare can be understood as a model where buyers purchase a fractional ownership of a specific vacation property – a form of ownership allowing multiple people to use the property during designated times each year. Timeshare is also described as a vacation ownership model where buyers have the right to use a week (or longer) each year for a specific period in a condo/complex/villa/resort as outlined in the contract.
In many countries, the timeshare business model has increasingly lost its reputation and brand image due to the proliferation and persistence of buyer complaints over the decades. Consequently, to distance themselves from the tarnished image of timeshare, some companies have adopted alternative terminologies such as “Vacation Club,” “Fractional Ownership,” “Destination Club,” or “Vacation Ownership.” Nevertheless, regardless of the terminology used, the essence remains the same – it is still a timeshare business model.
Thus, based on its formation and development, the following characteristics and specific transactional aspects of the timeshare business model can be summarized:
· Timeshare ownership is a complex product and business model. To invest in or participate in a timeshare model, buyers must sign a timeshare contract – a document with complex content related to agreements on rights and obligations concerning the timeshare product.
· The value of an average timeshare contract ranges from tens to several tens of thousands of US dollars (10,000 USD – 40,000 USD). Additionally, after acquiring a timeshare, buyers must pay an annual fee (usually management, operational, or maintenance fees) based on the scale, number of weeks, type of weeks they own each year, and the value of the contract they have entered into. Timeshare contracts typically apply to a specific period each year and can last from several years to several decades, with some extending up to 80 years (as in Australia).
· Timeshare ownership is a rather specialized field. Depending on the nature and specific content of the agreements between the buyer and seller, timeshare business models worldwide can be categorized into the following main types:
- Fixed-Week Timeshare Ownership.
- Floating-Week Timeshare Ownership.
- Rotational or Flexible Timeshare Ownership.
- Points-Based Timeshare Programs.
· Timeshare ownership is not a basic or everyday product or service that people can easily decide to purchase. Therefore, to sell timeshare ownership, sellers often focus on strategies that exploit customer psychology. Specifically, sellers frequently approach potential customers through advertising/marketing via telephone or similar methods, sometimes promising gifts, vouchers, or "free vacations" to entice and attract potential customers to attend a presentation or introduction event about vacation ownership, where they aim to persuade customers to agree to a timeshare contract on the spot.
· When entering into a timeshare contract, buyers often do not fully understand the advantages and disadvantages of this product, particularly failing to carefully consider and evaluate the total costs they will incur over the years as per the agreement, only realizing the issues once they arise in practice.
· The decision to purchase timeshare ownership is often based on the misconception that it is a profitable investment. Experience in many countries has shown that timeshare ownership should be chosen primarily for personal or family vacation enjoyment within a specified period, rather than as a profitable investment.
· The issue of "fraud" in "reselling timeshare ownership" arises from the difficulty of selling timeshare rights. Some "timeshare resellers" offer to sell the buyer's timeshare to a third party, provided the timeshare owner pays a fee in advance. However, in most cases, these timeshares are either not resold or cannot be sold at all, leaving the timeshare owner with a loss (not insignificant) paid to the reseller.
· The main and common issues faced by timeshare buyers in many countries include:
(i) Excessively high and long-lasting annual maintenance fees due to the typically long duration of timeshare contracts, which can range from several years to several decades.
(ii) Inability to cancel or withdraw from the signed contract.
(iii) Inability to book vacations as initially scheduled.
(iv) Difficulty or impossibility of renting out or transferring the contract.
(v) Misleading practices, fraud, deceptive sales tactics, and high-pressure sales behavior by sellers, etc.
Among these issues, the problem of canceling an established timeshare contract remains the most significant and challenging aspect of the timeshare business model worldwide and has led to the most disputes and complaints from buyers since the 1980s.
3. Regulatory Framework for Timeshare Business in Various Countries and Recommendations for Vietnam
In recent years, the timeshare business under various names such as "long-term vacation services/timeshare" (or similar terms) in Vietnam has exhibited characteristics and issues comparable to those observed in the global timeshare industry since the 1960s. As a complex business model (as previously analyzed), the challenges associated with timeshare ownership have emerged long ago in several countries and regions worldwide, including Europe, the United States, Australia, the United Kingdom, France, Germany, Spain, and others.
In response to these complex issues, although each country or region may approach "timeshare ownership" differently, many places such as the European Union, the United Kingdom, France, Germany, Spain, Australia, and certain states in the United States have established direct regulations to manage this activity. For example:
In the European Union, timeshare business activities are directly regulated by a specific statute from 1994 (the Timeshare Directive passed by the European Community in 1994), a Directive from 2008 (Directive 2008/122/EC of the European Parliament and Council issued on January 14, 2009, regarding consumer protection in relation to certain aspects of timeshare, long-term holiday products, and resale contracts), and the individual laws of member states (particularly those with resort and tourism industries).
In the United States, for example, in the state of Florida, timeshare ownership is directly regulated by the Florida Statutes from 2018 (Chapter 721 with 98 Sections) dated September 25, 2018, which establishes procedures and requirements for the public disclosure of sales, exchanges, marketing, and operational activities related to timeshare ownership.
In Australia, timeshare business activities are directly regulated by the Companies Act (Chapter 5).
Overall, due to the long-standing development of the timeshare model, many countries and regions have enacted relatively comprehensive and direct legal regulations to ensure transparency and rigor in business operations. These include regulations on timeshare operation licensing, conditions for marketing products, requirements for providing complete and accurate information in advertisements and before signing contracts, consumer rights (withdrawal/consideration periods), management mechanisms, and handling violations, among others.
Notably, some customer rights are strictly regulated, such as: the right to unconditionally terminate the contract within a specified period without incurring any costs and without the possibility of withdrawal for any reason; prohibitions against requiring consumers to make payments before the end of the withdrawal period; or mandates for companies to establish escrow accounts to ensure payment capacity for customers wishing to withdraw from the contract, along with specific refund timelines.
While timeshare business activities are directly regulated by the laws of many countries and regions worldwide, Vietnam currently lacks a distinct, comprehensive legal framework to regulate this business model. Therefore, based on international practices and the current situation in Vietnam, it is crucial to review and establish a thorough and stringent legal framework to regulate timeshare services, mitigate risks, safeguard consumer rights, and stabilize social order in the current context.
