Are timeshares stocks VAC, TNL, and HGV good investments?

Timeshares, also known as vacation ownership, is one of the most controversial industries in the United States. It has been known for over-marketing, exploitation of its customers, difficulty of moving out, and expensive costs. 

As a result, many well-known companies like Marriott and Hilton have spun off their timeshare operations. In an article by the WSJ, the writer recommended his readers against investing in timeshares. Instead, he proposed investing in timeshare stocks. 

In this case, the three best timeshare stocks in the US are Marriott Vacations Worldwide Corporation (NYSE: VAC), Travel + Leisure (TNL), and Hilton Grand Vacations (NYSE: HGV). These companies. While VAC and HBV have their Marriott and Hilton names, they are both independent entities. Travel + Leisure emerged from Wyndham.

A timeshare is a product aimed at families that love traveling and vacations. In this, these companies enable customers to share ownership of fully furnished vacation accommodations. In this case, the customer can buy a title to a fraction of the unit, mostly through a points-based system. 

After purchasing the products, customers can visit any location for a certain period in a year. As such, timeshares argue that the approach saves money for future locations. They also argue that there is flexibility and certainty of vacations.

However, most financial experts recommend against these timeshares for three main reasons. First, the total cost of owning a timeshare is not cheap, with the average price being over $24,000. Experts believe that customers can get more savings without using these products.

Second, it is difficult to exit a timeshare agreement. While timeshare exit companies exist, the FTC recommends against using them. For one, these firms charge an upfront fee and have a low success rate.

Third, a timeshare is usually not a good investment because of depreciation purposes. For example, if you bought a timeshare for $100k, it will be impossible to sell it back for this amount. In most cases, you will sell it for much less amount. 

A closer look at reviews of timeshare companies shows that most people don’t get what they paid for. Also, they show that most customers regret making their investments in the first place. 

VAC vs TNL vs HGV stock price chart

For a long time, timeshare companies thrived in Wall Street. For example, shares of Mariott Vacations Worldwide (VAC) surged by more than 1,223% between January 2012 and March 2021. Travel + Leisure shares jumped by over 600% in the same period.

Hilton Grand Vacations stock surged by almost 600% from its lowest point in March 2020 to its highest point in 2021. Recently, however, these companies have come under pressure and erased part of their gains. HGV is down by 28% from its 2021 high while VAC and TNL have slumped by 53% and 37%, respectively.

This performance is mostly because of their bad reputations, regulatory risks, and the difficulty of selling new memberships. In the most recent quarter, Marriott Vacations said that its contract sales dropped by 4% while HGV noted that contract sales were coming below expectations.

To be clear. These companies have worked hard to improve their reputations in the past few years. They believe that doing so will help them continue growing in the long term. However, I am a bit concerned about the reputation and the ongoing soft demand for timeshares.

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