Ask RedWeek / March, 2017

What commission rate is typical when your resort rents your week?

I own a California timeshare, which I enjoy. This year my plans have changed, so I called the resort to see if they could rent it for me. They said, "sure," but want to charge me a 25 percent commission. That seems outrageous - is this fee typical?

Answer: This is a great question. We contacted numerous companies and resorts to evaluate their in-house programs, if any, and discovered the options vary dramatically.

Resorts Charge 25 to 50 Percent Commissions on Owner Rentals

When it comes to helping owners rent out their un-used timeshare weeks, resorts seem to fall into one of three categories. Some try to prevent rentals, and won't provide referrals to help their owners re-coup their fees for the un-used week. Some don't have a rental program of their own, but are helpful in providing recommendations - encouraging owners to use a marketplace like RedWeek.com to rent their week.

A third group of developers and resorts will be happy to fully facilitate the timeshare rental. But for that service, which saves time and anxiety for owners, the developer or resort will charge a rental commission that typically ranges between 25 and 30 percent. It is not uncommon, however, for some resorts to charge 40 to 50 percent commissions.

Among those who charge sky-high rental fees, the developer or reservation company will pocket part of the commission, then kick the rest back to the originating resort, ensuring that everyone in the transaction gets a piece of the rental proceeds.

If you don't mind paying a high commission, renting through your home resort can be a nice way to generate some low-stress income that will potentially cover your annual maintenance fee. Your resort benefits from this scenario too - they get additional income on a unit for which maintenance fees have already been paid. It also creates a brand-new lead for your resort's timeshare sales team - your renter may be heavily incentivized to add a timeshare tour to their travel agenda.

Of course, if you DO mind the high commissions, we believe there are better options. You can advertise your week yourself quickly and easily, with an ad that runs up to a full 6 months for just $29.99. If you prefer an option similar to the resort's program, RedWeek does that too for a cost of $79.99 upfront, and a flat commission of $99 only if and when it rents. On a typical $1,500 rental price, even the full-service fees amount to less than 15%. Your resort may still charge for a name change, as we discussed last month - so you will want to make sure you understand their fee structure.

Some Examples: Marriott + an Independent Resort

For purposes of this story, we examined the rental programs for a major developer, Marriott Vacation Club, and an independent legacy resort, Tahoe Beach and Ski Club. (RedWeek chose these two because they were very open to talking about their programs.) Their rental policies are very different --- and their commissions differ by 100 percent.

Tahoe Beach charges a 25 percent commission to handle the rental of an owner's timeshare, which means the owner gets 75 percent of the rental price. A one-bedroom Tahoe Beach unit might rent for $750 a week in off-season, to perhaps $1,500 a week, or more, in primetime summer. After deducting the commission, the owner still recovers most if not all of the annual maintenance fee... assuming it rents, which is not guaranteed.

That same ease-of-use appeals to owners of Marriott Vacation Club, which has a more complicated but guaranteed-payment owner-rental program — plus a 50 percent commission structure. Here's how it works:

An owner calls Marriott's owner services department, informing them of their desire to let Marriott rent their week. Marriott will first check inventory at your resort to determine whether they want to handle the rental (sometimes, they won't, but most of the time, they will want it, because most Marriott timeshares are in high demand). Marriott will quote you a rental price, right away, over the phone, e-mail or send you paperwork authorizing the rental and, within 10 days, send you a check for your share of the rental. Easy, right?

Here's a real-life example of how the Marriott program worked recently. An owner at Maui Beach Club, a fancy Marriott resort on Kaanapali Beach, turned in a two-bedroom, two-bath summer week to Marriott for rental. Marriott said the timeshare's rental value was $3,300, and offered to pay the owner $1,650, immediately, to close the transaction. The owner received the paperwork and check in a week, while Marriott listed the timeshare on its timeshare and hotel websites. At the same time, Marriott marked-up the retail rental price on its Web site to approximately $5,600 for the week.

That's a big profit for Marriott on one week of inventory. It already had the owner's $1,800 maintenance fees. On top of that, the company presumably rented the week for the advertised $5,600, minus the $1,650 commission paid to the owner. If you are doing the math, in this scenario, that 50% commission ends up looking closer to 70%.

One Marriott owner services rep we talked to conceded, "it's always better to go to separate [rental] entities. A lot of our owners say our prices are not enough for what their timeshare is worth on the rental market. We tell them to look at RedWeek to get a good estimate of what they are renting for."

The rep also said, "Our system has lots of advantages for owners. It will calculate your value on the spot and kick out a check to you, then we'll look for someone else to rent it. The program really does help a lot of people out."

Just for a reality check, we checked the rental values for that same Maui Ocean Club unit on RedWeek and on Marriott.com. An April 15-22 Easter break week in a one-bedroom unit is posted for for $2,000 ($286/night). On Marriott.com, the same sized unit with the same view is bookable for over $4,600.

Bottom line: a 25% commission may not be unreasonable for this type of resort-handled rental program - it may actually be a deal. But you can charge a lower price and still keep more of the proceeds if you rent it yourself.

Have you ever rented through your resort? How much did it cost you, and how did you feel about the experience? Let us know below.

About the author

This answer was provided by RedWeek's Chief Correspondent, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of RedWeek.com.

Leave a comment

    7 Comments

  • Avatar for dianep394
    dianep394
    Mar 14, 2017 (4 months ago)

    I, on the other hand, I'm looking to rent a week in Cabo San Lucas and I was told I would be responsible for fees at the hotel and taxes and the owner did not know what they were. On top of that weekly fee the homeowner it's charging. Is this how it works? If there is a resort fee and taxes, is the renter responsible for the additional nightly charges all the time?

  • Avatar for hwrjmcl
    hwrjmcl
    Mar 14, 2017 (4 months ago)

    Unless you need the cash, why not bank the week at II or RCI? It will cost you for the trade you make, but less than the commission, and you get to keep a vacation week (or more, if it's a lock-off and you trade each side separately.

  • Avatar for phyl21
    phyl21
    RedWeek.com Team
    Mar 14, 2017 (4 months ago)

    Diane-

    If a resort charges any fees or taxes at check in (such as an energy surcharge, amenities or housekeeping fee, etc) typically the renter is responsible to pay those. Each resort is different, so I would recommend calling the resort to confirm what those charges would be before signing a rental agreement.

    If you need further assistance, please Contact Us.

    Phyllis

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  • Avatar for michaelp706
    michaelp706
    Mar 15, 2017 (4 months ago)

    What you did not mention is that any income received for the rental of your week is considered taxable income by the IRS (and most likely by your State, and maybe by your local taxing authority). Marriott will send the appropriate income document (1099?) to both you and the IRS. Can't hide from the taxman.