Converting To A Timeshare, A Follow Up

Author(s): Arthur O. Spaulding, Jr.

Source: Hotel Interactive

12/24/2012

Arthur Spaulding, Jr. wrote an opinion piece published by Hotel Interactive on Dec. 24, 2012 about whether converting a portion of the rooms in hotel projects to timeshares makes economic sense. Spaulding was responding to an earlier article Hotel Interactive published on that topic.

While Spaulding agreed with the timeshare idea, he cautioned that there are a number of factors that can inhibit or derail a conversion. The biggest issue, he noted, is whether there is real property secured debt on the project. If so, the developer/seller will have to comply with certain regulatory requirements to obtain a permit or right to sell their timeshare interests.

A hotel project lender may also have reservations about the “mixed use” aspect, Spaulding wrote. “The lender will seethe building as a whole, and may be concerned about the management of the project should the developer go bankrupt.”

While there are many other technical and regulatory considerations that would be involved in converting a hotel property to timeshare, “those identified above are probably the most significant for any serious consideration of such a plan,” he wrote. “In other words, there may be very good and compelling reasons to explore the idea of converting a hotel to timeshare, but there are also very significant legal and practical hurdles to be overcome to bring such a plan to fruition.”
 

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