Vacation Solutions

Demographic changes are fueling the growth of high-end variations on the time-share theme. Many Baby Boomers have the money and leisure time to travel well, but don't want to be tied down, financially or logistically, to a full-time vacation home. And with second-home sales slumping — they fell by 19% in 2006, according to the National Association of Realtors — developers are marketing partial ownership as a less risky way to invest in vacation property. Here's an overview of the most popular options:

The good news: There's evidence that at the higher end, the investment outlook is better. These days, 10 big hotel-industry brands control about 80% of the timeshare market, and several have launched swankier "private residence clubs," which come with larger blocks of time and often adjoin four- or five-star resorts. The number of private residence clubs rose from four in 1995 to 46 in 2006, according to industry analyst Richard Ragatz. Lower marketing costs and access to luxury amenities like excursions and spas have boosted the resale value of some of these properties. And for people looking for variety, luxury fractionals are increasingly easy to exchange.

As the broader condo market has sagged, however, the drawbacks have become more apparent. It's surprisingly difficult for owners to calculate how much they can make in rent, because securities regulations discourage developers from discussing room rates or occupancy levels. Because they don't want to lose revenue, most hotels won't let owners use their condos for more than 30 nights a year. Monthly maintenance fees, meanwhile, can run as high as $1,000. To make a condo-hotel pay off, it's best to bargain-hunt — and to buy a property you know you'll use often.

Destination club members usually do not own equity — and quitting can be thorny. Most clubs will refund only 80% of your initial membership fee. Many also require three new members to join before one can leave, and you can't sell your stake. Given the commitment involved, it's worth crunching the numbers. An "elite" membership at Steve Case's Exclusive Resorts, for example, costs $425,000 for 45 days per year, plus an annual fee of about $30,000. Assuming that you remain a member for 10 years, and factoring in an opportunity cost, that pencils out to a little more than $2,000 per night. That's hardly cheap, but comparable residences rent for $2,000 to $4,000 per night. By comparison, High Country comes to about $300 per night at the $50,000 buy-in level. You can certainly find a hotel room at that price — but it's unlikely to sleep six comfortably or have fireplaces and balcony views.