- [Narrator] Timeshares are a $35.7 billion industry with a bad reputation. - We give them tequila, champagne, whatever it takes to get 'em in the door. - [Narrator] But execs say they put the industry's bait and switch days behind them, rebranding timeshares as vacation clubs that offer an increasing range of accommodations and experiences that are meant to appeal to younger people. For the largest companies, the changes have worked. The leading players are worth billions of dollars. But the industry is still grappling with some fundamental issues. Timeshares are typically a terrible investment, and the industry is a magnet for scammers. This is "The Economics of Timeshares." - Timeshares emerged in Europe in the 1960s, and then later, in the US. The sort of thing that you could be on a vacation, and be convinced to invest in. - [Narrator] Timeshares were initially pretty simple. They were fractions of a deed, where people would buy partial ownership of a vacation property. That granted them a fixed week at a specific resort. They'd have to pay a sizable down payment and annual maintenance fees. But since this was a property, they'd own it forever, until they died, and passed it on. Timeshares were often marketed to families. - Does anybody really get very excited about going into a standard hotel room with two kids, and you've got two queen beds sitting there? No, not really. - [Narrator] But the business model has changed significantly. - It's really transformed over, gosh, 40 or 50 years now. We're doing a lot of things to grow the business. Not only is it an expansion of our resorts, not only has it been through M&A, but it's also driving people to maximize engagement. - [Narrator] To start, they're able to combine multiple businesses into one. Timeshare companies are developers that build their own properties. Banks that provide high interest financing. Clubs that manage a network of resorts. And hotel management companies that rent out extra rooms. Secondly, they've been able to ride the wave of interest in vacation rentals, as companies like Airbnb have taken off. Third, they've adopted their product, switching to points-based systems. - They've figured out a way to give you a more flexible experience, and make more money in the process. - [Narrator] Timeshare points work like frequent flyer miles. But people get a certain number every year, or every other year, based on their initial payment. Then they can use these points to book stays at any number of properties, or transfer them to other vacations like cruises. This system is better for the timeshare company because they get total control. It's also generally easier to resell points than set weeks at specific resorts. And companies can also rent out any unused rooms like a hotel would. Finally, the largest operators have leveraged the reputation of brand names, that they're able to use because of licensing agreements, and grown through consolidation. This has helped clean up the industry, though there are still some major issues. - There's definitely a stigma that has stuck with the industry, but I think the consolidation in the industry only helps matters. - [Narrator] Timeshares were initially known for high pressure and unethical sales tactics. But the largest timeshare companies have to follow the standards of the brands they license. Which means most US timeshare companies won't directly lie to customers. - While they're not being dishonest, they're not volunteering any unpleasant details either. It sounds good, but people don't ask questions. - [Narrator] Many people though, really like their timeshares. Industry figures show 91% of owners are satisfied with their overall experience. - I've spoken with many of them who are very pleased with them, who are actually a bit defensive. They don't want to think that they've been duped, or overpaid for something somehow. - [Narrator] Now, most of the industry's issues center on what happens when owners try to sell. They often find their memberships worth little, or even less than nothing, since annual fees make timeshares a liability. - As inflation has taken off, people are getting shocking assessment fees, creating financial hardship for some people, or just, it's just simply not worth it. - We had buyer's remorse pretty quick, and that's been pretty sustained over time. - [Narrator] Justin and his wife were on their honeymoon, when the concierge suggested they attend a meeting that ended up being a sales presentation, where they say they were given multiple drinks until they signed an $18,000 contract. - Our original thought was, let's try and sell this, or try and back out in some ways. - [Narrator] But selling the timeshare, they realized, could end up costing them a lot of money. Because the biggest scams remaining in the industry involve companies that prey on people trying to sell. The Wall Street Journal reached out to Villa del Palmar, where Justin and his wife own a timeshare, but did not receive a response. Selling a timeshare can be challenging and expensive. There's an entire industry dedicated to helping people exit timeshares. With books, companies, and podcasts offering advice. Thousands of timeshare owners say they've been defrauded millions of dollars by companies that offered to help them sell their timeshares, but then allegedly failed to follow through. - You need to be extremely careful dealing with them, because that is a business that is not regulated, and there are a lot of sob stories, and a lot of unethical people. - [Narrator] Last year, a Wisconsin Attorney General won a nearly $2.6 million judgment against timeshare exit company, Relief Solutions International, for misrepresenting itself, and its services. Earlier this year, Minnesota's Attorney General settled with three timeshare exit companies for violating the state's debt settlement services law. - The ugly truth is that for a lot of people, not only are they kind of stuck with this timeshare, but they have to basically get into a standoff with the timeshare company, who would love for you to keep on paying the fees. - [Narrator] Which is why it's important, at the very least, not to think about timeshares as an investment that holds value. Because timeshare companies profit by getting more people to buy in, take out loans, and pay annual fees. Not by giving people their money back. - Timeshare is a prepaid vacation. This is not buying a second home, where you're sitting on it and expecting appreciation. - One person in the timeshare business said to me that you have to think about timeshares like an engagement ring. It's a lot of sentimental value to you, but as soon as you walk out of the jeweler, it's worth a lot less. 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