Timeshares carry unsavoury connotations of dodgy deals, half-built flats and ruinous upkeep. Pacaso, a San Francisco-based second home start-up that has reached a $1bn valuation in just six months, hopes to rescue their reputation.
Not that Pacaso admits to selling timeshares. Property vendors know the value of marketing. See the company’s boast that half a million people have visited its website, a figure that sounds more impressive than its tally of 100 customers. But Pacaso has what realtors call “good bones”. Co-founder Spencer Rascoff was a co-founder of Zillow — the $31bn online real estate company. His new venture has secured $1bn of debt. Backers include ex-Amazon consumer boss Jeff Wilke.
Pacaso insists that it is selling shares in second homes, not timeshares. The difference is negligible. What it really sells is exclusivity. The business buys homes in destinations such as Palm Springs, makes them look snazzy then sets up a limited liability company for co-owners, who arrange visits via an app. It claims onward sales will be easier than typical timeshares.
Prices are steep. Pacaso takes a 12 per cent cut of the purchase price — double the commission typically charged by real estate agents — plus a $99 monthly fee. Owners also pay property management costs.
Still, the rise of flexible working could increase movement around the US and bump up demand for second homes. Timeshares are already popular, in spite of their bad press. In the US there are more than 206,000 units in resorts, according to the American Resort Development Association.
The risk is that Pacaso will be left with properties it cannot sell. Zillow’s own homebuying business is popular but not yet profitable, reporting a loss of $320m on revenues of $1.7bn last year.
A $1bn valuation for a company with just 100 customers is aggressively optimistic. Tech cannot eliminate every timeshare problem. Buyers will still worry about reselling their share and paying for running costs. Even more will realise that visiting the same holiday destination every year can get boring — even when the destination is Palm Springs.
The Lex team is interested in hearing more from readers. Does Pacaso have a strong proposition? Please give us your analysis in the comments section below