acadams
newbie
Shell Vacations Club - A Very Bad Deal!
On September 3rd, 2009, my wife and I attended a Shell vacations Club presentation at the Kauai Coast Resort in Kauai (for a discounted helicopter ride). The night before, I did some research on this board to see what I was getting into. This board was invaluable in helping me avoid one of the worst financial decisions imaginable, and so I feel I should ‘give back’ by posting my experience and the excel spreadsheet that I used to compare offers.
Link To Spreadsheet
Link to Screenshot of Spreadsheet
Link to Screenshot of shellhospitality.com
Summary:
The Shell Vacations Club is a tremendously bad deal. You are paying $250/night for a room that you can get on shellhospitality.com for $68/night. Do not do this.
Advice:
If you feel that you need to set aside some money to ensure that you will go on vacation, set up a separate bank account, and put some money into it. Do not buy into this club. If you have a lot of money and feel that you want to "own" something, buy a small vacation home. My second home in Vermont required a down payment of about $25,000 -- not very much more than it would cost to enter this club.
How is it that they have 127,000 members? It has been said that no one ever went broke by underestimating the intelligence of the American people. The salespeople are very skilled, very smooth, and very deceptive. They prey on the uneducated, on people who do not know how to book their own vacations, and on people who are unable to run cash flow simulations in Microsoft Excel. Now, you have the tools.
Qualifications:
I have an undergraduate degree in economics from a top 20 school and an MBA from a top 50 school. The attached documents and spreadsheets are properly adjusted for inflation and for the net present value of money and for the net present value of money. You are welcome to download the spreadsheet and test it for yourself.
Details
Having attended the presentation and looked into this matter, I cannot personally believe that this business model is even legal. The deceptive sales tactics, appeals to emotion, and the use of fraudulent, useless, meaningless numbers without any adjustments for inflation or for the concept of net present value of money at any discount rate were appalling.
The Shell vacations club maintains a website called www.shellhospitality.com where they sell their extra rooms. On this open market, you can find out the real value of a room at the Shell vacations club. In order to compare apples to apples, I compared a room at the same resort later in September, for one week.
I found that, on that website, I could book that room for $86.04 per night.
Thanks to the points chart found on this bulletin board, I knew that booking that room as a club member would cost 4550 points, since it was a platinum week. Again, thanks to this board, I knew that the maintenance fee would be about $900 per year. So, right off the bat, entry into the club looks like a very bad deal -- you are paying $900 a year in maintenance fees, plus about $127 in additional annual fees, for the right to book a week that you can book on the open market for $86 per night, which is a lot less than 900 per week.
When I mentioned that I was able to book a week on this website, several people there told me that I must be wrong. Fortunately, I took a screenshot of it, which is available as part of this posting.
I was offered entrance to the club for slightly more than $20,000 with that number of points. I also found out that there would be about $127 per year in fees separate from the maintenance fee.
Putting those numbers into my spreadsheet gave me the cash flows that I wanted. For those of you who do not have much experience in net present value calculations, let me offer an explanation. If I hand you $100 today, I am handing you $100. However, if I promise to hand you $100 a year from now, that promise is worth somewhat less than $100 -- say, $95. If I promise to hand you $100.10 years from now, that promise is worth much less than $100 -- say, $60. Using this principle, it is possible to come up with the value today of a series of payments into the future.
That is exactly what my spreadsheet does. It calculates the initial payment and the annual payments of remaining in the club for 20 years. It also calculates a stream of payments assuming that I buy that same room without entering the club from their website. Of course, I could buy some other room on some other island, and it would probably be about the same price.
Another way of putting this would be to imagine that I wanted to set up a bank account that would buy me 20 years of vacations at that resort. I would need to put about $9300 in that bank account, and I would withdraw a certain amount each year for the vacation, while the rest grew to pay for future years.
Let us imagine that I wanted to start a bank account that would not only fund my entry into the club, but also pay the maintenance and annual fees for the next 20 years. Do you see that those two bank accounts are buying me exactly the same thing -- 20 years of staying for one week at that resort?
However, setting up a bank account that would buy me into the club and pay the maintenance and other annual fees would require almost $35,000. This is a catastrophically bad deal.
I initially set up my spreadsheet for 10 years. Not being business savvy -- the person I met with encouraged me to stretch it to 20 years. When you do so, you will see that the numbers get even worse. Then they said that I could sell my membership at some future time. Since $20,000 20 years from now is worth much less than $20,000 today, this does not improve the situation very much.
Also, when you can buy memberships on the secondary market for a few hundred dollars, the idea that someone will be willing to pay me $20,000 for my membership 20 years from now is a preposterous idea. The presentation harps again and again on the idea that you are buying something valuable, and that doing so is better than renting. It is difficult to overstate the extent to which this is deceptive. You are buying nothing but the opportunity to pay more than $1000 per week for a room that really costs more like $650 a week. And you are paying $20,000 to buy that right. For those of you who are already in the club, I apologize.
On September 3rd, 2009, my wife and I attended a Shell vacations Club presentation at the Kauai Coast Resort in Kauai (for a discounted helicopter ride). The night before, I did some research on this board to see what I was getting into. This board was invaluable in helping me avoid one of the worst financial decisions imaginable, and so I feel I should ‘give back’ by posting my experience and the excel spreadsheet that I used to compare offers.
Link To Spreadsheet
Link to Screenshot of Spreadsheet
Link to Screenshot of shellhospitality.com
Summary:
The Shell Vacations Club is a tremendously bad deal. You are paying $250/night for a room that you can get on shellhospitality.com for $68/night. Do not do this.
Advice:
If you feel that you need to set aside some money to ensure that you will go on vacation, set up a separate bank account, and put some money into it. Do not buy into this club. If you have a lot of money and feel that you want to "own" something, buy a small vacation home. My second home in Vermont required a down payment of about $25,000 -- not very much more than it would cost to enter this club.
How is it that they have 127,000 members? It has been said that no one ever went broke by underestimating the intelligence of the American people. The salespeople are very skilled, very smooth, and very deceptive. They prey on the uneducated, on people who do not know how to book their own vacations, and on people who are unable to run cash flow simulations in Microsoft Excel. Now, you have the tools.
Qualifications:
I have an undergraduate degree in economics from a top 20 school and an MBA from a top 50 school. The attached documents and spreadsheets are properly adjusted for inflation and for the net present value of money and for the net present value of money. You are welcome to download the spreadsheet and test it for yourself.
Details
Having attended the presentation and looked into this matter, I cannot personally believe that this business model is even legal. The deceptive sales tactics, appeals to emotion, and the use of fraudulent, useless, meaningless numbers without any adjustments for inflation or for the concept of net present value of money at any discount rate were appalling.
The Shell vacations club maintains a website called www.shellhospitality.com where they sell their extra rooms. On this open market, you can find out the real value of a room at the Shell vacations club. In order to compare apples to apples, I compared a room at the same resort later in September, for one week.
I found that, on that website, I could book that room for $86.04 per night.
Thanks to the points chart found on this bulletin board, I knew that booking that room as a club member would cost 4550 points, since it was a platinum week. Again, thanks to this board, I knew that the maintenance fee would be about $900 per year. So, right off the bat, entry into the club looks like a very bad deal -- you are paying $900 a year in maintenance fees, plus about $127 in additional annual fees, for the right to book a week that you can book on the open market for $86 per night, which is a lot less than 900 per week.
When I mentioned that I was able to book a week on this website, several people there told me that I must be wrong. Fortunately, I took a screenshot of it, which is available as part of this posting.
I was offered entrance to the club for slightly more than $20,000 with that number of points. I also found out that there would be about $127 per year in fees separate from the maintenance fee.
Putting those numbers into my spreadsheet gave me the cash flows that I wanted. For those of you who do not have much experience in net present value calculations, let me offer an explanation. If I hand you $100 today, I am handing you $100. However, if I promise to hand you $100 a year from now, that promise is worth somewhat less than $100 -- say, $95. If I promise to hand you $100.10 years from now, that promise is worth much less than $100 -- say, $60. Using this principle, it is possible to come up with the value today of a series of payments into the future.
That is exactly what my spreadsheet does. It calculates the initial payment and the annual payments of remaining in the club for 20 years. It also calculates a stream of payments assuming that I buy that same room without entering the club from their website. Of course, I could buy some other room on some other island, and it would probably be about the same price.
Another way of putting this would be to imagine that I wanted to set up a bank account that would buy me 20 years of vacations at that resort. I would need to put about $9300 in that bank account, and I would withdraw a certain amount each year for the vacation, while the rest grew to pay for future years.
Let us imagine that I wanted to start a bank account that would not only fund my entry into the club, but also pay the maintenance and annual fees for the next 20 years. Do you see that those two bank accounts are buying me exactly the same thing -- 20 years of staying for one week at that resort?
However, setting up a bank account that would buy me into the club and pay the maintenance and other annual fees would require almost $35,000. This is a catastrophically bad deal.
I initially set up my spreadsheet for 10 years. Not being business savvy -- the person I met with encouraged me to stretch it to 20 years. When you do so, you will see that the numbers get even worse. Then they said that I could sell my membership at some future time. Since $20,000 20 years from now is worth much less than $20,000 today, this does not improve the situation very much.
Also, when you can buy memberships on the secondary market for a few hundred dollars, the idea that someone will be willing to pay me $20,000 for my membership 20 years from now is a preposterous idea. The presentation harps again and again on the idea that you are buying something valuable, and that doing so is better than renting. It is difficult to overstate the extent to which this is deceptive. You are buying nothing but the opportunity to pay more than $1000 per week for a room that really costs more like $650 a week. And you are paying $20,000 to buy that right. For those of you who are already in the club, I apologize.
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