Timeshares vs. Destination Clubs, Fractionals, etc.

I’m surprised that I haven’t seen more discussion on the growing alternatives to the traditional Timeshare such as Fractionals (a.k.a. “Shared Ownership” or “Residence Clubs”) and Destination Clubs. I am currently considering a membership in a Destination Club as an alternative to, or addition to, timeshare ownership.

Here’s how I came to consider a Destination Club membership:

We have a collection of Timeshares:
We’ve recently been reevaluating our travel strategies and assortment of timeshares. We got started over 20 years ago with the purchase of two weeks of entry-level timeshares on Hilton Head Island and still use those two weeks as traders into higher quality resorts. That was our “developer” timeshare purchase as there was no such thing as timeshare “resale” back then. Years later, we purchased two additional weeks in Sea Pines Plantation on Hilton Head and recently purchased 15,000 Hilton Grand Vacation Club Points (all through resale). We use or exchange all our current timeshare weeks. The end result is that we have a broad range of timeshares in multiple locations with varying quality levels.

Our travel patterns have changed:
Our situation may be similar to many Tuggers that have been involved with timesharing for many years. Our travel needs have evolved:
1. We have more time to travel now.
2. We have become accustomed to vacationing in better quality accommodations (a.k.a. spoiled).
3. We have changed and added to the locations where we vacation.
4. We have less time to play the “Exchange Game”.
5. We do more business on vacation due to advances in technology and connectivity (internet, laptops, cell phones, Starbucks, etc.)
6. We travel with family more often and need larger accommodations.

My concerns about timeshare exchange companies:
My observation is that quality exchanges are becoming more difficult. (Yes, both weeks and points…let’s not have that discussion here!) I’ve always been proud of the exchanges that I’ve achieved with RCI and SFX but I’m concerned that the process is requiring more time, more patience, greater pursuit and more compromise at a time when I’m becoming less compromising about my travel accommodation requirements. I’ve been much more successful working within the HGVC (Hilton Grand Vacation Club) reservation system but I still don’t get everything that I want.

It all started with a ski week:
One vacation that is constant for us is a two week ski vacation in Colorado’s Summit County. The strange thing is that none of our seven timeshares are located in a place where it actually snows! I determined that I would resolve this oversight by adding several ski weeks to our timeshare portfolio. I started looking at the eBay and TUG ads for ski weeks. Let me make it clear that we are now spoiled with the quality of our stays at timeshares by Hilton, Marriott, Westin, Hyatt and the occasional Club Regina. So our new ski weeks would need a similar pedigree. I was unpleasantly surprised when I saw the resale pricing of prime ski season, 2bd, ski in/out timeshares from some of the aforementioned developers. Needless to say, I didn’t purchase one.

What about “Fractionals”?:
We were at Beaver Creek last January and I was watching “Good Morning Vail” to get the ski conditions for the day’s skiing when I saw an interview of a developer of a new “Fractional” ownership resort in Vail. It took me awhile to realize that he was describing what I call a “Timeshare”. Then I realized that what he was selling cost over six figures and came with a personal “slope-side concierge”! And since when did “timeshare” become a bad word? It seems that the super high end interval ownership developers (Ritz-Carlton Club, Four Seasons, etc.) refer to their ownership as “Fractional” and never use the term “timeshare”. I know these are great quality resorts from the feedback on this forum, the fractional company web sites, and the entries over in the Resort Reviews section. It’s interesting that the #1 rated resort on TUG is “Four Seasons Residence Club Aviara”. Maybe it should be RCUG instead of TUG?? Anyway, my consideration for “Fractional” ownership ended when I saw the prices (yes, the resale prices)! Enough said about “Fractionals”.

How I became aware of Destination Clubs:
I was aware of Destination Clubs (DCs) but thought they were way outside my (our) budget and that I’d buy a vacation home if I wanted to spend that type of money for vacation accommodations. Then, I became aware of an affordable DC from this thread http://www.tugbbs.com/forums/showthread.php?t=28527 started by PerryM and I started to investigate. I quickly determined that the only DC that makes sense to me is High Country Club. There is also plenty of information on DCs available at www.heliumreport.com.

Evaluating Destination Clubs vs. Timeshares:
Until High Country Club (HCC), most of the DCs in the industry had membership fees in the $200K - $400K price range and yearly dues anywhere from $15K - $25K. This made the DCs totally incomparable with timeshares. However, HCC has an entry membership fee of $30K with yearly dues of $4,800 and you get 3 weeks access to any of their high end destinations. This pricing is on par with the high end Westin, Marriot, Hyatt or Hilton timeshares which only buys you one week of travel a year. If you break down the yearly dues to a weekly MF, you are still somewhat comparable keeping in mind that these are 2bd to 4bd homes. The HCC weekly MF at $1,600 is slightly higher that the high end timeshares ranging form $1,000 - $1,500 but with HCC you have access to larger/nicer residences that are professionally decorated, well stocked, and they offer more amenities. Also keep in mind that there are no Exchange Company membership fees or weekly exchange fees. Three weeks of domestic RCI exchange fees adds another $500 to the yearly cost of the timeshares.

As a result of the costs associated with DCs, my evaluation of DCs has been limited to High Country Club as the only DC that I believe is affordable for us.

High Country Club info:
First let me say that I’m not a member of HCC, don’t have any association with them and have no financial gain from HCC. I’m simply looking for good feedback as I consider a membership with HCC.

The HCC portfolio consists of properties in the $800K - $1M range. The properties range from 2 BR beachfront condo’s in 6 star resorts, 3-4 BR houses on beautiful golf courses, and 2-4 BR ski-in/ski-out condo’s/townhomes in some of the worlds best ski destinations, with all the amenities. It appears that these are a step above even the high end timeshares. The properties are professionally decorated and are fully stocked with everything their members would need from, flat screens TV’s, gourmet kitchens, DVD players, Xbox game systems, wireless internet access, pools (some private), hot tubs and the best locations. They also offer concierge services to assist their members with planning their trips, set up tee times, schedule shuttle service to and from the airport, dinner reservations etc.

My quest for additional vacation weeks started with a ski week but my wife and I also love beaches and islands (Hawaiian and otherwise). HCC currently has 23 properties in their portfolio and they seem to add them daily. They have 14 Ski properties in Colorado, Utah, California and Vermont. There are Beach properties in Florida, California, Mexico and Hawaii. They also have a golf property in California, the seemingly required Orlando property and a New York property with a view of Times Square. They also tell me that they intend to have properties in Deer Valley, Hilton Head Island, Costa Rica, Turks & Cacaos and Tuscany in the next couple months.

The HCC reservations system is online or by operator and appears to be simple and efficient. You don’t have the hassle of exchanging weeks and have a more flexible reservation policy. They still had tons of ski weeks available for the 2007 prime ski season when I inquired last week.

I know there has been great discussion on the longevity of the DC model due to a recent shake up in the industry. I’ll just say that I’ve done significant due diligence on this topic with HCC and I’m satisfied that they are financially sound both currently and in their long term planning. I applaud them for being forthcoming with financial & corporate information.

And the best thing of all about HCC, and maybe all DCs, is that there are……. NO HIGH PRESSURE SALES TACTICS!!!! (Unfortunately, no fee gifts or trips either!). It appears that this also keeps the marketing costs to a fraction of what timeshare developers spend. Their website is www.highcountryclub.com .

The bottom line (finally):
It appears that an affordable DC, like High Country Club, may be the next logical step in the process of assembling a value oriented, high quality vacation accommodation portfolio. They appear to be competitively priced with higher end timeshares, have higher quality properties, more convenient reservations, great locations and better amenities.

Now if I could just get them to take some of my timeshare weeks as a trade-in…..

Your Thoughts????

I am also interested in this concept as the price is right for these type of accomidations. My only problem was the 3 week usage and I do not travel that much. If they had a 1-2 week usage at $1500-3000 MF then I would probably buy.

WOW....
Thats alot to think about...

All of us are different, but you have much in common with my family. We are getting so spoiled. (The one bedroom hotel room with 6 people in for a soccor tournament definitely doesnt work anymore). We have come a long way baby. Last week 2 of my kids asked if they could join us at the Fairfield Flagstaff (2 bedroom). They werent impressed, but it was ok. That resort is nice but the location for so many things makes it perfect. I will say right up front that you must be in a higher income bracket or have more money to spend on vacations that I do.

A couple of years ago, We went to an auction of some sort. It was for fractional units. It was at the Grande Summit Lodge in PC, Utah. Very nice resort. They were autioning off fractional units. One week per month for a full year. You got the good and the bad weeks. The starting bid was at $55K for a 2 bedroom but I think with all the extra costs it would easily be $80K. We were thinking of buying in leu of a condo to rent out. The maintenance fees were around $700 per week (700 X 12). At that time, the thought of buying 12 weeks at one time was a little overwhelming but maybe not so much in a couple of years when I retire (if I didnt already have 5 at the time). My son looking for income property bought a condo closer into Salt Lake and rents his winter weeks out for $1500/wk and brings my grandchildren to visit me in the summer (works good for us). His condo that he paid $165K is now worth $250K and he has had a great write off for the past 2 years.

Looking back I dont regret my decision because:

1. I dont want to be obligated to trade every week, I own. Some of the timeshares I own I really do want to stay there. I like different places to stay. I wouldnt mind staying 2 weeks at one of my favorite timeshares but that would be enough.
2. If I was interested in the rental business (oh wait a minute, I do have rentals) or have so much money invested. I want properties that I own by myself. Im kind of a control freak, when it comes to an investment of that amount.

I dont ski anymore even though I live 15 minutes from some of the best snow on Earth. If I was going to buy several timeshares at the same place during prime time, I think I would opt to buy a condo in that area even if it stayed empty for half the year.

This is an interesting thread, its always good to think about alternatives. After all, there was a time that owning a timeshare never would have crossed my mind. I will look forward to see what others have to say.

Our dream...the "Virtual second home"

Travelguy,

Great minds think alike! We too have been looking at what I call the “Virtual second home”, one you own but don’t need to worry about. One that allows you to visit weeks/months at a time in all parts of the country/world.

Here’s my conclusions so far:

Fractional ownership:
We own TrendWest/WM fractions in South Lake Tahoe which can be converted to usage inside the WM system. This is not high end usage but what passes for 5-star timeshare usage.

Condo Hotels:
We own several that allow us to stay at them and receive rent when not there. Trump has a fantastic one going up in Waikiki Beach and reservations start next week. This is an opportunity of a lifetime but we already own one on Maui.

Destination Clubs:
We were just a day away from selecting High Country but with the bankruptcy of the first club we decided that there were no laws to protect us and our investment – we passed.

Residence Clubs:
High end RCs like Ritz Carlton are fantastic but we would rather put that money into a condo hotel. RCs are still fractional ownership, but real estate agents love to handle them.


We decided on taking the absolute cheapest way to stay the longest time at various places. 80% of our vacation portfolio is in TW and WM. We exchange into Marriotts all the time and thus leverage our money and usage. We can stay 6 months on Maui if we want, or spend the entire ski season in Steamboat, Whistler, South Lake Tahoe, or Park City.

Conclusion:
We own timeshares, fractionals, condo hotels and we are starting to fulfill our desire for our “Virtual second home”. We retire in a few years and plan to be on the road, in 5-star resorts for at least 6 months out of the year with what we now own.

Good luck,

PerryM said:

Condo Hotels:
We own several that allow us to stay at them and receive rent when not there. Trump has a fantastic one going up in Waikiki Beach and reservations start next week. This is an opportunity of a lifetime but we already own one on Maui.

Click to expand...

Perry

What condo-hotels do you own? Do you like them?

I own a few studios at the Delta Whistler Village Suites. They are decent investments that produce a small positive income flow (if you can avoid a mortgage) but are NOT a home run like some real estate properties. But they are 100% headache free.

I would guess Trump would want $1000-$1500 per sq foot. Thus, a studio would be about $750,000 or MORE. I am not sure if this would be a good investment. Why do you classify it as a once-in-a-lifetime opportunity?

FYI-------This is a e-mail I just received:


Greetings from The Residence Club at PGA West. I wanted to touch base with you, and see if you were still interested in The Residence Club.

Please feel free to call me at anytime so I may update you on the status of sales. I also want to assure you that despite the changing real estate market it has not effected our sales. It has actually been a tremendous advantage for us being the desert's only high-end Equity Residence Club. We have also found that compared to other high-end clubs throughout the world, The Residence Club at PGA WEST offers more luxurious homes, many added features and the best overall value for the price.

I also wanted to give you the opportunity to take advantage of our "Summer Incentive", owning one of the last Interests available in Phase One, priced at $259,000. We have just a few Interests remaining. Phase Two prices will start at $279,000 and ultimately Phase Three will sell out in the mid to high $300,000 range. With the "Summer Incentive" our developer will take care of your first quarter Home Owners Dues, (valued at $3270.00) This incentive is offered for those owners who can close in one of the last homes in Phase One and no later than October 2006.

Please call me as soon as possible if you would like to lock in an Interest in Phase One, (subject to availability, on a first come basis). This requires a $10,000 refundable deposit to get started and will enable you to review the CC&R's, Rules & Regs, budgets, etc. If you have not had the opportunity to preview the property as yet, let me know as soon as possible, so I can help arrange a discount at La Quinta Resort.

If you have friends or family that might be interested please let me know right away, so they might also receive Phase One pricing, and the "Summer Incentive".

If you have any questions or do not have further interest in our Club, please let me know. I look forward to hearing from you at your earliest convenience.

Thank you,

Bambi Lynn Belchar
Sales Executive
The Residence Club at PGA West
bambi@residenceclubpgawest.com
(888)650-9200

http://www.residenceclubpgawest.com
http://www.destinationclub.com

Perry what is the standard split between management and owner of a condo hotel unit.
Lets say the management rents it out for $400 per night 20 nights per month, making approx. $8,000 per month. What would be a good guess as to how much the owner of a condo hotel would receive? Half? More? Less?
I have thought abotu buying at a nice condo hotel with plans to retire (25-30 years away) there, after renting it out in the immediate. Any insight into this would be great.

Djp,

The standard split is 50/50. However, this can be very deceiving. Many resorts take 50% out and then charge you with housekeeping charges and front desk. You need to investigate each resort and ask for the rental management agreement.

Unfortunately, many new hot projects don’t have the management agreement until the very last day of when you can back out of the agreement. It’s too late then and you can be stuck with the management agreement until 80% of the condos are sold and even there the contract can go on for 5 years before the owners can get a new one.

Folks like Trump charge 10% of the gross rental income and that goes directly to Donald then you and the management company split 50/50 and then charges, like credit cards, can be taken out of your part.

The rental management agreement is a very critical document and you are under tremendous pressure to complete the transaction or lose your deposit.

I'd use the number of 40% as an average "cut".

Bill,

I sent you Donald’s condo hotel info by eMail.

Trump Waikiki

PerryM said:

. Trump has a fantastic one going up in Waikiki Beach and reservations start next week. This is an opportunity of a lifetime but we already own one on Maui.


Good luck,

Click to expand...

I am very interest in the Trump Waikiki. I am trying to figure out whether it is justify to have a condotel. The studio starting price is: $450,000, 1 bedroom $770,000. 1 bedroom+ Den: $1.4M, Two Bedroom: $1.5M, 2 Bedroom + Den $1.75M As of this week, no maintenace fees is set or the rental management agreement. I am looking at the Studio. Can you really break even on it since the purchase price is high.

http://www.trumpwaikikihotel.com/beach_walk_map.php

Can be done

Myip,

The developer CAN NOT give you stats on rentals – it’s a real estate law. What you need to do is to find resorts nearby and find their rental rates. From the literature, the Trump is going to be a real 5-star on the beach – the only one and it has the Trump name.

So find the most expensive rental rates and it’s going to be occupied 90% of the time thru the year. Then take 40% of that and that will tell you what your debt servicing should be.

Then use a mortgage calculator and work backwards to find your initial down payment – interest only mortgage. It may turn out that you need to put 30% down and then the rental income equals your mortgage payment AND your MFs.

Thanks for all this interesting information! I hadn't heard of High Country Club but I'd like to know more. Previously, I wasn't too impressed with the expense of the desination clubs and thought there was too much risk involved.
I'll take a look at the link to the HCC site and learn more about it.
Thanks!

I'm curious to know why people think that HCC's business model is sustainable. Simply put the math doesn't work.

Lets assume that all they sell are their most expensive memberships for $60k which gets you 42 nights. Maximum sales based on capacity (365/42) = 8.69 or 8 since you can't sell less than a full membership. That represents a 92% occupancy rate which is astoundingly high IMO.

8 memberships x $60,000 = $480,000

Marketing material states that homes are worth $850,000

Okay, so what happened to the other $370,000?

How is this sustainable? What part of the marketing material isn't telling the whole story because it just doesn't make sense to me. How are the marketing costs being paid? What about admin costs?

Is there something blatant that I'm missing here?

I looked at their mf's as well and find them to be too low since there isn't any profit component that would also add to sustainability.

Annual dues = $9,600 x 8 = $76,800

Perry has used 8% of capex for his analysis I believe, I usually assume 10% with the extra used to build a replacement reserve:

Perry = $68,000
Mine = $85,000
Average = $76,500

I think it's reasonable to assume that there's nominal margin in the mf's to cover overheads.

My conclusion - this is the next T&H

Too risky or too expensive

Timeshares, for all their flaws, still represent ownership of real estate. Either we have a deed that states we own 1/52 of a condo, or paperwork indicating we own a tiny part of the trust of the master deeds (like WM). Some are RTU and it’s spelled out how many years we have access to the real estate.

ALL Destination Clubs (DC), with just 2 exceptions (BellHavens being one of them) do NOT have you owning ANYTHING. You own a dream that can crumble like the pioneer DC and lose your entire investment as a worst case scenario.

I also could not make the “numbers” work with High Courntry. If they buy $1 M homes and 8 to 10 folks “own” them then the membership fee needs to be $100,000 per member. It’s half of that and I could not figure out how they could make the club work. Well, the only way is to start leasing homes/condos and not buy them.

So because of what I learned on my excursion into DCs I found them very exciting but very risky; and for the amount of money they want only BelleHavens looked attractive at $200,000 membership fee that appreciates with real estate.

Most DCs ONLY allow the earliest members to participate in the real estate appreciation of the units that they own. (This was used as a lure to attract investors) Most don’t allow members to cash out and realize the appreciation of the underlying real estate in the club.

I purchased a Hotel/Condo studio unit at the Delta Whistler Village Suites in British Columbia, Canada. This is a very well managed property in a fantastic location.

Price = $142,000 Canadian dollars (exchange rate was about 1 CAD = 70c USD)

Income received = $6,500 after ALL HOTEL expenses in 2005

Real Estate Taxes = $3000

Accountant = $500

True NET PROFIT = $3,000

Because I have no mortgage, the return on investment (ROI) is 2.11%...not so good.

However, I am banking on capital appreciation of the property as the Olympics arrive in 2010. In addition, I bought the unit for a bargain as the same units were going for $200,000 in 2003.

A side unplanned event has been the strengthening of the Canadian dollar vs the US dollar (now $1 CAD = 85c USD) some people think it will be $1 CAD = $1 USD soon and I tend to agree with them.

One piece of advice a trusted real estate broker told me: "the high end hotel condo's like the Four Seasons, Westin, Pan pacific, etc. have lower ROI's than mid range properties like the Delta as they have higher staff expensed and have to keep replacing bed sheets, towels, furniture, etc to maintain their 5-star rating.

Thus, I do not see the Trump property as a great investment. Stick with a 5.5 % CD or a nice dividen paying stock.

Bill,

Your analysis sounds sound. A person can easily use Zillow.com and get real estate appreciation at many locations for the past 10 years. A person then needs to do a lot of detective work, find comparable rents, and then estimate what the rent will be at the new condo-hotel. Occupancy rates can be found by doing research in local newspapers who keep track of this kind of data. Call them and ask for the data.

Once that is done you can then form a business plan and determine the down payment needed to make the numbers work. Hawaii has one of the highest real estate appreciations over 10 years that exist.

Here are a few more thoughts on condo/hotels.

Pros:
Revenue sharing, thus no real competition from other owners.
100% headache free....the checks get wired to the bank every month.
Can be a good , but not great, investement

Cons:
You can't change a thing in your unit, even a picture. Thus, there is no real sense of ownership.
Limited usage (4 weeks per year, etc.) as there are restrictions and then your monthly revenue goes down when you use it.

I bought in Canada to have some international exposure for my assests. In fact, it has appreciated about 20% just in the strenght of the Canadian dollar vs US dollar. Of course, this could reverse and I am screwed.

Yes, I could have bought Canadian stocks, but I fell in love with Whistler and think it is one of the most beautiful palces in the world.

I purchased a 2BR unit at Castaways' Cove which is the condo/hotel part of the Reef Resort on Grand Cayman. Some items unique to this property:

Hurrican Ivan - had to dig out foundation and start over again which delayed everything by at least a year. The delay has seen the same unit increase in value by approx. 17%

US/Canadian exchange rate - dramatic improvement so our capex dropped considerably AND allowed us to finance a portion in Canada and lock in the best exchange rate we've seen in a very long time.

Rents in US$ - This provides us with a reasonable hedge against future fluctuation of exchange rates on the operating cost side.

Management co - takes a 25% split on revenue but we pay all the expenses

I haven't drawn any conclusions on this as yet as it's too early, I'm not enamored with the interior design, size and finishes which are of a lower quality than I'd anticipated. We are considering upgrading to their phase 4 units which are to be much bigger. For my money it's the best location we can find I just don't know if I'm going to be happy in a unit that didn't meet my expectations.

Hawaii is different in many ways

Steamboat Bill said:

Here are a few more thoughts on condo/hotels.

Pros:
Revenue sharing, thus no real competition from other owners.
100% headache free....the checks get wired to the bank every month.
Can be a good , but not great, investement

Cons:
You can't change a thing in your unit, even a picture. Thus, there is no real sense of ownership.
Limited usage (4 weeks per year, etc.) as there are restrictions and then your monthly revenue goes down when you use it.

I bought in Canada to have some international exposure for my assests. In fact, it has appreciated about 20% just in the strenght of the Canadian dollar vs US dollar. Of course, this could reverse and I am screwed.

Yes, I could have bought Canadian stocks, but I fell in love with Whistler and think it is one of the most beautiful palces in the world.

Click to expand...

With the new Trump there are NO occupancy restrictions - that's the law in Hawaii. Want to live there 6 months and then rent 6 months - no problem. You are right with decorating your unit - you can't if you are in the rental pool. Many folks never enter the rental pool and use the unit for years then enter it into the rental pool.

Hawaii also makes NO distinction to a condo-hotel and a condo - they are identical in Hawaii. This is a BIG difference to condo-hotels in Florida where you normally own "From the paint inwards" and someone else owns the wallboard outward to include the condo, building, lands, etc. In Hawaii you own Fee Simple part of the entire resort. (Well assuming its Fee Simple to begin with and not leasehold).

Intrawest starts their second round of reservations at Ka’anapali beach – this might be the last NEW whole ownership on Ka’anapali beach for decades to come. Link: http://www.honuakai.com/ (we own there)

TUG Special Offers

Steamboat Bill said:

I am also interested in this concept as the price is right for these type of accomidations. My only problem was the 3 week usage and I do not travel that much. If they had a 1-2 week usage at $1500-3000 MF then I would probably buy.

Click to expand...

You might try contacting HCC and ask them if they can accommodate you through one of their programs. I've found them to be flexible and very straightforward.

For example, HCC continues to offer the Tug Special Offer originally posted by PerryM as follows:

PerryM said:

TUG Special Offers:

• You can buy a membership and NOT pay MF’s for 1 year. Since timeshare owners are always booked up 12 months out they realized that you could not use their DC and thus are allowing TUG members to buy and not pay MF’s for 12 months. Of course you can’t use the DC either but you can vacation in your timeshares and lock in a cheap price.

• You can buy an Affiliate membership and when you decide to use it, you can use for 3 years and then upgrade to a Private membership and pay only $10K more. With Private membership, you get 3 12 months reservations, one of which is a holiday week and get 3 more weeks of usage (total of 6). That way folks who have only a few weeks of vacation now can “lock in” a higher membership usage for years down the road.

• Group & Corporate memberships allow your friends and employees to use the DC. The same applies here too, lock in the Affiliate membership and have up to 3 year to upgrade to Group & Corporate for today’s difference of $20K..

Click to expand...

The prices have changed since that original post. An Affiliate membership costs $30K. You can buy this now and not use it for 1 year. After that year, you pay a MF of $4,800 for 3 weeks usage. You also have the option to upgrade to a Private membership within 3 years for an additional $20K. The Private Membership gives you 6 weeks usage for the MF at that time (currently $8,400).

Bottom line is that HCC seems to work WITH its members for win/win situations. Could be a hard adjustment for us timeshare types who are accustomed to the developers and exchange companies working AGAINST us.

HCC & the Numbers

caribbeansun said:

I'm curious to know why people think that HCC's business model is sustainable. Simply put the math doesn't work.

My conclusion - this is the next T&H

Click to expand...

Caribbeansun,

My experience so far with HCC is that they have been extremely forthcoming on this subject and transparent with their business plan and projections. Prospective members can sign a non-disclosure agreement and receive the standard marketing info along with the company's 10 year projection. The projection is detailed and includes all assumptions that contribute to the plan. I also spent over an hour with the HCC CFO. He answered all my questions and was totally open about their business, its potential and its liabilities.

I'll contact HCC today or tomorrow and ask them what I can post here in regard to their business plan, etc. Here's a hint: Don't think purchase and payment ... Think leverage and cash flow!

As a prospective HCC member, I'm very interested to see what Tuggers have to say about the true HCC business plan. Maybe they are the next T&H and I just don't see it.

I'll post whatever I can as soon as I get approval.

Too risky for me

Travelguy,

I too found HCC an interesting proposition; I just can’t seem to get the numbers to ever work out. I never got an explanation from them that I could understand, it could be just me.

If 8 folks buy a $800,000 condo then each person pays $100,000. I just don’t see how it can be any other way. The other item that has me worried is that the member has NO ownership of anything – zip. If the HCC folks decide to close shop and liquidate the properties I don’t see where the members have any protection. In the case of the founding Destination Club – they are in bankruptcy court with little protection for the members.

If the DC industry sponsors legislation that protects the investment of their members, I’ll reconsider. Until then I’d rather put the money into something safer.

I’m not challenging HCC, there were very forthcoming with information and seems to want to tap the high end timeshare market. However timeshares offer ownership and DCs don’t, with just one or two exceptions, and HCC is not one of them.

I'm glad to hear that they are forthcoming and open. However, even trustworthy people do make mistakes. I would say that just because somebody tells you their ideas it doesn't make them good ideas it just means you know what you're in for.

If a DC's business plan includes leverage and the assumption that debt payments will be made out of future membership sales what they are creating is a model dependent on future sales just to meet their ongoing obligations on those debt instruments. That can seriously undermine the financial viability of the organization and in turn the security of your deposit very quickly should membership sales lag from projections.

Further, unless they can increase their membership deposit amounts much more than the actual cost of future properties there must be a sizable deficit/debt with no manner of repayment. Keep in mind it's only supposed to be the 20% they don't refund when you leave that is really their's to spend. Sounds like they've lost sight of the fact that there is a real obligation to the membership to me.

Alternatively they are going to carve out a portion of their annual dues to make debt payments which again if future membership sales don't keep pace it has special assessments and big mf increases written all over it.

Maybe I'm missing something here but to me this model isn't sustainable in the long run.

travelguy said:

Caribbeansun,

My experience so far with HCC is that they have been extremely forthcoming on this subject and transparent with their business plan and projections. Prospective members can sign a non-disclosure agreement and receive the standard marketing info along with the company's 10 year projection. The projection is detailed and includes all assumptions that contribute to the plan. I also spent over an hour with the HCC CFO. He answered all my questions and was totally open about their business, its potential and its liabilities.

I'll contact HCC today or tomorrow and ask them what I can post here in regard to their business plan, etc. Here's a hint: Don't think purchase and payment ... Think leverage and cash flow!

As a prospective HCC member, I'm very interested to see what Tuggers have to say about the true HCC business plan. Maybe they are the next T&H and I just don't see it.

I'll post whatever I can as soon as I get approval.

Click to expand...

Y'all are certainly living in the stratosphere!

My impression of full-ownership is that it is a win-win-win situation. The sales department wins when they sell it to you. The resort management wins when they bill you for maintenance. The rental department wins when they take 50% of what you let them rent for you.

Such a deal.



Fractionals are similar, only on a fractional scale.

JMHO.

I have to agree with JLB. I would much rather buy a condo outright even if it is not at a fancy resort project. They will be much easier to sell if the need comes up suddenly. Association fees are a lot better too.

Timeshares have been around for many years and cost a fraction of these prices but still you have to take a beating, most of the time, when you have to sell but it is not such a large amount. If you buy them re-sale like most people do here, you can't go wrong so wait until these new developments come on the market too.

Renting one of the Trump condos sounds a lot better to me than owning one. JMHO.

The Timeshare Beat

Today's Timeshare Beat's headline mentions that the Ritz-Carlton Club is building the first fractional property ownership in Hawaii. Club residence prices start at $300,000 per interest. Why not buy one or two of these?

On the other hand, I read today that housing construction in the USA fell to a three-year low! When will the top of the market hit the timeshare developers? If I were in the market for a re-sale timeshare, I would wait a little bit longer as I expect to find some of the choice timeshares at the best resorts coming back on the market not too long from now and the same for the ones that cost $300,000 to purchase.

For $300,000 you can own a condo outright in many areas in Mexico right on the beach but no longer in the tourist areas. The Puerto Vallarta area is still booming and prices have risen rapidly this year because financing is available now from US lenders for vacation homes or condos.

We love reading about the real estate market in other countries. Our single boat neighbor in our marina just bought in Panama at one of the most beautiful beaches you can imagine. :whoopie: He showed us some of the pictures and his house appreciated already so much since he bought it only recently. The country is stable and very friendly towards American retirees. You may still find a good buy here but not much longer once it has been discovered by fellow Americans or Europeans like in Mexico.

There is so much to read about real estate outside the country and especially in Mexico.


I love Hawaii but buying a condo hotel in Maui sounds too risky to me if the economy really turns south. What worries me too is that the island is getting so overbuilt and congested. Maui is ruining it for everyone!