# Shell Vacation Club- Bad deal



## acadams (Sep 13, 2009)

*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.


----------



## Picker57 (Sep 13, 2009)

Interesting post - thanks.  I doubt this is a surprise to anyone who has purchased from the developer (like we did) and then dope-slapped himself bigtime after discovering TUG and doing due diligence way after the fact.  But in today's market, buying into Shell for almost-zero cost points is less painful. The MF's still have the daily cost running from $100 up.  

Thanks for the shellhopitality.com site tip. Like the main Shell website, it's difficult for me to find real information, but it's a good start and looks promising.  Funny, I don't recall Shell ever advertising this to us members. My guess is that all these clubs (Diamond Int'l, etc) are much different. 

          ------Zach Kaplan


----------



## Picker57 (Sep 13, 2009)

OK, now having dissed Shell, I must say that the Shell properties where we've stayed have been consistently very nice.  However I'm not sure I'd be that generous with the RCI properties we've traded into via Shell. Those have been more of a crapshoot, and I'm wondering if there's any way to guarantee a 'good' (eg. "quiet") suite when booking these through Shell. I keep reading where people have gained beautiful, renovated, ocean-front, etc. places for next to nothing; we've not got that figured out yet. When we trade for an RCI listing, are we automatically lower on the pecking order? Is it just a matter of asking for a specific type of suite ("quiet", "ocean front", etc.)?  Thanks for any tips on how to maximize benefits when staying at a non-Shell property (especially Maui). 

                    Zach


----------



## shellboy (Sep 13, 2009)

I agree with most all comments regarding developer purchases, but it not specific to Shell. This is typical of all developer sales pitches. With regards to rental opportunities and value, I would suggest that Sept. 09 rental prices are not typical of the next 20 years. First of all, this is a short notice rental, in the slowest time of the year, and in a depressed economy for a 1BR GV unit. I personnally tried to rent an extra unit at this resort (Kauai Coast) for Feb. 09 and nothing was available. I could have rented at 9 months in advance for $235/night for a 1BR OV (you cannot rent the OF rooms from Shell). Since most TUG members buy resale (once they discover TUG, at least), it would be prudent to rerun the numbers with a typical resale price (less than $1 point right now - but use a $1 as a high limit). We bought all of our Shell points resale, use them to stay in OF accomodations in the winter season and are very happy with the value we receive. We have only used Shell points once through RCI for a Maui trade. I think we got lucky in that we traded for a fixed week, fixed unit so we knew what we were getting ahead of time. Otherwise, I think trades are typically lower on the quality list unless you can snag a last minute cancellation. The owners of the nicer units tend to rent rather than trade for that reason.


----------



## Picker57 (Sep 13, 2009)

Yes, the purchase price is definitely the deciding value factor.  I keep browsing Shell points on eBay (compulsive self-flaggelation, I guess) and 5000 Hawaii points just sold for around $450.  And, yes, I've just discovered the 'just rent' possibilities and they do sound better than what we've so-far experienced with RCI trades.  Am also exploring other "bank and trade" sites, like DAE.  Any suggestions are appreciated. Thanks. 

           --Zach


----------



## CatLovers (Sep 13, 2009)

*Buy From The Developer - Bad Deal!*

The OP assessment is bang on, but the title of the thread should say - *"Buy from the developer - bad deal!"*  It really doesn't matter what timeshare system you do the math on, from an investment perspective the answer for us has ALWAYS been - "bad deal"!

Having said that, we are VERY HAPPY Shell owners, but that would be because we bought our Shell points on the resale market.  To echo what *Picker57 *said earlier in this thread, the one thing we have ALWAYS been able to consistently count on it the TOP-NOTCH quality of the Shell resorts.  As a very frequent traveller (for business), I can also say that the consistency of quality, amenities, etc. at the Shell resorts is much higher than even some of my favorite hotel chains - Starwood, Marriott and Hilton.  I have occasionally been disappointed at these hotel chains, but never (at least yet) been disappointed at a Shell property.


----------



## DeniseM (Sep 13, 2009)

Welcome to TUG!  

Just about everyone here will agree that buying from the developer is usually not a good deal, but there are some fabulous deals on the resale market.  If you are still interested in the concept, you should check it out.


----------



## deejay (Sep 14, 2009)

acadams just doesn't get it. Its a lifestyle that few of us here would want to be without. Put the spreadsheets, paper, pencils and CPA certificate away, quit listening to Dave Ramsey and enjoy some tremendous vacations.


----------



## miesque1127 (Sep 26, 2009)

We bought 6,000 pts 2 years ago and I have regretted it ever since.  We're still paying it off, and I just don't see the value. I tried to talk my wife into just stopping the payments and eating what we invested,  but she didn't want her credit rating affected. We spent thousands of dollars and I feel like an absolute idiot. 

We fell for the slick presentation.  Does anybody have anything good to say about SVC??  Geez, the MF alone seem excessive for what you get.


----------



## GregT (Sep 26, 2009)

I agree with both the OP and deejay.  I've made four time share purchases -- two Worldmark, one Wyndham, and one Marriott.   Three of the four were eBay purchases, and the Marriott purchase was direct from the developer.  I intentionally purchased direct from Marriott because I wanted a fixed week and a unit size that's extremely difficult to find on resale (I've not found it since).  So I knowingly paid the direct purchase premium and viewed it as an expense, not an investment.

So I agree with OP -- the dollars will never pencil out.  But I am completely with deejay on the lifestyle choice.  Like OP -- I'm a numbers guy -- I'm a CPA, and a CFO of a medical device company -- but this is a pure lifestyle decision.  Sometimes we do need to put the pencil down.

So -- buy resale whenever possible -- and buy direct when you have to, and understand you're overpaying for that direct, so you should have a good reason for it.  But there are good reasons.

And take as many vacations as possible -- in the next 18 months (!!), I'm going to HGVC Waikoloa, St. Thomas (Elysian Beach Resort), Maui Ocean Club, Desert Springs Villas, and Cayman Islands (The Reef Resort) -- via trades with WM (great trader bought resale), via my very cheap Wyndham resale purchase, and my incredibly expensive MOC direct purchase.

I rarely took vacations before, and timeshares help to ensure that I go -- and go back to my favorite places.

All the best,

Greg


----------



## timeos2 (Sep 26, 2009)

*Not alone - way too small*

There is a problem with high priced timeshare systems such as Shell and too many others that simply don't have enough locations for the high buy in cost. IMO if a system doesn't have a minimum of 100+ internal resorts to choose from it is too small to consider. There are only a handful of systems that do have adequate numbers to be basically self supporting such as Wyndham, Bluegreen, DRI Club and a few others. Most are 10-30 in size with maybe some affiliates and for the thousands or even tens of thousands they demand to buy in it simply isn't worth it. 

RCI Points could be the best of all systems if it manages to evolve as a "one stop" for the majority of locations. So far it hasn't and it may never do so. But that would be the ideal goal of any trade system - access to virtually any resort anywhere using the points. The little groups are virtually worthless and even the bigger ones have real limitations. But at least the biggest give you a good selection without requiring another third party trade or leaving the system to go to different spots.


----------



## lv_maui (Sep 26, 2009)

*Is there an error in this.*



acadams said:


> Link To Spreadsheet



IN the spreadsheet for each of cells D13 and F13, shouldn't the forumula include the numbers in D32 & D33 and F32 & F33?  Makes the arguement even better


----------



## mepiccolo (Nov 5, 2009)

Just piping in that we too bought Shell points not once but twice on the resale market 3 years ago.  We also own Westin Kaanapali ocean front center in Maui and comparing what we paid for that one (even on the resale market) we are MUCH happier with our Shell purchases dollar for dollar.  

I agree that it is not a smart money "investment" but our Shell purchases have resulted in the best family vacations we otherwise would not have taken.  We have even been able to take friends each time we've gone because of the great deals we found on the resale market.  You just can't put a price on that.  

By the way our friends are renting in November when we are going up again and it was not $68 a night (beginning the Saturday after Thanksgiving) - it was more like $200+ a night.  Staying at Kauai Coast Resort is one of our favorite places - it has such a warm, home feeling to it and the staff is second to none, the grounds are kept immaculate.  

Timesharing isn't for everyone.  I used to think it was the dumbest thing ever - until I bought once, then again, and finally a third time.  My children will grow up having vacations we certainly would never have taken were it not for the commitment we made to making taking vacations a priority in our lives.  Twenty years from now I don't think we'll be looking back regretting our decision to buy timeshares - on the resale market, of course.


----------



## BocaBum99 (Nov 6, 2009)

I love Shell Resorts.  The biggest problem is their maintenance fees are way too high.  That's why even resale points are worthless.


----------



## timeos2 (Nov 6, 2009)

*Classic case - its getting worse*



BocaBum99 said:


> I love Shell Resorts.  The biggest problem is their maintenance fees are way too high.  That's why even resale points are worthless.



This is true and I fear it is happening or will happen to more and more systems/resorts. Even the very best quality resorts simply aren't worth the annual fees charged compared to the use or rental value. That naturally leaves the resale value of virtually zero.  It is epidemic with the brand names where they feel free to charge a stiff premium to owners for everything they do - management, repairs, etc - all with the developer / name brand making a big return while the fees no longer represent any value to the owners despite what may be a top notch resort or group of resorts. 

Independent resorts can have the same issue if they allow the fees to get out of hand or simply don't watch every penny spent and/or allow the property to deteriorate.  The annual fees are the key to it all and few resorts/systems are doing all they can to hold them down while keeping the quality and use/rental value up.  It is a system wide problem and worse for seasonal areas than the less seasonal ones but bad or over priced management, maintenance and operations hurt the owners no matter it may be where or who is running the show. 

Even the greatest resorts are worthless at resale if the costs far exceeds any value. That is happening with most of the big brands now and I don't see anything happening to turn it around. In fact it appears to be on a path to getting even worse as they look to survive on the backs of the owners.


----------



## Picker57 (Nov 25, 2009)

Does anyone have an idea how Shell's MF's compare to other systems?  We just got our 2010 statement - they've increased but not by "game-breaker" amounts.  For comparisons, we figure that we can get 1-bedroom unit for a little over  $100 per day in MF's.  Still a pretty good deal - just wish we hadn't paid a small fortune for the privilege.  (Ah TUG, where were you when I needed you most?)

I agree with the earlier statement about being a small system and not enough internally-owned units.  Certainly a matter of tastes, but Shell doesn't have units in some of the places we'd like to go, I'm not interested in some of their locations, and the trades through RCI have always been dicey for us.  However, we're headed for 3 weeks on the Big Island in Feb, and life doesn't get much better than that. 

Aloha, and mahalo for all the great observations and insights.  Happy Holidays to all.

                   -----Zach


----------

