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Sometimes it's better to buy from the brand [says Timeshare Salesman]

Sapper

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Here are my spreadsheets for Rent vs. Own and Investment vs. Own at the average costs given by ARDA (believe it or not, my company has packages of similar price and lower maintenance).

First is Rent vs. Own:

Assumptions:

1 week in a hotel vs. a 1 week timeshare deed

Hotel Rents are assumed to be $220/night for a 1-bedroom luxury resort at a popular destination, which is argued to be fair in comparison to the average US hotel ADR of $140/night for a studio.

Hotel taxes are assumed to be 15%, slightly above the national average of 13.7% to account for the popular destinations offered by timeshare resorts.

We will use a Net Present Value analysis to account for the time value of money, and apply a 2% discount rate to all future cash flows. 2% is argued to be fair as the traditional metric for this sort of analysis is the 3-month T-bill, which is currently at 2.4% but has been close to zero for most of the last decade, as seen by the chart below.

View attachment 10276

Hotel ADR inflation is assumed to be 3.7%, the estimated rate in 2018 (I do not try to manipulate you into believe it is 7-8% as some reps do).

Maintenance fee inflation is assumed to be 2.5%.

Deed equity value of the timeshare deed is set at 50% of retail price, which is assumed to appreciate at 4% annually

Initial Investment in the timeshare deed is set to depreciate in purchasing power at the discount rate

First Day Incentive value is assumed to be equal to the discounted cost of renting 3 weeks over the next 3 years

View attachment 10277

And here is the chart for a savvy negotiator that is able to command 5 weeks worth of First Day Incentives:

View attachment 10278

And just for fun, here's a chart with 3 weeks FDI and the deed set to ZERO equity value:

View attachment 10279

Timeshare wins the numbers handily in all cases.

Now, Investment vs. Own:

Assumptions:

The equivalent amount of capital to purchase a deed was placed into an Investment Fund, assumed to appreciate at 5% per year.

We have again used an NPV analysis that discounts all future cash flows at the assumed rate of 2%

Hotel rent was assumed to be $220/night + 15% taxes, appreciating at 3.7% annually.

The capital gains of the investment only purchase 3.7 nights in the 1st year, and less each successive year due to inflation. Because the compared plans are for 7 days, it is assumed that additional money is spent each year to bring the number of nights up to 7.

Maintenance fee inflation is assumed to be 2.5%

Deed equity value of the timeshare deed is set at 50% of retail price, which is assumed to appreciate at 4% annually

Initial Investment in the timeshare deed is set to depreciate in purchasing power at the discount rate

First Day Incentive value is assumed to be equal to the discounted cost of renting 3 weeks over the next 3 years


View attachment 10275

Timeshare again wins the numbers vs. an investment fund.

As part of the sales contract, will you write in a repurchase agreement stating what you have stated here: your company agrees to repurchase the (unit / week / points) at 50% of this sales agreement with a 4% annual increase?
 

davidvel

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There are too many flaws in your analysis to pick them all out. I will point out the first few.

Isn't the net present value of 22000 not spent 22000.....not 0 as your chart shows. Or your deed chart would have to start at -50% not half the deed value. It seems you have left the purchase price out. I will give you points for generating a NPV chart of a -cash flow and get positive numbers.

You give a 4% gain per year on your deed. Name one timeshare property that has gained in value by 4% for 40 yrs. Or even 10. It is just a variation on the old lie of timeshares as an investment.

Who out there is getting 3 to 5 weeks of incentives at prime time?

Not hard to make numbers look good over time when you assume the value of your product goes up 4% and the cost to use that only goes up 2.5% Again show us a property that has increased in value at a higher rate than the increase in maintenance fees.

What number did you use for MF? The chart looks to me like you used a low number....hmmmm

What value did you use for the risk of special assessments, use fees, and stripping of perks that devalue the deed?
Yes, and what are you buying where you get 7 days for 980 mf, for 22000 to the developer? What kind of room is this?

I stay in 2BR Marriotts in Hawaii and Tahoe/Park City during ski season for under $140/night all in (upfront, mf, club dues.) What is Bill selling at HGVC for the 22k upfront purchase plus 980 a year? That part is missing from his graph.
 

davidvel

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As part of the sales contract, will you write in a repurchase agreement stating what you have stated here: your company agrees to repurchase the (unit / week / points) at 50% of this sales agreement with a 4% annual increase?
Why would he have to? He has a graph. :shrug:
 

tschwa2

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If not the OP does anyone know system wide in HGVC what is the most points you could buy retail from HGVC for $22,000 and have a $1000 or less MF?

As others have stated the MF increase listed also doesn't track. Most high end timeshares average 4-5% increase per year. Perhaps the first 3-5 years when they are in active sales they can keep it at 2.5% but after that you will see a jump. If you are going to go out 40 years on your chart, at 20 years the cost to maintain an older building to brand standards is probably going to increase to 5-8% or higher if you can't get the non performing weeks back into the hands of someone paying MF as the original owners age out- yes they can deed it to their children but a lot of children don't wan't timeshares.

And $22,000 is the basic starter package at higher end companies- one week in mid or lower season. There is no way HGVC is using ROFR at 50% for a mid or low week season. A gold week worth 5000 points and a MF probably a little over $1000 probably passes ROFR at less than $4000 all in including all closing costs. HGVC resale set up mandatory start up/transfer fees have increased quite a bit over the last 8 years which in anything less than platinum probably suppressed resale at least $500-$1000 and lowered the ROFR.

Also if you are going to use ARDA averages then I would imagine the ARDA numbers for ROFR in resorts that have ROFR is 10% or less of the actual purchase price. As I and others have stated DVC is the only developer that consistently exercises ROFR. Some developers rarely exercise, perhaps only if they have a buyer looking for a particular week and commits to purchase that week if the developer can find it. Others exercise regularly only on the highest demand resort weeks (not $22,000 starter weeks) at up to 40-50% and other weeks inconsistently at 0-10% of retail cost.
 
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dayooper

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The average income of a timeshare sale exec is six figures plus, for a relatively short day, great working conditions, great benefits, and a constant supply of 'pre-qualified' leads (any making less than that are simply not making sales and are weeded out quickly). Now timeshare products/companies vary tremendously, but the OP has clearly aligned himself with one where he can sell a premium product at a premium price, which leads me to believe his income is a multiple of the average.

I would be willing to bet his approach using charts and spreadsheets results in a much higher than average feedback score from clients even two + years after a purchase. This approach floods the prospect with so many variables, that even if they disagree with one chart, they are at such a disadvantage in a presentation that the overwhelming evidence supports the decision to purchase. I would guess that in 50% of his presentations, the only obstacle to overcome is simply the one of financing.

The worst part of selling timeshares for most of us would have to be the ability to sleep nights. After pressuring a couple in their 80's to spend another 30k to save $100 a month payment on a product they are not even using, and when they clearly can't afford ANY timeshare (we've all heard these stories) is not something most of us could do.

Kudos to the OP as my guess is except for 'maybe' early on before he perfected his pitch, he has never had to sell to anyone like this example. He is like the car guy selling at over MSRP when the prospect can go down the road and find the same car for well under invoice. Some folks value their time more than money (not too many of these are tuggers), and are willing to pay a premium just to get the product they want and walk.

The OP is well aware of where most tuggers come from, and did not come here to change anyone's opinion He is a 'perfectionist' who is utilizing the feedback he gets here to further refine and perfect his pitch to allow him to be even more successful in selling his product.

And I for one say have at it, as we all know if he doesn't make a retail sale, there will be no resort for us to buy at resale prices, and then utilize for pennies on the dollar!

This is spot on, IMO. It’s what I thought when he started posting the first night.
 

dayooper

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If not the OP does anyone know system wide in HGVC what is the most points you could buy retail from HGVC for $22,000 and have a $1000 or less MF?

As others have stated the MF increase listed also doesn't track. Most high end timeshares average 4-5% increase per year. Perhaps the first 3-5 years when they are in active sales they can keep it at 2.5% but after that you will see a jump. If you are going to go out 40 years on your chart, at 20 years the cost to maintain an older building to brand standards is probably going to increase to 5-8% or higher if you can't get the non performing weeks back into the hands of someone paying MF as the original owners age out- yes they can deed it to their children but a lot of children don't wan't timeshares.

And $22,000 is the basic starter package at higher end companies- one week in mid or lower season. There is no way HGVC is using ROFR at 50% for a mid or low week season. A gold week worth 5000 points and a MF probably a little over $1000 probably passes ROFR at less than $4000 all in including all closing costs. HGVC resale set up mandatory start up/transfer fees have increased quite a bit over the last 8 years which in anything less than platinum probably suppressed resale at least $500-$1000 and lowered the ROFR.

$4000? My guess is it passes at $2000. I know it was a year and a half ago, but ROFR.net has a 2bedroom gold at HGVC on the Boulevard passing for $2000 and another for $3000 in the fall of 2018. I know you can’t always go by the numbers there, but those gold 2 bedrooms aren’t worth much, maybe $0.50 a point or less.
 

tschwa2

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$4000? My guess is it passes at $2000. I know it was a year and a half ago, but ROFR.net has a 2bedroom gold at HGVC on the Boulevard passing for $2000 and another for $3000 in the fall of 2018. I know you can’t always go by the numbers there, but those gold 2 bedrooms aren’t worth much, maybe $0.50 a point or less.
I agree. At one point they were worth $0.75-almost $1.00. Those days were 10 years ago or more. Which is another point when resorts are new and resales are hard to find the ROFR might be artificially high but as more and more resales hit the market the level drops (does not increase by 4% a year)
 

CalGalTraveler

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@maxpot46 I appreciate that you shared your calculations. A couple of questions and comments:

1) Does first day incentive mean bonus points? If so, how does that equate to your term "weeks rent" - do you divide the number of bonus points by the point value of the week you own? (If that is the case we received 8 weeks with our purchase.)

2) The value depreciation rate on our NYC developer unit since 2014 when we first purchased has averaged 14% decline a year over 5 years or a total of 70% decline in value if we were to sell today. The first day bonus value we received comes no where near compensating for this depreciation rate.

If we purchased resale about the same time we bought developer we would not have had extra points, but the value of our unit would have declined by about 40% (not great but not 70%); but instead of losing tens of thousands, it would have been thousands which is much easier to digest. An older resort would result in an even smaller decline in value because it because it would be fully depreciated and close to ROFR value.

Bottom Line: There is an opportunity cost of the capital that we lost by going developer because that's money we will never recover that we never expected to lose on "scarce" NYC real estate. Our story is not unique. Just talk to all the Westin, Hyatt, HGVC, and Marriott owners who lost tens of thousands across the country and still pay ever increasing maintenance fees - this is why people are skeptical.

3) FWIW our NYC maintenance fee has been increasing by 5% a year for the past few years. Last year it was 5.48%. 2.5% is way too low.

4) A key advantage of renting or investing is that you have the flexibility to stop the expense at any time. Lose a job? Health issue? Economic downturn? Simple, travel less and hold off on expenses for a few years. You cannot do that with a timeshare because you are locked into the expense. Economics would dictate that there should be a significant return for the risk involved of locking in your spending. However the high up front purchase price of developer doesn't provide sufficient reward due to the rapid decline in value. Resale reduces this risk tremendously but as developers increase MF to the point that there is no savings below renting the unit, the economic value of taking on TS risk vs. other options decline as well.
 
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bluehende

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@maxpot46

4) A key advantage of renting or investing is that you have the flexibility to stop the expense at any time. Lose a job? Health issue? Economic downturn? Simple, travel less and hold off on expenses for a few years. You cannot do that with a timeshare because you are locked into the expense. Now economics would dictate that there should be a significant return for the risk involved including the cost of airfare and meals for each trip. The high up front purchase price of developer doesn't provide sufficient reward given the high up-front purchase price. Resale reduces this risk tremendously but as developers increase MF to the point that there is no margin below renting, the economic value of taking on TS risk vs. other options is declining as well.

(Of course the economic value of staycationing will always look economically best but may not be the vacation one desires.)

That is exactly it. 40 yrs ago I would have died for a ski week that I could go to every year. At 23 I could not consider that I may not use it every year. Now go to real life. With 5 surgery's and family commitments for end of life care I would have not been able to use it for about 10 of those years. Obviously trading it would work but adds significantly to the cost. I do not think that my example is unique. My wife would have fared better, but still not be able to use it for some of those years. Since we are a couple and you combine those years a significant amount of the value in owning is gone. Somehow going to a ski area and propping my immobile knee up does not appeal to me. I am sure if you use pie in the sky numbers and ignore real life you can make the numbers work. In real life those numbers will never work out. Even with resale costs of 0 it is not easy to make the numbers work when actual experiences are taken into account.
 

CalGalTraveler

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If not the OP does anyone know system wide in HGVC what is the most points you could buy retail from HGVC for $22,000 and have a $1000 or less MF?

My guess is this would probably be a low season, week or EOY in Vegas, Myrtle Beach or Orlando in HGVC for 3,500 points or less. They probably wouldn't exercise on these low value weeks but not sure.
 
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maxpot46

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Didn't your business school teach about the cost of money, present/future value, opportunity cost etc? If you add 5% opportunity cost (conservative) on your $13500 initial purchase price, your spreadsheet changes completely. Of course some of your clients also take a loan with more than 5% interest which makes your numbers even worse.
I do not think you are selling Ferraries, i think you are selling Ladas to people who cannot read. Of course i am not referring to the quality of the resorts but to the quality of the products you sell.

Others give you the benefit of the doubt. Given your education, sorry, I can't. Very hard for me to believe that you trust your own numbers.

As stated, the spreadsheet is a Net Present Value analysis that accounts for the time value of money by discounting all future cash flows at a discount rate based on the 3-month Treasury Bill (the standard for this sort of analysis). Ironic that you bring up people that can't read! I do understand that it's surprising since I may be the only rep in the world who uses a NPV analysis instead of nominal figures, but I described all of this in my post under "assumptions".
 

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Why are you (not) answering with a question? My question was, how much is the list price for a 2 bedroom platinum season where you sell?

To answer your question, ROFR.net

Because, as stated multiple times, I'm unwilling to violate company policy by describing the specifics of our products, which would risk my job. Perhaps you noticed attempts to doxx me in this forum? Perhaps you noticed hostile participants in this thread who might conceivably alert my employer out of spite?

You're just an internet nobody who doesn't even read very well. Winning an argument with you is much less important to me than securing my employment.
 

tschwa2

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This would probably be a low season week or EOY in Vegas or Orlando in HGVC for 3,500 points or less. They probably wouldn't exercise on these low value weeks.
That's what I thought. So the ROFR value is $0. You only have enough points for other off season periods but you are paying the same MF's as someone in high season. You probably could rent during the off season for the same or less than what you pay in MF's. Owning one of these $22,000 weeks (even if you did get 5 weeks of bonus points) would actually cost you more to own, and you would likely have to pay someone $1000-3000 in perks like prepaid MF in order to rid yourself of the week. Certainly no value in buying at all (resale or retail) one of those weeks.
 

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I appreciate screen shots of your analysis, however, without the spreadsheet I can't check the formulas.

The initial sales pitch you made was that buying direct was a better option than resale.

Even if resale holds 50% of the value, your analysis charts will show it to be lower cost than direct. In most cases timeshare resales are 0-20% making them a much better value.

I'd be delighted to share the Excel file, but TUG doesn't allow that sort of file to be attached.

It was not a sales pitch, it was a dialectical proposition. The proposition was not that it is ALWAYS better to buy direct, but that IN SOME CASES it is better to buy direct and IN OTHER CASES better to buy resale. Some here have admitted this is true, but only in a small % of timeshares. The small % is irrelevant to the truth of my original proposition.

It depends on how many First Day Incentives are received, and how strict the developer is about gimping resale products.
 

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Incredible, but true. There are lots of good deals to be had if you look.

Regardless, since the analysis is using average figures, I am using average price and not cheapest possible nor most expensive possible price. If you were in my office, I'd run the calculation for your personal figures, and if I can't beat them, we wouldn't do business.
 

davidvel

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Because, as stated multiple times, I'm unwilling to violate company policy by describing the specifics of our products, which would risk my job. Perhaps you noticed attempts to doxx me in this forum? Perhaps you noticed hostile participants in this thread who might conceivably alert my employer out of spite?

You're just an internet nobody who doesn't even read very well. Winning an argument with you is much less important to me than securing my employment.
Not to worry. Others have pointed out that what you sell at HGVC for $22K and $980 MF is a low value week that would never meet all (or any) of your assumptions. I'm sure others with HGVC experience will chime in with more concrete examples of the numbers to refute your theoretical world example.

This is why I prefer to debate TS sales people in presentations. They can't ignore the questions you ask them or refuse to tell you the numbers of what they are selling (or the pitch ends quickly). Here, you can hide behind your "risk my job" excuse to refuse to disclose the very facts that make up your faulty graph.

P.S. No doxxing here. Just posts about where you work, that is easily searchable, and nothing personal.
 

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There are too many flaws in your analysis to pick them all out. I will point out the first few.

Isn't the net present value of 22000 not spent 22000.....not 0 as your chart shows. Or your deed chart would have to start at -50% not half the deed value. It seems you have left the purchase price out. I will give you points for generating a NPV chart of a -cash flow and get positive numbers.

You give a 4% gain per year on your deed. Name one timeshare property that has gained in value by 4% for 40 yrs. Or even 10. It is just a variation on the old lie of timeshares as an investment.

Who out there is getting 3 to 5 weeks of incentives at prime time?

Not hard to make numbers look good over time when you assume the value of your product goes up 4% and the cost to use that only goes up 2.5% Again show us a property that has increased in value at a higher rate than the increase in maintenance fees.

What number did you use for MF? The chart looks to me like you used a low number....hmmmm

What value did you use for the risk of special assessments, use fees, and stripping of perks that devalue the deed?

The sheet accounts for the purchase price. Not sure what cells you're looking at. I've had the sheet analyzed by financial professionals and they agree that it's set up properly (including financial professionals who have bought from me). The cells are set up to show spending in each successive year, including the original outlay. You may be looking at certain cells where I needed to list nominal values, due to how the spreadsheet calculations are set up.

That figure of 4% appreciation of retail price is actually conservative based on my study of the last 15 years of my companies price sheets. The figure of 2.5% inflation of MFs is also taken from that source, but I adjusted it up to 3% on the last spreadsheet I showed.

Perhaps you should look at the sheet shown in a later post where I adjusted the assumptions to equity value of 15%, hotel rents to 2.6% inflation, and MF to 3% inflation. Timeshare still wins the numbers.

MF was assumed to be $980, the industry average for 2017, as per ARDA.

I chose not to account for those factors, in order to balance out the fact that I've also not accounted for factors positive to timeshare such as free food & alcohol, VIP status in parent company hotel rewards program, the value of RCI Last Call Vacations, food savings due to availability of kitchen facilities, various discounts offered through affiliates, etc.
 

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There is a reason why Bill uses hypothetical average numbers in his fancy spreadsheet, and not actual numbers based upon the HGVC product that he sells. It's called fuzzy math or smoke and mirrors. You would think he would want to show a real calculation based on what he was selling, not hypothetical averages. Also, we are assuming his calculattions are accurate as he has not shared the spreadsheet for anyone to verify.

Hey Bill, plug the actual numbers of a real world example into your spreadsheet and show the results.

My name isn't Bill, and in any case, attempts to doxx are very uncool. Moderators?
 

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The average income of a timeshare sale exec is six figures plus, for a relatively short day, great working conditions, great benefits, and a constant supply of 'pre-qualified' leads (any making less than that are simply not making sales and are weeded out quickly). Now timeshare products/companies vary tremendously, but the OP has clearly aligned himself with one where he can sell a premium product at a premium price, which leads me to believe his income is a multiple of the average.

I would be willing to bet his approach using charts and spreadsheets results in a much higher than average feedback score from clients even two + years after a purchase. This approach floods the prospect with so many variables, that even if they disagree with one chart, they are at such a disadvantage in a presentation that the overwhelming evidence supports the decision to purchase. I would guess that in 50% of his presentations, the only obstacle to overcome is simply the one of financing.

The worst part of selling timeshares for most of us would have to be the ability to sleep nights. After pressuring a couple in their 80's to spend another 30k to save $100 a month payment on a product they are not even using, and when they clearly can't afford ANY timeshare (we've all heard these stories) is not something most of us could do.

Kudos to the OP as my guess is except for 'maybe' early on before he perfected his pitch, he has never had to sell to anyone like this example. He is like the car guy selling at over MSRP when the prospect can go down the road and find the same car for well under invoice. Some folks value their time more than money (not too many of these are tuggers), and are willing to pay a premium just to get the product they want and walk.

The OP is well aware of where most tuggers come from, and did not come here to change anyone's opinion He is a 'perfectionist' who is utilizing the feedback he gets here to further refine and perfect his pitch to allow him to be even more successful in selling his product.

And I for one say have at it, as we all know if he doesn't make a retail sale, there will be no resort for us to buy at resale prices, and then utilize for pennies on the dollar!

This is a very fair and accurate analysis, particularly in regards to my motivations for creating/participating in this thread. Much obliged!
 

tschwa2

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While retail prices go up 4% a year, resale prices and ROFR doesn't increase by that number.
 

bluehende

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The sheet accounts for the purchase price. Not sure what cells you're looking at. I've had the sheet analyzed by financial professionals and they agree that it's set up properly (including financial professionals who have bought from me). The cells are set up to show spending in each successive year, including the original outlay. You may be looking at certain cells where I needed to list nominal values, due to how the spreadsheet calculations are set up.

That figure of 4% appreciation of retail price is actually conservative based on my study of the last 15 years of my companies price sheets. The figure of 2.5% inflation of MFs is also taken from that source, but I adjusted it up to 3% on the last spreadsheet I showed.

Perhaps you should look at the sheet shown in a later post where I adjusted the assumptions to equity value of 15%, hotel rents to 2.6% inflation, and MF to 3% inflation. Timeshare still wins the numbers.

MF was assumed to be $980, the industry average for 2017, as per ARDA.

I chose not to account for those factors, in order to balance out the fact that I've also not accounted for factors positive to timeshare such as free food & alcohol, VIP status in parent company hotel rewards program, the value of RCI Last Call Vacations, food savings due to availability of kitchen facilities, various discounts offered through affiliates, etc.

Not looking at cells. At the start of the graph. Your rent line is at 0 ie not accounting for the 22 grand in your pocket.
Again it has been pointed out. No one argues that RETAIL prices have risen. Answer one question. Will you buy back at the retail price since you used that increase for the NPV?

Why did you not answer the other questions I posed?????? The only one you answered was with a bogus retail price inflation that has nothing to do with resale prices.
 

maxpot46

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My guess is this would probably be a low season, week or EOY in Vegas, Myrtle Beach or Orlando in HGVC for 3,500 points or less. They probably wouldn't exercise on these low value weeks because Ebay is full of them.

No, I'm not talking about that sort of inferior deed. I don't actually sell those, but we do have them available and they are a lot cheaper than the national average. I'm talking about deeds that allow for high season access to any of our locations. Also note that I am talking about PRO-RATED pricing.
 

maxpot46

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That's what I thought. So the ROFR value is $0. You only have enough points for other off season periods but you are paying the same MF's as someone in high season. You probably could rent during the off season for the same or less than what you pay in MF's. Owning one of these $22,000 weeks (even if you did get 5 weeks of bonus points) would actually cost you more to own, and you would likely have to pay someone $1000-3000 in perks like prepaid MF in order to rid yourself of the week. Certainly no value in buying at all (resale or retail) one of those weeks.

Incorrect, I am referring to premium deeds, not inferior ones.
 

K2Quick

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Maintenance fee inflation is assumed to be 2.5%.
That's a pretty big assumption. My maintenance fees have gone up exactly 5% per year for the last five years or so at roughly double the rate of CPI. I know Marriott and Starwood resorts also went through a patch where their maintenance fees were going up at even higher annual rates. If you looked at the compound annual growth rate of maintenance fee increases over the last ten years across the industry, I'm thinking you'd find increases far greater than the overall rate of inflation in the economy.
 
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