Analysis: Resale prices & Maint Fees

[smartin737]

I recently examined (my wife would say obsessed over) the resale market for Wyndham points on eBay. I was shocked by the low prices to purchase the deeds, and wondered what was better over the long run--getting the best eBay deal (low purchase price per 1000 points (KPts)) or paying a premium for a deed with low maintenance fees (MX rate). The fees are reported on each auction.
MX rate = (annual MX fees+ taxes) / (# of points).

I started plugging examples into a spreadsheet, and eventually built up a spreadsheet page that accepts input for # of shares, MX fees per 1000 shares, and purchase price; and spits out the cost per night of vacation based on a 154,000 point week. In other words, it converts timeshare deals into Hotel-style per-night costs.

I looked at the per night costs at the 10, 20, 30, and 40-year points.

Even over the short 10-year period, Low MX rates are worth paying a big premium for.

eBay completed auction cost average was $13.4 per KPts, and MX rate average was $5.3 per Kpts. A deal based on these numbers comes to $120 per night at 10-years.

I paid $18.50 per share for my deed because...

$18.50 per KPts for a deed paying $3.26 MX fee per KPts came to $113 per night over 10 years.

The differences over longer terms are more dramatic in favor of low MX fees because MX fees pile on forever. The up-front purchase prices are so low on eBay that it's worth paying 70% more up front for deeds with exceptionally low MX fees.

I'll gladly share the excel spreadsheet if anyone wants to try it to compare deals. Try this: http://www.geocities.com/smartin737/Cost-vs-MX-rate.xls

Steve

 

[Corky]

I'd love to have a copy of your spread shee, if you could kindly post a link to it. Thanks.

By MX, do you mean maintenance fees?

 

[John37130]

Steve:

I agree. I created a spreadsheet last year when I bought RCI points. I discounted all the future fees under various scenarios to the get the "present value (i.e. cost)" of the future maintenance fee payments and added that to the cost of the property. That allowed me to compare different points packages on a present value basis. I came to the same conclusion that it was a better deal to pay a little more on the front end for points with lower maintenance fees (my 89,000 RCI points have annual maintenance fees of about $400/year). It was the "nerdy accountant" coming out in me ... but I guess I'm not alone

Enjoy your Wyndham points,

John

 

[smartin737]

Please try the link I just added to download the file & let me know if it works for you.

Yes, MX is short for maintenance here.

 

[JudyS]

This sounds like a useful analysis; thanks. A question -- did you consider the "opportunity cost" of your purchase price? That is, did you consider the interest you could be making if you invested your purchase price?

A suggestion -- I think more people will understand you if you use the terms others do here: MF (for maintenance fees) and cents per point.

 

[rickandcindy23]

Please try the link I just added to download the file & let me know if it works for you.

Yes, MX is short for maintenance here.

You are on your way to being completely obsessed with timeshare. Be careful, because like Lay's Potato Chips, you can never stop with just one.

 

[bnoble]

I've reached a similar conclusion, but using possibly a different metric. I assume that the opportunity cost of the purchase price plus closing costs plus any known special assessments is 8% per year. My metric for a potential purchase compares opportunity cost plus annual costs (MF+taxes), per thousand points. The deed I own has a carrying cost by this computation of about $4.75/K/year. I would not purchase one over $5/K given my current vacation needs, because I can rent small amounts from Wynfield for that price. In fact, I find that I have slightly more than I need right this second, in part because our vacation habits have us going to places that are possible to exchange into with low-point generic weeks.

I'm ignoring residual value on resale, as I expect to hold these a long time, so the impact of that value tends to zero. In any event, the total capital risked is low.

The ebay market does seem to favor low-MF deeds, and also to favor a handful of specific resorts (either because they are new, or in the case of MB, ARP matters), but my valuation rewards low-MF deeds and penalizes high-MF deeds more than the market as a whole, it seems.

 

[Bill4728]

All of this assumes that the deeded property you are buying is already in FF points (Fairshare). You are not getting a deal if you buy a deeded TS at a resort managed by FF if that unit isn't in Fairshare.

 

[smartin737]

John37130, I was also accused of getting in touch with my inner accountant when I did this.

Judy, Thanks for the advice. I haven't been kicking around here long enough to learn the local lingo :whoopie:

R&C23, No doubt. Obsession is more than an '80s perfume.

bnoble, Lib arts major here, so I'm afraid I got a little lost in your post. Isn't opportunity costs the potential investment return lost by paying a higher purchase price up front? If so, the cost here is pretty small potatoes. Under $2000 price difference for each week purchased, and I'm not strict enough with my budget for that to be a real benefit to me personally. We're not talking whole life vs term insurance here.
Is 'cost computation' a number that considers MF+Tax + annualized purchase price including opportunity cost?? If so, how did you develop a baseline for determining opportunity cost? Average deal $/KShare?

Bill, True. It's all based on points, although I suppose you could use the spreadsheet to evaluate weeks by putting in 154 in the 1000-point box since that's the point value I assigned to be = one week. Of course, an assigned week in one resort doesn't directly compare with an assigned week at another, while points "here" basically = points "there."

 

[Steve]

Steve,

This is good research and makes a lot of sense. Just keep in mind, however, that sometimes resorts with the lowest fees also have the most deferred maintenance...and therefore are most likely to have a large fee increase and/or special assessment. One of my resorts (Hilton, not Fairfield) had a fee increase from $760 to $1099 in 1 year. Ouch! I sold it.

Steve

 

[bnoble]

Isn't opportunity costs the potential investment return lost by paying a higher purchase price up front?

No, "opportunity cost" accounts for the income you lose by not investing the purchase price in some income-bearing investment.

Here's a better way to describe it. I have two options. I can invest my purchase price today in some investment vehicle, and then use the earnings to help defray my ongoing vacation rental costs. Alternatively, I can buy a timeshare. This is a way to compare the two options. I'm not comapring between two purchases, I'm comparing renting vs. buying, and on those terms, any two options are directly comparable.

PS: I'm only an engineer, not an accountant.

 

[acesneights]

Assume the lowest MF resort fee rises 2% per year (more than the average resort). Most of the price differential disappears. I would say that the market expects the lowest fee resorts to rise faster.

Witness the 37% increase at Atlantic City last year.

Doesn't take too many heavy hits like that to offset the supposed advantage of low MF resorts.

Stan

 

[bnoble]

I think, though, that it depends on *why* the MFs are low. A new resort heavy in active sales is low in part through offset by WVO, and in part because many amenities aren't up and running (and costing money) yet. When WVO pulls back, and it is fully up and running, MFs jump up big.

A more established resort is less likely to feel this. On the other hand, if the more-established resort isn't setting aside adequate reserves, then it could be a smokescreen with a big increase and/or assessment down the road. You pays your money and you takes your chances.

Finally, a converted fixed week from prime (or sometimes even high) season benefits from the fact that all weeks are charged equally, but different seasons are pointed differently.

One thing I would bet heavy on though: it is unlikely that the MFs at a high-MF resort will ever go down.

 

[smartin737]

Fair warning on the "why are the fees low?" question. I suppose I'm not even sure why there's such a disparity on eBay in the quoted MFs. In the case of the unusuallly low (sub-$3.75 per K), it seems to usually be points that came from a fixed week conversion and got some kind of grandfathered great base rate. Also, my Mom's deeds have a $77-a-year Fairfield admin fee tacked on. Perhaps this is a "dealer add-on" that some deeds don't have or have in different amounts??

Anyone else have an explination why the rates differ so? I mean the calculated self-proclaimed rates vary for the same resort in eBay listings.

I looked at the eBay offerings for about 3 weeks in July and found it rare that two deals for the same resort likely carried the same MF.

Examples:
Branson, the Meadows had 4.84, 4.97, 5.27, 5.27, and 5.3.
Orlando Star Island: 3.94, 4.59, 4.84.
Nashville: 4.84, 5.27, 5.27, 5.3, 5.5, 5.67.
Pagosa Spgs: 3.26, 5.17
Lure Lake, FFld Mtns: 5.03, 5.27. 6.19

As someone said, past performance is not a guarantee going fwd, but it's likely better than buying a KNOWN crappy deal.

Steve

 

[bnoble]

Steve: there are two reasons the $/K MFs vary. First, lower-point contracts pay proportionally higher FSP fees. That's not a real big deal, but every once in a while you see small (42K) contracts where it does start to make a difference. Second, in a resort that was originally a fixed-week resort, each week pays exactly the same MFs. But, a Prime week is usually 2x the point value of a Value or Quiet week. Put another way, the Quiet week has double the $/K MFs compared to the Prime week.

Tom Cornelius has a much better explanation for this in his Fairfield Resales Yahoo group. Well worth reading.

 

[T_R_Oglodyte]

Some developers also subsidize maintenance fees while resorts are in active sales. As the resort approaches fully sold out, they yank the subsidy.

 

[smartin737]

Thanks, guys!
Temporarily subsidized fees=not nice. I don't suppose that's fully explained by the salesman.
FSP fees. That's what my mom complained to me about. She said she didn't know they'd be paying those. For her Vegas weeks, it's $77/year per week. That's $11 per night's stay--not a small deal.
Do the FSP fees vary from resort to resort & contract to contract? It still smells like automotive "dealer mark-up" to me.
Steve

 

[Dman67]

Wow! This is a great post and so I thought I'd give it a "bump" so that any new prospective buyers would have the chance to read this over and try out smartin737's spreadsheet.

I was looking at a listing on eBay and according to the spreadsheet the average cost per night was around $135. That seems a little higher than what I was thinking it might be. Maybe I should reconsider my purchase?

 

[Bill4728]

I was looking at a listing on eBay and according to the spreadsheet the average cost per night was around $135. That seems a little higher than what I was thinking it might be. Maybe I should reconsider my purchase?

$135 / night is a bargain when you consider that your not getting a single hotel room but a 2 bedroom/ 2 bath apartment with a full kitchen.

 

[bnoble]

I figure my total cost basis is about $4.75/K---that's annual fees plus 8% opportunity cost on the purchase price. A week in a 2BR Wyndham in prime time goes anywhere from 154K to 224K and up.

At 154K, the per-night cost is about $105. At 224K, it is about $155.

That's not a super-huge bargain compared to the average fixed-week. But, with points, you are not tied to specific dates or a single resort. For example, my summer wisconsin dells fixed week has a total cost of about $560, or $80 per night. But, if I want to change weeks or resorts, I also have to pay an exchange fee. With RCI, that raises my cost to $724 or...$103 per night.

Worse, with an exchange company, you're at the whim of the rules of trade power, how much inventory is redirected to rentals, etc. etc. etc. Within Wyndham, most everything is going to have some availability at 10 months out---the exceptions include things like peak myrtle beach oceanfront, Daytona bike week, and a few other odds and ends.

That's the apples-to-apples comparison to make, IMO: compare the cost of a points week to the cost of a fixed week+exchange fee. You might also have to include the cost of the exchange membership, if you don't have it already.

 

[TSNotSure]

I'm still not convinced, even cheap resales, that they are such a bargain. Why lock in when you can find much more selection via VRBO.com, etc. In some markets $135/nt is a deal, but not that great a deal. I bought a cheap resale with more points to weasel 2 weeks of small units a year from and try to justify it that way, but in the back of my mind, I'm still not sure it's such a great deal assuming I can pull it off.

This analysis just confirms that in my mind.

 

[bnoble]

The biggest problem with private rental---vrbo, redweek, etc. etc. etc. is the amount of time and effort it takes to find the right rental for you.

I used to do VRBO and similar lists for all of my Orlando stays, but it took a half-hour to an hour a day, for several days, spread over a few weeks, to identify suitable properties and go through the email exchanges of "I'm sorry that week is booked (and we haven't updated our availability calendar in about two months)" and "No, the web site price of X is not current, it's now X*1.3" and even better "Oh, we don't own that property anymore" before finally getting a unit booked.

I figure that, for Orlando, my per-night dollar cost is about break-even timeshare vs. VRBO for a straight points booking, but my time cost is a small fraction of what it was.

The good news is that Orlando is one of those places were a very small points deposit can snag an acceptable unit given enough notice, and so playing the leveraged exchange game my per-night cost is MUCH lower with timeshare than it was with private rental. In other places, where leveraged exchange is not as useful, the private rental market is also less well-developed. So, there is still something of an advantage.

You are right, the downside of ownership is a loss of flexibility, and being locked in to using what you own, exchanging it or renting it and using the cash proceeds for something else. A large mini-system ameliorates that somewhat, because you have a nicely-sized portfolio of resorts to pick from. Even here in the upper midwest, I've got at least 6 different locations within a day's drive, plus a much longer list if I'm willing to fly.

 

[TSNotSure]

There is some truth about the time it takes using VRBO, some time wasting has been alleviated with the booking calendars, etc. You don't know for certain what you're getting until you get there either, but usually that has worked ok for us.

I'm going to dabbel with this, bought a cheap resale for about 3.7cents/1K point maint. fees costs, for about $2,500.

One feature I'm interested in is the RCI access for last minute deals. I know a couple years ago, they had weeks for $150 last minute type deal, don't know if they are there anymore or not.

If Fairfield ever gets me set up this decade, I would give it a whirl. Only been 5 months total from the purchase to now and nothing yet.

 

[ladycody]

Does anyone take into account the number of baby boomers retiring? While it may sound like it...I truly dont think it's just sales rep hype. There are a ton of people that will be hitting retirement...the largest population dump into retirement in history...(over 70 million according to most sources...from AAA to the US gov) and the hospitality industry and TS rental markets are not going to remain stable as demand increases. I dont think it will effect prices immediately since most baby boomers are likely to delay retirement a titch (which is already being seen)...but within 10-15 years...I think it'll have a huge impact.

I like having the security of knowing I can get what I want and need and am satisfied with my ownership and believe it holds outstanding value for me considering how I use it...but I'm curious about what thoughts are on the future (pricing stability) of the TS rental market. I'd love it to continue to offer bargains until&when I hit retirement (for extra travel) but am not sure the pricing by then will be affordable for me. Just wondering what others thoughts are.

 

[bnoble]

All I know is that I can't successfully predict my own plans in a few years, let alone what retirees will do in a decade!