Maui: The Road to Hana and Beyond

Recently, we had the chance to visit Maui. For years I’ve heard about the legendary Road to Hana, so naturally it was on the agenda. The biggest question we had was: Should we drive out and back or try to do a clockwise loop continuing along the south shore from Hana?

We rented motorcycles and, naturally, the rental shop told us we didn’t want to do the loop: too much rough concrete and several stretches of dirt road. But there was nothing in the rental contract that prohibited us from taking that route. (Many car rental contracts prohibit driving cars on dirt roads.) We weren’t sure what we might be getting ourselves into, but that’s usually a prerequisite for a real adventure!

In the end, I think we made an excellent choice. The video below captures some of the more scenic, and bumpy, stretches of road. I know full well that this video will appeal to a very limited audience. But what a clever audience it is!

 

Oh, and in case I don’t get around to writing about it, here are a couple of shots of the Grand Wailea, where we blew through a huge pile of Hilton points…and had a fantastic time!

Yes, it really is this beautiful.

Yes, it really is this beautiful.

This is quality time!

This is quality time!

The Girl Plays in the Surf

The Girl Plays in the Surf

The Handsomest Lad in the Pacific!

The Handsomest Lad in the Pacific!

No, it doesn't get better than this.

No, it doesn’t get better than this.

 

Posted in 1000 Places, EagleRider, Hilton | 1 Comment

Winning

IHG’s Win Big promotion is drawing to a close and I won!

What a neat thing to happen to a nice guy like me.

woohoo

You gotta love it when a promotion works out just the way you planned.

Sadly, I won’t be playing in Round 2; the offer just doesn’t work out for me.

Fortunately, this will net me enough points for a couple of nights somewhere tropical.

Happy Holidays!

Posted in Priority Club | Leave a comment

Disney Time Shares – What Are They Worth?

I think my new motto should be: “When all else fails, build a spreadsheet.”

Over the last couple of weeks I’ve been (intermittently) thinking about time shares and whether or not there is good value in purchasing one. I haven’t reached a definitive conclusion, but I am beginning to make a bit of progress. First, some background…

We live in Utah and have two young kids. So far, most of our family loves sunshine, beaches, and Disney. If there’s somewhere we’re likely to go, year after year, California and Hawaii are as good a bet as any. These factors make the Disney Vacation Club a good place to begin studying out the pros and cons of a time-share ownership.

There is also an interesting feature of all Disney time shares that I like: after 50 years, ownership reverts back to Disney. It’s more like a lease than ownership. How, you might ask, does it make sense to buy into a property you never really own? Well, there are actually a couple of good reasons…

If Wikipedia is to be believed, time-sharing got its start in the United States in 1974, making the oldest time-share properties about 40 years old. Have you ever stayed in a 40-year old time-share? Would you want to? Many timeshare owners find that as their property becomes older and outdated, they can’t get rid of them at any price. There simply is no good exit strategy, which leaves owners potentially on the hook for ever-increasing maintenance fees for a property they no longer visit.

Disney solves this problem by reserving the right to take in back. I expect that when properties reach the end of their 50-year life cycle, Disney will either completely renovate or bulldoze the properties and replace them with more profitable attractions. Try doing that with thousands of fractional owners of a building. Not only does it allow someone to take action on an aging property, it allows Disney to control and make the best use of real estate surrounding its park. I’d call it a win-win.

The real question, though, is “Does is make sense to buy into a Disney time-share?” Unfortunately, the answer is: Maybe. This is where the spreadsheet comes into play.

There are enough variables in this equation that anyone considering a purchase in a time-share should plug his/her own assumptions into the model. I have included all of the tabs referenced in the following analysis so you can do your own math.

It might help to go through an example or two:

Owning the Villas at Grand Californian

The first step of this process is to identify the number of points needed for the kind of stay you want. For my purposes, I figured 150 points at the Grand Californian would be about right. It would give me a full week in a Deluxe Studio during some of the less crowded times of the year at Disneyland. (This could also be broken up into a couple of weekend trips.) At current market rates, these points can be purchased on the resale market for about $105/point with about $750 in closing fees. Assuming a 5% increase in Maintenance Fees over the life of the ownership period and a 10% discount rate (what I would expect to earn over the long run by putting my money in a diversified stock fund), I calculated the present value of the payments for this ownership stake to be $26,088. But is this a good deal? Let’s see…

The alternative to ownership would be to spend 7 nights in a hotel. Rates at the Grand Californian can easily be $400/night. However, I don’t think I would spend more than about $200/night. This doesn’t factor in the benefits that come from DVC ownership (such as discounted park passes and meals. Using the same assumptions of 5% inflation in hotel expenses and a 10% discount rate, I calculated the present value of payments for hotel stays to be $22,596; significantly less expensive than the ownership proposition. Feel free to tweak the assumptions based on what you think is reasonable.

DVC - VillasGC

The bottom line here is that it is cheaper to rent than to own. The advantage to renting, of course, is that you also aren’t locked into a long-term agreement obligating you to take a vacation to the same place every year. For us, and with the right assumptions, this could make sense for the first ten or twenty years. However, it would be difficult to predict the value of these points on a resale basis twenty years into the future. Also, the graphic above only shows ten years of results, but the model is designed to show returns if the time-share is held to expiration: 2060 for this property.

Next, let’s move to an example that seems to make more sense…

Owning Aulani

Moving beyond California, I thought I would take a look at Aulani, in Hawaii. The analysis is the same, but the variables are different. In this case, it only takes 126 points to visit in February, which is right about the time we’re looking for a good warm weather fix. Points can be purchased for closer to $95 each. The maintenance fees are different (and I have used subsidized fees in this example; this is an issue you would want to be familiar with before making a purchase). Expiration of the time-share agreement is 2062 for this property.

Aulani is a pretty remarkable property. I have conservatively estimated a $250/nigh hotel cost. However, paying for something comparable would actually be significantly above this amount. Even with this modest hotel room expense, the Present Value of ownership payments equal $21,373, which is significantly below the PV of Hotel Rental at $28,562.

DVC - Aulani

The bottom line here is that ownership could make sense, from a strictly economic perspective. The problem is that you have to commit to going to Hawaii every year. I know that doesn’t sound like much of a hardship, but changing schedules, fluctuation airfare prices, and the other vicissitudes of life can make such a commitment challenging. The numbers look much better in this example, but buying real estate is not something to be taken lightly.

A DVC Time Share as an Investment?

In the course of researching time-shares, I quickly discovered that there are lots of people who own properties and never actually visit them. A few seem to make tidy profits by simply renting them out. Naturally I had to build a model to estimate the potential returns of such an endeavor. Since Aulani seems to offer attractive economics as a personal use property, I figured it might be a good rental, as well.

Out on the InterWeb, there is a guy name David who runs a seemingly respectable website where he buys and sells DVC points that might otherwise go unused. Currently, he buys at $11 and sells at $14. You can do better on your own, but he takes the hassle out of the transaction. By using some of the same assumptions as previous models (i.e. the inflation rate at which points can be sold each year will match the inflation rate of the maintenance fees), I calculated that buying points in Aulani and renting them every year could potentially yield an Internal Rate of Return of 10.85%.

I’m no investment advisor, and I’m not recommending any kind of investment decision. But when I think about the potential return and diversification of revenue that could be added from this option…I kind of like it.

DVC - Investment

Whenever you actually wanted to visit the property, the cost would simply be the opportunity cost of the rental income you would otherwise earn. As with the other models, I have assumed that the property reverts back to Disney at expiration.

There are numerous other variables that can influence the decision to purchase a time-share, but I finally feel like I understand how the numbers add up (or don’t). Let me know if you spot errors in the analysis.

Thanks!

Posted in Hotel Points Valuation, Resources | 3 Comments

“Renting” Points in a Time-Share Program for Big Savings

This post might get a bit tedious, so let me skip to the bottom line: I will save 45% off a hotel stay at Marriott’s Ko Olina Beach Club by “renting” time share points from an owner.

Here’s how it happened…

For a couple of weeks now, I’ve been learning about time-shares and building spreadsheets to estimate the savings and value of various time-share options. (In case you’re interested, I plan to post my spreadsheets once I feel comfortable with them.) That value seems a bit elusive still, but I did discover at least one way to experience some pretty remarkable properties at substantial savings.

We have a trip to Oahu, Hawaii coming up and we’ve been contemplating our various hotel options. There will be six of us travelling – including two young children – so family friendly accommodations are highly desired. We’ve stayed at the Hilton Hawaiian Village and the Sheraton Waikiki before. This time we wanted to spend some time in the Ko Olina area – at the southwest corner of the island. Lodging options in this area are limited and expensive. It didn’t take long to figure out that if we were going to stay there, our best options were:

All of these looked incredible. None of them looked cheap. The JW Marriott can be reserved on points, but we would have needed 2 rooms for 5 nights. At 40,000/night, or 400,000 total, this didn’t really work. Paying the cash rate ($400+/night) would have put us at nearly $5,000. Deal breaker.

Next, we considered Aulani. Awesome resort! No point redemption options. Rooms are over $400/night. We also looked at the 2-bedroom suites, but they obliterated the budget. This clearly wasn’t going to work.

Somewhere along the way I learned a bit about renting points from Marriott’s time-share program. The system is completely separate and very different from the Membership Rewards program. (See point redemption rates here.) Perhaps the greatest difference is that owners are not restricted from “renting” their points. I placed a request on one of the time-share forums indicating the dates and type of accommodations I was looking for and within a day, I had two offers for points at $0.50/point. For a two-bedroom suite at Marriott’s Ko Olina Beach Club, I would need 3,425 points, making my hotel stay $1,712.50. And there’s no tax.

Non-owners can actually book these rooms anytime. Just not at this rate. My Marriott status gives me access to a current promotion that would make this stay a total of $2,706.60.

Marriott Ko Olina 1

Anyone without status would be stuck paying the rack rate of $543/night for a total of $3,094.07

Marriott Ko Olina 2

So, by renting points from an owner that is unable to use the points they have, I get a 45% savings off the rack rate and a 37% savings off a limited-time Elite status offer. The cost per room comes out to $171.25 and I expect to have the $30/night parking fee waived (owner benefit). Since it is a vacation club property, it includes a full kitchen, a washer/dryer, and plenty of space for two busy kids. That rate seems a bit more than satisfactory for a hotel that also looks like this:

koolina

Aloha, baby!

 

P.S. I should also add that you can rent points in Disney’s Vacation Club to stay at Aulani, but this wasn’t economical for us.

P.P.S. Renting time-share points does entail some risk and it is important to understand the program and develop some trust with the owner before parting with your cash.

P.P.S. Also, if you ever thought airline and hotel point redemption programs were complicated, time-shares take things to a whole new level. I guess that’s why blogs were invented…

Posted in Marriott | 2 Comments

Time-Sharing? More like Time-Wasting

A couple of weeks ago, Hilton Grand Vacations called to offer me a promotional stay at one of their properties. Of course, there was a catch: attendance at a time share presentation. Well, we were actually thinking about taking a trip to Vegas to enjoy what are likely to be some of the last few days of swimming pool weather. Plus, I’ve always been curious about the time-sharing business model, especially the points-based programs, like HGV. So, we booked a 2-bedroom suite at the Hilton Grand Vacation Suites on the Las Vegas Strip for a sweet deal of $349 for three nights, packed our bags, and loaded two kids (ages 3 and 11.9 months) in the car for a 400 mile road trip. I guess you could say we were feeling pretty brave.

The drive actually went exceptionally well. Only two bathroom stops, no leaky diapers, and less than five minutes of fussing in a 6+ hour trip? Awesome! Our kids are well on their way to becomimg professional road-trippers.

The Girl was very excited to see the Eiffel Tower...even if it's just the "pretend" one.

The Girl loved seeing the Eiffel Tower…even if it’s just the “pretend” one.

Once we arrived, it didn’t take long to settle in and start enjoying a very beautiful property. However, soon it came time to pay our dues…

I expected the time share presentation to be a full-court press, no holds barred style presentation. Boy, was I right. Only I underestimated the aggressiveness of the sales staff. Naturally they try to demonstrate the value of a time share with lots of questionable financial assumptions. But before they put on the hard sell, they try to soften you up with a video full of heartwarming testimonials about how joining the HGV will change your life, save your failing marriage, turn your children into geniuses, and maybe even cure cancer. Our favorite line from the video: “When you step out of your car and the valet gives you a hug, you know you’re home.” A hug from the valet? Sign me up!

What puzzled me most, and continues to astound me, is the way the sales people talk in circles around the pricing of the time share, financing options, and the so-called “value proposition” without ever being explicit about what we were supposedly buying. The sales person and manager seemed to jump back and forth between offering us a deal on the Strip property and Elara. Our two-hour presentation turned into nearly four. After we walked away without making a purchase (phew!), we realized that we hardly knew what we were even being offered. And it was going to cost more than $40,000 plus annual maintenance fees to get it!

We did get a nice consolation prize: 15,000 bonus HHonors points, a $200 bounce-back certificate good for a stay at a Hilton hotel, and vouchers for a show and dinner (although, this last perk wasn’t as good as it sounds). Overall, this worked out to be a pretty fair deal for taking a peek at a vacation ownership program. I just can’t shake the feeling that I almost got mugged. I also can’t understand why Hilton would put their reputation at risk by using this sales tactic. Sure, there is a lot of money to be made, and the program is actually quite appealing, but we figured out pretty quickly that this was a bad deal.

I still think there must be some great savings in vacation ownership, I just haven’t discovered how to make it work yet. It certainly isn’t to be found by purchasing direct from the developer. Resales look significantly more interesting (and less than half the price).

With two small kids, we find ourselves looking for spacious housing options where we can “set up camp” and get comfortable for a while. Being able to wash bottles, cook food, and put the kids to bed in a separate bedroom are all great features of most time share properties. Finding this kind of arrangement in a hotel can be challenging and usually consumes large amounts of points, hence the potential value of time-sharing. On the other hand, maybe I should just stick with VRBO.

Posted in Hilton | 3 Comments