We just returned from our third trip to Maui. The impetus for the trip was a timeshare presentation offer we couldn't refuse: in exchange for a 90 minute pitch, we'd get lodging at the Hyatt Residence Club on Ka'anapali for $1295 plus taxes and a $100 spending credit while we're there. The taxes were about $180 dollars and we would no doubt charge at least a few things to the room, so the net was 5 nights in a fantastic 2-bedroom condo with ocean view, right on the beach, for just under $1400. We split the cost with my sister-in-law's family, bringing our net to about $140 a night per couple, per night, in premium accommodations.
The presentation was scheduled for the 3rd full day of our stay, giving us enough time to enjoy everything and be in a fully receptive mood. Our agent took 10-15 minutes to get to know us, asked about our travel and spending habits. He did some math to show us we'd spend about $500k in a lifetime of vacationing. This, of course, is meant to make the ensuing offer seem cheap by comparison (as he writes $500k in one column and $2600 per year in the other - we'll get to the actual math later). He lays out that we have 4 options: use our purchased week, trade it in for 2600 points towards another Hyatt Residence Club location, 3000 Interval International points, or 90,000 Hyatt hotel points. These are, of course, all different opaque points in different systems, with different nebulous values.
He then takes us around the property to show us professional shots of the Residence Club properties and declares that Interval International has 3000 hotels in 80 countries (which is supposed to make you think "I can go anywhere I want!"). We are presented with another scale involving Travel Destination Index (a measure of the desirability of a location at a time) and bedrooms pointing out points per week, and he highlights that by trading in our week in Maui, we could get 4 or 5 weeks in some other locations. He also tells us just how high the retail price is these locations we'd get access too. For example, our Maui condo would run $8800 a week after taxes (but could be ours for just $2600 a year!). There were many other leading questions about "wouldn't it be nice to just show up and not have a bill?" and similar. Sure, sounds great, but how much do I pay ahead of time for it? We eventually tour the grounds of the timeshare property and gaze over the ocean from the 12th story. He tells us how much courage the first owners had to buy before the property was even finished ... and did we have the same courage to become owners too?
What's the deal?
In the end we said no, partly because there's simply no way to assess such a convoluted asset in an hour, and mostly we weren't interested to begin with. In the interest of keeping an open mind (as we had been asked to do), I wanted to work through what the offered asset is actually worth, and explore the value of the offer. The terms are:
The true benefit can be quantified as the market value of whichever option in [3] the owner takes that year. Each sub-option deserves its own analysis. In other words, how much cash would I need to spend to get the same thing?
Value of property use
I can't currently find a published price to rent a week at the Maui property, so the only number I have is the claimed $8800 after taxes. However, we must also compare similar nearby options (unless the Hyatt is uniquely special to someone). There are several other condo buildings on Ka'anapali, along with numerous hotels. A year ago we rented a 2-bed, 2-bath vrbo set a quarter mile back from the beach, with sweeping ocean views and lanai. We watched whales every morning over breakfast, had a pool, hot tub, kitchen. We paid just under $3000 for 7 nights. The actual place was a little less posh, but still nice, and we didn't have room service or a bar on premise ... so we took a trip to Costco when we landed instead.
For comparison, the nearby ocean-front Ka'anapali Alii runs between $500-600 a night for a 2-bedroom condo. The building is clearly older and the units are a bit outdated, but we have to consider the relative value.
A comparably appointed Westin or Hyatt hotel on the beach, with ocean views runs about $400-500 per night, and this cost would be doubled to get to two bedrooms. This does not appear to be a better value. Opting out of the ocean views would save about $100 per night.
Value of Hyatt Residence Points
The additional consideration here is the limited set of locations. This exchange only works if there's one in a desired destination. There are 15 other Residence Clubs, and they are heavily concentrated on ski (Tahoe, Colorado) and beach locations (with 4 in the Florida Keys), and then a few more esoteric spots like San Antonio and Sedona. There is no indication on their website of how many points any of these could be booked for, that information seems limited to owners. Our one data point is that we rented a 2-bedroom at the Hyatt Sedona Residence Club, in August 2013, for $282 a night. That is clearly far under the market value of the Ka'anapali property. Searching "Hyatt Residence Club" on hotels.com offers some glimpses, for example the Hyatt Beach House in Key West is indicated "from $319 a night", but no concrete bookable offers popped up in my quick searches. At best I can conclude that comparable quality properties can be had for that range, so unless the points can be translated to longer stays, it's a clearly lesser value than just using the home property.
Value of Interval International Points
There are 3000 locations in 80 countries. While talking, Marisa thumbed through the booklet and noted that many of the locations seemed to be in slightly obscure spots. For example, there were half a dozen options in Hungary, but none in Budapest. A quick perusal suggests the locations tend towards the more remote, though this is not conclusive. While the website allows a search of locations, you need to be a member to see any cost details. This lack of access makes this entirely opaque, so we can't really evaluate the value.
Value of Hyatt Global Points
90,000 sounds like a lot, but nights seem to start at 8000 per, and a mid-range Hyatt hotel is about 12,000 (per examples shown to us). Nights start as low as 5000, but I expect these are few and far between. Even if a 12,000 point mid-range hotel is $300 a night, that's still only a $2000-2500 benefit in exchange for the original property.
Are people buying?
Yes. Assuming our agent was truthful, about 50% of the timeshare has been sold. There are 52 weeks times 134 units for a total of about 7000 shares. The property has been open for about 3 years so they are selling about 3 shares a day (3500 divided by ~1100 days). Assuming every buyer is getting a pitch in person, about 6% of the claimed 50 daily sessions are converted into sales. The bulk of the sessions are set up in exchange for freebies like sunset cruises or golf, my estimate is that 5-10 of the daily sessions are for people who got a deal similar to ours.
Is it worth it?
To me it appears this is not generally worth it. For someone who has 70k and nothing else to do with it, who loves the nicest accommodations and Ka'anapali, it's not an inherently terrible deal. Using $6-8k as the effective cost, comparing it to $4500-5000 for a less nice Ka'anapali Alii, or $7000+ for comparable hotel rooms, the numbers aren't way off. Assuming the retail prices grow at 10% for the area and the HOA grows at the same rate, locking in the bulk of the investment as a one-time payment can be a benefit. It does not appear that the exchanges are great options, so the value of the asset is primarily the one location. Anyone who prioritizes flexibility and variety in vacations is probably better off saying no. Still, it's amazing to me that people are committing $70k based on an hour of cherry-picked information. People ask questions, but not all the questions. However, having been able to ask a few questions might make them feel comfortable? It takes way longer to assess the underlying asset. I just spent several hours laying it out and trying to dig up representative numbers and wasn't able to answer questions to my own satisfaction.
What about buyer's remorse?
The presentation is short enough (and we weren't interested enough) that we never even asked about selling. Apparently it's possible to sell back to Hyatt at the current market rate minus 6% commission. Those rates are not made public, though I suspect it'd be easy enough to find out what the current asking price is. I suppose that's better than lots of other cases where people are desperate enough to get out that they just abandon their asset and lose everything, but that's a pretty low bar to beat.
The presentation was scheduled for the 3rd full day of our stay, giving us enough time to enjoy everything and be in a fully receptive mood. Our agent took 10-15 minutes to get to know us, asked about our travel and spending habits. He did some math to show us we'd spend about $500k in a lifetime of vacationing. This, of course, is meant to make the ensuing offer seem cheap by comparison (as he writes $500k in one column and $2600 per year in the other - we'll get to the actual math later). He lays out that we have 4 options: use our purchased week, trade it in for 2600 points towards another Hyatt Residence Club location, 3000 Interval International points, or 90,000 Hyatt hotel points. These are, of course, all different opaque points in different systems, with different nebulous values.
He then takes us around the property to show us professional shots of the Residence Club properties and declares that Interval International has 3000 hotels in 80 countries (which is supposed to make you think "I can go anywhere I want!"). We are presented with another scale involving Travel Destination Index (a measure of the desirability of a location at a time) and bedrooms pointing out points per week, and he highlights that by trading in our week in Maui, we could get 4 or 5 weeks in some other locations. He also tells us just how high the retail price is these locations we'd get access too. For example, our Maui condo would run $8800 a week after taxes (but could be ours for just $2600 a year!). There were many other leading questions about "wouldn't it be nice to just show up and not have a bill?" and similar. Sure, sounds great, but how much do I pay ahead of time for it? We eventually tour the grounds of the timeshare property and gaze over the ocean from the 12th story. He tells us how much courage the first owners had to buy before the property was even finished ... and did we have the same courage to become owners too?
What's the deal?
In the end we said no, partly because there's simply no way to assess such a convoluted asset in an hour, and mostly we weren't interested to begin with. In the interest of keeping an open mind (as we had been asked to do), I wanted to work through what the offered asset is actually worth, and explore the value of the offer. The terms are:
- Buyer makes a down payment of $66-76k, depending on the chosen floor (2 to 12).
- Buyer pays a yearly HOA payment starting at $2600 (assume it rises over time)
- Buyer may, in each calendar year:
- use the property for any 1 week, excluding Christmas and New Years (which cost unspecified extra)
- exchange use of property for 2600 Hyatt Residence Club points
- exchange use of property for 3000 Interval International points
- exchange use of property for 90,000 Hyatt Global (hotel) points
The true benefit can be quantified as the market value of whichever option in [3] the owner takes that year. Each sub-option deserves its own analysis. In other words, how much cash would I need to spend to get the same thing?
Value of property use
I can't currently find a published price to rent a week at the Maui property, so the only number I have is the claimed $8800 after taxes. However, we must also compare similar nearby options (unless the Hyatt is uniquely special to someone). There are several other condo buildings on Ka'anapali, along with numerous hotels. A year ago we rented a 2-bed, 2-bath vrbo set a quarter mile back from the beach, with sweeping ocean views and lanai. We watched whales every morning over breakfast, had a pool, hot tub, kitchen. We paid just under $3000 for 7 nights. The actual place was a little less posh, but still nice, and we didn't have room service or a bar on premise ... so we took a trip to Costco when we landed instead.
For comparison, the nearby ocean-front Ka'anapali Alii runs between $500-600 a night for a 2-bedroom condo. The building is clearly older and the units are a bit outdated, but we have to consider the relative value.
A comparably appointed Westin or Hyatt hotel on the beach, with ocean views runs about $400-500 per night, and this cost would be doubled to get to two bedrooms. This does not appear to be a better value. Opting out of the ocean views would save about $100 per night.
Value of Hyatt Residence Points
The additional consideration here is the limited set of locations. This exchange only works if there's one in a desired destination. There are 15 other Residence Clubs, and they are heavily concentrated on ski (Tahoe, Colorado) and beach locations (with 4 in the Florida Keys), and then a few more esoteric spots like San Antonio and Sedona. There is no indication on their website of how many points any of these could be booked for, that information seems limited to owners. Our one data point is that we rented a 2-bedroom at the Hyatt Sedona Residence Club, in August 2013, for $282 a night. That is clearly far under the market value of the Ka'anapali property. Searching "Hyatt Residence Club" on hotels.com offers some glimpses, for example the Hyatt Beach House in Key West is indicated "from $319 a night", but no concrete bookable offers popped up in my quick searches. At best I can conclude that comparable quality properties can be had for that range, so unless the points can be translated to longer stays, it's a clearly lesser value than just using the home property.
Value of Interval International Points
There are 3000 locations in 80 countries. While talking, Marisa thumbed through the booklet and noted that many of the locations seemed to be in slightly obscure spots. For example, there were half a dozen options in Hungary, but none in Budapest. A quick perusal suggests the locations tend towards the more remote, though this is not conclusive. While the website allows a search of locations, you need to be a member to see any cost details. This lack of access makes this entirely opaque, so we can't really evaluate the value.
Value of Hyatt Global Points
90,000 sounds like a lot, but nights seem to start at 8000 per, and a mid-range Hyatt hotel is about 12,000 (per examples shown to us). Nights start as low as 5000, but I expect these are few and far between. Even if a 12,000 point mid-range hotel is $300 a night, that's still only a $2000-2500 benefit in exchange for the original property.
Are people buying?
Yes. Assuming our agent was truthful, about 50% of the timeshare has been sold. There are 52 weeks times 134 units for a total of about 7000 shares. The property has been open for about 3 years so they are selling about 3 shares a day (3500 divided by ~1100 days). Assuming every buyer is getting a pitch in person, about 6% of the claimed 50 daily sessions are converted into sales. The bulk of the sessions are set up in exchange for freebies like sunset cruises or golf, my estimate is that 5-10 of the daily sessions are for people who got a deal similar to ours.
Is it worth it?
To me it appears this is not generally worth it. For someone who has 70k and nothing else to do with it, who loves the nicest accommodations and Ka'anapali, it's not an inherently terrible deal. Using $6-8k as the effective cost, comparing it to $4500-5000 for a less nice Ka'anapali Alii, or $7000+ for comparable hotel rooms, the numbers aren't way off. Assuming the retail prices grow at 10% for the area and the HOA grows at the same rate, locking in the bulk of the investment as a one-time payment can be a benefit. It does not appear that the exchanges are great options, so the value of the asset is primarily the one location. Anyone who prioritizes flexibility and variety in vacations is probably better off saying no. Still, it's amazing to me that people are committing $70k based on an hour of cherry-picked information. People ask questions, but not all the questions. However, having been able to ask a few questions might make them feel comfortable? It takes way longer to assess the underlying asset. I just spent several hours laying it out and trying to dig up representative numbers and wasn't able to answer questions to my own satisfaction.
What about buyer's remorse?
The presentation is short enough (and we weren't interested enough) that we never even asked about selling. Apparently it's possible to sell back to Hyatt at the current market rate minus 6% commission. Those rates are not made public, though I suspect it'd be easy enough to find out what the current asking price is. I suppose that's better than lots of other cases where people are desperate enough to get out that they just abandon their asset and lose everything, but that's a pretty low bar to beat.
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