The Proposition
If you decide to "invest" in this vacation "asset" you get 1 week/year at a very nice complex in Kauai. It is called the Waiohai Beach Club and is located on the very nice Poipu beach. Here's a snap:
Now the week of the room you are acquiring is no mere hotel room. It's about 1100 square feet, kitchen, 2 bedroom, 2 bath and nice throughout.
The Cost
So what's this puppy go for. Well - there are two direct cost components. The upfront cost for a room with a beach view is $42,000. If that seems a little steep you can option for the garden view room for $33,000. Then, there's a yearly maintenance fee that they don't talk about too much. This fee right now is $1200/year and is subject to increase. Now to determine the present value of this thing pull out your finance book and look up the value of a growing perpetuity. Some folks call this the "Gordon" model but I digress. Here's the formula:
PV = 1 / (r - g) where r can be the anticipated inflation rate and g is the expected growth rate. Marriott's own site references r to be 5%. There is no reason to expect g, the annual average growth rate of the maintenance fee to be much less than that but we'll do a little sensitivity analysis just to make sure we're in the ballpark:
with g at 2% the PV is $40,000
with g at 3% the PV is $60,000
with g at 4% the PV is $120,000
and as g approaches r the PV approaches infinity
So that's it, depending on the spread you are likely looking at a ~$100K+ investment for a week of vacation fun forever. Oh, and don't forget the flight and rental care expenses you'll be accountable for if you want to enjoy the beach.
1 comment:
That sounds like a good deal! I'm making plans to sell my house so I can buy into that fabulous week a year!
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