The Marriott Timeshare Deal

We spent a week in Kauai that was partially subsidized by our willingness to partake in a 90 minute timeshare pitch. It actually stretched to 120 minutes but it wasn't as horrible as some of the stories I've heard. Please don't construe that it was fun or enjoyable either however. All in all, it was similar to the 120 minutes spent at a dentist getting a tooth prepared for a crown.

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.