On Friday of last week, I went into detail about the decision that brought a timeshare into our lives.
I had noted that in 2000 when I first looked into a Marriott Aruba timeshare it was around $14,000. In late 2004, it was $19,000.
This lead me to conclude, these things only go up and up. My future wife bought in at the $19,000 price.
So when my wife and I were on our Maui vacation, we decided to take in a timeshare presentation to see what they had to show now. For this we were compensated with $95 in gift certificates that we could use at the hotel. I'll get into more of the pitch later, but they told us something interesting...
... our timeshare's value was $33,640
Considering that until about 6 months ago the performance of the stock market from 2004 was flat, this is a pretty fantastic gain, right? Of course!
So the value of these timeshares always go up. Measured from the my $14,000 estimate it cost in 2000, it has gone up 11.7%. Measured from 2004, it was 11%.
Did I find an investment that goes up 11% long term (okay 12 years), even despite recessions?
Perhaps not so much. Let's dig deeper...
Marriott's Destination Club Points
A couple of years ago, Marriott got a fantastic idea to make timeshare ownership more confusing. They put all the properties in a trust and create a point system. Every location and type of room would have a point value associated with it. Our 1-week, 2-bedroom timeshare at the Aruba Surf Club was valued as being worth 3075 points. Those that join this point system (and own the property that we do) can use those 3075 points in various ways. It might buy 4-weeks in Kansas (if Marriott had a timeshare there) as the points at the mythical place would likely be cheap. Those points could be traded for a 3-day stay in Maui as the resort we stayed at cost 7000 points a week. (No offense Marriott in Maui, but your accomidations should be valued at 20% less than Aruba, not over a 100% more.)
If you've followed me thus far, let's go a little further. If you owned somewhere else and wanted to trade for the same timeshare that we own through this point system, you'd have to give up 3,500 points. The difference between the 3,075 points that Marriott is awarding us and the 3,500 that they'll charge other people seems to be called the "skim" in timeshare lingo. In my view that 425 points per 3075 points (a 13.8% margin) is a rather large "skim." However, I've read about others which seem to be as high as 25%. You can review the prices of what Marriott charges here (PDF) (i.e. the 3,500) number. Getting the value of what you previously owned is a little more difficult. Fortunately, this person has compiled a pretty good list. This gives you the 3,075 number for existing owners that Marriott doesn't publicize too much.
With the Destination Club Points system, Marriott has decided to do away with selling weeks at a timeshare. You can only points. You want to stay at the 2-bedroom timeshare at the Aruba Surf Club for a week like we can? That's going to cost you 3,500 points (see above), so you have to buy 3,500 points.
How much does a point cost? It has changed over time. Marriott doesn't seem to post the point history, but in looking through various forums, I think I've comprised some decent data:
- 8/26/2010 - the price per point was $9.20 (Source)
- 3/19/2011 - the price per point was $10.22 (Source)
- 2/15/2012 - the price per point was $10.94 (I'm reporting this first-hand from my own presenation.)
When we went into the timeshare presentation there was a handy graph showing these price changes, specifically pointing out that prices have gone up 19% since they've switched over to the point system (which is roughly 18 months ago).
The implied message was clear. If you want in, you better buy now, because with the way prices are going up you'll just pay more later. The salesman was even more direct saying (paraphrased) "If you are ever thinking of expanding your Marriott ownership, the time is now."
It occurred to me that the price per point is whatever Marriott wants to make it. They set it at whatever they want and it seems like it is calculated to increase around 11% per year. What's really interesting to me though, is how Marriott is able to continue to raise prices consistently and still make sales. Perhaps people are buying in with the belief that it an appreciating investment.
It seems to be an appreciating investment only in the minds of Marriott. If you do an search for Marriott Timeshares in Aruba on Ebay, there are a number of places listed for around $8,000 to $10,000. That's quite a gap from the $33,640 that our place is supposedly worth. It seems to be a gap that is only wider and wider.
I know I'm liberal with my use of the word "scam" especially with the MLMs that I occasionally write about. However, this does seem to be a scam by definition, right?
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