With each of the destination clubs and residence funds having different fee structures, it requires a little math to put them on a par to compare the cost per night. This article walks through the calculation and provides you with a downloadable spreadsheet showing the calculation for most of the clubs.
The calculation of a cost per night (equivalent) is a useful tool to financially compare each of the destination clubs. It is also useful for comparing the clubs to alternatives, such as luxury hotels or house rentals, for which the cost per night is much more obvious.
There are a variety of ways to do this calculation, with no one "right" way. The way we've done it is to use 4 elements:
- Annual dues
- Refundable portion of the initial fee (if any)
- Nightly fee (if any)
- Opportunity cost (on the initial fee)
The Calculation
1. Annual Fees: These are divided by the number of days in the plan or tier of membership, to produce a cost per night. Some memberships have "unlimited" nights of use, but are subject to the clubs reservation rules. In these cases, where there is no specific number of nights with a plan we've assumed 30 days a year of usage. You can adjust this 30 days to better fit your own travel patterns in cell B7 of the spreadsheet.
2. Opportunity Cost: Your initial membership fee ties up a piece of your capital assets that could otherwise be invested. We apply an interest rate to this capital to produce an "Opportunity Cost" of having this capital used for membership rather than being invested. The default interest rate in the spreadsheet is a conservative 4%. You can change this in cell B6 on the sheet "Compare DCs"
3. Refundable Initial Fee: When a member leaves a club or fund, they may receive back a portion of their initial membership fee or equity share. This is usually related to the appreciation or depreciation in the property portfolio. .
Where the refundable amount includes an expected appreciation of the property portfolio, we have not used this appreciation, since it is not guaranteed - it totally depends on the initial buying abilities of the fund managers and of the subsequent movements in real estate markets. However column S on the spreadsheet shows the clubs that do offer some potential appreciation so that you can bear this in mind. Note some clubs, particularly clubs where the initial fee is small, do not refund any of this fee.
4. Nightly Fee: some of the clubs charge a per night fee for any nights that a member uses. Others charge a fee over a certain number of nights, such as a cleaning fee.
Variables and Assumptions
The calculation assumes a membership period of 10 years. You can alter this period eg make it 15 years or 20 years, by changing the figure in cell B5.
The calculation assumes an opportunity cost of capital of 6%. You can change this in cell B6. In early 2023 money market accounts yielded about 4%, the long term return on equities is between 8-10%.
If a given plan or tier offers "unlimited" nights of usage we've based the calculation on 30 nights of actual usage. If you know you will use more or less than this you can change this in cell B7.
Examples
The full spreadsheet includes information for several tiers of membership in each of the clubs. You can download the spreadsheet below.
When comparing the cost per night to hotel rooms remember that the destination clubs provide large family homes that typically have 3/4/5 + bedrooms. You will usually need to pay for multiple hotel rooms to have the same sleeping accommodation. So to make a comparison, you can either divide the destination club cost per night by the typical number of bedrooms or multiply the hotel cost per night by the number of bedrooms you will need.
You can download the full cost per night spreadsheet here.
For other aspects of comparing the destination clubs start at "Compare Destination Clubs".
