ROI for points

[Geoff Chovaz]

Hi guys, I'm trying to figure out a rough idea on what the ROI on points is, and whether or not it would just be cheaper to book with the hotel directly? I tried searching, but many of my words were too small.

Assuming that I purchased points from someone for FREE, I would still have to pay $500/BI, and a minimum $3000 initiation fee (is this on top of the $/BI fee?) plus an assortment of other fees. Putting that aside, the maintenance is $133 or so/BI. If I bought enough points for the average week for a 2-bdrm (I think I saw it listed as 4150 somewhere) that would require 17 BI's. 17 BI's would cost me $2261 per year in maintenance (plus some other ownership fees.) That means the hotel I choose to book would need to cost me $300/night in order to break even. If it was more, I'm winning, if it's less, I'm losing.

Is my math correct?

 

[vacationtime1]

Your math is good, but you should consider two additional things:

1. Marriott has a right of first refusal on points; they will scoop up any points being sold to you for zero. I believe their ROFR exercise point is about $3 - $3.50 per point, but others may have more recent information on that.

2. Hotel room and timeshare units are fundamentally difference creatures, based on both space and amenities. Unless you are planning to use DC points only for Pulse hotels or similar, you are comparing apples to oranges.

 

[Geoff Chovaz]

Your math is good, but you should consider two additional things:

1. Marriott has a right of first refusal on points; they will scoop up any points being sold to you for zero. I believe their ROFR exercise point is about $3 - $3.50 per point, but others may have more recent information on that.

2. Hotel room and timeshare units are fundamentally difference creatures, based on both space and amenities. Unless you are planning to use DC points only for Pulse hotels or similar, you are comparing apples to oranges.

Thanks. I would be planning to stay in timeshare units, most likely 2 bdrm's. So purchasing for 3.50/pt drives an initial investment up to $14,875. Spread over even 30 years adds another $500/yr so now $2750 or so/yr. That's $392/night.

In July, Summit Watch in Utah is 3900/wk. The price to book it as of right now (a 2 bdrm villa) from Jul 15-22 is $2600. It's very close to the value calculated.

I guess my overarching question really is do you feel that you get a much better value by owning the points than you would by just booking directly? Your comment #2 - I'm assuming that the room I looked at with Summit Watch (2 bdrm villa) would be comparable to the timeshare unit? Or is that inaccurate?

 

[StevenTing]

Attached is the spreadsheet I use. I used your 4250 point Assumption (17 BI) priced at $3 per point. The first worksheet shows how much your cash outflow is. Make sure you mark the year "Active" for it to include the costs. The second worksheet is what you're perceived value is during the year you use the points. You can then figure out the difference between your Outflow and your perceived value and determine your break even point. I use the average increase of MF each year to predict what the future MF's will be.

 

[Geoff Chovaz]

thanks! Anyone know what the going price per point is purchasing directly from Marriott?

 

[StevenTing]

Thanks. I would be planning to stay in timeshare units, most likely 2 bdrm's. So purchasing for 3.50/pt drives an initial investment up to $14,875. Spread over even 30 years adds another $500/yr so now $2750 or so/yr. That's $392/night.

In July, Summit Watch in Utah is 3900/wk. The price to book it as of right now (a 2 bdrm villa) from Jul 15-22 is $2600. It's very close to the value calculated.

I guess my overarching question really is do you feel that you get a much better value by owning the points than you would by just booking directly? Your comment #2 - I'm assuming that the room I looked at with Summit Watch (2 bdrm villa) would be comparable to the timeshare unit? Or is that inaccurate?

Your initial investment is much higher.

$3.50 per point x 4250 Points = $14875
$500 Junk Fee per BI x 17 BI = $8500
$25 transfer Fee per BI x 17 BI = $425
$95 for ROFR

Total of $23895.

 

[Geoff Chovaz]

Yes, I had not included those other fees. I thought the junk fee would be charged to the seller, not the new buyer...

Also, should your formula in F3 (and copied down) on the purchase and MF sheet be =SUM($E$3:E3,$C$28) so that the total maintenance costs are accumulated over the years?

 

[vacationtime1]

thanks! Anyone know what the going price per point is purchasing directly from Marriott?

$11 - $13 per point. There is an "official" price, but they find ways to discount it. Inasmuch as those points are immediately worth about $3.50 on the resale market, I would not recommend a straight points purchase from the developer unless you have a very specific reason to do so.

A better deal is the hybrid package; you buy a week and a comparable number of DC points to dollar cost average. It comes out to about $7/point. If you search the Marriott board using "hybrid" and "points", you will find various threads on how that works.

 

[Geoff Chovaz]

$11 - $13 per point. There is an "official" price, but they find ways to discount it. Inasmuch as those points are immediately worth about $3.50 on the resale market, I would not recommend a straight points purchase from the developer unless you have a very specific reason to do so.

A better deal is the hybrid package; you buy a week and a comparable number of DC points to dollar cost average. It comes out to about $7/point. If you search the Marriott board using "hybrid" and "points", you will find various threads on how that works.

Thanks for the info.

 

[StevenTing]

Yes, I had not included those other fees. I thought the junk fee would be charged to the seller, not the new buyer...

Also, should your formula in F3 (and copied down) on the purchase and MF sheet be =SUM($E$3:E3,$C$28) so that the total maintenance costs are accumulated over the years?

The existing formula is correct. I use this spreadsheet, but in an expanded version, to track my own purchases. You don't want the $E$3:E3 copied down as Column E already does a cumulative sum of the MF's. If you did as you suggest, it compounds the MF's.

 

[Geoff Chovaz]

The existing formula is correct. I use this spreadsheet, but in an expanded version, to track my own purchases. You don't want the $E$3:E3 copied down as Column E already does a cumulative sum of the MF's. If you did as you suggest, it compounds the MF's.

Oh I see now. I had not copied the 1 in the Active column down from 2018 on.

 

[Hi I'm new here]

I cannot imagine shelling out so much cash upfront to buy points, not to mention the yearly fees. And it is not a matter of whether I coukd afford it, actually I could.
Pay as you go, get a hotel room, rent a condo or a timeshare, take a cruise. The DC program is good for Marriott but should be buyer beware, especially for young families.

 

[JIMinNC]

I believe their ROFR exercise point is about $3 - $3.50 per point, but others may have more recent information on that.

It's hard to pin down exactly what the ROFR point is, but other than 1 or 2 cases that have been posted that slipped through for under $3/point, I believe there have been recent postings of Marriott exercising ROFR at $4.50 a point or even a little higher. So $3-$3.50 may be low. At one point, the assumption was it might take $4.75 to $5.00/point to pass ROFR, then add to that the $2/point ($500/BI) fee and the other fees. Conventional wisdom is it will take somewhere around $6.75 to $7/point all-in. So with that, 4250 points is more like $30,000, plus $2250/year in maintenance fees.

As far as ROI, the key is what you are comparing it to. As others have noted, to compare apples-to-apples you can't compare a 2BR MVC condo to a hotel room. A week in July at Summit Watch (2BR) might be $2600 in July, but I bet it's a lot more in ski season. I know 2BR weeks at the beachfront resorts in Hilton Head are often $600 to $700/night in peak season ($4200 to $5000 per week). Prime time 2BR Hawaii can be over $900/night or more. So, it all depends on how you want to use an ownership as to what the ROI might be.

Also, I'm sure others will point out that by renting direct from other owners weeks can be had for much less than the marriott.com prices, but those person-to-person transactions do come with some additional risk and generally less liberal cancellation privileges (maybe NO cancellation rights). So in every case, a potential buyer needs to evaluate their purchase against the relevant yardstick on the rental side. In other words, if you're comfortable using owner rentals, then use that as your comparison, but don't use that as a comparison if that's not a transaction you would be comfortable relying on for your vacations.

 

[Beachspace]

Current price for Marriott Points Retail are: $27,000 for 2,000 points and it was non-negotiable last month at our tour. So your example of 4250 points would basically get you more than double the points on the resale market for the same price.

However, Two sets of points just sold on Ebay I was watching: 2,000 points for $3250 and 2,000 points for $4,000. Add in the fees of $4395 (Or $4095 if you are already a member) and you get a value of $7,645 and $8,395 respectively. Add them up and 4,000 points would have cost you $15,740 (I deducted one $300 fee since you'd be a member after your first purchase). That's well under the $23k the person above referenced it would cost for 4250 points.
Of course we don't know if either will go through ROFR but it comes out to the $3.50+/per point minimum that you guys said is needed (including fees).

HOA fees are $2558/year on all these points.

 

[JIMinNC]

Current price for Marriott Points Retail are: $27,000 for 2,000 points and it was non-negotiable last month at our tour. So your example of 4250 points would basically get you more than double the points on the resale market for the same price.

However, Two sets of points just sold on Ebay I was watching: 2,000 points for $3250 and 2,000 points for $4,000. Add in the fees of $4395 (Or $4095 if you are already a member) and you get a value of $7,645 and $8,395 respectively. Add them up and 4,000 points would have cost you $15,740 (I deducted one $300 fee since you'd be a member after your first purchase). That's well under the $23k the person above referenced it would cost for 4250 points.
Of course we don't know if either will go through ROFR but it comes out to the $3.50+/per point minimum that you guys said is needed (including fees).

HOA fees are $2558/year on all these points.

The $3.50/point quoted earlier in this thread was the price BEFORE the fees, so that would be around $5.50/point after the fees to Marriott. But if you look at ROFR.NET, very few points packages pass ROFR at that low of a price ($3.50).

I would be very surprised if the two eBay sales you quoted pass ROFR since the price that would be submitted to Marriott would likely be $1.63/point for one and $2/point for the other. Of course, if the seller was an upfront fee company that charged the seller a big upfront fee, that fee might be added to the submittal, increasing the total "price" and increasing the chance these might pass.