Does a WorldMark membership save any money?

[Originally published in April 2018 edition of the Redseason Newsletter as part of a 3 part series.  Other articles covered Personal Choice and Wyndham Rewards]

After my last two articles I did get a few people questioning if there was any value in owning a Worldmark membership since my articles concluded it was better to pay cash than use credits for Personal Choice and Wyndham Rewards (in most cases).  So I thought I had better conclude the series by looking at what value you get if you use your credits in the way they were originally intended – by booking time at the club resorts.

I will use a similar analysis to the previous articles and for this one we will assume our fictitious owners, Mr & Mrs Smart, have a 12000 credit membership so they can get roughly a week away with the family each year. I will also do the analysis with them purchasing all credits through Wyndham ($2.70 per credit) or all through Redseason (60c per credit) and have assumed they generally prefer to holiday in school holidays in a 2 bedroom apartment.  As with the last articles I have assumed they pay for their credits by redrawing from a home loan (or by using savings that they could have invested) and the interest rate is 4%  (*1).

If they purchase through Redseason their 12000 credits would cost $7200.  At 4% interest rate the annual interest cost on the purchase price would be $288.  Add on their annual fees which are $963.88 and the annual cost of their credits would be $1251.88 (lets call it $1252).

If they purchased from Wyndham their 12000 credits would have cost $32400.  So the annual interest cost (at 4%) would be $1296.  The annual fees would be $1092.28 (as they have the extra $128.40 in Privileges fees to pay as well) for a total annual cost of $2388.

In order to compare the value I have picked four different holidays that the Smart’s could take with their 12000 credits and then looked at what they would have to pay for a similar apartment in the same area.  
 
Year 1:  Kirra Beach on Gold Coast in January school holidays in 2 bedroom (11000 credits)

On Hotels.com I searched for a 7 night stay in 2 bedroom checking in on Saturday 6th January 2019 in the Kirra or Coolangatta area.  There were various option priced at between around $2600 and $4500 for the 7 nights if you wanted a similar room quality to our resort.  The cheapest similar ocean view apartment I could find was $2900.

Year 2:  Denarau in September school holidays in 2 bedroom (12000 credits)
I searched for a 7 night stay on Denarau checking in late September.  The only option with a 2 bedroom apartment was the Sheraton Denarau Island Villas – 2 bedroom Garden View is $4889

Year 3:  Port Douglas in early September in a 2 bedroom (11300 credits)
There are quite a few hotels to pick from in Port Douglas but for a nice looking one with a 2 bedroom apartment the best value seemed to be Oaks Lagoons 2 bedroom for $2293

Year 4:  Sunshine Coast Ramada Golden Beach at Easter time (12500 credits)
As Golden Beach is slightly cheaper on credits they can get around 9 nights in a 2 bedroom. This is an easy one to compare as you can get the same room type at the same resort through the booking sites.  Price for 9 nights in 2 bedroom is around $2300 for school holiday dates.

So over these 4 years if they paid cash their accommodation costs  would have been $2900 + $4889 + $2293 + $2300 for a total of  $12382 or an average of around $3095 per year.

If they purchased through Redseason their annual costs were $1252 per year or $5008 for the 4 years so by having the membership they would save $7374. They have actually paid for the total cost of the membership in less than 4 years.

If they purchased from Wyndham the annual costs were $2388 per year so they save around $707 per year.  Payback for the full membership cost takes a little longer if buying from Wyndham – it will take around 26.5 years until the membership has paid for itself (interest bill goes down each year as the savings reduce the cost).

Note that if you buy from Redseason and invest the savings after the membership has paid for itself in the 4th year (at the same 4% interest rate) then by the time the Wyndham purchase would have been paid off in 27 years you are over $79,000 better off by purchasing from Redseason.  Not a bad saving!

So as you can see using a membership for club holidays will pay for itself within a few years if you buy from Redseason.  It still will pay for itself if you buy from Wyndham but the savings are smaller and due to the high purchase price it takes a LOT longer to get there.  Luckily the Smart’s always shop at Redseason!

(*2)

I have ignored the resale value of the membership in these calculations. For a 12,000 credit membership you could sell it back to Redseason for around $4800. That takes around 2 years off the payback time so if purchasing from Wyndham it is reduced to around 24 years, if purchasing from Redseason the payback time is only around 2 years!

* Note 1: The 4% interest rate is applicable even if you pay cash for your credits and never use finance as if you hadn’t purchased credits you could have either paid more off your home loan or invested the money somewhere to get a 4% return (after tax – shares for example).  If you do finance through Wyndham then the interest rate is MUCH higher and the “Purchase from Wyndham” option becomes at least twice as expensive per year at least for the initial years. 

* Note 2: This table assumes that both hotel costs and Worldmark fees rise at roughly the same rate with inflation – if fees rise more than inflation then the payback period for a Wyndham purchase will be longer than 27 years and total savings would be a bit lower.  If hotel costs rise more then that could shorten the payback and give bigger savings.

As always if you have any questions on this just email me or give us a call and we are more that happy to have a chat.  

*Analysis prepared April2018 by Terry Bradford from Redseason Pty Ltd, holder of Australian Financial Services Licence number 491352. Information on credit rates taken from current Resort Guide and hotel rates sourced from Hotels.com at the time the article was prepared for the specified holiday dates.Interest rate for home loan based on current CBA Variable Rates (rounded down for simplicity).

Any advice in this document should be considered general in nature and does not take into account individual financial circumstances. Please seek specific advice for your situation before making any decision to purchase a Worldmark by Wyndham membership.