Valuing a Contract

[DougEMG]

When looking at different contract and trying to determine the value of one contract compared to another, I use the following methods.

Method 1
(AnnualPoints*$/point -$10*BankedPoints - $10*CurrentPoints + MF*CurrentPoints + ClosingCosts) / Annual Points

The $10 per point for banked and current points is based on the current average value of renting out points. If the banked points are going to expire real fast I'll use a lower number such as $5.

So for example given the following three contracts, how do they compare:

OKW 200 points, $48/point, 0 banked, 100 current points, buyer pays closing ($450), seller & buyer split MF ($520 for buyer)

= (200*48 - 10*0 - 10*100 + 520 + 450) / 200 = $47.85/point


SSR 300 points, $53/point, 300 banked, 450 current, seller pays closing, seller pays MF

= (300*53 - 300*10 - 450*10 + 0 + 0) / 300 = $28.00/point


BLT 150 points, $90/point, 150 banked points, 150 current points, buyer pays closing ($350) and current MF ($633).

= (150*90 - 150*10 - 150*10 + 350 + 633) / 150 = $76.55/point

VB 50 points, $40/point, 0 banked points, 0 current points, buyer pays closing ($350) and seller pays current MF ($535)

= (50*40 - 0*10 - 0*10 + 350 + 0) / 50 = $47.00/point


Method 2
This looks at how much each point per year costs you for the years remaining on the contract past the current year.

OKW: expires in 2042, so has 29 years left after the current year

$/pnt/yr = $47.85/29 = $1.65 per point per year


SSR: expires in 2054, so has 41 years left after the current year

$/pnt/yr = $28.00/41 = $0.68 per point per year


BLT: expires in 2060, so have 47 years left after the current year

$/pnt/yr = $76.55/47 = $1.63 per point per year


VB: expires in 2042, so has 29 years left after the current year

$/pnt/yr = $47.00/29 = $1.62 per point per year


Method 3
Same as Method 2, but add the current annual MF to get what a trip this year will cost you per point.

OKW: $1.65 + $5.20 = $6.85/point

SSR: $0.68 + $4.73 = $5.41/point

BLT: $1.63 + $4.22 = $5.85/point

VB: $1.62 + $7.11 = $8.73/point


Note that none of this takes into account ones personal preferences on home resort, a UY preference, etc.

For myself I'm normally looking to spend as little money up front for as many points as possible at a resort that has a fairly low MF. I have no real preference for a home resort and enjoy staying at any one of the onsite resorts. So I normally look at method 1, which means that I'm wanting to get as many free points as possible.

Hope this was of some benefit to some people. If not, feel free to ignore it.

 

[Tunseeker1]

I like it, it's just numbers with no emotions.

Now if we had a spreadsheet....

 

[AllieV]

I'm not sure I'm following why you are subtracting dollars for banked and available points. Or why it's $10. I guess if you use the exact formula for everything, you can still compare them evenly. But I'd think you'd use the maintenance fee dollar amount, not a flat $10.

The way I'd been doing it is to find out how much they each sold for originally and dividing by the life of the contract and points. That much would be subtracted for each point per year that has passed. Some have pointed out that you have to account for inflation since then, so it's not a great method. But it does explain why OKWs can be had for much less if you buy from an original owner. Even at $50, they're getting back more than they paid for it (not accounting for yearly MFs).

 

[DougEMG]

I'm not sure I'm following why you are subtracting dollars for banked and available points. Or why it's $10. I guess if you use the exact formula for everything, you can still compare them evenly. But I'd think you'd use the maintenance fee dollar amount, not a flat $10.

The way I'd been doing it is to find out how much they each sold for originally and dividing by the life of the contract and points. That much would be subtracted for each point per year that has passed. Some have pointed out that you have to account for inflation since then, so it's not a great method. But it does explain why OKWs can be had for much less if you buy from an original owner. Even at $50, they're getting back more than they paid for it (not accounting for yearly MFs).

I'm using $10 because I would be typically renting out those points to help reduce the costs.

For someone who is going to use the points themselves, then using MF for that resort instead of the $10 would also make sense.

 

[DougEMG]

That's an interesting idea. Did the resorts have much change in their pricing while they were being sold?

 

[AllieV]

I'm using $10 because I would be typically renting out those points to help reduce the costs.

Oh, I get it now. Thanks. If I was buying/calculating one and didn't plan to rent the points, I wouldn't count that in then.

 

[Tunseeker1]

Almost finished with a quick spreadsheet, now to add bells and whistles.

 

[Tunseeker1]

A one Page simple spreadsheet that uses the 3 method formulas.

 

[zeferjen]

The other thing to keep in mind is that there is a liquidity premium, where larger contracts typically sell for less per point than smaller contracts. I am not sure how to quantify this, though.

 

[Dean]

When looking at different contract and trying to determine the value of one contract compared to another, I use the following methods.

Method 1
(AnnualPoints*$/point -$10*BankedPoints - $10*CurrentPoints + MF*CurrentPoints + ClosingCosts) / Annual Points

The $10 per point for banked and current points is based on the current average value of renting out points. If the banked points are going to expire real fast I'll use a lower number such as $5.

So for example given the following three contracts, how do they compare:

OKW 200 points, $48/point, 0 banked, 100 current points, buyer pays closing ($450), seller & buyer split MF ($520 for buyer)

= (200*48 - 10*0 - 10*100 + 520 + 450) / 200 = $47.85/point


SSR 300 points, $53/point, 300 banked, 450 current, seller pays closing, seller pays MF

= (300*53 - 300*10 - 450*10 + 0 + 0) / 300 = $28.00/point


BLT 150 points, $90/point, 150 banked points, 150 current points, buyer pays closing ($350) and current MF ($633).

= (150*90 - 150*10 - 150*10 + 350 + 633) / 150 = $76.55/point

VB 50 points, $40/point, 0 banked points, 0 current points, buyer pays closing ($350) and seller pays current MF ($535)

= (50*40 - 0*10 - 0*10 + 350 + 0) / 50 = $47.00/point


Method 2
This looks at how much each point per year costs you for the years remaining on the contract past the current year.

OKW: expires in 2042, so has 29 years left after the current year

$/pnt/yr = $47.85/29 = $1.65 per point per year


SSR: expires in 2054, so has 41 years left after the current year

$/pnt/yr = $28.00/41 = $0.68 per point per year


BLT: expires in 2060, so have 47 years left after the current year

$/pnt/yr = $76.55/47 = $1.63 per point per year


VB: expires in 2042, so has 29 years left after the current year

$/pnt/yr = $47.00/29 = $1.62 per point per year


Method 3
Same as Method 2, but add the current annual MF to get what a trip this year will cost you per point.

OKW: $1.65 + $5.20 = $6.85/point

SSR: $0.68 + $4.73 = $5.41/point

BLT: $1.63 + $4.22 = $5.85/point

VB: $1.62 + $7.11 = $8.73/point


Note that none of this takes into account ones personal preferences on home resort, a UY preference, etc.

For myself I'm normally looking to spend as little money up front for as many points as possible at a resort that has a fairly low MF. I have no real preference for a home resort and enjoy staying at any one of the onsite resorts. So I normally look at method 1, which means that I'm wanting to get as many free points as possible.

Hope this was of some benefit to some people. If not, feel free to ignore it.

What I'd suggest is to ignore any banked or borrowed points initially but to deduct at least $10 a point for any current of future points that are either not available or are limited (banked/borrowed). This and a per point reference for a given resort should allow you to compare contracts fairly easily. I'd use any additional banked/borrowed points as tiebreakers but I personally would not value them at $10 a point. If you want to use the same method to compare different resorts you just need to decide on an appropriate price per point for each resort based on some objective info like resale prices or ROFR prices. Plus you need to adjust for the RTU if they are different by a % amount.

 

[Tunseeker1]

I put the a calculation in my spreadsheet that adds value for banked and subtracts value for used or borrowed points, so if you want to use the points for a trip you can use those calculation in the value of a contract