We’ve spoken with several readers who’ve been trying to figure out a “cost-per-night” for the destination clubs they’re considering.  Some of the clubs publish basic models in their literature.

One of our objectives at Helium Report is to equip you with the tools you need to figure out which club is right for you. We’ve published a series of charts and tables to explain the industry and make comparisons to alternatives.

Today, we explain our five-step methodology for our cost-per-night analysis. It’s not the only way to do the math, but it will provide a means to compare the expense of destination clubs against luxury hotels and resort rentals.

1. Collect the key inputs

Membership deposit, annual dues, nightly fees (if any), and the amount of deposit refundable are four basic figures you’ll need to get started.

2. Figure out the number of days you’ll travel

Some clubs offer “unlimited days” in their membership plans. Unless you can divide by infinity or expect to travel several months a year, we recommend using a standardized number like thirty days. We’re finding that most of our readers are traveling between 28 and 35 days (4-5 weeks) per year.

3. Pick an interest rate

The membership deposit is a large amount of money that you could be investing elsewhere. As we often say in the office, “you’re parking your money in someone else’s garage.” Choose a reasonable interest rate to determine the opportunity cost of that money.

4. Estimate how long you’ll stay a member

Dream Catcher Retreats recently re-worded its membership agreement to a “30-year contract,” with a “service fee” if you resign your membership before that time has passed. Select a number that fits your timeframe. We chose ten years; maybe you take the kids traveling while they’re young and then resign when they’re off in college. We need an endpoint to figure out the refundable portion (80-100%) in today’s dollars.

5. Build an Excel model

Ah, here’s the hard part. Once you have all of the data from steps 1 to 4, you’ll need to create a model to calculate the present value of all these numbers divided by the number of days you’ll travel per year. Email us at tips@heliumreport.com if you’ve started one already.

And if you haven’t, that’s ok – we’ll publish our calculations tomorrow to compare. Hint:  We’re showing an average of $1,800 per night for the industry.
Continue reading Part 2 »