Tuesday, August 27, 2013

Starwood Villa Timeshares

It's only been 2 nights, but we're loving the Westin Riverfront in Avon, Colorado. Since we're here in the last week of August, we're obviously not in peak ski season, so we've been enjoying the property and it's amenities without all the crowds.

My grandmother likes it so much that she's talking about coming back with the rest of my family every summer.

Funny she should mention that, because the Westin Riverfront is one of 19 Resort Villa properties in the Starwood Vacation Network (aka "Timeshares").

Since my father's a nerd about Starwood status and points a student of human nature who wants to learn better sales techniques, he agreed to attend the 90 minute Starwood Villas sales pitch yesterday morning while I was having breakfast with my grandmother. The gift for attending the meeting, was 11,000 SPG points (which he values at about $330). His other choice was a $175 Amex gift card, but last I checked, $330 is better than $175.

If you're not familiar with a Timeshare, it's basically like a co-op. If you're not familiar with a co-op, then you're probably not from New York City. But don't worry, no one's perfect.

Basically, it's buying (and owning) a fractional share of something that own the real estate property. In the case of a timeshare, you own the right to stay in one of the villas (condo style units) for 1 week every year...forever. If my father were to own a timeshare and pass away, I would inherit it get 1 week every year for the rest of my life. Sounds pretty sweet, right?

Well, not so fast. Like anything in life, a timeshare comes at a price. First, you have a big upfront payment to buy the unit. Second, you have to pay annual dues and maintenance...every year (I realize I already said "annual" but I wanted dramatic effect). Overall, this set up is not too dissimilar from owning any real estate, but it's a smaller asset. Instead of a full house or condo that you own for 52 weeks/year, this unit would be yours for only 1 week a year.

Starwood Vacation Network
At the Westin Riverfront Villas (or any other Starwood Villa property), you could purchase either (A) a studio villa, (B) a 1 bedroom villa or (C) a 2 bedroom villa (which is just a studio connected to a 1 bedroom, as seen here).

Unlike a regular hotel room, each villa will have a full kitchen, dining table, and washer/dryer, which make them much more family friendly than a traditional hotel room.

The upfront prices at the Westin Riverfront (during peak times called Platinum+) were as follows:

(A) Studio - $15,900
(B) 1 Bedroom - $28,900
(C) 2 Bedroom - $54,900

So for just $15,900, my father gets a week's vacation for the rest of his entire life and then can pass it down to his beloved daughter who can own it for my her entire life, etc.

But it's actually even better than that. The way the Starwood Villas program works is that you get Starwood StarOptions (similar to Starwood Hotel SPG points).

The StarOptions are awarded every year of your ownership and can be used at any of the 19 Starwood Vacation Properties for as many days as you can purchase. And like hotel prices, the cost in StarOptions fluctuates both during the year as well as during the week.

For example, the Studio (Platinum+) gives you 67,100 StarOptions a year.
  • Those 67,100 StarOptions can get you 1 week in your Westin Riverfront Studio Villa during a peak Platinum+ week (January to mid-April, or Christmas-New Years). 
  • But you could also choose to use 62,100 for 3 weeks (20,700/week) during low season Gold+ week (mid-April to end of May, or October to Thanksgiving).
  • Or you could also choose a few random weeknights during peak season, a few long weekends in low season until you total 67,100 StarOptions.
So basically, for (A) $15,900 + (B) annual maintenance fees, you're buying the right to receive 67,100 StarOptions a year forever (or as long as you own the villa). How you choose to use those StarOptions each year is completely up to you. And if you don't use them all in the single year, you can roll over unused StarOptions, but only for 2 years before they expire.

But what if you don't want to spend a week every year in Avon, CO? 
Well, you can use your StarOptions to buy time in any of the other Starwood Vacation Properties, including properties in Arizona (2), California (2), Colorado (4), Florida (4), Hawaii (3), South Carolina (1), Bahamas (1), St. Johns (1) and Cancun (1).

But what if you don't want to go to those 19 Starwood Vacation Property resorts? 
Well, then you can "trade in" the week in your villa for a week in someone else's villa somewhere else in the world by using a 3rd party exchange company called IntervalWorld.com. And because you're exchanging a property from well-regarded Starwood, you should get a premium for your villa in terms of what you can receive in return (in theory).

But after I went online to the site and scanned through the villa options available, I didn't really find anything that my father would want to go to. Perhaps he's a hotel snob now that he made SPG Platinum, Hyatt Diamond, Hilton Gold and Marriott Gold, but it's hard for him to give up the VIP treatment he receives at these dependable U.S. chain hotels for a no-name resort (that may or may not live up to its Expedia photos).

But what if you don't want to go to any of those random villas?
Well, then you can convert your StarOptions to regular SPG points - the same SPG points that my father avidly collects like a fat kid in a candy store to use for our amazing vacations.

Using the SPG points, he can use them for any redemption he wants (free night awards, suite upgrades, cash & point redemptions, airline mile transfers, nights & flights redemptions, etc).

Unfortunately, it takes about 2 StarOptions to convert into 1 SPG point. So 67,100 StarOptions will convert to just 33,500 SPG points. And they also charge $130 for each conversion.

Other Perks
If my father signed up and made a 10% down payment (plus an additional $695 title/deed processing fee), he would have received the following welcome gifts:

1. Starwood Vacation Owner Gold Status - same SPG Gold status benefits (enhanced room upgrade, free wifi, late checkout), BUT he would start each year with 10 stays and 25 nights of credit. Therefore, to reach Platinum again next year, he would only need 15 stays or 25 nights in a calendar year (instead of starting from zero and needing 25 stays or 50 nights).

Plus since he already had both the Starwood American Express Personal and Business cards, he already started each year with 4 stays and 10 nights of credit. So combined, he would only need 11 stays or 15 nights to reach Platinum status. Very interesting to a Status Whore like my father.

2. SPG Points - for buying at the Studio villa right away, he would also receive a gift of 60,000 SPG points that would be worth about $1,200-$1,800 to my father (assuming a 2-3 cent/pt redemption value). Had he bought a 1 bedroom villa or a 2 bedroom villa, it would have been 90,000 or 100,000 SPG points, respectively (worth $1,800-$3,000).

3. SPG Point Purchase Option - and finally, he would receive two options to purchase up to 100,000 SPG points each for $1,900 (for a total of up to 200,000 for $3,800). While this purchase price of 1.9 cents/SPG point is relatively attractive (since my father can usually redeem for 3-6 cents/pt), it's not attractive enough to fork over $15,900 + fees.

Asians Love Math
Let's ignore the bribe welcome gifts for now. So thinking about it another way, you're paying (A) $15,900 upfront PLUS (B) annual maintenance fees (about $2,500/year) PLUS (C) a $130 conversion fee for a perpetual stream of 33,500 SPG points every year for as long as you own the timeshare. But take a look at (B) again.

Paying $2,500/year after 6 years will be $15,000 (almost the same as the purchase price). After 10 years, it will be $25,000. Owning a timeshare that gives us just 1 vacation week a year will end up costing $100,000 after 40 years by the time my father's in his 70's (and that's assuming no inflation on the maintenance fee). And that, folks, is how Starwood makes their profit. "Give away the razor and sell the razor blades."

Of course, my nerdy father pulled out his Excel (no, that's not a euphemism) and started creating spreadsheets. Based on his math, he was essentially buying SPG points for about 10-12 cents / pt (after 5 years of ownership), gradually going down to 3-4 cents / pt after 60 years of ownership. Um, thanks but no thanks!

Instead of prepaying for a stream of illiquid hotel points that will eventually be devalued at some point in the next 60 years, we'll just continue watching my father open up SPG American Express credit cards each year for a free 25,000-30,000 SPG points every time, plus using Amazon Payments to get another free 24,000 SPG points every year.

Maybe we won't have a kitchen, dining table, or washer/dryer, but 48,000 SPG points gets us 5 free nights at a pretty nice Category 5 Starwood hotel (like this Westin Riverfront Resort & Spa). Did I mention this would all come 100% FREE?

And that $15,900 that we didn't spend today will just go back into my college fund to pay for my expensive future Princeton tuition.

Do you think this Starwood Vacation Network is a good deal? Does anyone who bought into a Starwood villa want to share their experiences?


  1. Thousands of International travelers, particularly from the US and Canada, have fallen victims of timeshare fraud while vacationing. Resort developers hire skilled salesmen to represent their timeshares as many different attractive packages, such as financial investments, deeded properties, or vacation clubs, just to increase their sales.

    1. Yes, completely agree that the sales tactics prey on people who aren't prepared to do their own analysis and research. I can only hope that people don't buy things they don't understand.