Friday, February 13, 2009

True [Inflation Linked] cost of ClubMahindra Vacation


Idea behind this calculation is to compute per day cost for a member, that also move up according to inflation giving you true cost of your accommodation.

Main point in this calculation..

*) Assume if you have put your membership cost in a Holiday Account which earn interest, also you withdraw money at yearly interval from this account for your accommodation expenses.  During 25 years of membership you spend all your money and interest and do not receive any money at the end of 25 years.  [ See yellow cells]

*) Inflation is assumed at 7% and interest rate on your money at [inflation rate + 2% =] 9%. If you create similar table with inflation rate at 6% and interest rate at 8% or as long as rate difference is 2%, per day cost will come almost same (margin of error will be negligible).


*) It is calculated in a way that your withdrawal amount from this account is increasing with same rate as inflation (7%), as your ASF. As result last column  (per day cost) is increasing at rate as inflation or ASF. Also at the end of 25th year all your money is spent.


*) Promotional item cost is reduced from the membership cost. (cost may vary with time/membership type so proportionately adjust per night cost)

*) ASF is assumed to be increasing at rate 7% in line with our assumed inflation for simplicity, it may increase more or less as may be decided by the Mahindra Holidays time to time.

You may like to do your calculation here ::

Related post:

Before considering Club Mahindra Membership : My personal advice
What are you paying for your Timeshare Membership?
Club Mahindra at its best: from 50 to 70 consumer cases in 10 months

44 comments:

  1. Hi Bhupesh,

    i found your calculation very useful but i have a question.

    how did you calculate the withdrawal amount(C) from 2008? Please comment

    Cheers
    Nitai

    ReplyDelete
  2. Hi Nitai,

    Calculating withdrawal amount is an iterative process. At start of the calculation (2008) you know
    your membership cost (A),
    Starting ASF (D) and
    you assume an interest rate and calculate interest amount on your membership fee (B).
    Calculating C is an iterative process you adjust it in year 2008 such that the amount in row year 2032 in "Remaining" column comes to near zero.

    If you observe withdrawal amount is increasing by 7% each year, your ASF is assumed to be increasing by 7% so the resultant per day cost year by year (7% assumed inflation).

    Instead of looking inflation free calculation what Mahindra Holidays tells to customer, if we look inflation linked cost of membership, it give more sense to me. My starting per day cost is X Rs. and that will increase in line with inflation.

    Do I am satisfied with this amount X in current year cost considering different limitation of the membership? If first year per day cost looks bargain/reasonable, this calculation assure it will continue to remain same for rest of the years.

    ReplyDelete
  3. Hi Bhupesh,

    Thats an interesting way to look at this! I was with the CM guy yesterday as i am considering purple membership. Trying to figure out what is the ideal purchase price for me to buy the purple studio for 25 yrs. Their offer is 5,40,000 but it sound ridiculous to me. there are a few second hand memberships available on the net. What according to you could be an ideal offer price?
    Cheers
    nitai

    ReplyDelete
  4. If you give me current ASF payable on this purple membership. I can calculate per day cost for you.

    Now you need to decide how much you will be willing to pay for similar accommodation, given that your booking is subject to competition from other members and other limitation of the membership, also look my other post Before considering Club Mahindra Membership : My personal advice


    Buying an old membership will always save you minimum 25% money after adjusting for used period.

    ReplyDelete
  5. Bhupesh

    What is withdrawal amount...is it the cost of a holiday for a family of 4? sorry I am unable to understand.

    Thanks
    Deep

    ReplyDelete
  6. Hi Deep,

    It is like you have kept 3 lakh Rs in Holiday account which earn 9% interest on it. Now you use this amount to pay for your hotel expenses every year. You assume room rates will be increasing year by year at the rate 7%. Noe how much money you can take out (Withdrawal Amount) from this fund so that this fund last for 25 years also every year you take out higher amount then previous year.

    I hope it makes it bit clear.

    As per price list on 1st April 2010, Red Studio membership cost ~3.5Lakh at full down payment.

    Studio accommodation allows 3 adults or 2 Adult + 2 children.

    ReplyDelete
  7. Hi Bhupesh

    Apologies for delayed response!

    Purple membership cost: INR 5,40,000
    ASF for studio: INR 9,000

    What do you think?

    rgds
    Nitai

    ReplyDelete
  8. Dear Nitai

    Here are calculation based on figures given by you. Link

    It comes to 5450 per day for current year.
    ---------------

    7 Purple days = ~8.78 Red or ~12.4 White or ~16.44 Blue Days,

    if you are not able to avail days in Purple season will you be able to use higher number of days in lower season.

    ReplyDelete
  9. Not sure if link came proper in previous comments.

    Please cut paste following in browser

    https://spreadsheets.google.com/ccc?key=0AhHCrqYP02M8dHUzQklZcUVwOWFFZjhOX1ZkekNQemc&hl=en

    ReplyDelete
  10. Oh! 5450 is a lot to pay for the room. I think it should not be more than 3000 per night. I downloaded the calculation from the link as an excel file and was trying to substitute the value of 540,000 with 250,000 to see what would be the cost per day, but since the file doesnt have formulae calculation, it didnt do it automatically. I can put in the formulae of all the columns as per your calculation except for the column of withdrawal amount. What do i do?

    Thanks
    Nitai

    ReplyDelete
  11. Dear Nitai,

    You may send me a mail, you may get my mail id from my blog profile. I will send you xls file for same calculation.

    ReplyDelete
  12. Thanks Bhupesh! that was very helpful! now I know where I got fooled

    Deep

    ReplyDelete
  13. Dear Bhupesh,
    Sales persons of Mhril always tak about going up in season i.e. from blue to white or white to red etc. but this never possible because for going up the season same can be done 15 days prior to the day of travel.At the moment booking is not available even 4 months in advance and so this scheme is absolutely non starter and is nothing but FOOLING potential members.
    k desai
    mumbai

    ReplyDelete
  14. Dear Desai,

    You are correct, it remain more of marketing trick then real benefit. There are many such things in Club Mahindra' business. I have realized that you should not commit for long term service without an exit clause, specially in India, otherwise one may have to go through feelings like expressed by you.

    ReplyDelete
  15. Hi,
    Club mahindra is surely a cheater company but let's have another way to look at it. Now you have already paid them and can't exit. Just look at the RCI benefits. That is really very professional organisation. You can use Bonus holiday's without depositing your Club Mahindra week. You have to pay directly to RCI. They give you very good deal. Imagine, you pay Rs.4000 per night for Club Mahindra but if you have somebody like your brother/sister/friend etc, they can also contribute and become co-applicant. Once you are done with this arrangement you can avail 14 days holiday in totality for you and your coapplicant.RCI offer Bonus holiday scheme. So.... effectively you can reduce your per day cost. Eg. Club Mahindra Rs.4000 per day RCI Rs.2800 per day. 4000+2800= 6800/2= Rs. 3400. Also you get lot of flexibility with RCI. You can even book 1 BHk, 2 BHK etc. They do not restrict you for Studio or with your contract terms like Club Mahindra.
    So. by this way you can reduce your burden by around Rs.600- 800 per day, case by case basis.

    ReplyDelete
  16. Yes, In many situation RCI may benefit:
    - You can plan in advance.
    - If you have extended family to take advantage of it.
    - If you can travel in low season. Bonus holidays are usually available in low season.

    ReplyDelete
  17. Annual Subscription Fee (ASF)

    It is annual fee which ClubMahindra charges from its member irrespective of holiday utilization. They are free to increase it based on some inflation data.

    ReplyDelete
  18. Hi,
    I have made the down payment yesterday for White-Studio, what do you think? is it better to quit?
    Please suggest me.

    Pramodh

    ReplyDelete
  19. Hi Pramodh,

    If you have not taken enough time before taking decision then it make sense to call quite now. You can always buy it again when you are fully convinced. When again if you decide to go for it, try to get good deals available from existing customers, you may save good ~30% over existing membership price.

    You may like read my other post.

    Link to Buy/Sell entries

    Club Mahindra Cancellation rules

    Before considering Club Mahindra Membership : My personal advice

    ReplyDelete
  20. Good Morning Mr Bhupesh,

    Just a quick question, I am looking to buy blue studio with mahindras, is it worth or not as per you for a small & young family. Thanks.

    ReplyDelete
  21. Thanks for your comments,

    My advise will to look for the season chart of Club Mahindra resorts and evaluate if you can travel in those weeks/months. Booking in the season higher to yours is usually difficult.

    Go through other blog post here and else where for common problem and advantage of timeshare membership.

    If you decide to purchase a membership, buy it in second sale from entries listed on following page, It will save you good money.

    http://what-goes-in-my-mind.blogspot.in/2008/04/want-to-buy-or-sell-your.html

    ReplyDelete
  22. Hello Bhupesh,
    I am concerned about the RCI exchange ,While selling they offered two years.Now on receiving the package I came to know the offered RCI package is to be consumed within first two year.I feel I am cheated.
    Can I use RCI exchange later without paying extra.

    ReplyDelete
  23. Generally RCI membership start with the start of Club Mahindra membership. You can extend it after 2 years, in block of 3 year, 5 year or 10 years by paying prevailing charges.

    Sales manager must have misguided you.

    I personally do not find RCI useful unless you can exhaust your CM days and plan in advance.

    ReplyDelete
  24. Hi Bhupesh,

    I was going through your blog and very much intrigued with your inflation linked calculation. I did it on my own and I must say that it was nice calculation. Now while doing this I was wondering on how long it will take to get a break-even point, if I decided to go ahead and take the membership? So I did a similar calculation like your one, taking three parameters: starting amount, ASF and an average room rent in a mahindra own resort and I assume that both in ASF and room rent there will be an average increase of 7%. With this data point I got that on the 10th year I was able to get the break-even point, if we assume that the current average room rent in a resort is 5000. If this rent is high then we will get the break even point much quicker. Here is the calculation

    Year Beginning Balance ASF Room rent in a resort (per day) Remaining Amount
    [A] [B] [C] [A + B - 7*C]
    2012 INR 400,000.00 INR 10,748.00 INR 5,000.00 INR 375,748.00
    2013 INR 375,748.00 INR 11,500.36 INR 5,350.00 INR 349,798.36
    2014 INR 349,798.36 INR 12,305.39 INR 5,724.50 INR 322,032.25
    2015 INR 322,032.25 INR 13,166.76 INR 6,125.22 INR 292,322.50
    2016 INR 292,322.50 INR 14,088.44 INR 6,553.98 INR 260,533.08
    2017 INR 260,533.08 INR 15,074.63 INR 7,012.76 INR 226,518.39
    2018 INR 226,518.39 INR 16,129.85 INR 7,503.65 INR 190,122.68
    2019 INR 190,122.68 INR 17,258.94 INR 8,028.91 INR 151,179.27
    2020 INR 151,179.27 INR 18,467.07 INR 8,590.93 INR 109,509.82
    2021 INR 109,509.82 INR 19,759.76 INR 9,192.30 INR 64,923.50
    2022 INR 64,923.50 INR 21,142.94 INR 9,835.76 INR 17,216.15
    2023 INR 17,216.15 INR 22,622.95 INR 10,524.26 -INR 33,830.72
    2024 -INR 33,830.72 INR 24,206.56 INR 11,471.44 -INR 89,924.27
    2025 -INR 89,924.27 INR 25,901.01 INR 12,274.44 -INR 149,944.36
    2026 -INR 149,944.36 INR 27,714.09 INR 13,133.66 -INR 214,165.86
    2027 -INR 214,165.86 INR 29,654.07 INR 14,053.01 -INR 282,882.87
    2028 -INR 282,882.87 INR 31,729.86 INR 15,036.72 -INR 356,410.07
    2029 -INR 356,410.07 INR 33,950.95 INR 16,089.29 -INR 435,084.17
    2030 -INR 435,084.17 INR 36,327.51 INR 17,215.54 -INR 519,265.46
    2031 -INR 519,265.46 INR 38,870.44 INR 18,420.63 -INR 609,339.44
    2032 -INR 609,339.44 INR 41,591.37 INR 19,710.08 -INR 705,718.59
    2033 -INR 705,718.59 INR 44,502.76 INR 21,089.78 -INR 808,844.29
    2034 -INR 808,844.29 INR 47,617.96 INR 22,566.06 -INR 919,188.79
    2035 -INR 919,188.79 INR 50,951.21 INR 24,145.69 -INR 1,037,257.40
    2036 -INR 1,037,257.40 INR 54,517.80 INR 25,835.89 -INR 1,163,590.81


    If that's the case I think it's an interesting proposition to take the membership.

    ReplyDelete
  25. Thanks Abanindra for your interest in this article.

    What about interest opportunity on your 4Lakh, when it will break even if you take that into account?

    1)Instead of paying for membership if you close your Car loan you will save 14-15% interest payout!
    2)If you reduce your home loan by 4 lakh, you will save 11-12% interest payout!
    3) or you put this amount in to other financial instruments.

    Try your calculation for scenario : instead of going for 25 year new membership, you get an old membership which has 20 year left which is available in 2 lakh Rs.

    ReplyDelete
  26. Hi Bhupesh,

    Thanks for the calculation but i am still not able to calculate the Column( C ). I have a blue studio bought in 2010.

    thanks
    pooja

    ReplyDelete
  27. >>Calculating C is an iterative process you adjust it in year 2008 such that the amount in row year 2032 in "Remaining" column comes to near zero.

    So C cell in 2008 row (let' say it C1)does not have any formula, but C2 to C25 ( C cell in 2009 to 2032 row) has formula [C1 *(1+ 0.07 ) .. Cn*(1+0.07)] ( 0.07 is for 7% inflation)

    Now you can adjust C1 such that [A+B -C] in year 2032 come to near zero.

    ReplyDelete
  28. thanks a lot bhupesh.

    pooja

    ReplyDelete
  29. Bhupesh , your calculation is right EXCEPT for one thing , you put the interest rate at 9%. Truth is that you don't put money in untrustworthy company like MHRIL for 9%. You will be expecting at least 12% to 15% return compensating you for FAILURE risk if you put your money in this company. Because the risk is always there that there will be difficulty down the road and your membership might become near unusable in 10 years time!

    ReplyDelete
  30. Anonymous, you are absolutely right!

    In another post "What are you paying for your Timeshare Membership" I have brought up same thought process.

    http://what-goes-in-my-mind.blogspot.in/2007/09/what-are-you-paying-for-your-timeshare.html

    ReplyDelete
  31. Hi Bhupesh,

    I have bought blue membership studio in 2010....well tried to calculate the cost per holiday but coun't get it , it would be very kind of you if you can do the same for me.I have paid ASF 8800, 9600, 10500,11500 respectively.

    ReplyDelete
  32. I will require the price you paid for the membership and list any gift you received for the same to be able to calculate per day price for your membership.

    ReplyDelete
  33. Hi Bhupesh,

    I Paid 150000 and i received a gift as free holiday for 2 in coorg for 2 days.

    ReplyDelete
  34. According to ASF amount you have mentioned in above comments, ASF is increasing at rate 9.3% per year. If current trend continue, in 2030 you would be paying 50k as ASF.

    I have taken Inflation @9% and Interest rate @11% , Current (2013) per day cost for your blue days is ~3150/-

    Year __ASF ___ Per Day Cost
    2010 ___8800 ___2,430
    2011 ___9,592 ___2,649
    2012 ___10,455 ___2,887
    2013 ___11,396 ___3,147
    2014 ___12,422 ___3,430
    2015 ___13,540 ___3,739
    2016 ___14,758 ___4,075
    2017 ___16,087 ___4,442
    2018 ___17,535 ___4,842
    2019 ___19,113 ___5,278
    2020 ___20,833 ___5,753
    2021 ___22,708 ___6,270
    2022 ___24,751 ___6,835
    2023 ___26,979 ___7,450
    2024 ___29,407 ___8,120
    2025 ___32,054 ___8,851
    2026 ___ 34,939 ___9,648
    2027 ___38,083 ___10,516
    2028 ___ 41,511 ___11,463
    2029 ___45,247 ___12,494
    2030 ___49,319 ___13,619
    2031 ___ 53,758 ___14,844
    2032 ___58,596 ___16,180
    2033 ___63,869 ___17,637
    2034 ___69,618 ___19,224

    ReplyDelete
    Replies
    1. Hi Bhupesh,

      Thanks a ton ...... But you are doing a great job.. wish i should have gone through this prior to buying.

      Delete
  35. Good to know you found it useful!

    Blue membership are difficult to sell, any way you can list it for sale some may find it useful. Cost wise good to makeup your mind and consider it an investment loss.

    ReplyDelete
  36. Hey Bhupesh ... I am glad to have come across this before buying the membership. Will it be possible for u to share the xl sheet so that I can calculate

    ReplyDelete
  37. Sir, Need urgent response. Iam buying a Red Studio unused , bought on 2015 April. Resale, offer price is 2 lak 90 Thousand. Please advice.

    ReplyDelete
  38. Good price, make sure it was not on emi, or otherwise should have all emi paid.

    ReplyDelete
  39. hi bhupesh can you send me the xl sheet to my mail id

    ReplyDelete
  40. hi bhupesh can you mail the xl sheet please we are about to decide , we are planning for white for 15 years only and mostly the holidays are on may and december. pl suggest

    ReplyDelete
  41. karthik, I can not locate your mail ID. If you are looking to holiday in May or December white membership will not serve the purpose. Pl look season chart to confirm white season weeks in different resorts. Thansk

    ReplyDelete