My Long Weekend Vacation, Pocket Excel and the Time Value of Money

I just came back from a lovely weekend at Blue Mountain Village near Collingwood in Ontario. I hadn't been to the area since I was a kid. It's changed a lot.

The good:

  • every room has high speed internet for a reasonable cost.
  • a lovely private beach onto Georgian bay for guests that included lounge chairs, towel service, toys for the kids, and kayaks to borrow. You can walk out close to a kilometer before it gets past your knees so it's great for the little ones, and you don't really care that the water is only a couple of degrees higher than freezing. Of course in the hot sun, the shallow water warms up nicely.
  • our room looked out into a lovely village square. Panoramic Photo here (2.3mb).
  • can you say beer festival? We came back Saturday afternoon from the beach to find there was a Blues, Brews & BBQ festival outside our room. Waterloo, Brick, Big Rock, Creemore, Sleeman's, Rickard's, Steam Whistle and a slightly out of place Coors Lite booth. All appreciated though. Pig roast too - strangely right across the aisle from some place giving out samples of vegetarian hot dogs.
  • the square had some kind of computerized fountains with a small waterfall and man made river - not only artistically pleasing, but the designers knew kids would want to play in this fountain - so they embraced that idea and made a nice entry into it and put lots of chairs around so grown ups could watch their kids (right side of photo)
  • a big fire pit in the middle for pseudo-camp fires which the kids loved.
  • Friday night they had an outdoor movie in the square with popcorn.
  • a surprising amount of things to do right in the village square. Many shops and watering holes. Lots for the kids: scooter rentals, remote control cars & boats for the pond nearby, peddle boast, catch & release fishing, a small water park with water slides & splash pad for the kids. Rock Climbing, face painting. If you've never tried a beaver tail, you must.
  • there is some good golf & tennis available, and in the winter, best skiing in Ontario (not saying much). On the "mountain" there is some good downhill mountain biking to be had during the summer. There are also lots of hiking trails and scenic caves.
  • handy underground parking for the hotel.
  • only 2 hours from Toronto!

The Bad:

  • it's not really a mountain - just an edge of the Niagara escarpment. May not be great vertical, but the largest horizontal around.
  • the open air gondola which was suppose to be open July 1st wasn't.

The Ugly:

The same old timeshare crap sales pitch reminded me of my first day in business school. My Econ101 prof said: "If you learn one thing from university, remember this: At some point in the future, some salesperson is going to try and tell you that money today is worth the same as money in the future." Boy did I run into that here this weekend. I don't mind hearing a good sales pitch, and I had pleasantly enjoyed my vacation to date, so when somebody in the activity centre asked if I wanted to go see a presentation and they would give us a $100 gift certificate for anywhere in the village, I willingly obliged. I also knew it was going to rain that afternoon.

I was a bit surprised that the presentation was not high pressured at all. Intrawest has probably one of the better point systems for Timeshares. You can go anywhere, any time of the year, and for any length of stay. You basically buy points into the system to spend throughout the year. You pay a premium if you book through their travel agent to an external real estate but you basically aren't screwed if you don't like their resorts. Since we don't ski or golf all that much, and not on family vacations to date, I'd be in the “paying extra“ category pretty much every year.

It all boils down to you pay a large chunk of money up front as an equity “investment“, in this case $26K, which gives you 150 points per year, which works out to about 7-10 days depending on what time of the year, what location and what kind of accommodations you want. You also pay an annual maintenance fee of $850. I quickly bumped that up to $1200 to account for the premiums I'd have to pay to book outside the system. The salesperson was quite friendly, but at some point said that "your annual vacation - hotel room part anyway, is basically only costing you $1200 per year". That would probably give me on average 10 days of hotels. So $120/night for a 1 bedroom suite on average was quite good.


What about the $26K? That would probably earn between $800-2000 as investment income if invested somewhere else. The timeshare equity doesn't really appreciate under the point system. It can, but you have a very limited market to where you can sell it, so it generally doesn't. Intrawest will buy back your investment at par in 8 years should you want out of the system.

The salesperson offered all kinds of perks if we accepted - right there on the spot, but if I returned tomorrow I wouldn't get those perks. She said the last 20 people who bought in, all did so on the spot. Of course they did - all the other folks who went home and entered a few numbers into a spreadsheet figured out they could invest their $26K in a t-bill and do much better and have more flexibility. She told me that "just last week" they had a customer come in with a laptop and crunch the numbers and ended up jumping on the deal. I happened to have my pocket PC and before I could enter in a single formula into Pocket Excel, she said, "you know what, this probably isn't going to be for you". I'm guessing she knew the answer to the spreadsheet and didn't want all the other people in the showroom listening to me figure out that my vacations were going to cost about 50% more than we pay now.

To make matters worst, I was being sold Intrawest points at a price of $170/point CDN. You can find these points for sale from existing people not satisfied with the program for less than $120/point CDN.....working out to roughly a 40% markup over current market rates. No wonder they don't want you to go away and “think about it“.

While stupidity and income aren't mutually exclusive, it strikes me that the average joe that meets Intrawest's financial requirements and has $20-$40K to invest in their vacations doesn't always factor in the time value of money. So here is a good refresher on the Time Value of Money that takes an IT perspective and shows you the formulas in excel. OK, we should all generally know this, but it's so easy to forget when you've just seen a great video of how your vacations are going to look for the next 10 years. Or you've just test driven a vehicle that's just a little nicer than you would have otherwise purchased, but has an “interesting financing option“.

So we didn't exactly waste 90 minutes. We saw some nice vacation resorts and a nice sales presentation. There was a torrential rain storm while we were in the meeting and our kids were getting treated to some fun arts & crafts activities in the next room. We ended up going out to a nice dinner on the house that evening. It's a little ugly when somebody tries to sell you something that they know is not a financially sound decision. It would have been a lot more honest had somebody just tried to sell us real estate on its own merits without the confusion & mis-direction.