Why Are Redseason Prices So Low?

This is one of the most common questions that I get asked - particularly by people who have just attended a Wyndham/Worldmark or Accor Vacation Club presentation and are then comparing the prices that we offer.

Essentially, as with any free market, the price is basically determined by supply and demand. If we put our prices up then we get more people wanting to sell their membership to us and fewer buyers whilst if we drop our prices we get fewer sellers and more buyers. Where the number of buyers and sellers is balanced is the market value of the memberships and currently this appears to be at around 95 cents per credit for Worldmark credits. With their retail price of $2.49 this represents a discount of just over 60% off their price.

With AVC memberships things are a little more complex - because AVC do not allow memberships to be combined together there is effectively a different market price for each size membership. The Bronze and Silver memberships are in quite high supply but low demand as most buyers on the resale market recognise the value in purchasing a larger membership - consequently the resale price on a Bronze membership is only around $2.00 per point. On the other had Platinum memberships are much harder to find but actually in much higher demand (we sell more Platinum memberships than Bronze and Silver combined) and therefore the market price on those is around $2.50 per point. AVC themselves have quite a different market price between the various size memberships with Bronze memberships selling for $7.35 per point while Platinum purchasers only pay $5.57 per point - consequently the Redseason discount varies from around 55% on Platinum up to 73% on Bronze memberships.

The question really should be why are the Developer prices so high? Both Wyndham and AVC products are marketed as managed investment schemes (basically because this is what ASIC has classified them as - I think both of them are a little uncomfortable with that classification). Buyers no doubt see this and believe that most of what they are paying is being invested into the club to buy new property and therefore are extremely surprised and suspicious when they see our cheap prices. Unfortunately the truth in both cases is that significantly less than half of what a new customer pays the developer is actually invested into the club.

Just as an example from the 2007 AVC financial statements we can see that last year they purchased three units in Wanaka New Zealand for a total cost of $1,000,515 which created 575,800 points in the club - so each one of those points cost them $1.73. Now obviously there are some additional costs involved in turning those points into memberships so a resale price of around $2.00 per point is quite reasonable and good value - a retail price of $7.35 would seem a little harder to justify!

So to sum up the reason our prices are so cheap is that we are selling the memberships for what the market evaluates they are worth - and probably very close to the underlying value of the club owned properties. The real question is how the developers can sell them for so much of a markup over this price?