The calculation of cost per night in the earlier article gave one method of doing this calculation. As I said at the time there are several methods you could use and I've now updated the spreadsheet with 3 different methods.
The calculation of cost per night causes a lot of discussion amongst folks who are financially oriented. At SherpaReport, we've had comments from members and potential members of destination clubs and residence funds and even some comments from CFOs at some of the destination clubs. People with MBAs, CPAs, CFAs, CFPs have provided feedback, and it seems that if you talk to 10 people about this then you'll get at least 5 answers as to the way to do this calculation.
With all this in mind, the downloadable cost per night spreadsheet now has three models on it:
1. The original model (described here), that includes the following elements
- Annual dues
- Non refundable portion of the initial fee
- Nightly fee (if any)
- Opportunity cost (on the initial fee), with the opportunity cost compounded over the all the years of membership and then divided by the number of nights usage over this full membership period.
2. A simplified version of the original model. This is the same as the original model except that the opportunity cost is simply calculated over one year, and then divided by the nights of usage in one year.
3. A net present value based model. This calculates the net present value (NPV) of your cash flows (Initial membership fee, annual dues, any daily fees and the membership fee that is returned when you leave the club) as a member, this NPV is then divided by the number of nights over your membership period to come up with a cost per night. The NPV calculation also includes an element to calculate the value of the clubs who offer an increase in the value of the initial deposit.
Each of the calculations gives different results with the NPV calculation giving the lowest results. The final tabbed sheet on the downloadable spreadsheet compares the results of all three calculations.
These three calculations are good for comparing the destination clubs amongst themselves and also for comparing the clubs with alternatives such as hotels and villa rentals. Use the calculation method that you feel most comfortable with. Feel free to contact us if you have any questions on this or anything else on destination clubs, we also have other variations that we can send you.