Steamboat Bill

This is a splinter discussion from another thread about charging a 2x premium for the new Maui property as it costs 2.5x the price of an average HCC home. The jury is still out on that one and the debate continues (on the other thread).

However, I had a new thought....Should there be certain properties that are restricted from the Companion (7 night) and Associate (15 night) members?

Said another way, should certain trophy properties be restricted to the Affiliate (25 night) and Private (35 night) members only?

The main advantage is to have incentives for members to upgrade their membership plan which would make the club healthier by bringing in more capital and would actually improve all home availability.

More capital is always a good thing for any business and members that upgrade would also force HCC to buy more homes to keep the "7 Private Member Equivalent to 1 new home" ratio in balance.

It takes 7 Private members to buy one new home, but it takes 35 Companion members to buy one new home. Would you rather compete with 7 Private members trying to book the new Maui property or 35 Companion members???

Also, this would increase availability because the Affiliate and Private members usually don't use 100% of the alloted nights while the Companion and Associate members usually use all of their nights. This is common for all the other DCs out there as the higher membership categories rarely book 100% of their allotment.

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For the record, I was the one person that encouraged HCC to start a 1 week trial membership (it was called a TUG special and was only available for 3 months and members would have to upgrade to a higher plan after 1 year) and was only for TUG members and not mentioned on their website. HCC liked the idea and program so much they made it a permanent category.

While this may be good for HCC business, it actually creates more competition for the average member when it comes to booking future travel. We are all sick of the timeshare booking games and that was one reason why we joined a DC....however, it appears that we may have to play the 365 day booking game all over again.

mjs

Bill,
I Do not think this will make the club healthier, but just the opposite. I would guess many members who bought 1 and 2 week memberships, joined so they could use the nicier homes. Instead of upgrading, I think many would leave the club.
mark

pwrshift

I agree ... I think the lesser members run for the hills and abandon HCC within the 1 year 100% refund period. You buy into a DC like this based on a higher membership fee which is based entirely on the number of nights you have access to over a year ... and you pay more in dues for 25 days than you would for 15 days. So the lesser members have less shots at the prime locations/dates anyways. Setting restrictions - changing a successful game plan - would be suicide for HCC. You just don't chase your paying customers away.

caribbeansun

I don't see how they can pull properties that exist.

If they want to create another upgraded tier that's one thing but you can't waterdown or restrict what already exists as it materially changes the agreement and therefore subject to challenge.

mjs

Early members that bought 6 wks of membership paid $30,000, or $5000 per week.
Companian members(1 week) now pay $30,000, or $30,000 per week.

Early members started paying about $1200 per week in fees.

Newer members pay about $2300 per week.

So, why should the club penalize the people that have paid the most for initiation(per week), and yearly dues to use their week?

mark

Tedpilot

Pwrshift/Mark - You are right. I just posted something similar in Bill's other thread.

Mark - I originally paid $1400/wk in fees for my Corporate Membership. It has gone up very slightly.

LTTravel

It is actually up to $2304/wk for the 5 week "family and friends" (aka corporate) plan and higher for the others.

Bourne

I don't think HCC should change their current model in the near term.

Like another member put it, HCC is very appealing to prospective members due to the quality of properties at an affordable price. In addition, HCC does not discriminate by using a tiered system or laddered reservation windows. In other words, every one is treated equal.

There are two sides to this coin. On the positive side, at the current price point, HCC will attract more Companion/Associate members. In reality, HCC gets more deposits this way. With 7 Private members(7*35 days) per property, they would get 560K per home as deposits. The equivalent in Companion members is 35 i.e. 35*30K = 1.05 Mil. The realistic amount is somewhere in the middle.

In the long run, it is more profitable to sell lower level memberships as long as the growth is consistently paced without incremental increase in marketing budget.

Downside is that there are more warm bodies vying for the same lucrative week. It is a tightrope of managing expectations that HCC has to walk.

Speaking of tiers, HCC does have a tiered reservation structure for the most coveted weeks. Private members get first shot at LT Holiday reservation, Affiliate members get it 6 months in advance and Companion and Associate members have a shot at remaining inventory.

Steamboat Bill

Ok how about this.....

Modify the reservation system for "Companion" Members (7 nights) to only allow 6 month bookings. This would mirror the 6 month Holiday reservation window for Affiliate members and prevent these "trial" members from booking the BEST properties 1 year in advance.

I think this is an excellent compromise that would satisfy everyone (especially me)

When you look at the HCC membership options:

Companion - 7 nights - 100% long term booking possibility
Associate - 15 nights - 46% long term booking possibility
Affiliate - 25 nights - 28% long term booking possibility and 28% 6 month holiday
Private - 35 nights - 60% long term booking possibility

The above data hits the nail on the head for my "concern" as there is an unfair balance of long term bookings towards the Companion members. This is counterproductive as HCC should have STRONG incentives to encourage companion members to UPGRADE their membership level. The 7 nights is really a trial offer and was never meant to be a permanent category.

My prediction - If they leave the Companion members with 12 month reservations windows it will soon cause the other members to get VERY upset as they will have significant competition for the best weeks at the best properties. This is something that must change ASAP.

DosMasCervesos

I don't have a problem with this. They may have to grandfather in the current Companion members, but it does seem strange that the Companion membership currently gets the same reservation allotments as the Associate membership plan.

Regards,
Matt

Bourne

Existing members have always been grandfathered. Old Private members did not see their usage drop from 45 to 35.

That said, a couple of things have to be kept in mind...

1. Limiting new companion members to a 9 mn + long term window is an option that HCC has in the bag but may not exercise until the club dynamics demand it.
2. Does the 12 month reservation for Companion members impact existing members. Maybe. They might be few voices of dissent but collectively they are not loud enough to make a change. In other word, HCC is managing the expectations of existing members while keeping a marketable option in hand.
3. When it does become an issue, HCC can always cap the level by introducing a new reservation policy for new Companion members.
4. It may sound wierd but the two lower tier membership are the biggest selling memberships at the current price point. HCC has a good thing going and should not rock the boat.

Steamboat Bill

I respectfully disagree....let me explain.

HCC price analysis

If you ignore the cost of capital and the 80% refund of the membership fee and only focus on the annual dues, you can draw some interesting conclusions for the various HCC membership levels based upon only the long term reservations.

Companion
$2,300 for 7 nights and 1 Long-Term Reservation
$329 per night for one long term week (7 nights)

Associate
$4,800 for 15 nights and 1 Long-Term Reservation
$320 per night if use all 15 nights
$343 per night is only use 14 nights (possible 2 week long term reservation in Italy)
$686 per night if you only use one long term week (7 nights)

Affiliate
$7,200 for 25 nights and 1 Long-Term Reservation and 1 6-month Holiday Reservation
$288 per night if use all 25 nights
$343 per night if use only 21 nights
$514 per night if you only use one long term week and one holiday week (14 nights)

Private
$9,600 for 35 nights and 2 Long-Term Reservations and 1 Long-Term Holiday Reservation
$274 per night if you use all 5 weeks (statistically unlikely)
$343 per night if you use only 4 weeks
$457 per night if you use only 2 long term and 1 holiday (21 nights)

My analysis:
There is currently NO COMPELLING reason to upgrade from a Companion membership to an Associate membership as you will pay more and get less. It is far better to buy a second Companion membership rather than upgrade to an Associate level as it will give you 2 long term reservations weeks for $4,600 in annual dues vs only getting one long term reservation and one non-long term week (or a 4 + 4 short term reservation) for $4,800 annual dues.

There is only one reason to upgrade to a Affiliate membership…to get a holiday otherwise it would be better to buy 3 Companion memberships and get three long term reservations rather than the 1 Long-Term Reservation and 1 6-month Holiday Reservation and 11 nights of short term availability.

The best plan is still the Private membership, but it will probably be rare that someone upgrades from 7 nights to 35 nights.

Also, note that upgrading ONLY become cheaper than a Companion membership if you use 100% of your nights...which is very unlikely as 14/15 and 21/25 are more likely combinations....especially if the Companion members grab all the best weeks 1 year in advance.

HCC makes a slight initial profit from Companion members vs a Private member (and other membership categories) but this quickly diminishes if they don’t upgrade to a higher plan as their usage and administration costs for 35 Companion Members vs 7 Private Members will be much higher in the long run.

Recommendation:
HCC needs to immediately change the reservation window of the Companion membership to 6 months (or even 9 months) to close this loophole or it risks morphing into a timeshare with TONS of 7 night members and potentially losing the higher category members. I suggest that the immediately make this change to all future Companion members and then phase in the new rule to current members over the next 12 months. Will HCC lose some Companion members? Possibly, but it is better to lose a Companion member than it is to lose the Associate and Affiliate members (due to increased competition for 12 month reservations) and it is better than having a system where people join HCC as a Companion member and NEVER upgrade…or worse yet, use my idea to buy a second (or third) Companion membership week.

I helped create the HCC Trial membership and I did it to try to recruit some new (timeshare) members to Destination Clubs and I NEVER intended this to be a permanent membership category. I am not against a permanent Companion Membership with a 6 month reservation window, but I am 100% against the current 12 month reservation window.

LTTravel

I think you may be right. Maybe they have to change it back to a trial membership or limit the long term reservation window. I think 6 months is a little too severe. Perhaps 9-11 months. If they cant' do that contractually, extend the booking window for the other membership levels to 13 months.

Bourne

The cost of capital is the compelling reason.

2 Companion memberships would cost $60K and $4600 in dues. Compare it to $50K and $4800 for Associate in addition to a lost day. Even if HCC allowed a member to buy two Companion memberships, the prospective member will be paying $10K extra for the additional Long Term week. That is more than what HCC charges for customizing an account. Keep in mind, these are LT weeks and not LT holiday weeks.

3 Companion memberships will give you an extra LT holiday over Affiliate membership with comparable dues and 4 lost days . Plus the member would be paying a premium of $30K extra.

Remember, the holy grail of vacation travel is Holiday weeks. And HCC has a good tiered reservation structure and 1 in 3 year policy to keep things equitable.

To repeat a statement I made before, the bread and butter of HCC's growth and profitability will now come from Companion and Associate members. An increase in this kind of membership will put a strain on the reservation system and availability. HCC just has to walk a tight rope in managing expectations of existing members while having a compelling product to market.

Will it have to pull the trigger down the line. Yes, but now is not the time. It should go against the market requirement at the top of the credit cycle, not at the bottom.

P.S. I reserved OBX for Labor Day weekend using Advance reservation. This may be anecdotal but there is still prime availability for prime properties.