Marriott Resale Prices low??

[BocaBoy]

My final comments and then I will leave this topic: (1) Energy costs in fact have a huge impact on timeshare budgets. At Ko Olina, for example, it is the third highest expense item after housekeeping and property taxes. (I don't count management fee because it is simply a percentage of the total budget.) I would expect energy to be even more significant in areas with cold winters and much hotter summers than Hawaii. Boston and Atlantic City come to mind but I have not looked at their budgets. (2) Most of my career has been spent in senior human resources roles in consulting firms and in Fortune 100 companies. With the exception of health care costs, there have been only minimal increases in personnel costs over the past 10 years, pretty consistent with the low CPI numbers. Health care costs have increased much faster, but in the past several years even these increases have been much smaller than in the previous decade or two.

 

[JIMinNC]

1. [working pop growth + wage increase + productivity gains] accounts for the increase in total output

or to put it another way, labor costs don't feed through to inflation because less people are required to deliver something than the year before, and so on.

2 - so the organisation in charge of controlling and setting cost levels is paid more as costs increase, and TUG is having difficulty working out why costs are increasing? - Really?!

Actually productivity growth has been flat for a number of years - as the linked New York Times article explains, actual economic output is merely moving in lock step with the number of hours people put in, rather than rising as it has throughout modern history. The lack of productivity growth has been one of the major things holding back economic growth in recent years.

https://www.nytimes.com/2016/04/29/upshot/why-is-productivity-so-weak-three-theories.html?_r=0

So, if productivity is flat, any wage gains feed directly into inflation.

On your second point, I agree that timeshare HOAs do not have the same cost control incentives as exist in other types of HOAs - neighborhoods, condo/townhomes, etc. Timeshare ownership is so diluted by the number of owners involved, the same cost control incentive doesn't exist as it does in a condo complex or neighborhood where people are more connected because it's where they live.

Having said all that, I still don't find the 3% to 5% or so annual increases in Marriott maintenance fees to be out of line with the cost increases I see elsewhere. For example, from 2011 to 2016 our monthly cable/internet bill increased from $148 to $239 (an annual growth rate of +10%); over that same time period our monthly telephone bill has grown from $74 to $104 (annual growth of +7%). In both cases the services we are receiving are identical. I don't have an easy way to track our grocery spending over that same time frame, but my sense is our grocery bills are growing much faster than the stated CPI. Maybe we're buying different things, but I don't think our eating patterns are that much different. So despite what the CPI says, costs ARE going up.

 

[JIMinNC]

My final comments and then I will leave this topic: (1) Energy costs in fact have a huge impact on timeshare budgets. At Ko Olina, for example, it is the third highest expense item after housekeeping and property taxes. (I don't count management fee because it is simply a percentage of the total budget.) I would expect energy to be even more significant in areas with cold winters and much hotter summers than Hawaii. Boston and Atlantic City come to mind but I have not looked at their budgets. (2) Most of my career has been spent in senior human resources roles in consulting firms and in Fortune 100 companies. With the exception of health care costs, there have been only minimal increases in personnel costs over the past 10 years, pretty consistent with the low CPI numbers. Health care costs have increased much faster, but in the past several years even these increases have been much smaller than in the previous decade or two.

At Barony Beach Club in Hilton Head - a place with very hot summers - the costs for Electricity and Gas total $671,448, only about 5% of the $13.4 million operating budget. By contrast, line items that have significant staffing components (accounting, activities, administration, front desk, housekeeping, human resources, owner services) total about $5.3 million, or about 40% of the operating budget. If you throw in maintenance line items which may have significant labor cost components as well (landscaping/grounds, maintenance, pool maintenance, pest control) that adds another $1.7 million (an additional 13% of the budget).

As I said in my earlier post, I agree that healthcare cost increases have slowed in recent years but they are still significant. According to the Kaiser Family Foundation Employer Health Benefits Survey, from 2000 to 2010 the annual growth rate was 7.3%, falling to 5.3% from 2010-2014, and 4.8% in 2015. So healthcare costs are growing slower, but they are still growing at a rate over twice that of the official CPI.

As I said just above with my cable tv and telephone examples, a lot of things we pay for every day are increasing at rates far above the stated CPI. So I don't agree that if a timeshare operating budget grows by more than the CPI, it automatically means the HOA/Property Manager is gouging the owners. You have to look at the components of the timeshare budget and look at how those types of expenses are actually increasing vs. an overall average like the CPI where meaningful variations in sector or category get averaged out.

But I do agree that most HOAs could do a better job of expense management, and as I said just above, I also agree the management companies may not have the same cost control incentives we see in other areas of the economy. But as long as the rate of growth in timeshare maintenance fees stays in the 4% to 5% range, it means that they are not growing faster than hotel rates. The two articles linked below peg hotel room rate growth at 4.6% (hotel-online) and 5.4% (CNBC) annually.

http://www.hotel-online.com/press_releases/release/u.s.-hotel-revenue-growing-but-slowing
http://www.cnbc.com/2015/01/26/us-average-hotel-room-rate-forecast-to-rise-54-percent.html

 

[BocaBoy]

As I said in my earlier post, I agree that healthcare cost increases have slowed in recent years but they are still significant. According to the Kaiser Family Foundation Employer Health Benefits Survey, from 2000 to 2010 the annual growth rate was 7.3%, falling to 5.3% from 2010-2014, and 4.8% in 2015. So healthcare costs are growing slower, but they are still growing at a rate over twice that of the official CPI.

But the whole point of my responses were addressed to the claim that inflation actually got a lot worse starting with the Great Recession, and even your health care numbers (which I do not dispute) run contrary to that. I also agree with your comments that incentives for cost control at timeshares are not great because of the dilution of ownership. And finally, I guess cable and telephone bills vary widely by location because ours have changed very little in the past decade. In fact,m we recently moved and our new costs for these items are a lot less than they were 10 years ago in our former location, where the last 10 years of costs were rather stable.

 

[JIMinNC]

But the whole point of my responses were addressed to the claim that inflation actually got a lot worse starting with the Great Recession, and even your health care numbers (which I do not dispute) run contrary to that. I also agree with your comments that incentives for cost control at timeshares are not great because of the dilution of ownership. And finally, I guess cable and telephone bills vary widely by location because ours have changed very little in the past decade. In fact,m we recently moved and our new costs for these items are a lot less than they were 10 years ago in our former location, where the last 10 years of costs were rather stable.

I don't recall anyone suggesting that inflation actually got worse during and after the Great Recession. What I recall being said was just that some categories of prices have still been rising (mainly since the recovery began in 2010 or so, not in the depths of the recession) even within what statistically has been a low inflationary environment. You're lucky on the cable and phone - I was shocked myself when I looked ours up that it had risen as much as it had.

 

[Saintsfanfl]

I think labor has gone up while many other things have gone down. My wife and I drive around 45,000 miles a year so gas over $4 a gallon 8 years ago to just over $2 today is huge. My cable is the same as 8 years ago and my phone has actually gone down.

Labor going up is a factor with timeshares since the maintenance is heavily labor related but overall defaults and underfunded reserves is what eventually sinks a timeshare property.

 

[BocaBoy]

I don't recall anyone suggesting that inflation actually got worse during and after the Great Recession. What I recall being said was just that some categories of prices have still been rising (mainly since the recovery began in 2010 or so, not in the depths of the recession) even within what statistically has been a low inflationary environment. You're lucky on the cable and phone - I was shocked myself when I looked ours up that it had risen as much as it had.

See post #15 from RLS50 in this thread. It starts like this:

"With respect I still disagree with any assertion that inflation ended 10 years ago. It did the exact opposite. It surged once the economy collapsed and the FED threw out the playbook they operated under for decades and went into full time money creation mode. Real inflation...inflation that impacts real stuff that people need and buy has been running at a 5+% clip for almost 9 years now."

This is what got me so actively involved in this debate.

 

[RLS50]

But the whole point of my responses were addressed to the claim that inflation actually got a lot worse starting with the Great Recession, and even your health care numbers (which I do not dispute) run contrary to that. I also agree with your comments that incentives for cost control at timeshares are not great because of the dilution of ownership. And finally, I guess cable and telephone bills vary widely by location because ours have changed very little in the past decade. In fact,m we recently moved and our new costs for these items are a lot less than they were 10 years ago in our former location, where the last 10 years of costs were rather stable.

Well, just so we don't talk past each other, my original response was based on your statement "The problem really started about the time inflation screeched to a halt 10 or so years ago. It is ironic that fees were better controlled in high inflation times than they are today."

While I agree with many of your other points and general critiques as it relates to timeshare fees, and defer to your expansive knowledge when it comes to anything about the Marriott system or timeshares in general, my basic point is that inflation did not screech to a halt.

Inflation is not linear...it does not influence every segment/sector of the market the same. But when money supply growth is averaging about 5+% a year, and is not matched by a corresponding pace of economic growth, there will be most certainly be inflation felt throughout the economy. It is the basic math behind any fiat current system. Other external factors and regional locations may see inflation in some sectors only be at 1% or maybe even -2% in one sector. But that means that other sectors somewhere will carry over that difference and could be 6%, 7%, 8%, etc.

You are correct that the FED was worried about massive deflation as the financial crisis exploded in 2008, 2009. So what did they do? They undertook a policy to intentionally CREATE inflation, especially to reliquify the banks and to re-inflate assets like the stock market and real estate. This makes people feel better and increases consumer confidence levels...and they needed consumers to keep shopping and buying because the economy is so dependent on people shopping and buying consumer products.

However monetary policy is a blunt instrument, it cannot be laser targeted. Any policy designed to rapidly create and maintain inflation in asset classes the FED wanted inflated also seeped out into other areas of the economy and into other sectors, that created unintended increased inflationary costs for consumers. The FED knows this, but considered it a necessary evil as part of the price to pay for staving off a global depression.

The above is not meant to render moral judgment or criticism on what was done and how it was done, merely to speak to what happened.

Sounds like we have similar backgrounds. I also have worked in Fortune 100 companies my entire career supporting supply chain and finance.

One thing I think we can both agree on is that annual MF increases of 5% or more across the timeshare world (with even more additional nickel and dime fees) are probably not sustainable longer term, unless wage growth keeps up that pace, and it hasn't and won't.

 

[JIMinNC]

See post #15 from RLS50 in this thread. It starts like this:

"With respect I still disagree with any assertion that inflation ended 10 years ago. It did the exact opposite. It surged once the economy collapsed and the FED threw out the playbook they operated under for decades and went into full time money creation mode. Real inflation...inflation that impacts real stuff that people need and buy has been running at a 5+% clip for almost 9 years now."

This is what got me so actively involved in this debate.

I had forgotten about that. No question the Fed has dramatically inflated the money supply, as the attached chart shows. But as the linked article below explains, for a variety of reasons, an increased money supply does not always lead to price inflation.

https://www.ineteconomics.org/perspectives/blog/rapid-money-supply-growth-does-not-cause-inflation

I think the third paragraph in the introductory section sums it up best:

"... And to be fair, conventional monetary economics (and economists) would argue that, all else equal, large increases in the money supply will cause inflation. But we haven’t seen that, even with the Fed’s historic actions, mainly because aggregate demand remains so low after the Great Recession, and because the massive debt accumulations that helped trigger the downturn are taking years to work through."

Average inflation will likely remain low until average incomes rise enough to drive an increase in aggregate demand. Average incomes have been flat for a number of years and only began to rise in 2015. Household debt may need to be worked down as well.

Despite all this, even though the overall rate of inflation remains low, some categories can and do rise faster than the overall rate. As I've said, I think that fact, plus the diluted/broad ownership of timeshares (which results in weaker owner control) are the main factors in increased maintenance fees. But I still am not that bothered by 3% to 5% increases. For a timeshare, I think that is reasonable and is in line with hotel rate increases.

 

[BocaBoy]

I had forgotten about that. No question the Fed has dramatically inflated the money supply, as the attached chart shows. But as the linked article below explains, for a variety of reasons, an increased money supply does not always lead to price inflation.

https://www.ineteconomics.org/perspectives/blog/rapid-money-supply-growth-does-not-cause-inflation

I think the third paragraph in the introductory section sums it up best:

"... And to be fair, conventional monetary economics (and economists) would argue that, all else equal, large increases in the money supply will cause inflation. But we haven’t seen that, even with the Fed’s historic actions, mainly because aggregate demand remains so low after the Great Recession, and because the massive debt accumulations that helped trigger the downturn are taking years to work through."

Average inflation will likely remain low until average incomes rise enough to drive an increase in aggregate demand. Average incomes have been flat for a number of years and only began to rise in 2015. Household debt may need to be worked down as well.

Despite all this, even though the overall rate of inflation remains low, some categories can and do rise faster than the overall rate. As I've said, I think that fact, plus the diluted/broad ownership of timeshares (which results in weaker owner control) are the main factors in increased maintenance fees. But I still am not that bothered by 3% to 5% increases. For a timeshare, I think that is reasonable and is in line with hotel rate increases.

View attachment 3211

Thank you--finally a post that makes sense. My only disagreement is with your last paragraph, but we have to agree to disagree on that one. I am very bothered by the 3-5% increases. The problems I see in your comparison to hotel rental rates are twofold: First, hotel rates dropped dramatically early in the Great Recession and only now are back above where they were 8-9 years ago. During the period that hotel rental rates dropped, timeshare maintenance fees continued to rise as if nothing happened. They are now hugely above where they were 8-9 years ago. And second, maintenance fees are ownership expenses, while rental rates are more directly related to rental supply and demand. With the higher hotel rates, profits in the hotel industry are up a lot too, which is consistent with expenses rising more slowly than rents. (Of course, it is a lot more complicated than that.)

 

[JIMinNC]

Thank you--finally a post that makes sense. My only disagreement is with your last paragraph, but we have to agree to disagree on that one. I am very bothered by the 3-5% increases. The problems I see in your comparison to hotel rental rates are twofold: First, hotel rates dropped dramatically early in the Great Recession and only now are back above where they were 8-9 years ago. During the period that hotel rental rates dropped, timeshare maintenance fees continued to rise as if nothing happened. They are now hugely above where they were 8-9 years ago. And second, maintenance fees are ownership expenses, while rental rates are more directly related to rental supply and demand. With the higher hotel rates, profits in the hotel industry are up a lot too, which is consistent with expenses rising more slowly than rents. (Of course, it is a lot more complicated than that.)

I agree 100% that the nature of timeshare expenses (purely ownership expenses) vs. hotel rates (supply & demand is a component) are totally different, so it's very true that one doesn't directly justify the other. My rationale for comparing the 3% to 5% increases in maintenance fees to hotel rates was mainly because that's the comparison that is most relevant for our usage - if our timeshare costs were rising faster than hotel rates, then each year, the economics of ownership would be getting less advantageous when compared to renting accommodations. Since they are rising at a similar rate (at least right now) the cost relationship is staying stable - hence my relative comfort level with the current level of increases. I guess a second reason I'm more comfortable than you with the rate of MVC increases is my previous experience with Diamond. By contrast, MVC are expense management tigers!

Secondarily, the costs of operating a hotel are probably the most similar proxy for operating costs at a timeshare. (In reality, the cost profile is somewhere in between a full ownership condo and a hotel, but timeshares are more like a hotel in the provision of housekeeping, reservations, and front desk expenses which condos don't usually have.) But, as you note, hotel rates are not purely cost based, and market supply and demand has a major impact on the rate the market will bear. So in good times, rates go up and hotel profit margins go up, but in bad times, rates and profit go down. That is in fact, one reason hotel companies got into the timeshare business in the first place - a more predictable steady profit stream that, at least on the operating/management side, is more steady and predictable than the economic ups and down of the hotel business. Obviously, on the sales side, slower business conditions impact sales significantly, but the operating side is a more steady revenue stream.

 

[BocaBoy]

I agree 100% that the nature of timeshare expenses (purely ownership expenses) vs. hotel rates (supply & demand is a component) are totally different, so it's very true that one doesn't directly justify the other. My rationale for comparing the 3% to 5% increases in maintenance fees to hotel rates was mainly because that's the comparison that is most relevant for our usage - if our timeshare costs were rising faster than hotel rates, then each year, the economics of ownership would be getting less advantageous when compared to renting accommodations. Since they are rising at a similar rate (at least right now) the cost relationship is staying stable - hence my relative comfort level with the current level of increases. I guess a second reason I'm more comfortable than you with the rate of MVC increases is my previous experience with Diamond. By contrast, MVC are expense management tigers!

Secondarily, the costs of operating a hotel are probably the most similar proxy for operating costs at a timeshare. (In reality, the cost profile is somewhere in between a full ownership condo and a hotel, but timeshares are more like a hotel in the provision of housekeeping, reservations, and front desk expenses which condos don't usually have.) But, as you note, hotel rates are not purely cost based, and market supply and demand has a major impact on the rate the market will bear. So in good times, rates go up and hotel profit margins go up, but in bad times, rates and profit go down. That is in fact, one reason hotel companies got into the timeshare business in the first place - a more predictable steady profit stream that, at least on the operating/management side, is more steady and predictable than the economic ups and down of the hotel business. Obviously, on the sales side, slower business conditions impact sales significantly, but the operating side is a more steady revenue stream.

So I think we mostly agree, the only major difference being our point of reference. I compare it to our condominium ownership and you compare it to hotel stays.

 

[JIMinNC]

So I think we mostly agree, the only major difference being our point of reference. I compare it to our condominium ownership and you compare it to hotel stays.

Yep. Good discussion.

 

[kjd]

Resale prices are dropping. I have been buying lately after selling four units through Marriott before the prices really started to drop. The units I sold were enrolled and the units that I purchased were not enrolled. It's a buyers market right now in my opinion because almost anything passes ROFR, resistance to paying maintenance fees has increased, a lack of Marriott inventory with Interval International and more sellers than buyers.

While it's not a pretty picture if one bought their unit directly from Marriott at listed prices it is a good time to buy resales IMO. No one can pick the bottom of any market. I believe the market for quality timeshare will turn around. We live in an economy of scarcity. As available Marriott weeks dry up on Interval International and a lot of weeks are converted to points, resale prices will rise. In my opinion it still makes sense to buy where you're going to vacation. The real value of a timeshare is what someone will pay for it. A marketplace like Ebay will determine the real value of any timeshare at any given time.

 

[kjd]

Resale prices are dropping. I have been buying lately after selling four units through Marriott before the prices really started to drop. The units I sold were enrolled and the units that I purchased were not enrolled. It's a buyers market right now in my opinion because almost anything passes ROFR, resistance to paying maintenance fees has increased, a lack of Marriott inventory with Interval International and more sellers than buyers.

While it's not a pretty picture if one bought their unit directly from Marriott at listed prices it is a good time to buy resales IMO. No one can pick the bottom of any market. I believe the market for quality timeshare will turn around. We live in an economy of scarcity. As available Marriott weeks dry up on Interval International and a lot of weeks are converted to points, resale prices will rise. In my opinion it still makes sense to buy where you're going to vacation. The real value of a timeshare is what someone will pay for it. A marketplace like Ebay will determine the real value of any timeshare at any given time.

 

[dioxide45]

I have been buying lately after selling four units through Marriott before the prices really started to drop. The units I sold were enrolled and the units that I purchased were not enrolled.

If you don't mind me asking, I am curious why you chose to sell enrolled weeks and then buy unenrolled weeks? I know I wouldn't do this as to us, those enrolled weeks are like gold and irreplaceable except for very large dollar amounts (Marriott willing). Even though we don't use the DC points very much, the added flexibility in II and consolidated use fee make it a huge deal. They would have to pry those enrolled weeks from my hands before I would ever give them up.

 

[BocaBoy]

If you don't mind me asking, I am curious why you chose to sell enrolled weeks and then buy unenrolled weeks? I know I wouldn't do this as to us, those enrolled weeks are like gold and irreplaceable except for very large dollar amounts (Marriott willing). Even though we don't use the DC points very much, the added flexibility in II and consolidated use fee make it a huge deal. They would have to pry those enrolled weeks from my hands before I would ever give them up.

I think kjd sold when prices were higher than now and has been buying at lower prices. I don't think the decision had anything to do with weeks being enrolled, but rather with the level of market prices for the weeks. We have sold some enrolled weeks ourselves, but of course I do not plan on replacing them. Our portfolio right now is ideal for us, and I agree that having all our weeks enrolled (which they are) is a huge deal.

 

[bazzap]

I think kjd sold when prices were higher than now and has been buying at lower prices. I don't think the decision had anything to do with weeks being enrolled, but rather with the level of market prices for the weeks. We have sold some enrolled weeks ourselves, but of course I do not plan on replacing them. Our portfolio right now is ideal for us, and I agree that having all our weeks enrolled (which they are) is a huge deal.

I read kjd's comments in the same way and I can understand the sell high buy low reasoning, even if losing enrolled status, if it is clearly financially advantageous to do so.
The benefits of having all weeks enrolled are significant, we have 3 unenrollable weeks in just one of our resorts, but it is the one Son Antem where we have every expectation of always going to.

 

[kjd]

To explain a few points in my previous post about why I would sell enrolled weeks and then buy more weeks that are not enrolled, in short I got better weeks as an end result. I am not a trader or a landlord and I am not a fan of the point system. My family and I are users and previously traded most of our units for better ones. The point system has clouded the trade enviornment.

The new purchases were for personal usage or better trades. Here are some of the prices of the non-enrolled units: MGC (3 EOYs) 803, 1,000. 1.500. Newport Coast (EOY) 2,100 and Cyrpress Harbour 1,400. I kept one rnrolled unit, a three bedroom annual at MGC.

 

[Ralph Sir Edward]

Back to the question of weeks dropping in value.

Yes, they are dropping, on average, as they should be, by basic economics. I will describe.

First, absolute supply is always increasing. The big money, from a corporate sense is in the selling of the timeshare, and nowhere else. So supply (averaged for the business cycle) is always increasing.

The underlying buildings and property, are long term durable assets. If reasonable maintained, they will last many decades, maybe even a century. Certainly longer than the lifespan of most buyers. That means the supply is not being consumed, like a candy bar.

Demand does not keep up with supply, because the economic pressure to create new supply is so overwhelming as to continually drown out demand. Hence there is always an oversupply scenario. When supply exceeds demand for long periods, prices drop. Especially for long term durable goods.

Inside this is a business cycle, which at this point (prosperity) is supporting prices. More people have jobs and money to spend on luxury goods. During a recession, just the opposite happens and goods like timeshares fall hard.

Now in most markets, new supply is only added when the open market prices are greater than the cost of producing new product. Timeshares are such high mark-up, that this mostly ignored.

Of course, there is the relative value scenario, comparing to hotel rentals, condo rentals, and condo ownership. These also affect value. The problem with discussing that is determining how you do a true "apples-to-apples" comparison. I will leave that for others. . .

 

[JIMinNC]

During this thread, we got into the old debate about rising maintenance fees and why they increase 3% to 5% a year, even in an overall low inflationary environment. I don't want to re-open the debate or any other such cans of worms, but I thought he Barony Beach Club owners newsletter linked by Susan in the first post of the linked thread below, does a good job explaining some of the personnel/hiring issues faced by that resort, and why staffing costs are a significant factor in the rising operating costs of the resort. I suspect some of these same issues are a factor in many other resort areas as well.

http://tugbbs.com/forums/index.php?threads/barony-beach-gm-newsletter-feb-17.250923/

Again, not trying to re-open the debate, but I thought that some of the folks who had participated in the earlier debate might find the information enlightening.

 

[BocaBoy]

During this thread, we got into the old debate about rising maintenance fees and why they increase 3% to 5% a year, even in an overall low inflationary environment. I don't want to re-open the debate or any other such cans of worms, but I thought he Barony Beach Club owners newsletter linked by Susan in the first post of the linked thread below, does a good job explaining some of the personnel/hiring issues faced by that resort, and why staffing costs are a significant factor in the rising operating costs of the resort. I suspect some of these same issues are a factor in many other resort areas as well.

http://tugbbs.com/forums/index.php?threads/barony-beach-gm-newsletter-feb-17.250923/

Again, not trying to re-open the debate, but I thought that some of the folks who had participated in the earlier debate might find the information enlightening.

If wages had been going up 5% every year for the past 10 years, housekeeping salaries in Hilton head would be a lot higher than they are.

 

[elleny76]

Resale prices are dropping. I have been buying lately after selling four units through Marriott before the prices really started to drop. The units I sold were enrolled and the units that I purchased were not enrolled. It's a buyers market right now in my opinion because almost anything passes ROFR, resistance to paying maintenance fees has increased, a lack of Marriott inventory with Interval International and more sellers than buyers.

While it's not a pretty picture if one bought their unit directly from Marriott at listed prices it is a good time to buy resales IMO. No one can pick the bottom of any market. I believe the market for quality timeshare will turn around. We live in an economy of scarcity. As available Marriott weeks dry up on Interval International and a lot of weeks are converted to points, resale prices will rise. In my opinion it still makes sense to buy where you're going to vacation. The real value of a timeshare is what someone will pay for it. A marketplace like Ebay will determine the real value of any timeshare at any given time.

Hi, Can you please explain why you sold "enroll" and bought "not enrolled"..what's the difference?.Money? AF? Looking to buy a 3 bed or 2 bed weeks (of course /no points) Please share with me your seller so I can see the inventory available. You can please comment here or PM at anytime thanks so much

 

[JIMinNC]

If wages had been going up 5% every year for the past 10 years, housekeeping salaries in Hilton head would be a lot higher than they are.

While it only addresses one year, here's the most relevant part of the discussion of labor costs and maintenance fee:

Labor Update and Impacts

As you may or may not be aware, labor is a major part of both our operations and your maintenance fee. Over the past few years we have managed labor in several ways. In 2015, we utilized a significant amount of contract labor and overtime due to the labor shortage in our market. During that year, we also increased the hourly wages for housekeepers in order to be equal to all positions at the resort. We felt that this would give us a competitive advantage and aid in hiring. Although we did see an increase in applicant flow, we were not able to compete with the growth of the mainland, Bluffton, and the easier commutes for similar or slightly lower wages.

In 2016, we re-ignited our efforts in the H2B Visa Program. We went to Jamaica and recruited seasonal workforce due to market labor shortages. We recruited more than 70 associates for the Marriott Vacation Club resorts on Hilton Head Island. This proved to be a successful venture for us in 2016 as we were able to minimize contract labor. However, the cost for this program averages out to about $1.50 - 2.00 more per hour per associate. Although the associates are seasonal, they are employed long enough to receive full-time benefits. In addition to governmental requirements, we must also provide supplemental housing and transportation for these associates, which is part of why the costs are higher than a regular full-time associate.

We will participate in this program again in 2017. Although this program has been successful, it remains a seasonal program only. We do have many positions that are full-time regular jobs and this market continues to remain a struggle. Bluffton continues to see growth and over 10 new businesses are opening in Bluffton in 2017 that will compete for our associates. There are also pressures across the country to see minimum wage increased. Therefore in 2017, we will be increasing our hourly wages due to a market study and ensuring we have parity with the market. The impacts of this move and the seasonal H2B program are about $200,000 to the 2017 Budget.

In addition to the hourly wage opportunities, we have been working through recent changes to Management positions due to the Fair Labor Standards Act (FLSA). In 2016, FLSA changed the minimum salary threshold to over $46,000 and required a duties test be met as well. Due to the FLSA, we had over 50% of our Managers impacted. These Managers now will be paid their same wage, but clock in based on a 40-hour a week job versus a 50-hour a week job. The impact to our budget was almost $140,000.

These two labor opportunities impacted the 2017 Budget by $340,000 or $26.15 per unit week, which equates to about 2.1% of the increase in the maintenance fee from 2016 to 2017.

Disaster Recovery Fee

Due to Hurricane Matthew and at least $650,000.00 in recovery costs, the Management Team and the Board determined that it was necessary to recover these costs through a one-time Disaster Recovery Fee. During the November 10, 2016 Board Meeting, we discussed potential unknowns and preventing the need to request additional funds. Therefore, the Board and Management Team decided to establish a one-time Disaster Recovery Fee of $75.00 per unit week. This amount covers the projected cost and any unexpected costs that may arise. The Board stated that if the full amount is not needed, then they will use it towards offsetting any future maintenance fee needs for 2018.

Maintenance Fee

The 2017 Maintenance Fee that was billed at the end of 2016 was approved by the Board at $1,351.13, which was a 9.7% increase over 2016. As you are aware the increase was mainly impacted by the one-time Disaster Recovery Fee and the labor impacts as explained early in the newsletter. These two items account for 8.1% of the total increase for 2017. The remaining 1.6% was made up of nominal increases in expenses due to increased Consumer Price Index impacts to our contracted services, costs for textiles and supplies, and a 3% increase in our Reserve for Replacement Fee. The Board and the Management Team work hard all year to keep costs down and to focus on our fiduciary responsibilities.

 

[Saintsfanfl]

Back to the question of weeks dropping in value.

Yes, they are dropping, on average, as they should be, by basic economics. I will describe.

First, absolute supply is always increasing. The big money, from a corporate sense is in the selling of the timeshare, and nowhere else. So supply (averaged for the business cycle) is always increasing.

The underlying buildings and property, are long term durable assets. If reasonable maintained, they will last many decades, maybe even a century. Certainly longer than the lifespan of most buyers. That means the supply is not being consumed, like a candy bar.

Demand does not keep up with supply, because the economic pressure to create new supply is so overwhelming as to continually drown out demand. Hence there is always an oversupply scenario. When supply exceeds demand for long periods, prices drop. Especially for long term durable goods.

Inside this is a business cycle, which at this point (prosperity) is supporting prices. More people have jobs and money to spend on luxury goods. During a recession, just the opposite happens and goods like timeshares fall hard.

Now in most markets, new supply is only added when the open market prices are greater than the cost of producing new product. Timeshares are such high mark-up, that this mostly ignored.

Of course, there is the relative value scenario, comparing to hotel rentals, condo rentals, and condo ownership. These also affect value. The problem with discussing that is determining how you do a true "apples-to-apples" comparison. I will leave that for others. . .

People decide they no longer want the timeshare much sooner than when they die. Many times only a few days later. Hotel buildings don't get consumed either but new hotels are booming right now. Timeshares have no problem selling at high prices so the demand is certainly there. The real problem problem is so many people buy timeshares that can't make proper use of them, lack of organized resale market as a comparable to sales presentation purchase, and rising maintenance fees.

Imagine what would happen if every person attending a presentation were given the option of buying resale at real market rates. Prices would go up and supply would go down. It would slow down building new timeshares but you would see the resale supply and demand start to equal out. You would still have maintenance fee issues at poorly run properties but that's a different issue of demand than supply.