# Who is subsidizing the trade downs for Shared DAE/Redweek inventory?



## BocaBum99 (Jun 17, 2007)

Dear DAE,

I have found a paradox in the Redweek and DAE joint service that I hope you can shine some light on.  If I have it wrong, please illuminate.  My analysis suggests that due to the differences in assigning like kind trades between DAE (1-to-1) and Redweek (any-to-1), someone is subsidizing a trade imbalance.   Who is it?

Let me explain.

There is a TUG poster who is or plans to deposit a prime week in Myrtle Beach.  This is the week he said he was going to deposit:

"The Plantation Resort Myrtle Beach two bedroom July week scored 2017 RW points."

Further, he said his strategy was to immediately exchange for a unit and then take out 2 or 3 more weeks in addition to it.

Let's say that this depositer takes 4 weeks out of the "shared inventory" from DAE.  That makes it a 4-for-1 trade.  One deposit gets Four weeks in return.

In Redweek's methodology, this 4-for-1 trade is EQUAL.  In DAE's methodology, the depositer stills owes DAE 3 more deposits since DAE has a Anything in gets Anything out rule (i.e. it should be a 4-for-4 trade).  To maintain integrity in both the Redweek and DAE system, something needs to give.   Either Redweek must give to DAE 4 weeks behind the scenes or DAE is shorting its members by allowing Redweek customers to get 4 weeks for 1 when its other customers are not allowed such a generous benefit.

The only way I see for this trade paradox to be resolved is if DAE supplies weeks to replenish the shared inventory or Redweek provides DAE with extra weeks that are not part of the inventory to balance their books.  Make no mistake, there is a trade imbalance create either on DAE's books or on Redweek's book.  The question is who is providing the subsidy?  

So, which is it who is subsidizing this trade imbalance?  
1) Redweek the company out of exchange fees
2) DAE the company out of its shared exchange fees
3) Redweek depositers
4) DAE depositers

If there is an alternate explanation, I would love to hear it.

Thanks.


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## e.bram (Jun 17, 2007)

Even more to the point, who is going to deposit the bright red weeks?


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## philemer (Jun 17, 2007)

e.bram said:


> Even more to the point, who is going to deposit the bright red weeks?



Those who can get 2 or 3 weeks back.


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## e.bram (Jun 17, 2007)

I wouldn't give up my summer Cape Cod oceanfront for 6 pink weeks, and I don't think meny people would. It is going to be near impossible(if not impossible) to get any quantity of prime red weeks to get this exchange scheme fly(or hunt per Carolinian).


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## philemer (Jun 17, 2007)

e.bram said:


> I wouldn't give up my summer Cape Cod oceanfront for 6 pink weeks, and I don't think meny people would. It is going to be near impossible(if not impossible) to get any quantity of prime red weeks to get this exchange scheme fly(or hunt per Carolinian).



You may be correct but, remember, a lot of us don't need 'prime red weeks' when we travel. 1000's of us travel in 'pink' or 'white' season. But I do think it will be tough for this model to work. Two, three or four weeks for one will not cut it.

I'm surprised that DAE & TPI are still doing well since they let you have any week available when you deposit a 'dog'. Time will tell.


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## e.bram (Jun 17, 2007)

Philemer:
If all you are looking for are off season weeks, RCI and II are great(weeks or points). Because of their embeded popularity thru the developers no one will be able to come close to their inventory. (probably 100:1 campared to other exchange companies who have to scroung for their inventory.


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## Carolinian (Jun 18, 2007)

philemer said:


> I'm surprised that DAE & TPI are still doing well since they let you have any week available when you deposit a 'dog'. Time will tell.



If it were but a theory of which to operate an exchange company, I would tend to agree with you, but the forumula is well tested in the Australia / New Zealand market, not only by DAE but also by Interchange, another Australian-owned independent and it works!


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## BocaBum99 (Jun 18, 2007)

Back to the original question please?

Who is providing the subsidy for the trade imbalance created by a Redweek 4-for-1 trade into shared DAE/Redweek inventory?

1) Redweek, the company?
2) DAE, the company?
3) Redweek members?
4) DAE members?

If either of you have developer affiliations that provide free weeks for you to inject into the system, I count that as "DAE, the company" since you could take those weeks and rent them instead.  

Please illuminate.


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## Ask DAE (Jun 18, 2007)

I appreciate all the opinions, they seem thought out and engaging, outside of terms like "scrounging" and "dogs". 

DAE has a set of policies and business practices that is driving its growth and with the highest possible focus on member satisfaction, we make business decisions we believe are best for us and our members. This is a forum we have chosen to participate in to answer questions concerning DAE and what we do for our members. 

RedWeek is a business client for whom we provide our services as well. In answer to your question, yes... there is another explanation as to how we are handling our inventory and other aspects of our business relationships.... But as you know, this is a public forum and it would be imprudent to put key business practices out for our competitors (current and future) to study. 

This is especially true when the question involves partner companies and not just DAE.  You have to trust that we know what we're doing to keep both companies and our exchange systems healthy, productive and beneficial.

I appreciate your input!


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## TUGBrian (Jun 18, 2007)

While I am sure DAE would love to continue answering questions concerning DAE member benefits, questions on member policies, etc. They cannot disclose confidential business operations with partners, or contractual information concerning said agreements.


Please keep discussions and questions within these guidelines!

Thank you


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## PerryM (Jun 20, 2007)

*The Missouri trade imbalance - OMG!*

This topic reminds me of how on earth does the medical doctor making $400k a year do business with the high school kid making $8/hr.  The currency, RedWeek Points in this case, makes all of this moot.  Just like worrying about our doctor and high school kid.

Since RW has picked rental rates as the underlying foundation to the RW Point then there is NO problem of imbalances that I can foresee.  This is like worrying about the trade imbalance with China.  If China became the 51st state tomorrow who would worry then?  Who worries about the trading imbalance with Missouri?

RW at some point will reject the bottom of the barrel bilge that RCI must accept – they will accept only units that they know are rentable.  So maybe while they wrestle with the “chicken and egg” syndrome they will accept some bottom feeders that will disappear.

The guy depositing $100 weeks will have to deposit a bunch to get to Maui.  Once he has deposited his weeks he does NOT have some right to exchange into the same number of units he gave up.  This is madness.

Some of you are stuck in “Weeks land” of II and RCI and that thinking of haggling for upgrades does not exist in “Points land” where it's currency based.

P.S.
What does RedWeek do with the money someone pays to upgrade?  E.g. you have 1,000 RW Points and find an exchange for 1,250 RW Points.  You pay $250 to RedWeek and get the exchange.  Just what happens to that $250?  Simple, RW keeps it in a separate fund and later RW will pay someone who is advertising a rental on RW and add that week to the inventory.

Now I'm sure some folks will find it hard to believe that RW won't just pocket the money - but that's small potatoes compared to the exchange fees and dues they collect.

Will an outside CPA firm audit their system/currency?  I would hope so and report to the RW members that they find the exchange run so as to assure that the currency is not being devalued.


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## mamiecarter (Jun 21, 2007)

*One persons dog is anothers dreamboat!!!*

Not everyone is hooked on the name brand resorts. Not everyone travels in the red hot weeks. DAE fill an important nitch. Someday I will go to Tasmania with DAE.


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## theo (Jun 25, 2007)

Re :: >> Since RW has picked rental rates as the underlying foundation to the RW Point then there is NO problem of imbalances that I can foresee. <<

Perry:
I too at first thought that RW valuations were closely tied to rental rates, but I am now much less confident in that early conclusion. In fact, I have now come to believe that they are "winging" it, at least in part. 

After submitting a handful of my own weeks for RW point evaluation, I found a fair amount of inconsistency. For example, the same 2008 winter ski week (in the very same unit) at Lake Tahoe changed in point value by 25% when submitted on two separate occasions over a 10 day period (in June 2007). That "rental value" didn't change by 25% six months in advance of use date. Also, I've now observed numerous point valuations well below (and numerous valuations considerably above) figures even remotely resembling true weekly rental value in equivalent dollars at places with which I am familiar. I welcome ANY viable alternative to RCI, and I genuinely wish the RedWeek model success, but I nonetheless personally believe that the RW "valuation" process is still very much a "work in progress"...............


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## PerryM (Jun 25, 2007)

theo said:


> Re :: >> Since RW has picked rental rates as the underlying foundation to the RW Point then there is NO problem of imbalances that I can foresee. <<
> 
> Perry:
> I too at first thought that RW valuations were closely tied to rental rates, but I am now much less confident in that early conclusion. In fact, I have now come to believe that they are "winging" it, at least in part.
> ...




My 2 deposits were within a few dollars of my actual rental rates last year - I'm happy with my deposits; personally.

*If RW chooses to not abide by the independent source - the rental rates they are doomed. * I'm assuming that they know this and variations in rental rates are easily explained - multiple deposits or multiple submissions would cause RW to lower the offering - too much supply; there is but one solution to too much supply - lower prices.

Unless shown hard proof I am with RW on this - they are using rental rates AND intelligence.  If they have a lot of supply or potential supply they need to do what any free market would do - lower the price.

I would be interested in the history of an offering and someway of verifying what the rental rate is.  I will take the word of any tugger who has actually rented the unit as proof too.


We must keep an eye on RW and how it deals with the currency it created - it can cheat if it wants; just like our government seems to screw around with monetary policy all the time - there is NO proof that I've ever seen where a government is better at handling the money than a free market.


My only stake with RW is for them to offer a fair method of exchanging - there is NO reason under the sun to favor one side in an exchange over the other.

This is II and RCI's solution to making money exchanging - favor one side over the other.  Anytime you upgrade that is an indication that free market forces are NOT at work.  If you made out like a bandit that means another owner got screwed.  A new exchange company can come in and dominate the industry if they just offer a 100% transparent exchange system that is 100% neutral to all parties concerned.

*It's real simple RW - don't blow this opportunity!*


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## Jya-Ning (Jun 25, 2007)

PerryM said:


> P.S.
> What does RedWeek do with the money someone pays to upgrade?  E.g. you have 1,000 RW Points and find an exchange for 1,250 RW Points.  You pay $250 to RedWeek and get the exchange.  Just what happens to that $250?  Simple, RW keeps it in a separate fund and later RW will pay someone who is advertising a rental on RW and add that week to the inventory.
> 
> Now I'm sure some folks will find it hard to believe that RW won't just pocket the money - but that's small potatoes compared to the exchange fees and dues they collect.
> ...



Or, if they are truely tie to rent rate, it should go similar to the inflation rate, which means, your points today will actually get shrink.  They can pocket the upgrade change.  But that will very likely kill their exchange business if they inflate too quick.

I am sure at certain size, they will have a outside CPA firm audit them.

Jya-Ning


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## Carolinian (Jul 1, 2007)

Perry - You really should give folks a disclaimer that it is only *your theory* that RW is basing its points values on rental rates.  I have asked you and you cannot point to anything coming from RW that says this.

Also has RW ever said themselves what they do with the money for upgrades, or is this just your speculation, too?

To give one example from my neck of the woods, I saw on another thread where RW gave similar valuations for the same OBX resort, same size unit, for an April week 15, barely red, and a July week 29, as prime as you can get.  The Week 29 would rent for at least twice what the week 15 would, and it would be *a lot* easier to rent as well.  These values hardly track rental prices.  They smack of the ''value all red weeks the same'' mentality of the RCI Points grids for non-points resorts.

One specific OBX example I would like to see is to compare RW'S valuation of similar weeks at Barrier Island Station Kitty Hawk, the lowest demand resort on the OBX timeshare rental market, on one hand, and the two most demanded - Outer Banks Beach Club I and II, and Barrier Island Station Duck - on the other.  That will tell the tale as to whether they are following rental value.
Owners at BIS-Kitty Hawk often price their rentals a hundred dollars less than rentals at standard oceanfront t/s resorts, but they still rarely rent until all of the oceanfront rentals are gone.  Most people just don't want to have to drive to the beach if their is beachfront availibility.




PerryM said:


> My 2 deposits were within a few dollars of my actual rental rates last year - I'm happy with my deposits; personally.
> 
> *If RW chooses to not abide by the independent source - the rental rates they are doomed. * I'm assuming that they know this and variations in rental rates are easily explained - multiple deposits or multiple submissions would cause RW to lower the offering - too much supply; there is but one solution to too much supply - lower prices.
> 
> ...


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## PerryM (Jul 1, 2007)

Carolinian said:


> Perry - You really should give folks a disclaimer that it is only *your theory* that RW is basing its points values on rental rates.  I have asked you and you cannot point to anything coming from RW that says this.
> 
> Also has RW ever said themselves what they do with the money for upgrades, or is this just your speculation, too?
> <snip>





Of course I’m reverse engineering the RW system – like I’ve done with other timeshare systems.  RW has given little information in the way they do business.  Same with the upgrade cash payments.

It is my sincere hope that RW will become 100% transparent in their operations and 100% neutral in their bias towards any party.  I have no idea if RW will do either.

They started out on the right foot with a Point system and I believe enough evidence exists that they are basing the worth of an exchange on the valuation of other parties – the resort itself, Orbitz, historical rentals.  My 2 deposits were within 95% of the actual rental rates I’ve made in the past.

So far they have NOT indicated that they are in bed with the developers.  My ONLY complaint is that they are not doing enough in quality control to make 95% their offerings within 95% of rental rates.  They need to do more work here.

No one else, to my knowledge, has presented another way that RW works internally that matches my 2 deposits and others that report their offerings were close to rental rates charged by the resort itself.  Please, someone else come up with a working theory more accurate.

So until I see a better explanation I’ll use mine.  Maybe RW will acknowledge my theories and publish 100% of the inner workings of their exchange company.  Until then we must develop theories in order to maximize the usage of RW’s system.

I already have a way to take a MF and generate 5 times the number of RW Points in almost unlimited quantities apparently.  These are the numbers we should be concentrating on – how to maximize the RW system to our advantage.


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## Carolinian (Jul 2, 2007)

Another theory: could they be reworking something else off the shelf, like the RCI Points generic grid, applying a multiplier to make it less obvious?  There are some patterns in common with that grid, like all red weeks from the same resort of same size given the same values, and dissimilar resorts in the same area getting the same value.  Of course, with anything off the shelf, they may tweak it a bit.


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## PerryM (Jul 2, 2007)

*Call me crazy but...*



Carolinian said:


> Another theory: could they be reworking something else off the shelf, like the RCI Points generic grid, applying a multiplier to make it less obvious?  There are some patterns in common with that grid, like all red weeks from the same resort of same size given the same values, and dissimilar resorts in the same area getting the same value.  Of course, with anything off the shelf, they may tweak it a bit.





Ok, it’s a theory; I’ll grant you that.

Why on earth would RW take a miserable flop like RCI Points and “Jerry rig” it for their purposes?  Why take that system and do anything but use it for a guide of "What not to do"?


*Data Points:*

I’ve rented the unit I’ve deposited for the past 3 years for the following rates:
$1,400
$1,250
$1,100 (Last year was a hard year to rent for some reason)

I will, again, this year, rent the same unit, just 1 week later.  I’m going to shoot for $1,400 and see what I get.


*RW gave me 1,180 RW Points.*

The various theories must account for this data point.

The resort rents the week and the last time I checked, 2 years ago, that week rents for $200/night or $1,400 + 11% taxes.  (No availability from the resort)

RW allows you to substitute $1 for a RW Point up to a maximum of 50% of the RW Points.

RCI Points wants 23,000 RCI Points for the week.


*Theory “P”:*

1 RW Point = $1 rental rate.

You only need 590 RW Points and $590 to make do the exchange.


*Theory “C”:*

1 RW Point = 1 RCI Point.

Need 11,500 RW Points and $11,500 to make the exchange.  Since I bought the week for $2,500 almost 4 years ago this data point is having trouble fitting into what actually happened.


*Conclusion:*
Call me crazy but I, of course, favor theory “P” – my theory.  Theory “C” just does not fit this one data point.

I have another RW deposit that is within 95% of my previous rental rate and I must assume that Theory “C” is far far from fitting that data point too.



Next theory anyone?

P.S.
This is not just an exercise - you MUST be able to look at RW's offer for your unit and decide if it is 1) A super offer, 2) A just offer, 3) Stinks

P.P.S.
Ok, I can hear the reply: "Use a multiplier".  23,000 RCI Points = 1,180 RW Points * 19.5

Why pick 19.5?  I know some folks hold a special meaning for 19 so maybe RW really meant: 1,210 RW Points (1/19) and 30 points less to mask the secret 19 multiplier.  This holds some validity for the "19" folks I guess.


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## Carolinian (Jul 2, 2007)

But Perry, you conveniently ignore the data in the other thread where the RW point scheme does *NOT* track your theory, in this case rental rates.  That may be SOP for EPA scientists trying to justify a policy, but should we do that in analyzing t/s?


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## Kevin (Jul 2, 2007)

*??*

Haven't read all of the Redweek threads, but if Perry is saying that the amount of points offered is related to potential rental rates... I know that's incorrect.

My offer was about twice what I could get as a rental rate on one of my t/s units.  Maybe I am misunderstanding Perry's theory?


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## PerryM (Jul 2, 2007)

Kevin said:


> Haven't read all of the Redweek threads, but if Perry is saying that the amount of points offered is related to potential rental rates... I know that's incorrect.
> 
> My offer was about twice what I could get as a rental rate on one of my t/s units.  Maybe I am misunderstanding Perry's theory?



The "worth" of a unit is what others will pay for it - NOT RW and NOT the owner.  The published rate at the resort should be THE RW offer.  If that's not available then Orbitz, Travelocity, etc and finally historical rentals in RW.

RW offered me 1,000 RW Points for a $5,000 Marriott rental rate - their quality control is way off.

That's what I'm saying.


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## Carolinian (Jul 2, 2007)

PerryM said:


> RW offered me 1,000 RW Points for a $5,000 Marriott rental rate - their quality control is way off.



. . . OR your theory is wrong. . .


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## Jya-Ning (Jul 2, 2007)

*RW model*

Really, at this moment, they just start their new exchange model.  Maybe they don't have data and use any possible data they can get to make a reasonable assumption from their point of view?

Shouldn't it be better to revalue your week say 3 month before the check-in day, and 1 month before the check in day to see if there is any time value build in there system?  Then in 1 year, redo the valuation to see if it reflect better?  Maybe you will see much clear what their model is based on.

By the way, although DAE give them inventory support, I doubt if DAE know any of there model, or can answer on RW's behavior.  If that is the case, not only is this thread way off topic, but it is also in the wrong forum.

Jya-Ning


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