Greg,
Certain of the expenses of Marriott Vacations Worldwide represent regional overhead costs in the areas of administration, accounting and billing and collections. These costs are included in each resort's budget and are paid as a part of the maintenance fee paid by owners. These payments are in addition to the 10% management fee included in the resort's budget as a separate resort expense line item. The management fee does not subsidize these separate overhead expenses. The 10% management fee is intended to help cover (subsidize) expenses related to the "Resort management and other expenses" as you noted on page 26 of the 10Q. Hope this helps.
Eric
Eric,
Thank you kindly -- these allocations do make sense to me because these are costs that Marriott corporate incurs on behalf of running the individual properties -- across multiple departments.
These appear to be on the Income Statement in the Form 10-Q included in Cost Reimbursement, both on the Income and on the Expense side on a dollar for dollar basis so there isn't a profit component with these services. The risk for abuse here is that Marriott passes costs along to its properties that are actually incurred for the management of Marriott Corporate itself and not the properties themselves (but I don't think that survives an audit).
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What I think I am seeing is this:
1) Marriott charges 10% of MFs for its property management services
2) Marriott incurs actual costs to administer those property management services
3) Those actual costs take most of the money charged (80%) leaving 2% of the 10% received as Marriott's mark-up to manage the properties. So if Marriott is paid $100 per week, they spent $80 on direct property management expenses and keep $20 for their profit.
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4) Marriott also employs people and supports the properties with administrative functions
5) These administrative functions cover HR, Accounting, and general Administration and Management (including Call Center)
6) Marriott passes these costs on to the properties on a dollar-for-dollar basis
7) Marriott does
not mark-up these costs, ie they are purely a reimbursement of dollars expended
8) Marriott
could benefit its shareholders by passing along costs to the properties that really benefit Corporate Marriott
9) We have to rely on auditors to make sure that Marriott is not passing along Corporate Marriott's expenses to the properties.
If what I have described is what is happening, then I conclude as follows:
1) Of the 10% management fee added to our MFs, approx 8% covers Marriotts expenses to directly manage the properties
2) Personally I feel that a 25% markup (ie 2% profit on 8% costs) is a reasonable profit margin for a for-profit company
3) That's $50 profit to manage each of my MOC weeks -- and a $25 profit to manage a property with $1,200 in MFs
4) Marriott appears to pass on costs that it incurs at the corporate level to direclty support a timeshare network. It hires an accounting staff (including billing and collections), human resources personnel, Vacation Ownership Advisors, IT staff, and has physical infrastructure somewhere that house all those VOA's and all that staff. That physical infrastructure requires monthly rent, electricity, water, and a periodic holiday party to maintain morale.
5) Marriott passes along the costs of #4 on a dollar-for-dollar basis to all of the properties in the Marriott network. They do not mark up this at all, but weeks owners do bear the cost of these services. They could spend our money foolishly and pass along these costs to us without our approval -- but I doubt so in this day and age.
If what I have described is truly accurate, then what we have suspected is correct -- Marriott has high MFs not because they are greedy developers and are gouging us, but because they have high Brand Standards that the properties must adhere to and because they have an infrastructure to support our properties that they deem is necessary. They don't profit from that infrastructure, and only pass along the cost.
Interesting stuff...
Best,
Greg
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