Starwood Spinning off Timeshare Division - Vistana Signature Experiences

[okwiater]

I'm pretty nervous about the spin-off. We are four star elite and own at WKORV, WKORVN, and WDWV. But unlike, apparently, a lot of people, my decision to buy into SVO had everything to do with the ability to use the ownership at any of the other SVO properties (and future properties) as well as to convert to SPG points and access the hotel network. I first bought into WKORV more than a decade ago and have stayed there maybe three or four times. We never wanted or intended to go back to the same resort year after year. It was the flexibility of the program that sold me. (Although the conversion to SPG points isn't a GREAT deal, it's sufficient to get decent value out of the points in those years where we choose to exchange for them.)

But now that Starwood and SVO (to be Vistana, again) will be separate companies, it seems inevitable that SVO/Vistana will have to "buy" SPG points from the hotel company when owners trade for them. The hotel company will have an interest in maximizing revenue and increasing the cost after the initial terms expire. It seems almost inevitable that the option to trade for hotel points will either go away at some point, or be significantly devalued. And for us, that guts a big part of the value of ownership.

I don't think this is all that much of a change from the way things have always worked. Even under the same corporate umbrella, SVO has always had to "buy" SPG points from the hotel company -- both as purchase incentives and when owners trade for them. But remember that in exchange for the SPG points, an owner is giving up their usage rights. Even as a separate company, I am certain that those usage rights will be monetized as effectively as possible, likely by continuing to allow Starwood "the hotel company" to rent the rooms for dollars.

We'll probably be fine on the SVN trades – by whatever name they end up being known – unless the new company sells out or sells resorts off piecemeal, in which case all bets are off.

There was earlier discussion in this thread about the name of the new company, and personally I don't think it's that important. Clearly, for a variety of possible reasons I can think of, Starwood doesn't think they should share their corporate name with the new company, and although the value of the Vistana brand is not huge, it's probably better than choosing some new, made-up name that would start out with zero brand recognition.

I completely agree -- the Vistana name was likely chosen simply because there were no other viable alternatives that had any name recognition, and for whatever reason, it's not going to be practical to keep an affiliation with the Starwood brand.

The real value is in the resort branding – particularly Westin – and another key reason I chose SVN was because I felt the resorts would be operated and maintained to the Westin standard, because to do otherwise would tarnish their valuable brand. I still think that. Timeshares used to have a lousy reputation, and one of the many reasons was that many were poorly operated and maintained. I felt, and feel, that putting a well-respected name on the property provides a lot of security to owners that their investments will be well kept and renovated when appropriate. Once the initial term of the agreement between the two companies expires, will it still be in Starwood's interest to share their brand with Vistana? That's a scary question too.

I don't think it's as scary a question as you do. Starwood has emphasized time and again that they are after an "asset light" strategy, in which they make money essentially by licensing and managing properties, rather than owning them. A long-term affiliation with Vistana falls right in line with that strategy, particularly when you look at the licensing fees the new entity will be paying to Starwood. It would make no sense to sever the relationship with Vistana. What scenario do you envision could undermine the economics after the initial term of the agreement?

 

[daviator]

Thanks for the thoughtful reply. I wasn't thinking about the value of the relinquished week, and you're right — that will more than pay for the value of points that Vistana would buy from Starwood in cases where an owner trades for SPG points. So I feel better about this. Actually, give what the units in Maui are renting for, the best play might be to reserve the unit at a popular time, rent it to someone at market value, and use the money to pay for hotels wherever your real vacation happens to be. And you'd then earn more SPG points on the hotel stays. A bit of hassle in that, of course. Can't remember: will SVO allow you to change the name on a booking after it's been made?

I suppose you're probably also right on my second worry. So long as the new entity does, indeed, maintain the properties to the high standards expected by Starwood and by the timeshare owners — and it's hard to imagine that they wouldn't — I'm not sure why the two companies would not continue to have a strong partnership. But it just seems as if when companies "spin off" from parents, the close ties which exist often degrade over time. What if Vistana gets an opportunity to open or operate some hotels, which might directly compete with Starwood hotel properties? There could be instances where both companies want to pick the same fruit.

I'm a little unclear – under the new arrangement, Starwood would neither own NOR operate the timeshare properties, right? Or is the deal that Vistana would own them and the vacation ownership business, but that Starwood-branded properties would be managed by Starwood under an operating agreement?

 

[Wanttobe5StarElite]

Based on what I understand from the news release, and the hotel business...

Starwood - will basically charge management and franchise fees, etc. to the operators and owners of hotels.

Hotel owners are independent companies (most of the time).

Starwood wants to be "asset light", so they are selling the corporate owned hotels.

In short, Starwood, does not want to own any actual hotels and real estate.

They basically collect money from hotels using their brand, whether it's bookings, franchise fees, license fees, etc.

In fact, I would guess most hotels have to pay Starwood (or Marriott for that matter), the "right to use" their computer systems. That is why most hotels have the same format.

That is usually a separate "fee" for being part of the Starwood family.

 

[Wanttobe5StarElite]

Basically, just think of the hotel business, as a fast food franchise.

That is basically what they are.

The franchisees have to pay the franchisor all the fees involved to be part of the business.

 

[gregb]

Basically, just think of the hotel business, as a fast food franchise.

That is basically what they are.

The franchisees have to pay the franchisor all the fees involved to be part of the business.

I believe it is more than that. Not only does Starwood "sell" them the use of their trademarked names (Westin, Sheraton, etc), they actually operate the hotels. Hotel staff are actually Starwood employees, or under contract to Starwood. I believe this is how Marriott and Hilton have operated for years. Starwood is just emulating their competition.

Greg

 

[canesfan]

Employees are not Starwood employees. They are the management companies employees. Many hotels will have a owner and a management group. They will do business as a particular chain. Very few hotels are owned by the actual hotel corporation.
Where I have concerns is if Starwood gets bought or merges with another hotel chain. How will that affect the agreement? But that has always been a factor., somewhat. It's just emphasized now that we will be 2 separate companies.

 

[Wanttobe5StarElite]

It won't affect much, initially.

A lot of these hotel franchise and management contracts are quite long term.

A lot of times, developers with real estate will build a hotel and sign up with a hotel company.

So if you are building a hotel, it should be at least a 5/10/20 year deal or more.

As well, for example, Starwood just sold the Phoenician. Again, basically, some company will now manage the hotel, all the while paying Starwood all the fees they require to be part of the brand.

 

[Scott & Laura]

I agree with Greg Starwood is emulating Marriot

Wallstreet rewards management companies without cash tied up in assets as they can better whether a recession

The spinoff is to reduce Starwoods fixed assetts. Marriot generates only about 7.5% of its profits from assets it owns---Starwood generates about 26% of its profits from assetts it owns. In a recession Marriot has little exposure compared to Starwood so Marriot trades at 29 times PE and Starwood 27

I do hate the name --The word Vistana to me means cheap Disneyworld overcrowded timeshare


Scott

 

[gdlipp]

Starwood Spinoff & Deedback Questions

Starwood Hotels & Resorts Worldwide, Inc. said the company expects to complete the planned spin-off of its vacation ownership business into a separate publicly traded company in the fourth quarter of 2015. Starwood Vacation Ownership, which will be named Vistana Signature Experiences, Inc. Here's my question to the TUG membership. I feel that the spinoff is a breach of contract or trust between the member-owners and the company. Is this grounds or justification to pursue a deed back to Starwood before the spinoff goes through? Any suggestions on who to contact?

 

[sjsharkie]

I've posted this before on the Marriott board. It also applies to Starwood and their hotel model.

There's generally 3 classes of properties:

1. Starwood owns and manages the property.
2. Starwood manages the property only.
3. Starwood's flag is up for the property, but owner or their agent manages property under certain standards (pure franchise model).

Most properties fall in #2 or #3.

-ryan

 

[DavidnRobin]

Starwood Hotels & Resorts Worldwide, Inc. said the company expects to complete the planned spin-off of its vacation ownership business into a separate publicly traded company in the fourth quarter of 2015. Starwood Vacation Ownership, which will be named Vistana Signature Experiences, Inc. Here's my question to the TUG membership. I feel that the spinoff is a breach of contract or trust between the member-owners and the company. Is this grounds or justification to pursue a deed back to Starwood before the spinoff goes through? Any suggestions on who to contact?

Considering they are a multi-million publicly traded corporation with many highly paid lawyers, and very complex customer contract - I am sure it is futile, and a costly and lengthy process if pursued.

Why not contact SVO Corp. and ask if they will take back your VOI due to the spinoff - and see how they respond?

 

[sjsharkie]

Starwood Hotels & Resorts Worldwide, Inc. said the company expects to complete the planned spin-off of its vacation ownership business into a separate publicly traded company in the fourth quarter of 2015. Starwood Vacation Ownership, which will be named Vistana Signature Experiences, Inc. Here's my question to the TUG membership. I feel that the spinoff is a breach of contract or trust between the member-owners and the company. Is this grounds or justification to pursue a deed back to Starwood before the spinoff goes through? Any suggestions on who to contact?

I fail to see how you would have any standing in a breach of contract case. You as an owner have authorized the HOA to act on your behalf. If anything, you would have to persuade the HOA to file a breach of contract suit with Starwood as the management company. I believe this is not remotely possible.

As David mentions, you may just be able to deed back your VOI without such justification assuming there is no mortgage on the property. No harm in asking.

-ryan

 

[lizap]

If the new FLEX program ends up hurting mandatory owners by reducing inventory and hence our ability to use SOs to vacation at, WKORV, WKORVN, and WPORV, I DO feel that there are sufficient grounds for a class action suit by mandatory owners. Mandatory units were sold with Starwood promoting the use of SOs. This situation could be remedied by Starwood/Vistana allowing mandatory owners to buy into FLEX at a reasonable price.

I fail to see how you would have any standing in a breach of contract case. You as an owner have authorized the HOA to act on your behalf. If anything, you would have to persuade the HOA to file a breach of contract suit with Starwood as the management company. I believe this is not remotely possible.

As David mentions, you may just be able to deed back your VOI without such justification assuming there is no mortgage on the property. No harm in asking.

-ryan

 

[sjsharkie]

If the new FLEX program ends up hurting mandatory owners by reducing inventory and hence our ability to use SOs to vacation at, WKORV, WKORVN, and WPORV, I DO feel that there are sufficient grounds for a class action suit by mandatory owners. Mandatory units were sold with Starwood promoting the use of SOs. This situation could be remedied by Starwood/Vistana allowing mandatory owners to buy into FLEX at a reasonable price.

My point was that you would have to go through the HOA to do this. An individual owner or group of owners is not likely to be able to sue Starwood directly since they are not party to the contract IMHO.

I see this having a remote chance of a group owner(s) getting their case to the stage of being certified as a class action, and even slimmer than remote chance of winning that class action.

-ryan

 

[LisaRex]

If the new FLEX program ends up hurting mandatory owners by reducing inventory and hence our ability to use SOs to vacation at, WKORV, WKORVN, and WPORV, I DO feel that there are sufficient grounds for a class action suit by mandatory owners. Mandatory units were sold with Starwood promoting the use of SOs. This situation could be remedied by Starwood/Vistana allowing mandatory owners to buy into FLEX at a reasonable price.

Have you read your Owner's Agreement? It's written very clearly several times throughout the document that what you are purchasing is the right to use the week you bought in the season you bought in the size unit you bought at the resort you bought. Starwood cannot interfere with that. Everything else, including the entire SVN program, can be altered or dismantled, with virtually no recourse available to the owners.

Nonetheless, once again, in theory the new FLEX program will not hurt inventory. Think about it. If you have 52 weeks x 100 units x 10 resorts, you have 52,000 owners, and one week available to each owner, to either use or exchange. If you are one of 52,000 owners, you potentially have 51,999 other owners potentially vying for 51,999 exchanges.

If 50% of those units leave network #1 to go to network #2, then you have 52 weeks x 50 units x 10 resorts, or 26,000 owners. Fewer weeks, yes, but 1:1 fewer owners too. If you are one of 26,000 owners, you have 25,999 other owners potentially vying for 25,999 exchanges.

You are not out anything because the 26,000 owners who left for network #2 cannot exchange into network #1's inventory. It's only if you intermingle the two that there'd be grounds for complaint. You might have a complaint if there was evidence that Starwood cherry picked certain high season weeks, but that has little to do with the Flex program and everything to do with the integrity of the developer. Besides, how in the world are you going to obtain evidence to support that claim?

 

[lizap]

A huge problem IMO is Starwood is NOT being upfront with its owners of its intentions. I strongly suspect they do NOT have a clear strategic vision of what their plans are...Even if they have some sort of vision, it does not include the TS division, as evidenced by their desire to spin it off and ultimately sell it. The Westin brand has always been a pristine brand. I'm afraid that may be on the verge of changing, and NOT for the better. So many of us will need to decide if we want to be a part of this change.. Based on the limited information we have at this point about the FLEX program, Marriott did a much better job of managing the changes it made to its TS division several years ago and effectively communicating these changes to its stakeholders..

Have you read your Owner's Agreement? It's written very clearly several times throughout the document that what you are purchasing is the right to use the week you bought in the season you bought in the size unit you bought at the resort you bought. Starwood cannot interfere with that. Everything else, including the entire SVN program, can be altered or dismantled, with virtually no recourse available to the owners.

Nonetheless, once again, in theory the new FLEX program will not hurt inventory. Think about it. If you have 52 weeks x 100 units x 10 resorts, you have 52,000 owners, and one week available to each owner, to either use or exchange. If you are one of 52,000 owners, you potentially have 51,999 other owners potentially vying for 51,999 exchanges.

If 50% of those units leave network #1 to go to network #2, then you have 52 weeks x 50 units x 10 resorts, or 26,000 owners. Fewer weeks, yes, but 1:1 fewer owners too. If you are one of 26,000 owners, you have 25,999 other owners potentially vying for 25,999 exchanges.

You are not out anything because the 26,000 owners who left for network #2 cannot exchange into network #1's inventory. It's only if you intermingle the two that there'd be grounds for complaint. You might have a complaint if there was evidence that Starwood cherry picked certain high season weeks, but that has little to do with the Flex program and everything to do with the integrity of the developer. Besides, how in the world are you going to obtain evidence to support that claim?

 

[suzannesimon]

I remember being in the Bahamas planning my daughter's wedding when Starwood was born. There was a Westin and a Sheraton on the property and the staff was trying to explain what Starwood was going to be. It was a combo of Westin for upscale travelers and Sheraton was going to be a brand for a younger clientele. I couldn't wrap my head around what the point of Starwood was other than a shared website for the 2 already-excellent brands.

As long as Sheraton and Westin continue to manage the timeshares, I'm fine with it. I've been through the Marriott transition and know they can't destroy our investment with illegal point sales. I just don't like the Vistana name and wished they'd gone with a Westin name.

 

[VacationForever]

I remember being in the Bahamas planning my daughter's wedding when Starwood was born. There was a Westin and a Sheraton on the property and the staff was trying to explain what Starwood was going to be. It was a combo of Westin for upscale travelers and Sheraton was going to be a brand for a younger clientele. I couldn't wrap my head around what the point of Starwood was other than a shared website for the 2 already-excellent brands.

As long as Sheraton and Westin continue to manage the timeshares, I'm fine with it. I've been through the Marriott transition and know they can't destroy our investment with illegal point sales. I just don't like the Vistana name and wished they'd gone with a Westin name.

You can see that the greatest gripe is coming from some who have bought expensive resale mandatory resorts with intent to book at higher MF resorts in SVN. I think if one owns a fixed week or bought at a resort to stay then there is little impact.

 

[lizap]

Well you can't be possibly talking about me. We have exchanged into Hawaii only once and have plans to use SOs to go there only one more time...BUT there are many who have purchased mandatory resorts for that purpose, and there's nothing wrong with that since the SVN system was designed to allow people to use SOs to vacation at other resorts.

You can see that the greatest gripe is coming from some who have bought expensive resale mandatory resorts with intent to book at higher MF resorts in SVN. I think if one owns a fixed week or bought at a resort to stay then there is little impact.

 

[VacationForever]

Well you can't be possibly talking about me. We have exchanged into Hawaii only once and have plans to use SOs to go there only one more time...BUT there are many who have purchased mandatory resorts for that purpose, and there's nothing wrong with that since the SVN system was designed to allow people to use SOs to vacation at other resorts.

Yes, Starwood came up with mandatory designation for a handful of resorts and marketed that way. They then regretted doing so as they wanted to make resale worthless so that people will keep going back to the developer to make new purchases in order to be able to book within SVN. I don't think mandatory resort owners will be affected with current resorts/inventory under Flex Option. I can see limited to no availability of new desirable resorts in SVN as they will be fully booked or closed to fully booked during Home Option period.

 

[lizap]

Seems to me that Starwood is trying to circumvent the very system it created and marketed. NOT a great way to build brand loyalty. Maybe that's why they're changing their name...

Yes, Starwood came up with mandatory designation for a handful of resorts and marketed that way. They then regretted doing so as they wanted to make resale worthless so that people will keep going back to the developer to make new purchases in order to be able to book within SVN. I don't think mandatory resort owners will be affected with current resorts/inventory under Flex Option. I can see limited to no availability of new desirable resorts in SVN as they will be fully booked or closed to fully booked during Home Option period.

 

[daviator]

Which week?

I remember when I bought my first SVO week more than a decade ago, I asked about the week shown on the deed (all of my weeks are floating.) The Starwood people told me not to worry about that, it was just for the county and it was unimportant. The two subsequent SVO purchasers, I didn't even ask.

Now I'm wondering if there is any chance that floating owners will eventually get screwed and locked into the week's shown on their deeds. I couldn't even tell you when mine are without finding the deeds, but fixed-week ownerships would have little to no value to me.

Is my concern that the floating weeks could get jettisoned after some sort of merger or acquisition of VSE/SVO justified? Now that I think about it, I don't think that owners have any contract with Starwood guaranteeing their weeks will always float. We don't have any contract with Starwood period. All we really have are our deeds to the weeks we purchased, and all of those contain fixed and specified week numbers.

I took a promise from Starwood as gospel. But now it's not going to be Starwood any more' and soon there will be enough distance between VSE and Starwood that we won't have any ability to go back and sue them.

Having said all of that, I'm not sure what the advantage to VSE/SVO would be in eliminating the floating weeks, I think most of the owners might defect. It just makes me nervous to be dependent on benefits which are seemingly not guaranteed to continue.

 

[LisaRex]

A huge problem IMO is Starwood is NOT being upfront with its owners of its intentions. I strongly suspect they do NOT have a clear strategic vision of what their plans are...

I certainly agree with you on this. I just don't think that the lack of a clear vision is actionable.

To me, the biggest hit in the gut was that the developer didn't follow the rules of the timeshare game. The timeshare plan is to create a resort, sell individual weeks at a huge profit, then turn the resort over to the HOA, and move on to a new resort. The big bucks were supposed to be made in the initial sales phase, followed by modest profits made by their exchange program fees.

Starwood started out following the usual plan, only they made their resorts swankier and their brochures glossier. And people bought into them. They gladly paid tens, and sometimes even hundreds, of thousands of dollars for the right to use one week per year. They (including me!) justified the purchase because the MFs were so reasonably priced. On paper it looked good because we believed that we were investing in a "prepaid vacation."

And after raking in all those profits, and creating all these relatively happy owners, what did Starwood do? The second the resort sold out, they started increasing MFs significantly, to the point of ridicule. They wanted their cake and they wanted to eat it, too. And they did. They FEASTED on the cake. They made unbelievable profits up front and now continue to make incredible profits by manipulating the system for their gain.

To put it in perspective, Hawaii owners are paying $120,000+ per year to "maintain" a 1200 square foot condo. Harborside owners are paying even more. SVV owners are paying nearly $75,000 a year for their villas in Orlando. I can't imagine how nice my home would look if I had that kind of budget each year...and my home is 4x as big! I can tell you one thing with certainty: It would have a proper stove, a swim-up bar, and the furniture would not be laminated wood over press board.

Yes, after nearly my 10th year of ownership, it's very clear that Starwood went into this venture blindly and figured it out as they went along. They made some serious mistakes along the way, including the mandatory/voluntary thing and not being more thoughtful on their season and SO allotment. And then, when everything had finally stabilized, they polluted the water even further by mixing in a Flex system, which is creating a lot of uncertainty and fear among its loyal owners.

They really could write a book on incompetency.

But... I'm still an owner because I like their resorts. And if I get too disgruntled, I know that I can unload my VOI to someone else who'll be lured in by their swanky resorts.

 

[SMHarman]

Mostly true but HRA MF is also paying to maintain a massive theme park they get free entry to.

Even Disney timeshare in Orlando don't include inclusive park passes.

And from a running and maintainance perspective. $2-3 per square foot in NYC is not unusual to cover heat water insurance doorman gym etc so on a 1200 sqft building that is $3600 a month. Energy costs in many destinations will be higher than NYC.

Add cleaning and repair and furniture renewal and you are getting up there.

Is MF high or do people defer more saving for home expenses than they think? How much does the average home owner put aside each month to replace HVAC plant or furniture or siding or the roof. Most stuff it in general savings and grumble when the AC breaks down about the repair cost.

Sent from my LT26i using Tapatalk

 

[VacationForever]

I do not believe the MFs are unreasonable. I live in a large home, with cleaning service every other week and it costs $35K (property tax, homeowner insurance, utilities, cable, HOA...) to keep the home and that is not counting repairs. Repairs cost about 10K a year (This year I just replaced the water heater with a tankless water heater, replaced a !@#$ water softening system that we put in 3 years ago with a new brand/system; a year before put in a new furnace/air-con system even though the home was only 5 year old, the year before replace an entire bathroom because bathroom was leaking and made it into a walk-in shower). 3 years ago we also put in an expensive solar panel system after we put in a pool. There is always something.

My gripe with SVO / Vistana is that they screw existing owners because want to make more money from new buyers.