How much is the “skim” worth for all the Hyatt and Vistana resorts?

[DannyTS]

I just wanted to put a dollar amount on a possible skim for all the legacy ILG weeks. How much is that potentially worth to MVW, if any? How much can they gain from this skim?

I think it is worth a lot of money. Potentially 20,250,000 dollars annually. How did I estimate this?


There are 250,000 legacy ILG owners (Vistana and Hyatt) . Each owns an average of 1.5 weeks. This are publicly available numbers. Say each week is worth in average 2500 DC points. Let’s say in 10 years from now 40% of the Vistana and Hyatt owners will be enrolled in DC if they do it right. Say each DC point is worth $0.6 (although MVC rents them for more actually). If the skim is in average 9% as calculated by some TUGgers the calculation is:

250,000 x 1.5 x 2500 x 40% x $0.6 x 9% = 20,250,000



IF this estimate is remotely true, it is a very compelling reason to invite as many Vistana owners to enroll for a very small fee.
(edited)

 

[jjking42]

I don't think I would enroll if their is a skim. I sold my Marriott because of the skim. I don't care about access to their resorts and I am happy with Vistana, Hyatt and Wyndham. If I really wanted to stay in a Marriott I would rent from an owner or try with II.

 

[CalGalTraveler]

@DannyTS An interesting calculation. So the .6 pt is what they could rent the skim points for $20m annually? On top of that they would have one time enrollment fee but your calculation has this as zero. If this is correct, it would benefit MVC to enroll as many units as possible with low fee as early as possible to get that $20m - $40m annuity stream rolling.

 

[DannyTS]

@DannyTS An interesting calculation. So the .6 pt is what they could rent the skim points for $20m annually? On top of that they would have one time enrollment fee but your calculation has this as zero. If this is correct, it would benefit MVC to enroll as many units as possible with low fee as early as possible to get that $20m - $40m annuity stream rolling.

I think I was conservative with $0.6 per point since it is very close to the DC points MF.
For example 7 nights at Marriott's St Kitts 2bdr garden view in April 2020 is $4300 on Marriott.com. However, the same week is only 3325 DC points or $1995. Probably a point is worth to them closer to $1.

Indeed, the more people enroll, the better for the MVW bottom line. You are right, I did not even add the enrollment fees. 100,000 enrolled at $1000 is worth $100,000,000! If they announce something like this and if they do not get greedy with high enrollment fees, the stock is going to do very well.

 

[JIMinNC]

The analysis assumes all "skimmed" points are rented. I think there will likely be many orphaned nights that go unrented because they are isolated days that are created by shorter than 7-night bookings. I have no idea how many nights go unrented for this reason, but I'm sure they absorb at least part of the skim; it could be a significant part of the skim, but we have no way of knowing.

I just looked at online availability for 1 night in August and September in Hilton Head, and there are A LOT of isolated one-two nights at many of the resorts. For the 8 HHI resorts, there were 51 nights with some sort of availability over the next roughly 60 days. You could actually still book Barony for tonight.

I also think 9% is high. The skim on all three of our resorts is closer to 5%.

I'm not arguing that there isn't some spread to take advantage of in the skim, but I still say it's not as much as everyone thinks.

 

[DannyTS]

The analysis assumes all "skimmed" points are rented. I think there will likely be many orphaned nights that go unrented because they are isolated days that are created by shorter than 7-night bookings. I have no idea how many nights go unrented for this reason, but I'm sure they absorb at least part of the skim; it could be a significant part of the skim, but we have no way of knowing.

I just looked at online availability for 1 night in August and September in Hilton Head, and there are A LOT of isolated one-two nights at many of the resorts. For the 8 HHI resorts, there were 51 nights with some sort of availability over the next roughly 60 days. You could actually still book Barony for tonight.

I also think 9% is high. The skim on all three of our resorts is closer to 5%.

I'm not arguing that there isn't some spread to take advantage of in the skim, but I still say it's not as much as everyone thinks.

My estimate is not perfect and it can be improved.

51 nights over 8 resorts, for 2 months probably means 1% of capacity, depending on the total number of units. Are most of them weekdays or weekends? This can be another factor. I think I read on TUG that the average skim was 9%. For your resort, did you take into account all weeks, including event weeks (if included in your season)?

I am looking again at St Kitts. A 2bdr platinum season garden view week 52 for example can be deposited for 5125 points. Yet, the same weeks is 5500 points on the MVC calendar or a skim close to 7%. Most others seem to be around 6.5-7% so maybe 9% is a bit high.


But even if the skim is 4-5%, when you take into account that they actually rent the points for $1.3 not $0.6 like in my initial estimate,, we are still probably at more than $20 millions a year.

 

[CalGalTraveler]

FWIW..Although $20M is easy money, it would constitute <1% of the approx $3b annual VAC revenue. They would have to do much more to achieve growth that moves the needle for Wall St.

 

[JIMinNC]

My estimate is not perfect and it can be improved.

51 nights over 8 resorts, for 2 months probably means 1% of capacity, depending on the total number of units. Are most of them weekdays or weekends? This can be another factor. I think I read on TUG that the average skim was 9%. For your resort, did you take into account all weeks, including event weeks (if included in your season)?

I looked closer at the skim on my 3 weeks. Barony Beach Club is fairy easy because the points season and weeks season are the same and there are no event weeks in my season. For Maui and Kauai it's harder, because for weeks all 52 weeks are Platinum, but they have two seasons, plus a few event weeks for Points. I do have to factor out week 51 and 52 on Maui and 52 on Kauai since they were sold as fixed event weeks, so only looking at 50 weeks. I had to do a weighted average of the booking values by approximating the number of weeks in each of the points seasons. It's important to note that for Maui and Kauai, in the lower of the two seasons (basically the entire year except for Feb-Mar & Jun-Aug), there is NO skim at all. The booking value is basically the same as the election value. The entire skim is contained in the high season in Feb/Mar and summer.

Barony Beach Club
Booking Value: 1725
Election Value: 1625
Skim: 5.8%

Maui Ocean Club
Averaged Booking Value: 6245
Election Value: 5825
Skim: 6.7%

Waiohai Beach Club
Averaged Booking Value: 4525
Election Value: 4225
Skim: 6.6%

So my 5% was maybe low. Something like 5.5% to 7% may be more realistic.

There's no way to know what percentage those 51 HHI nights really represents, since it is not based on the total capacity of the resorts in HHI, but only that portion that is either held in the DC Trust or committed to points in the DC Exchange - basically the "points capacity" of the resorts. As far as weekdays or weekends, it was a mix - just random days scattered around, mostly single days, a very few back-to-back days.

So, if the skim averages 6.5% and "orphaned" points averaged 6.5%, then there would be no rental margin. If the orphans are 4%, then MVW has a 2.5% margin that could be rented. Unless we know for sure what percentage of the nights go unused due to broken weeks, we really have no way to predict the theoretical rental revenue they could earn from the skim.

 

[DannyTS]

@CalGalTraveler It is easy money and it will probably go to the bottom line. It is also recurring and companies like that. But the Vistana owners can bring other sources of revenue to the DC. As you mentioned, the enrollment fees can be substantial. They can also charge annually $209 to the Vistana owners that are not part of VSN and say $20-50 to those that are.

 

[DannyTS]

So my 5% was maybe low. Something like 5.5% to 7% may be more realistic.

There's no way to know what percentage those 51 HHI nights really represents, since it is not based on the total capacity of the resorts in HHI, but only that portion that is either held in the DC Trust or committed to points in the DC Exchange - basically the "points capacity" of the resorts.

That is a fair.
One more additional point. The Vistana chart is very simple and in many cases owners will end up losing very few points at the end of the year. For example if you have 2 bdr unit in Orlando you can exchange it for either a 2 bedroom or a 1 bedroom depending on the location if you keep the same season. So if I only have 81,000 SO, I will probably use all of them. With the DC you will probably end up losing some points at the end of the year. If my enrolled week is worth 3300 DC points, how many weeks are actually exactly 3300 points? Not many probably and in fact there will be an additional "skim" just by the nature of the chart.

 

[JIMinNC]

That is a fair.
One more additional point. The Vistana chart is very simple and in many cases owners will end up losing very few points at the end of the year. For example if you have 2 bdr unit in Orlando you can exchange it for either a 2 bedroom or a 1 bedroom depending on the location if you keep the same season. So if I only have 81,000 SO, I will probably use all of them. With the DC you will probably end up losing some points at the end of the year. If my enrolled week is worth 3300 DC points, how many weeks are actually exactly 3300 points? Not many probably and in fact there will be an additional "skim" just by the nature of the chart.

But you can always bank your unused points to the next year, as long as you do it by the banking deadline for your ownership level. In fact, the best thing to do is get ahead and always be borrowing points from the next year.

 

[DannyTS]

With Vistana you have to prepay your MF to borrow. Is it similar at MVC?

 

[dioxide45]

With Vistana you have to prepay your MF to borrow. Is it similar at MVC?

No prepaying of MFs with Marriott like there is with Vistana. Same with depositing in II. Vistana makes you prepay, Marriott doesn't.