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HOTEL OWNER Will Reflag or Sell 122 Marriott Int'l Properties / Kauai Beach Club Timeshare Co-Location Affected? [MERGED]

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controller1

controller1

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On failure to meet 80% termination threshold for cumulative owner’s priority returns, Service Properties Trust (NASDAQ:SVC) has terminated the management agreements for 122 hotels with Marriott International (NASDAQ:MAR), effective January 31, 2021 and currently plans to transfer the branding and management of 98 of these hotels to Sonesta and to sell 24 hotels.

seekingalpha.com

Service Properties Trust cancels agreements with Marriott for 122 hotels (NASDAQ:MAR)

On failure to meet 80% termination threshold for cumulative owner’s priority returns, Service Properties Trust (NASDAQ:SVC) has terminated the management...
seekingalpha.com seekingalpha.com
 
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I looked at Service Properties Trust holdings, and they do own the Kauai Beach Resort and Beach Club. This may have some future impact on the two MVC properties adjacent to the resort.
 
I am very confused - What is the non-MVC property there? We purchased a week at the Beach Club in 1995, but traded in the week in 2006 (at a very substantial profit on paper) for a preconstruction purchase of MOC Napili Towers, so I have forgotten. When Marriott reconstructed the buildings (post-Iniki) and developed the timeshare there, did they leave part of the property as a hotel? I don't recall any separation of facilities, not even check-in.
 
n777lt said:
I am very confused - What is the non-MVC property there? We purchased a week at the Beach Club in 1995, but traded in the week in 2006 (at a very substantial profit on paper) for a preconstruction purchase of MOC Napili Towers, so I have forgotten. When Marriott reconstructed the buildings (post-Iniki) and developed the timeshare there, did they leave part of the property as a hotel? I don't recall any separation of facilities, not even check-in.
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If you search marriott.com for Kauai Beach Club you'll see both "Marriott's Kaua'i Beach Club ... a vacation ownership resort ..." and "Kaua'i Marriott Resort ... oceanfront resort" with the same address, 3610 Rice Street. Looking at the resort map I know that at least the unlabeled building to the left of the pool is hotel rooms because we tacked on a night there before checking in to Waiohai the next day. I think I remember that the check-in area was for both the hotel and timeshares with separate lines for each, maybe what's labeled B and C on the linked map? Not sure, it was a while ago.
 
TheBeachBum said:
I looked at Service Properties Trust holdings, and they do own the Kauai Beach Resort and Beach Club. This may have some future impact on the two MVC properties adjacent to the resort.
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Assuming the second co-located timeshare property is Kauai Lagoons just up the road, is it as integrated with Kauai Beach Resort in that if the hotel company chooses at a later date to sever the relationship then Kauai Lagoons would have no stand-alone pool or other amenities?
 
SueDonJ said:
Assuming the second co-located timeshare property is Kauai Lagoons just up the road, is it as integrated with Kauai Beach Resort in that if the hotel company chooses at a later date to sever the relationship then Kauai Lagoons would have no stand-alone pool or other amenities?
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I wouldn't consider Kauai Lagoons to be a co-located resort with Kauai Beach Resort. They are probably at least a mile apart with the land between owned by another entity. Kauai Lagoons has its own pool. I beleive there are cross charging privileges with the hotel, so if you go to a hotel restaurant you can charge it back to your room at Kauai Lagoons. In reality, I wouldn't see much of an impact on the vacation experience of someone at Kauai Lagoons with this change. They are two very distinct properties. Now Kauai Beach Club is a different situation.
 
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Several years ago cross-charging privileges at Marriott Beach Club from Kauai Lagoons were discontinued. As Dioxide noted, the Lagoons has it's own pool and there is an upscale restaurant at the Timbers next door, not useful for a quick meal or light breakfast, but plenty of restaurants nearby. The impact on Kauai Beach Club will be significant I think. The hotel and timeshares have operated more or less as a single unit, sharing all facilities. We own there and it will be interesting to see how it all unwinds. I think Marriott can expect some backlash for this one.
 
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The winner so far is Sonesta, they are requiring over 100 Marriott's hotels in the United States.
 
It seems that the arrangement that Marriott had with the hotel owners of these properties really wasn't ideal. Paying a set return no matter the circumstances. I suspect Marriott stopped paying the returns as a strategic move to get out of the contracts. From what I read, these types of arrangements aren't really the norm, the hotel owners usually take on the risk and Marriott gets its management and license fees.
 
Kauai Beach Club has an MVCI timeshare section as well as a Marriott hotel section. Kauai Lagoons is its own separate entity, fully MVCI timeshare and unrelated.

I imagine the MVCI timeshare piece of Kauai Beach Club will remain (as it is owned by the owners) but the Marriott hotel portion would not.

The rub is that that are on the same resort campus and I believe share some of the costs associated to the amenities on-site under an umbrella “Marriott” name. Question I think is whether that will change?
 
We have seen similar situations in New Jersey and Spain. I suspect that the MVC owners will still continue to have to pay for whatever associate agreement they have with the hotel for use of the facilities. Unless of course MVC owns the facilities and the hotel leases them from MVC. Kauai Beach Club may have to put in its own checkin desk in order to facilitate checkins for guests staying at the vacation club.
 
Is it possible that Marriott buys the Kauai property?
 
CPNY said:
Is it possible that Marriott buys the Kauai property?
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Pre covid, possibly, but I don't see them wanting to take on the risk and inventory at this point.
 
dioxide45 said:
Pre covid, possibly, but I don't see them wanting to take on the risk and inventory at this point.
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I’m wondering if they pick and choose properties they don’t want to “lose”. Could this be one of them? I’m not familiar with the destination or competition in the area, but it seems there is a lot of buzz around this property
 
pedro47 said:
The winner so far is Sonesta, they are requiring over 100 Marriott's hotels in the United States.
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And this is in addition to over 100 IHG U.S.-based Service Properties Trust hotels also moving to Sonesta.
 
dioxide45 said:
We have seen similar situations in New Jersey and Spain. I suspect that the MVC owners will still continue to have to pay for whatever associate agreement they have with the hotel for use of the facilities. Unless of course MVC owns the facilities and the hotel leases them from MVC. Kauai Beach Club may have to put in its own checkin desk in order to facilitate checkins for guests staying at the vacation club.
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Yes, every shared resort property is probably different.
At Club Son Antem Mallorca, Spain quite a few of the facilities - golf courses, golf club restaurant, spa, many of the pools... were MVC’s rather than the hotels, so when another company took over the hotel management from Marriott International there was a need to work out which facilities could be shared and how the costs would be split..
Some issues were more challenging, such as security requirements where there were quite different views as to what was needed, so as MVC standards required a greater level we as owners had to pick up more of the cost.
The spa facilities sadly also had to be reduced, although these have been partially reintroduced more recently.
 
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Shares of Marriott International were actually up on the news. So investors seem to see it as a good thing.
 
100 hotels out of 7500 or so isn't going to move the needle here. The fact that 24 were in the process of being sold and another 9 were wanting to be disposed of but couldn't find a buyer speaks volumes. The only standout is really the Kauai property. These were likely underperforming properties. Marriott did the calculation and figured it was better to give these up than to continue paying out. I imagine that most of these can be easily replaced once travel starts to normalize - they simply need new investors willing to buy a franchise.
 
Financially this is a good move by Marriott's to sell off those under performancing hotels to Sonesta.
 
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