Marriott Resorts Hospitality Corporation -- what does it do?

[Jhw996]

In reviewing the Kaua'i Beach Club 2024 financial statement, I noticed a large budgetary increase from 2023 of $600K for management fee. The Marriott Resorts Hospitality Corporation is the management company. I search all the posted board minutes, bylaw and rules without finding any information on the exact functions. It was a statement in the 2024 Board minutes that the current fee is 12.5% of the annual budget. The contract automatically renews in Dec. 2025 with the fee increasing to 15%. Given that Sonesta manages the majority of the resort, this seems to be a large fee. I have searched online to find information on this Corp and haven't found anything.

I hope the great knowledge about Marriott in this group can educate me or point me in the right direction to understand this relationship. Thank you

 

[dioxide45]

It seems that Marriott Vacations has renegotiated their management fee to be 15% instead of the current 12.5%. I don't think this fee goes to Sonesta. This is Marriott Vacations management fee. There are many different subsidiary companies involved in the resort operations, sales, renovations and more. There should be a shared master association agreement or amenity agreement that covers shared costs regarding the larger resort. This would be covered under a different line item of the budget. Do you mind sharing the budget here?

 

[TSCurious1925]

It is hard to keep all the corporate identities of MVW straight, but I think MRHC may be the entity that operates the MVC Trust. Either way, I do know that is the management company for Marriott Grand Residence Club Lake Tahoe (GRCLT). GRCLT has tangled and settled with them a few times.

Question: Does the Kauia property have multiple HOA's? If so, each has a separate management agreement. The corporations that operate in this space like to have all the contracts at properties with multiple HOA's, but it is ultimately up to each HOA to choose.

It sounds like Sonesta may have the Master HOA contract, while MRHC has the timeshare HOA contract? If so, the timeshare HOA may want to explore switching to Sonesta to achieve efficiences.

However, if the timeshare HOA is controlled by any MVW corporate entity, then any exploration of this alternative will likely be shut down. As others have noted here and there, this conflict of interest on MVW's part may well be actionable, but only a qualified attorney could answer that question, and no qualified attorney would ever answer it on an anonymous Internet Forum.

 

[dioxide45]

but I think MRHC may be the entity that operates the MVC Trust

First American is the trust administrator. I suspect Marriott Resorts Hospitality Corporation is the subsidiary that manages the resort operations, food and beverage and such. The resorts wouldn't pay a management fee to the trust.

 

[TSCurious1925]

First American is the trust administrator. I suspect Marriott Resorts Hospitality Corporation is the subsidiary that manages the resort operations, food and beverage and such. The resorts wouldn't pay a management fee to the trust.

Yes. I also just did a cursory search and Sonesta appears to compete fiercely with Marriott in the resort management space.

To the OP - I would take a look at the Master Association minutes or even better, reach out to the Master BOD to get the history. Did any Marriott entity ever hold the Master HOA contract? If so, why did they switch to Sonesta? Alternatively, has the Master HOA historically been under Sonesta management, and are they contemplating switching to Marriott? In other words, have the Master HOA and the Timeshare HOA always been managed by separate management companies? or is this a recent development?

 

[TSCurious1925]

Cursory research suggests that the hotel owner switched management contract from Marriott to Sonesta. Sonesta does not appear to compete in management of timeshare properties, so if the timeshare owners want to negotiate management fee with MRHC, the timeshare HOA would have to get a proposal from another vendor.

In terms of the property's facilities, MVC website is clear that continuing access to Sonesta hotel amenities has been negotiated for the time being, but that access is subject to change. That will be a regularly occurring negotiation between the hotel and the timeshare HOA.

 

[dioxide45]

Yes. I also just did a cursory search and Sonesta appears to compete fiercely with Marriott in the resort management space.

To the OP - I would take a look at the Master Association minutes or even better, reach out to the Master BOD to get the history. Did any Marriott entity ever hold the Master HOA contract? If so, why did they switch to Sonesta? Alternatively, has the Master HOA historically been under Sonesta management, and are they contemplating switching to Marriott? In other words, have the Master HOA and the Timeshare HOA always been managed by separate management companies? or is this a recent development?

Sonesta is a hotel company. They purchased the Kauai Marriott hotel several years ago. They operate the hotel which is now the Royal Sonesta Kauai Resort. I don't know how the actual framework is setup, but I would suspect there is either a HOA association for the timeshare (Kauai Beach Club) and then a facilities usage agreement to access the hotel facilities by Marriott Kauai Beach Club guests. The two properties are separately owned and managed. They have separate lobbies and checkin desks. They share all other amenities but the food and beverage and other operations are handled managed by Sonesta.

 

[dioxide45]

Cursory research suggests that the hotel owner switched management contract from Marriott to Sonesta. Sonesta does not appear to compete in management of timeshare properties, so if the timeshare owners want to negotiate management fee with MRHC, the timeshare HOA would have to get a proposal from another vendor.

In terms of the property's facilities, MVC website is clear that continuing access to Sonesta hotel amenities has been negotiated for the time being, but that access is subject to change. That will be a regularly occurring negotiation between the hotel and the timeshare HOA.

It would be a real bad thing for Marriott Kauai Beach Club if they were to lose access to the Sonesta hotel amenties. What is stopping Sonesta from jacking up the price? This however is separate from what the OP is asking about. The 15% fee is Marriott's management fee. At many resorts this is only 10%.

 

[TSCurious1925]

Does Sonesta own the hotel? I know Marriott does not typically own the hotels they manage, but rather competes for management contracts of independently owned hotels.

 

[TSCurious1925]

It would be a real bad thing for Marriott Kauai Beach Club if they were to lose access to the Sonesta hotel amenties. What is stopping Sonesta from jacking up the price? This however is separate from what the OP is asking about. The 15% fee is Marriott's management fee. At many resorts this is only 10%.

Yes, whatever access fees the HOA pays to the hotel are separate from the management fee the HOA pays to MRHC. The hotel will charge whatever access fees the market will bear. I imagine they like the revenue they receive from the timeshare side, so they probably don't want to raise access fees beyond what the timeshare side is willing to pay lest they lose that stream entirely.

 

[TSCurious1925]

I am curious about the timeshare HOA board. If the HOA board is controlled by the management company and gives the management company an atypically large increase in the management fee without any explanation to association members, I would ask for more information. Was there any actual "negotiation?" or is this fox eating one of the chickens and hoping nobody notices? Maybe losing the hotel contract creates more work on the timeshare side and justifies the increase? Either way, OP's precise question is best answered by looking at the management agreement itself between the HOA and MRHC. That will tell OP exactly what MRHC is doing in exchange for the management fee.

 

[dioxide45]

Does Sonesta own the hotel? I know Marriott does not typically own the hotels they manage, but rather competes for management contracts of independently owned hotels.

The property is owned by Service Properties Trust (likely some kind of REIT and managed by Sonesta International Hotels Corporation. According to Google AI, Service Properties Trust also owns part of Sonesta International Hotels Corporation.

This is no different in how Marriott and hotel owners operate. The hotels are generally owned by a different company or REIT and Marriott International manages the resort or licenses the name and the hotel is operated under a franchise agreement.

 

[bizaro86]

The property is owned by Service Properties Trust (likely some kind of REIT and managed by Sonesta International Hotels Corporation. According to Google AI, Service Properties Trust also owns part of Sonesta International Hotels Corporation.

This is no different in how Marriott and hotel owners operate. The hotels are generally owned by a different company or REIT and Marriott International manages the resort or licenses the name and the hotel is operated under a franchise agreement.

Service Properties REIT and the Sonesta management corp are both managed by RMR realty. So they're sister companies - that management contract isn't going anywhere.

 

[TSCurious1925]

Are Hawaii condo declarations publicly available? I would be interested in seeing the governing documents for this property to read the language delineating common elements and spaces and how assessments are calculated for those elements.

 

[Chucez]

Are they trying to push Marriott out? If so, what happens to the timeshare owners?

 

[dioxide45]

Are they trying to push Marriott out? If so, what happens to the timeshare owners?

They can't if they wanted to. If there was ever a dispute, they would have to figure out how to play nice or litigate it. Sonesta could charge whatever they wanted for KBC guest access the hotel amenities. Though if the KBC BOD balks, then I suspect there would be a big revenue hit for the hotel. I understand the hotel is about 300 rooms where the timeshare is about 275, but many are larger units like 1BR and 2BR.

 

[Chucez]

It seems that Marriott Vacations has renegotiated their management fee to be 15% instead of the current 12.5%. I don't think this fee goes to Sonesta. This is Marriott Vacations management fee. There are many different subsidiary companies involved in the resort operations, sales, renovations and more. There should be a shared master association agreement or amenity agreement that covers shared costs regarding the larger resort. This would be covered under a different line item of the budget. Do you mind sharing the budget here?

 

[Chucez]

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[SueDonJ]

Haven’t at least some of the intervals at all of the Hawaii resorts been affiliated with the Asia-Pacific points program since either their or its inception, whichever came first? Isn’t that why their MF’s breakout is more than the US-standard three Operating/Taxes/Reserves components? As @bazzap reminds us the Management Fee is 15% at the European and AP resorts. Might this be related to only the AP-affiliated intervals, and possibly the tiered increases in the Management Fee have been scheduled since KBC was brought into the AP sector?

I apologize for not reading the docs because the answers to my questions are probably in them (or just as likely, I'm wrong!) but I'm on my phone and can't think straight with too many tabs open.

 

[bazzap]

Haven’t at least some of the intervals at all of the Hawaii resorts been affiliated with the Asia-Pacific points program since either their or its inception, whichever came first? Isn’t that why their MF’s breakout is more than the US-standard three Operating/Taxes/Reserves components? As @bazzap reminds us the Management Fee is 15% at the European and AP resorts. Might this be related to only the AP-affiliated intervals, and possibly the tiered increases in the Management Fee have been scheduled since KBC was brought into the AP sector?

I apologize for not reading the docs because the answers to my questions are probably in them (or just as likely, I'm wrong!) but I'm on my phone and can't think straight with too many tabs open.

Yes, Ko Olina Beach Club, Waiohai Beach Club and Grand Chateau.
“By becoming a Member of Marriott Vacation Club, Asia-Pacific, you can use your Club Points for stays at eight Club Resort Properties: Marriott's Bali Nusa Dua Gardens, Marriott Vacation Club SM at Surfers Paradise, Marriott’s Phuket Beach Club, Marriott’s Mai Khao Beach – Phuket, Marriott Vacation Club SM at the Empire Place , Marriott’s Ko Olina Beach Club, Marriott’s Waiohai Beach Club, and Marriott’s Grand Chateau.”


Sent from my iPad using Tapatalk

 

[SueDonJ]

Yes, Ko Olina Beach Club, Waiohai Beach Club and Grand Chateau.
“By becoming a Member of Marriott Vacation Club, Asia-Pacific, you can use your Club Points for stays at eight Club Resort Properties: Marriott's Bali Nusa Dua Gardens, Marriott Vacation Club SM at Surfers Paradise, Marriott’s Phuket Beach Club, Marriott’s Mai Khao Beach – Phuket, Marriott Vacation Club SM at the Empire Place , Marriott’s Ko Olina Beach Club, Marriott’s Waiohai Beach Club, and Marriott’s Grand Chateau.”


Sent from my iPad using Tapatalk

Thanks, Barry!

So it's not every Hawaii resort in AP, specifically Kauai Beach Club that's being talked about here is not part of AP?

Hmmmm.

 

[dioxide45]

Thanks, Barry!

So it's not every Hawaii resort in AP, specifically Kauai Beach Club that's being talked about here is not part of AP?

Hmmmm.

It seems that MVC is trying to reach into the pockets of owners a little more to try to prop up profits.

 

[SueDonJ]

It seems that MVC is trying to reach into the pockets of owners a little more to try to prop up profits.

(from @Chucez 6790 attachment)
"Note 3 - Management Agreement
The Association has a management agreement with MRHC ending December 31, 2025, for an initial term of three years with automatic three-year renewals unless sooner terminated as provided therein. For the year ending December 31, 2023, the management fee is equal to 10% of the annual budget of the Association. For the year ending December 31, 2024, the management fee is equal to 12.5% of the annual budget of the Association. For the years ended December 31, 2024 and 2023, the management fee was $2,169,968 and 1,535,238, respectively, and is recorded in the Statements of Revenue, Expenses and Changes in Fund Balance - Operating Fund."

The HOA was established in 1995. Presumably (because it would conform to the other US resorts) the Management Fee was set then at 10% and remained that until the increase to 12.5% effective 1/1/24? The OP says, "... The contract automatically renews in Dec. 2025 with the fee increasing to 15%. ..."

I wonder if there were any detailed explanations in advance of either the 12.5% increase or the 15% increase that the OP says will be coming? It's a little odd that it doesn't appear to have been something on any TUGgers' radar until now.

 

[Hindsite]

Manor Club, not sequel, as a different arrangement that isn't a fixed %, per below note from the 2024 annual report.

The 2025 management fee per week is $117.17 on a weekly maint fee of $1,865.95

 

[daviator]

(from @Chucez 6790 attachment)
"Note 3 - Management Agreement
The Association has a management agreement with MRHC ending December 31, 2025, for an initial term of three years with automatic three-year renewals unless sooner terminated as provided therein. For the year ending December 31, 2023, the management fee is equal to 10% of the annual budget of the Association. For the year ending December 31, 2024, the management fee is equal to 12.5% of the annual budget of the Association. For the years ended December 31, 2024 and 2023, the management fee was $2,169,968 and 1,535,238, respectively, and is recorded in the Statements of Revenue, Expenses and Changes in Fund Balance - Operating Fund."

The HOA was established in 1995. Presumably (because it would conform to the other US resorts) the Management Fee was set then at 10% and remained that until the increase to 12.5% effective 1/1/24? The OP says, "... The contract automatically renews in Dec. 2025 with the fee increasing to 15%. ..."

I wonder if there were any detailed explanations in advance of either the 12.5% increase or the 15% increase that the OP says will be coming? It's a little odd that it doesn't appear to have been something on any TUGgers' radar until now.

It's really hard to understand how such huge increases in the fee percentage can be justified, particularly since the fees themselves increase, generally at a rate that exceeds both inflation and the consumer price index. So not only are the maintenance fees themselves increasing, but over just two years the management fee increases by more than 50% (50% increase in the rate, multiplied by the maintenance fees which also increased.) No VOA board which is actually serving the interests of owners would have approved such an increase.

Of course, increasingly the resort owners are not weeks owners but the Abound trust, and the VOA boards don't need to operate in the interest of the trust owners, they only serve the developer. So as MVC acquires weeks and the number of weeks owners decreases, the various property VOA boards don't even have to pretend to serve owners, they no longer have any responsibility to act in any interest but MVC's.