Well folks -
HERE IT IS - the results of my meeting
I accept full responsibility for all misspellings (sic) and lack of humor. Beyond that, consider this posting an effort to inform, help you with information but NOT an attempt to satisfy your individual feelings or desires.
I am home after a couple of days vacation with my wife in the mountains of North Carolina. The trip included my visit to the offices of Festiva Resorts for a meeting with Davis Smith, Vice-President of Member Services, and Butch Patrick, President. An interesting twist to the meeting was that Mr. Patrick did not attend the meeting but was replaced by Mr. Don Clayton, the founder and CEO of Festiva. I feel change this was both fortuitous and beneficial.
The meeting began at 2pm and lasted for just over 2 hours during which time they had prepared answers to most of my questions and supplied me with documentation which I am still in the process of analyzing.
As I stated before the meeting, I was not there to represent any specific complaint or constituency grouping. My view and goals for the meeting were fact finding and a general expression of concern. I had three objectives: I wanted to understand the mechanism of maintenance fees assessment, the strategy of Festiva as it relates to the future of The Equivest Vacation Club, and finally to discuss the matter of ethics concerning their sales and marketing departments.
I came away from the meeting feeling that I had achieved my objectives. I was heard, they understood my issues and I have a good understanding of their rationale and direction. While I do not agree with them in all points, I understand their business position and they understand my concerns. When presented with logical arguments, I felt they were accepting of my personal views and have indicated that they would entertain consideration of a couple of my recommendations.
I felt fortunate that they had invited me for the meeting. While I did present a number of personal matters relating to my membership and those of my two children, I also discussed the views of many of the members of the user community. The following is a summary of the discussion which took place. They are not representative of my concurrence or disagreement. They are presented to provide information which I feel allows each individual to arrive at their own conclusion.
1. There are two types of members in the Peppertree/Equivest Vacation Club structure, “charter” members and “points” members. Charter members own deeded weeks specific to a time and property while points members have the opportunity to exchange points for available weeks in any given property within the Equivest inventory. Both New and Charter members have the ability to exchange points for available weeks at any given property within the Equivest Club inventory. The only difference between the two types of memberships is that Charter members own a deeded week at one of the club resorts and they have assigned the beneficial use rights of that week to the Equivest Club.
2. At the time of acquisition of Peppertree/EVC by Festiva there were over 10,000 in combined memberships. There are currently 5,675 members of which approximately 1,800 are in default of their current dues. All default members are EVC “points” members including both New and Charter members.
3. No new memberships in EVC have been sold since 2002, the time at which EVC was acquired by Fairfield. Fairfield, Wyndham, and Festiva made conscious decisions not to market EVC because they felt they each offered better products with their own offerings and saw it as a conflict of interest to market against their ‘better’ offering.
4. After the sale of EVC to Fairfield, former employees of Peppertree/EVC decided to create a new company with their own product – the Festiva Adventure Club. The endeavor was independent and actually competitive to their former but purchased company. Fairfield and subsequently Wyndham were significantly larger companies with no common management or operating boards with Festiva. After these employees left Equivest they started Festiva in 2000 and in 2006 Festiva started to sell the Festiva Adventure Club.
5. Festiva does not offer deeded properties – they are a points based time share company.
6. The non-chartered inventory of weeks owned by EVC at the time Festiva acquired EVC represented 108% of the required inventory to satisfy the 1:1 Trust ratio. The 108% comprised both non-charted and chartered weeks. The current percentage is approximately 103% with excess inventory being transferred to Festiva as owners of EVC convert.
7. Any inventory within EVC that is defaulted because of failure to pay dues is removed from the EVC inventory and transferred to Festiva who then become liable for future maintenance fees as “charter” owners of that property week.
8. The Festiva Adventure Club currently has 13,110 members and owns 14,580 interval weeks which is a 111% of the required ratio. The ratio for inventory for FAC is determined based on the number of points sold versus the point value of the weeks in the trust. It is not determined strictly by weeks/members.
9. The clauses in disclosure agreements to release Festiva from any agreements made outside the contract (such as those made by a specific sales person) are necessary as protection for the Corporation. There are specific corporate policies and procedures that employees are to follow. Festiva has taken actions, including termination, when specific documented cases are presented where these policies were not followed. This applies to both employees and 3rd party contractors engaged in sales for Festiva.
10. The current practice is to contact a customer, within the 5 day recession period, to make sure the terms of the contract are understood and misrepresentation has not taken place. This process is only in place for people who purchased through the 3rd party company Outfield Marketing. There are a number of instances where corrective action has taken place including invalidating the contract. It is however, the responsibility of each customer to read and understand the terms of the contract as in any real estate purchase.
11. The core values of Festiva are published and each employee is expected to adhere to them. Reporting and providing documentation of violations of the policies are encouraged and will result in appropriate action.
12. The cost of conversion of a membership to Festiva Adventure Club from EVC is appropriate. The costs cover deed transfer, legal fees, labor costs, commissions for sales personnel and profit margin.
13. The perception that Festiva Adventure Club members have more access to Peppertree properties than EVC members is inaccurate. The percentage of memberships in Peppertree locations is higher in EVC and therefore requires more weeks be reserved for EVC members than Festiva members. This percentage is true of all locations except Blue Ridge Village 1 & 2, and Tamarack.
14. Maintenance costs are comprised of two pieces, a base and per point charge. There is a difference between the maintenance fees of deeded fixed week owners and points members. This difference can be significantly attributed to the management fees associated with the Festiva parent company and the additional costs of running a reservations department to accommodate the ‘floating week’ nature of “points” ownership. The costs of administering fixed week deeded owners is significantly less.
15. Since acquisition of EVC by Festiva, the membership fees have averaged a 8.1% compounded increase. Increases under either Fairfield or Wyndham cannot be compared to those of Festiva because of differing methods of allocation of corporate overhead.
16. With the number of default memberships, the fees for EVC members can be expected to continue to increase.
17. It is not the stated goal of Festiva to eliminate EVC but rather to encourage conversion. At some point in time, the membership of EVC will shrink to the point that fees become to expensive and the membership will decide to dissolve the Club.
18. The Trust Agreement for the EVC does not allow for points members to drop their membership at time of death – it is specifically covered in the agreement. The membership covers an asset and the estate is required to continue to protect that asset.
19. EVC revenues decreased from $8,401,516 in 2008 to $5,609,683 in 2009, a reduction of 33.2%.
20. The number of members (both “charter” and points) dropped by over 37%. This resulted in a lower base to distribute the costs resulting in a significant portion of the increased maintenance fees especially when considering the additional costs associated with administering “points” over “charter” membership.
21. In October of 2008, approximately 740 “points” weeks were move out of the EVC inventory to FAC for default/delinquency.
22. Conversions to FAC from Peppertree/EVC in December were approximately 65 and for January, 2009 were approximately 50.
23. The most recent Trust Agreement for EVC is recorded in Haywood County on 05/09/2002 and represents the Third Amended and Restated Trust Agreement.
24. Under the terms of the trust agreement, original and restated, the management of EVC selects the Board of Directors and they are responsible for any amendments and revisions to the Trust Agreement.
The above points are the basic summarization of materials and discussions from the representatives of Festiva at the meeting. I have intentionally left out anything involving the personal side of my discussion for obvious reasons.
The following are my personal thoughts on a few of the matters discussed.
1. I brought to their attention my request for membership information under sections 7.01d and 8.05 in the Trust Agreement. After discussion, I consulted with my attorney and concur with their response - the Trust Agreement sections are superseded by State and Federal privacy laws similar to those instituted in the medical profession and other industries precluding the release of “personally identifiable” information. This is understandable when considering the issues of identity theft and sale of mailing lists.
2. I was very interested in the concern of Mr. Clayton regarding the matter of ethics. He stated that ethics was the primary reason for his involvement in the meeting. It was, in my opinion, a true concern. I wished that I could have given him “documentation” for instances where sales people had violated their code. Verbal, first or second party statements are not documentation that can be used for disciplinary action. If there are enough verbal statements, it can institute cautions, retraining, and further research. I was given enough evidence that actions have been taken when there was actual documentation. I also understood that people had been terminated for cause when there was a pattern directed at one or more individuals. What I did not see was a corporate disregard for the issue.
3. The current 3rd party marketing firm is Outfield (?) Marketing. Festiva is contacting individuals after the ‘informational’ (?) call to insure the understanding of the individual. This seems to be a fairly new practice.
4. I feel the days for EVC are limited. With the rate of conversion, increased defaults, and current economic times, it is only a matter of a couple of years before membership will be calling for EVC to be dissolved. If EVC is dissolved, we all lose. Memberships disappear and our access to Interval International also goes away. We are faced with conversion or riding the “mule” until it collapses.
5. I did recommend that the Trust Agreement be changed with regards to section 5.02. This section allows for an estate or beneficiaries mentioned in a will of a “Charter member” to discontinue membership 2 years after written notification. My suggestion was to allow all current members to withdraw membership after two years of written notice, without damaging their credit. This was an item they were going to look into. I am not sure it really matters because of the life expectancy of the EVC.
Three final notes:
1. I had a chance to get a look at Festiva from a different perspective than I had previously. While I disagree with them on several points, I found them to be sound business men from a strategic planning perspective. The fact that they were not a part of the Fairfield or Wyndham organizations dismisses the thought that they are in the business of “thrashing” or turning over memberships.
2. They read our user group postings(no surprise) – they find some of those posting reasonable but others just want to rant. I concur.
3. I do not intend to defend my methods or conclusions. I was operating independently and said, and did, what I judged was judicious and proper. If there is strong disagreement, address it with Festiva – I did.
