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[2012] Marriott points buy-back concept

Clark

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I have been trying to figure out even conceptually how Marriott could manage to support the resale of Destination Points, and am interested in opinions on how it could possibly work.

The Scenario: Mr. Jones walks in off the streets and buys into the DP program, buying enough points to go to Ocean Watch each year. Then suppose Jones can no longer travel and wants to sell his points, and that Marriott has a program to buy them back. This discussion is about how that could work (or not).

I'm going to make up numbers here just for the purpose of discussion (they may not be realistic -- just to demonstrate the point).

Let's suppose that weeks owner Mr. Smith paid Marriott $20,000 for the same Ocean Watch week that Jones uses each year, and that Jones bought 5000 points, also for $20,000. So, in a sense, Smith and Jones ownership are equivalent.

Smith is also selling and has discovered via Ebay or otherwise that the true value of his week on the resale market is only $5000 or 1/4 of that he paid. This would make Jones Destination Points also only worth $5000

So -- how can Marriott buy Jones points back? If they pay more than $5000 for the points they would be supporting the value of Smiths week in the resale market. Something Marriott, to my understanding, has never done.

If they offer $5000, then it's a direct acknowledgement of the loss one immediately takes when buying into the program. Another thing it is hard to imagine Marriott doing.

That seems to leave some kind of ROFR - like option where Marriott intercedes on sales between third parties. Does Marriott even have a ROFR type clause with their Destination Points program? Does anyone know?

Well, as you can see, I havent gotten very far figuring out how it could work --- ?
 

kds4

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I have been trying to figure out even conceptually how Marriott could manage to support the resale of Destination Points, and am interested in opinions on how it could possibly work.

The Scenario: Mr. Jones walks in off the streets and buys into the DP program, buying enough points to go to Ocean Watch each year. Then suppose Jones can no longer travel and wants to sell his points, and that Marriott has a program to buy them back. This discussion is about how that could work (or not).

I'm going to make up numbers here just for the purpose of discussion (they may not be realistic -- just to demonstrate the point).

Let's suppose that weeks owner Mr. Smith paid Marriott $20,000 for the same Ocean Watch week that Jones uses each year, and that Jones bought 5000 points, also for $20,000. So, in a sense, Smith and Jones ownership are equivalent.

Smith is also selling and has discovered via Ebay or otherwise that the true value of his week on the resale market is only $5000 or 1/4 of that he paid. This would make Jones Destination Points also only worth $5000

So -- how can Marriott buy Jones points back? If they pay more than $5000 for the points they would be supporting the value of Smiths week in the resale market. Something Marriott, to my understanding, has never done.

If they offer $5000, then it's a direct acknowledgement of the loss one immediately takes when buying into the program. Another thing it is hard to imagine Marriott doing.

That seems to leave some kind of ROFR - like option where Marriott intercedes on sales between third parties. Does Marriott even have a ROFR type clause with their Destination Points program? Does anyone know?

Well, as you can see, I havent gotten very far figuring out how it could work --- ?

We attended an 'Owners Update' presentation while at MGV this week. We spoke with a Sales Director about points re-purchase and how that would work for a Trust Points (as opposed to Legacy Points/Enrolled Week) owner who wanted to sell their DC points. He advised us that Marriott is rolling out a points re-purchase program that will buy back points from owners at a rate of approximately .40 on the dollar.

So, using your example, Mr. Smith's 2BR at MOW more likely ran in the $25k range. Mr. Jones wants to go to MOW, but cannot buy a week through the developer as the developer only sells points now (DC). Mr. Jones would have to buy a points package sufficient to get to MOW during the time periods/seasons that he would like to go there. I don't know exactly how many points that would require, but can be researched. But, for the sake of the illustration, let's say he purchases a 2,500 point package. Excluding potential discount incentives the developer may have thrown in, his cost would be the 2,500 points times $10.94 per point, plus closing costs (which I will not factor in to keep the example simple).

Jones investment for those 2,500 points would be approximately $27,350. If Jones later found he could no longer vacation regularly and wanted to sell his points, he could turn to the external resale market place - which is in its' infancy (and which the developer is building in points resale restrictions to inhibit) to try and sell the points. He may, or may not, be able to get .40 on the dollar. The real onus is on the buyer, assuming Jones (as the seller) disclosed all of the restrictions associated with buying his points to the seller. If I were a buyer, I would be unlikely to consider buying Jones' points.

However, Jones will (assuming the Sales Director was telling the truth - and without diverting into a separate thread about 'if the salesman's lips are moving, etc.') be able to sell his points back to Marriott for approximately $10,940 (or .40 on the dollar for what he purchased them for). Marriott will then pour them back into the trust inventory and resell them to another buyer for $10.94 per point, or whatever the going Marriott rate is.

Jones gets a 'reasonable' portion of his expenditure back (note I did not say investment - timeshares are not an investment). While one can argue that sellers should have the 'right' to sell their points for whatever amount they can get, maybe more or maybe less than Marriott may offer, I'll leave that to another thread.

These are just my thoughts, based on what we have been told.
 

GregT

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I think kds4's comments are interesting -- if they implement a buy-back program for 40% of the purchase price, this is effectively just like reselling your week (which I think used to be 60% in the old days?)

Marriott could simply put your points into the queue of what is available for sale and the next points sold would be yours. Instead of them receiving 100% of the revenue (and having the cost of the points of their own which WindJE saw somewhere at 40%?) leaving a gross margin of 60% when selling their points, now they sell your points.

And instead of Marriott getting 100% of the revenue, they get 60% of the revenue and you get 40% -- but they have no cost asociated, leaving the same gross margin of 60% for Marriott on the sale.

So....by introducing a points "buy-back" program, they have the same net profit. And a 40% buy-back price would certainly provide support for the secondary market, as sellers try to do better than the 40% "guarantee" from Marriott.

Interesting stuff...

Best,

Greg
 

Clark

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Thank you for your information and thoughts on this.

If it goes as suggested -- Marriott offering the DP member 40 cents on the dollar, that is essentially a resale market guarantee -- a first for Marriott, no?

Which would basically seem to put a floor on resale values for the weeks owner too.

They never did better than ROFR in the resale market before, which is no way the same thing --
 

GregT

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Thank you for your information and thoughts on this.

If it goes as suggested -- Marriott offering the DP member 40 cents on the dollar, that is essentially a resale market guarantee -- a first for Marriott, no?

Which would basically seem to put a floor on resale values for the weeks owner too.

They never did better than ROFR in the resale market before, which is no way the same thing --

Clark,

If it goes as suggested, yes Marriott would be offering a resale market guarantee -- which would be a first for Marriott. I think it's easy for them to do -- they sell points everyday and they just stick the resale points into the queue and they get the same profit margin.

I think this doesn't prop up resale values on weeks though -- I think those will continue to have whatever value the underlying week (and its season/size/view) determines.

Plus the value of weeks that has historically been helped by their perceived Trade Power will be harmed if owners are now longer reporting good trades. And high MF properties will come under pressue (like Westin Princeville, with high MFs and low resale prices for a beautiful property).

We will see --- interesting to see how it will all evolve in the years ahead.

Best,

Greg
 

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I think kds4's comments are interesting -- if they implement a buy-back program for 40% of the purchase price, this is effectively just like reselling your week (which I think used to be 60% in the old days?)

Marriott could simply put your points into the queue of what is available for sale and the next points sold would be yours. Instead of them receiving 100% of the revenue (and having the cost of the points of their own which WindJE saw somewhere at 40%?) leaving a gross margin of 60% when selling their points, now they sell your points.

And instead of Marriott getting 100% of the revenue, they get 60% of the revenue and you get 40% -- but they have no cost asociated, leaving the same gross margin of 60% for Marriott on the sale.

So....by introducing a points "buy-back" program, they have the same net profit. And a 40% buy-back price would certainly provide support for the secondary market, as sellers try to do better than the 40% "guarantee" from Marriott.

Interesting stuff...

Best,

Greg


I don't think you are 100% right on the "no cost" thing. They will still have sales commissions and other variable costs.

Where this gets interesting is when the trust is effectivley sold out. Marriott has deposited all weeks that it had and all points have been sold. Then the repurchase and resale becomes very easy for them as long as it was cheaper to buy the points back versus excercising ROFR or obtaining weeks by other means.

Rich
 

GregT

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I don't think you are 100% right on the "no cost" thing. They will still have sales commissions and other variable costs.

Where this gets interesting is when the trust is effectivley sold out. Marriott has deposited all weeks that it had and all points have been sold. Then the repurchase and resale becomes very easy for them as long as it was cheaper to buy the points back versus excercising ROFR or obtaining weeks by other means.

Rich

Rich, you may be right -- I definitely agree that they have the same sales commissions and other variable costs irrespective if they are selling your point or their Trust Point -- what I don't know is if those sales costs are already included in the 40% cost that WindJE mentioned.

I had assumed that they were not, but may be a flawed assumption.

Best,

Greg
 

SueDonJ

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For a number of years the buyback program was alive and well with Marriott Weeks but I don't think they ever "guaranteed" it, did they? I mean, to the extent where it was a written stipulation that an Owner could demand as a right?

I'd expect that any DC Points buyback program would be the same as what used to be in place for Weeks - an opportunity for Owners to rid themselves of unwanted purchases, with the financial benefits decidedly in Marriott's favor, and only available for the years in which it's beneficial for Marriott.

I think it's great that we're hearing about a possible buyback program from several different Marriott reps lately, because that generally means that something is in the works (even if what ends up being officially announced is a vastly different animal than what was discussed in the early stages.) If it comes to fruition, it will make a big difference in the question of whether it makes sense to purchase DC Points in the first place.
 

ronparise

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another thought from the peanut gallery

A timeshare developer usually look for a cost basis of about 40-50 percent when they are developing a property...ie what costs them about $400000 per unit to develop they will sell for about $1000000, or $25000 a week. So on the face of it...It might make sense to take your week to sell...ie they get the same profit without any invested capital

That capital requirement is I think a big reason why Marriott spun off the timeshare division, and it is in the spinoffs best interest to sell what they have as soon as possible

Heres what I think...as long as Marriott (or any other developer) has their own unsold inventory , there is no reason for them to make any buy back offer to their owners. Adding inventory to what they already have to sell, will just delay the sale of their own units, and keep all that capital tied up.

However once they get out of the development business look for Marriott to do what Wyndham is doing ie selling other developers unsold inventory and putting their name on it as manager...If that happens they might be willing to add your unit to the mix...Wyndham isnt doing it, but maybe Marriott will
 

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Heres what I think...as long as Marriott (or any other developer) has their own unsold inventory , there is no reason for them to make any buy back offer to their owners. Adding inventory to what they already have to sell, will just delay the sale of their own units, and keep all that capital tied up.
I don't necessarily agree with this. I think an official buy-back program would be a very powerful sales tactic. It would help them sell more trust points. Your statement would be true only if the buy-back program did not help them sell more trust points.
 

dioxide45

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I don't necessarily agree with this. I think an official buy-back program would be a very powerful sales tactic. It would help them sell more trust points. Your statement would be true only if the buy-back program did not help them sell more trust points.

The "illusion" of a buyback program has been used for years by Marriott. We always heard how Marriott would buy your week back during a sales presentation when you asked what would happen when you wanted to sell. The truth however was far different. Marriott would not buy back weeks at a resort when they had developer inventory left to sell. I don't see why this would be any different under points.

They don't want to offer a guaranteed buyback program just to sell points as if everything was to go south again, there would be a mad exodus and MVCI would go broke. They can't do it. Any buyback would be contingent on their inventory needs.
 

m61376

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I think a big difference between the earlier buy back programs and a points buy back is that earlier on the weeks most sour after to buy back were the ones that sold the fastest. At all the resorts ( at least to my knowledge) the first weeks to sell we're the peak weeks- Platinum Plus and then Platinum. So Marriott bought back such weeks to continue to have inventory to sell at each resort. Fast forward to okay- Marriott has a lot of inventory left, since seasons no longer fuel sales and there is no distinction. Iam not so sure that Marriott would routinely buy back points even at $.40 each. A 2000 point package would cost then $8000, and they could just buy back a week via ROFR that has 2000 points attached for much less, or a more valuable week with more underlying points attached, recharge the trust both with points and with inventory that was missing.

I don't see the incentive for them to buy back points in the foreseeable future, except perhaps doing it on rare occasion so they can dangle the carrot IF there are enough savvy buyers who know enough the express this concern. Talking to others, I really think this issue, while a very real concern, is something that people dont think about when in vacation mode.
 

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Which brings me back to one of my original questions.

Does anyone know if there is a ROFR clause for a person that walks in off the street and joins the Destination Club?

That's the one way I can see this working for Marriott -- someone goes to sell their Destination Club Points membership to a third party (when that is allowed in the future) and Marriott steps in to grab the points under some kind of ROFR.

For that to be even conceivable, there would need to be an ROFR clause.

This gives Marriott the ability to add inventory when needed, with no actual commitment that supports the resale market.

That would be the "Marriott Way", no?
 

Big Matt

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I think that people who buy trust points need to realize that they are not buying much of anything other than the ability to use this "currency" to exchange for future stays in a timeshare.

There is nothing they can do to stop Marriott from increasing points charts and devaluing their original purchase. At least with weeks you got a week. It's impossible to say what you really get with points.
 

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I think a big difference between the earlier buy back programs and a points buy back is that earlier on the weeks most sour after to buy back were the ones that sold the fastest. At all the resorts ( at least to my knowledge) the first weeks to sell we're the peak weeks- Platinum Plus and then Platinum. So Marriott bought back such weeks to continue to have inventory to sell at each resort. Fast forward to okay- Marriott has a lot of inventory left, since seasons no longer fuel sales and there is no distinction. Iam not so sure that Marriott would routinely buy back points even at $.40 each. A 2000 point package would cost then $8000, and they could just buy back a week via ROFR that has 2000 points attached for much less, or a more valuable week with more underlying points attached, recharge the trust both with points and with inventory that was missing.

I don't see the incentive for them to buy back points in the foreseeable future, except perhaps doing it on rare occasion so they can dangle the carrot IF there are enough savvy buyers who know enough the express this concern. Talking to others, I really think this issue, while a very real concern, is something that people dont think about when in vacation mode.

For $.40 each, I am sure Marriott would be happy to buy them back. I think you meant $4 each :) ? Remember that there are additional costs associated with buying weeks and placing them in the trust. Taking back points is a cheaper alternative. They can put the point owners on a waiting list and sell their packages to new buyers that want a matching point package. Only one deed transfer is needed. With a weeks reaquistion, they have to file additional notices and perform additional work to get that in to the trust. There are costs associated with that.

Something else to consider is that MVCI hasn't recently been in the ROFR aquistion mode. Recently they have made cash offers to owners for weeks that was above the market rate. I think they try to shy away from ROFR for whatever reason.

Which brings me back to one of my original questions.

Does anyone know if there is a ROFR clause for a person that walks in off the street and joins the Destination Club?

That's the one way I can see this working for Marriott -- someone goes to sell their Destination Club Points membership to a third party (when that is allowed in the future) and Marriott steps in to grab the points under some kind of ROFR.

For that to be even conceivable, there would need to be an ROFR clause.

This gives Marriott the ability to add inventory when needed, with no actual commitment that supports the resale market.

That would be the "Marriott Way", no?

Clark, Yes there is a ROFR clause built in to the original trust document. So Marriott can acquire points via ROFR. There is also a potential $1 ROFR waiver fee that they can charge, just like the $95 ROFR waiver fee we have in weeks.
 

GaryDouglas

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Sales Presentation Last week at MOC

Sales rep told us that they have a program to buy back trust points. Seller to recieve the current sales price less 30%. Maybe I got that wrong it was receive 30% of current sales price. Yes I know, that's a big difference, but I was mostly interested that they actually have a buy back program now. They didn't show me any details and don't know if it's up and running. Can't find it on the web yet, and yes, his lips were moving. As noted in another thread, they do have a buy back program for weeks.

Another interesting factoid was that of the 112MM points in the trust, 88MM have been sold. If I got those number right and they keep selling at that rate, it won't be long before they are sold out.

Anyone else heard this?
 

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I don't necessarily agree with this. I think an official buy-back program would be a very powerful sales tactic. It would help them sell more trust points. Your statement would be true only if the buy-back program did not help them sell more trust points.

One of the selling points when I bought my early Marriott Weeks (Sabal Palms, Heritage, Harbour) was that Marriott would sell your Week for you when you wanted out. It helped convince me to buy. The program was slow. Commission was reasonable. Sellers got put into a queue. While you were waiting for your week to reach the top of the list Marriott would rent your Week for you, more than covering your MFs. Marriott actually sold my Sabal Palms Week for me at a small profit. Later on they started tinkering with both their Sales and Rental Programs making them less desirable, so much so that I sold all my Marriott Weeks.

George
 

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Another interesting factoid was that of the 112MM points in the trust, 88MM have been sold. If I got those number right and they keep selling at that rate, it won't be long before they are sold out.

Anyone else heard this?

Gary,

It doesn't surprise me that they've sold most of what has been deposited already in the Trust -- but they have many more weeks of inventory still to be deposited and therefore I do not believe they will sell out anytime soon.

I think it's about 2 years at current run-rate before they get close to exhausting the supply of current inventory. It's one of the reasons I believe they will begin to exercise ROFR in the not-too-distant future. I've speculated elsewhere that 2012 may be our last opportunity to buy these things at the current pricing (near zero).

All the best,

Greg
 
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Bill4728

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Another interesting factoid was that of the 112MM points in the trust, 88MM have been sold. If I got those number right and they keep selling at that rate, it won't be long before they are sold out.

Gary,

It doesn't surprise me that they've sold most of what has been deposited already in the Trust -- but they have many more weeks of inventory still to be deposited and therefore I do not believe they will sell out anytime soon.

I think it's about 2 years at current run-rate before they get close to exhausting the supply of current inventory. It's one of the reasons I believe they will begin to exercise ROFR in the not-too-distant future. I've speculated elsewhere that 2012 may be our last opportunity to buy these things at the current pricing (near zero).

All the best,

Greg

Historically Marriott has used ROFR to cheaply create new inventory for the sales. They have not done this for several years which IMHO is why the price of resale units has fallen so low. BUT I agree that it is likely thet Marriott will need more inventory soon and start getting it from current owners who are selling. It may not matter to Marriott if that inventory is weeks or points because once Marriott is the owner they can make it anything they want it to be. .
 

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Sales rep told us that they have a program to buy back trust points. Seller to recieve the current sales price less 30%. Maybe I got that wrong it was receive 30% of current sales price. Yes I know, that's a big difference, but I was mostly interested that they actually have a buy back program now. They didn't show me any details and don't know if it's up and running. Can't find it on the web yet, and yes, his lips were moving. As noted in another thread, they do have a buy back program for weeks.

Another interesting factoid was that of the 112MM points in the trust, 88MM have been sold. If I got those number right and they keep selling at that rate, it won't be long before they are sold out.

Anyone else heard this?

I attended a presentation earlier this month with a very knowledgeable sales rep who has been in the same Marriott location 10-12 years. He definitely stated that Marriott does not currently have a program to buy back points, but they are working on one. He expects it will be released in about a year.

To me this is a big issue. I have considered buying points, but I won't buy them until I know how I can dispose of them. Situations change and if I can no longer travel I want to know I can get rid of them and not be stuck with the MF forever.
 

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To me this is a big issue. I have considered buying points, but I won't buy them until I know how I can dispose of them. Situations change and if I can no longer travel I want to know I can get rid of them and not be stuck with the MF forever.

Problem is that Marriott has a history of changing the rules as time goes on. Just hark back to their Resale and Rental Programs which gave me comfort when I bought. They essentially no longer exist.

George
 

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Problem is that Marriott has a history of changing the rules as time goes on. Just hark back to their Resale and Rental Programs which gave me comfort when I bought. They essentially no longer exist.

George

Good point. I've decided not to purchase trust points or enroll my resale weeks. If I can't continue to get the exchanges I want with II then I'll give my Marriott weeks away and try another program. It was fun while it lasted!
 

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Sales rep told us that they have a program to buy back trust points. Seller to recieve the current sales price less 30%. Maybe I got that wrong it was receive 30% of current sales price. Yes I know, that's a big difference, but I was mostly interested that they actually have a buy back program now. They didn't show me any details and don't know if it's up and running. Can't find it on the web yet, and yes, his lips were moving. As noted in another thread, they do have a buy back program for weeks.

Another interesting factoid was that of the 112MM points in the trust, 88MM have been sold. If I got those number right and they keep selling at that rate, it won't be long before they are sold out.

Anyone else heard this?
We heard, in Las Vegas, that the average point package is 5,000 points. This surprised me. Right now the cost per point is $11.16. I believe that he said that the points went up almost 25% already since the start at $9.20. I just figured it out at 21.3% exactly so that is quite a big jump in such a short time. He also said that they are ahead of schedule with selling points than the forecast was. I wonder who the buyers are but they are out there. I thought that they were foreigners but he said no. They are everybody combined (new and existing owners). I asked him how the enrollment was going but he wasn't dealing with that at all. He only sells points.

To be honest, I hope that they will be successful so that our timeshare resorts will stay in good shape and that more locations are added even if they don't build them. They need this to keep selling to present owners but not to us. ;) We bought for use mainly but I am still very curious where the New York City condo is that we can book today. I will find out when I talk to one of the advisors one of these days.
 

Fasttr

TUG Review Crew
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MVC Trust Points
I figured I would bring this thread back to life in light of the recent news of the junk fees getting jacked up....and the rumor that there "might" be a point buyback program starting "soon" by MVC. Any new fresh thoughts on the topic?
 
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