2024 Maintenance Fees DISCUSSION THREAD

[kozykritter]

The association meeting is early next month. If they approve the fully funded budget, fees increase to 82.4 cents per point, up 20.5%. If they go with the alternate budget that waives full funding which is what normally happens, it will be 78.74 cents, up 15.1%. The email cites the following factors contributing to the increase:

"1) Labor – there are still multiple markets with large increases in wages and benefits.

2) Reserves - Significant increases due to inflation, labor, infrastructure and, for only those underlying component associations in Florida, Florida Senate Bill 154.

3) Insurance premium increase.

Also twenty (20) underlying component associations returned a portion of their prior year estimated surplus funds reducing their 2023 assessments. They are not forecasting an additional return of surplus funds in their 2024 budgets creating an additional increase in their respective maintenance fees."

Both budgets indicate club dues will increase to $240 for owner and select, $280 for executive and presidential and stay the same at $295 for chairman.

 

[StevenTing]

That is a huge increase. Point rentals will now become more interesting with such a huge jump.

 

[Fasttr]

Excerpts from MVC email received on Trust points proposed budget.... This is always an early read on how big MF increases at the weeks may average this year....and its another doozy.

The projected increase in the “Alternative Budget” is $.079 per point which represents a 15.1% increase.

Please pay particular attention to the reserve funding line item on the enclosed “Proposed Budget”. The State of Florida requires MVC Trust Association to submit a Proposed Budget to you with a reserve funding amount that represents reserves which are “fully funded” based on statutory formula, unless the Owners vote to waive or reduce the reserve funding as permitted by the State of Florida. Therefore, the enclosed Proposed Budget includes reserves of $8.43 per beneficial interest, an amount which provides for reserves which are “fully funded” in accordance with the statutory formula. MVC Trust Association is required to fully fund the difference between a component association’s fully funded reserve amounts and that component association’s waived reserves amount unless MVC Trust Association Owners waive fully funding. In 2023, the underlying component associations’ owners waived fully funding within their budgets and the “Proposed Budget” reserves estimate is based on the 2023 actual difference of fully funding plus an inflation factor for 2024.

Also enclosed is an “Alternative Budget” that is not officially proposed but will be considered should MVC Trust Association Owners elect to waive fully funding. The Board is authorized to potentially lower the reserve funding amount below the amount shown in the Proposed Budget only if a majority of Owners vote “yes” to waive or reduce the “fully funded” reserve funding shown in the Proposed Budget. The Board may also determine to provide increased reserve funding in the final budget. The Board of Directors reviews the Association’s reserve funding needs on a regular basis and will do so again at this meeting. The goal has been and remains to maintain a balanced approach in reserve contributions versus projected expenditures for the Association.

For 2024 the enclosed “Proposed Budget” reflects that the MVC Trust Association maintenance fees to be paid to the underlying component associations are projected to have a 14.3% increase over the 2023 MVC Trust Association budget. This amount is reflected in the “Component Expense” line item of the 2024 MVC Trust Association “Proposed Budget” which you will note is approximately 85% of the total budgeted expenses for MVC Trust Association.

Some of the challenges faced by the underlying component associations which contributed to their maintenance fee increases include:

• Labor – there are still multiple markets with large increases in wages and benefits.
• Reserves - Significant increases due to inflation, labor, infrastructure and, for only those underlying component associations in Florida, Florida Senate Bill 154.
• Insurance premium increases.

Twenty (20) underlying component associations returned a portion of their prior year estimated surplus funds reducing their 2023 assessments. They are not forecasting an additional return of surplus funds in their 2024 budgets creating an additional increase in their respective maintenance fees.

 

[kozykritter]

I beat you to it with my post @SueDonJ, please merge.

 

[dioxide45]

That is a huge increase. Point rentals will now become more interesting with such a huge jump.

What percentage of point rentals are pure trust points? Many weeks owners have MF per point much lower than what the trust is and there are also some big mega renters with quartershares that have very low fees per point. I am sure their maintenance fees will also be going up since the trust is based on the fees of te underlying deeds. If those with low fees per point, they may still keep rental prices the same.

 

[DanCali]

What percentage of point rentals are pure trust points? Many weeks owners have MF per point much lower than what the trust is and there are also some big mega renters with quartershares that have very low fees per point. I am sure their maintenance fees will also be going up since the trust is based on the fees of te underlying deeds. If those with low fees per point, they may still keep rental prices the same.

The functionality of trust and legacy points is identical when rented. Their price should also be identical. Theory and reality may diverge but it's really not the renter's business how much the owner is paying in MFs, and an owner should not lower the rate and leave money on the table just because the MFs for weeks based ownership is (usually) lower.

For what it's worth - when you have entities advertising "will rent any amount of points from others" (no active listings like that now) and then, presumably, go and book weeks to rent out those weeks at a profit, it probably implies that points at $0.70 are way underpriced. Putting that activity aside, which maybe is more limited after the 20K point cap, I can rent 4850 points for $3400 and book a 2BR IV Waiohai in the summer and that would be a lot less than renting the same week from an owner on Redweek which would cost around $5000 after fees. To me, there is something wrong with that...

I suspect the glut of points on VPE is probably not due to price, but rather the "trust" element between the parties involved in these transactions. Setting the points rental price at $1.50 would make it so that owners get a decent return on their points, encourage people to elect points rather than rent weeks (increasing Abound inventory), reduce the rent-points-to-rent-weeks activity, and would make point rentals a source of supplemental points rather than a source of booking entire vacations. It may also reduce the incentive to buy just 1000 points and "rent as much as you need from others".

But we can't really "set" prices - we're not a cartel and owners are free charge what they want. But at $0.70 I prefer to rent out my weeks (even after taxes), and rent points from others as needed instead of just electing points for my weeks. Seems very inefficient...

 

[JIMinNC]

Our homeowners dues for our Hilton Head beach condo went up about 17% for 2023, due primarily to a 100% increase in property insurance premiums, so the proposed increase doesn't really surprise me. Our condo association also doesn't employ the large number of staff that MVC resorts do, so we are more insulated from wage inflation pressures, and we still were socked with a huge increase.

 

[kozykritter]

I'm less concerned about point rentals and more about the ongoing affordability of my timeshare. I also own Vistana which is likely to experience a similar jump. Large increases in MF cuts into my budget for travel to these locations, the cost of which is zooming as well between airfares, rental cars, hotels if I drive, gas, etc. It's unsustainable for some of us.

 

[JIMinNC]

I'm less concerned about point rentals and more about the ongoing affordability of my timeshare. I also own Vistana which is likely to experience a similar jump. Large increases in MF cuts into my budget for travel to these locations, the cost of which is zooming as well between airfares, rental cars, hotels if I drive, gas, etc. It's unsustainable for some of us.

Welcome to 2023. For most of the last 20 years or so, we have been spoiled by consistently low inflation. That all changed after the pandemic with a combination of enormous fiscal stimulus and supply chain constraints. Those of us who lived through the 1970s and early 1980s have seen this movie before. Once inflation gets pumping, it's really hard to stop the cycle. See the link below from he Federal Reserve.

The Great Inflation

 

[StevenTing]

This with points generated from weeks have the ability to rent their points at a lower price point. They shouldn’t but it allows them to clear out their inventory first. Most quarter shares were in the 0.30 to 0.35 per point range about 5-6 years ago. I don’t know what it is now. But their lower price point will continue to put pressure on rental price.

Personally, I will always try and rent my points for 0.05 to 0.10 above the MF for points. This would mean people should start renting their points at 0.80 to 0.90. Of course, weekly rentals will likely go up in price too.

 

[dioxide45]

Welcome to 2023. For most of the last 20 years or so, we have been spoiled by consistently low inflation. That all changed after the pandemic with a combination of enormous fiscal stimulus and supply chain constraints. Those of us who lived through the 1970s and early 1980s have seen this movie before. Once inflation gets pumping, it's really hard to stop the cycle. See the link below from he Federal Reserve.

The Great Inflation

But even through those years of "low inflation" we regularly say increases in the 3-8% range. Well above so called CPI. The same seems to be true next year if they come in around 15%. I think this shows that CPI isn't a good metric for inflation. I also wonder how the trust can be billing for fees prior to resorts actually finalizing the budgets. I suspect they have a good idea at this point what the fees will be for each resort, but our Orlando BOD meetings aren't until mid October. I have always wondered if the trust fees are "padded" to some degree to account for fluctuations. Perhaps Marriott has also been pulling in too many high MF to point ratio weeks into the trust and that is inflating the overall trust MF?

 

[JIMinNC]

But even through those years of "low inflation" we regularly say increases in the 3-8% range. Well above so called CPI. The same seems to be true next year if they come in around 15%. I think this shows that CPI isn't a good metric for inflation. I also wonder how the trust can be billing for fees prior to resorts actually finalizing the budgets. I suspect they have a good idea at this point what the fees will be for each resort, but our Orlando BOD meetings aren't until mid October. I have always wondered if the trust fees are "padded" to some degree to account for fluctuations. Perhaps Marriott has also been pulling in too many high MF to point ratio weeks into the trust and that is inflating the overall trust MF?

What we have to remember though, is the CPI and other inflation measures used by the Federal Reserve (like CPI ex food and energy) are broad measures across the entire economy. Within individual sectors, specific categories can differ widely from the overall measures. For example, for the expenses for a group of timeshare resorts, labor costs/healthcare benefit costs probably have had a greater impact on costs over the years than they do in the overall CPI figures, which are also influenced by manufacturing costs, raw material costs, etc. that don't impact resorts as much. Also, when so many MVC resorts are in Florida and other coastal areas, the recent meteoric rise in property insurance rates means resort costs may rise more than the overall CPI.

Having said all that, I have no idea how the CPI for resort-type expenses has actually varied from the overall CPI over the last few decades - it could have been greater or less, I'm not sure. I just wanted to point out that looking at economy-wide statistics like the CPI may not be reflective of actual cost changes in a micro-segment like resorts.

 

[jabberwocky]

The functionality of trust and legacy points is identical when rented. Their price should also be identical.

But we can't really "set" prices - we're not a cartel and owners are free charge what they want. But at $0.70 I prefer to rent out my weeks (even after taxes), and rent points from others as needed instead of just electing points for my weeks. Seems very inefficient...

Let’s face it. The whole timeshare industry is based on people trying to arbitrage this inefficient behavior away. TUGgers just happen to be very good at arbitrage overall I think. We know the market, but the general public doesn’t. How can Marriott sell the same points product for an amount that is significantly above the resale market price?

The pool of people looking to rent a week is much larger than the pool of MVC owners who would like to rent points (remember you have to own points to rent them and have them transferred to your account).

If you have a low cost advantage (as many enrolled week/quarter share owners do) then the price will tend to gravitate towards that lower bound depending on the available points. High cost producers (in this case those that own trust points) get slaughtered in the marketplace if there is insufficient demand to meet supply. An owner who has points with MF of $0.5 points could rent out at $0.7 and have a 40% margin, where the trust owner is essentially just covering the marginal cost.

 

[jabberwocky]

But even through those years of "low inflation" we regularly say increases in the 3-8% range. Well above so called CPI. The same seems to be true next year if they come in around 15%. I think this shows that CPI isn't a good metric for inflation. I also wonder how the trust can be billing for fees prior to resorts actually finalizing the budgets. I suspect they have a good idea at this point what the fees will be for each resort, but our Orlando BOD meetings aren't until mid October. I have always wondered if the trust fees are "padded" to some degree to account for fluctuations. Perhaps Marriott has also been pulling in too many high MF to point ratio weeks into the trust and that is inflating the overall trust MF?

I think they would have to make an estimate. It is interesting that they say last years were lowered because of a return of MF from prior years of the underlying resorts. In other words they overpaid in 2021 which benefited the 2022 year. Now they are catching up.

I think they have too many “expensive” weeks in the trust. I don’t know what the overall average MF for the MVC underlying weeks are, but you would think the trust MF should reflect that overall average. We often seek out the best weeks on a MF/points ratio, but has anyone looked at which resorts/weeks would give the worst MF/point? How high would that be?

 

[hcarman]

I'm less concerned about point rentals and more about the ongoing affordability of my timeshare. I also own Vistana which is likely to experience a similar jump. Large increases in MF cuts into my budget for travel to these locations, the cost of which is zooming as well between airfares, rental cars, hotels if I drive, gas, etc. It's unsustainable for some of us.

Same with us. Funny how they always sold the destination club points as having very stable maintenance fees. I don’t call 15-20% stable. We have been in the program for many years but the increases are starting to suck our travel budget dry. Every company we do business with seems to have their hand out for more money but sorry to say our salary increases have not covered these hefty increases.

 

[SueDonJ]

But even through those years of "low inflation" we regularly say increases in the 3-8% range. Well above so called CPI. The same seems to be true next year if they come in around 15%. I think this shows that CPI isn't a good metric for inflation. I also wonder how the trust can be billing for fees prior to resorts actually finalizing the budgets. I suspect they have a good idea at this point what the fees will be for each resort, but our Orlando BOD meetings aren't until mid October. I have always wondered if the trust fees are "padded" to some degree to account for fluctuations. Perhaps Marriott has also been pulling in too many high MF to point ratio weeks into the trust and that is inflating the overall trust MF?

Marriott corporate submits the resort budgets to the individual resort Boards who then review and maybe make adjustments, although I suspect many just rubber-stamp the corporate line, prior to holding their Annual Meetings. Isn't it possible that the compilation of all resorts is what Marriott submits to the Trustee, and the only reason the individual resorts don't send out their notice at the same time is because the Boards have to hold their Annual Meetings first? I'm not sure I'm explaining correctly what I mean to be saying, which would not come as a surprise, I'm sure. But the thought process is meant to lead to, it's just a matter of the timing of Annual Meetings?

 

[cubigbird]

These % of increases are not going to be sustainable. You can't raise fees 15-20% annually and not expect owners to stop paying.

 

[timsi]

But even through those years of "low inflation" we regularly say increases in the 3-8% range. Well above so called CPI. The same seems to be true next year if they come in around 15%. I think this shows that CPI isn't a good metric for inflation. I also wonder how the trust can be billing for fees prior to resorts actually finalizing the budgets. I suspect they have a good idea at this point what the fees will be for each resort, but our Orlando BOD meetings aren't until mid October. I have always wondered if the trust fees are "padded" to some degree to account for fluctuations. Perhaps Marriott has also been pulling in too many high MF to point ratio weeks into the trust and that is inflating the overall trust MF?

It's possible that the trust budget is somewhat delayed compared to the underlying resort budgets, for the reasons you mentioned. This could mean that it reflects more of the 2022 increases that many resorts have seen. If that's the case, it would be good news for trust owners in 2025, as the increase would be more in line with current inflation.

 

[SueDonJ]

I think they would have to make an estimate. It is interesting that they say last years were lowered because of a return of MF from prior years of the underlying resorts. In other words they overpaid in 2021 which benefited the 2022 year. Now they are catching up.

I think they have too many “expensive” weeks in the trust. I don’t know what the overall average MF for the MVC underlying weeks are, but you would think the trust MF should reflect that overall average. We often seek out the best weeks on a MF/points ratio, but has anyone looked at which resorts/weeks would give the worst MF/point? How high would that be?

This is math so I might be way over my head here, but why should the Trust MF's be averaged?! As a simplest example you have a Trust with two Weeks in it, one with a $100 MF's and the other with a $20 MF's. The Trust "owns" those two Weeks and is on the hook for the combined $120 MF's. Why would you have them pay only the average thereby shorting the resort the difference?

 

[jabberwocky]

This is math so I might be way over my head here, but why should the Trust MF's be averaged?! As a simplest example you have a Trust with two Weeks in it, one with a $100 MF's and the other with a $20 MF's. The Trust "owns" those two Weeks and is on the hook for the combined $120 MF's. Why would you have them pay only the average thereby shorting the resort the difference?

My thinking is that if the weeks in the trust are a representative sample of all of the weeks out there in MVC land (which we know it isn’t) then the overall MF for the trust should be close to the average MF of all weeks (of course we have to add a bit for trust admin).

To extend your example let’s assume there are two resorts available. Resort A has MF of $100, resort B has MF of $20. If each resort has 50 weeks available and the trust owned half of the weeks at each resort (25 from A and 25 from B) then the average MF of the trust would be equal to the MF of both resorts combined (in the case $60).

Now suppose the trust buys up more of the resort with high MF because they can pick up those weeks cheaply through ROFR and we end up with 40 weeks from resort A and 10 from resort B. Now the trust MF would be $84 but the overall average of all weeks is still $60.

 

[timsi]

My thinking is that if the weeks in the trust are a representative sample of all of the weeks out there in MVC land (which we know it isn’t) then the overall MF for the trust should be close to the average MF of all weeks (of course we have to add a bit for trust admin).

To extend your example let’s assume there are two resorts available. Resort A has MF of $100, resort B has MF of $20. If each resort has 50 weeks available and the trust owned half of the weeks at each resort (25 from A and 25 from B) then the average MF of the trust would be equal to the MF of both resorts combined (in the case $60).

Now suppose the trust buys up more of the resort with high MF because they can pick up those weeks cheaply through ROFR and we end up with 40 weeks from resort A and 10 from resort B. Now the trust MF would be $84 but the overall average of all weeks is still $60.

It is important to remember that the season is also a factor that contributes to the average MF of a trust. The more low-season weeks in the trust, the higher the average MF (same MF but fewer points). It is somewhat surprising that so many low-season weeks find their way into the trust, as I always thought that they primarily ROFRed the high-season weeks.

 

[Superchief]

Owners really need to start putting pressure on the BOA's to start controlling expenses better. There are several potential areas to reduce spending, but MVC has no incentive to do so because they collect their 10% management. I've noticed large increases for activities MF's in the past few years and that is one area for potential reductions that would also lower the HR and staffing costs. Most activities should require guest fees to cover the cost instead of giving away freebies to boost the guest ratings. Children's activities can be reduced during the week when schools are in session. Owner services costs also keep increasing despite to reduction of service. MVC is treating owners similar to the way the hotel corporation treats its property owners.

 

[emeryjre]

MVC as we all know is listed on the NYSE
They have to have an increase in profits to be considered successful for the quarter
They have no incentive to lower owner's cost
Their incentive is to lower the company costs and increase their profits
The increase in MF at a deeded week level and the cost per point is just passing the cost of doing business on to us, the owners of weeks and points

 

[DRH90277]

My thinking is that if the weeks in the trust are a representative sample of all of the weeks out there in MVC land (which we know it isn’t) then the overall MF for the trust should be close to the average MF of all weeks (of course we have to add a bit for trust admin).

To extend your example let’s assume there are two resorts available. Resort A has MF of $100, resort B has MF of $20. If each resort has 50 weeks available and the trust owned half of the weeks at each resort (25 from A and 25 from B) then the average MF of the trust would be equal to the MF of both resorts combined (in the case $60).

Now suppose the trust buys up more of the resort with high MF because they can pick up those weeks cheaply through ROFR and we end up with 40 weeks from resort A and 10 from resort B. Now the trust MF would be $84 but the overall average of all weeks is still $60.

We know the weeks included in the Trust are not a representative sample of the entire population of all the resorts. At the outset in 2010, the Trust inventory started with the unsold weeks at that time. Of course, timeshare units have been added from ROFR purchases, new Pulse properties, and other purchases since that time. From this, I'm thinking the Trust maintenance fees should be lower than a mere average of the maintenance fees for all resorts. On the other side, I suspect the maintenance fees must include a layer of costs for the administration of the points system which is probably less cost efficient than the old weeks system.

 

[JIMinNC]

On the other side, I suspect the maintenance fees must include a layer of costs for the administration of the points system which is probably less cost efficient than the old weeks system.

The Maintenance Fees the trust pays for the weeks it holds total just under $529 million in the proposed 2024 budget. Trust Association Administration adds another almost $94 million. The largest part of that $94 million in admin costs is $47.6 million for "...costs and expenses related to owner education, reservation services, owner communications and other programs and services provided by the Exchange Company." So, basically, that is the Points program's share of Owner Services and the owner-facing systems. The next two largest line items are Bad Debt expenses of $12 million and over $8 million in credit card fees. The Management Fee to MVW is just under $8 million.

In this context "Exchange Company" means the internal MVC Exchange Company where points reservations are fulfilled.