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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.
So is Marriott double dipping somewhat when it comes to Owner Services? Each week also bills some amount of owner services to the owner of the deed. Are they somehow just breaking these fees apart to show them in the trust budget? Or is the $529 and $47.6 million actually a total of what the deeded weeks are billing the trust. It would seem that carrying costs of the trust at about 18% are pretty excessive.
So is Marriott double dipping somewhat when it comes to Owner Services? Each week also bills some amount of owner services to the owner of the deed. Are they somehow just breaking these fees apart to show them in the trust budget? Or is the $529 and $47.6 million actually a total of what the deeded weeks are billing the trust. It would seem that carrying costs of the trust at about 18% are pretty excessive.
The notes to the budget are not that specific, but I suspect the way it works is the total Owner Services expenses are allocated in some fashion between the weeks-based HOA budgets and the Trust Admin Budget. In the Trust budget the Exchange Company Dues revenue line item is exactly the same to the dollar as that administrative expense line item.
The notes to the budget are not that specific, but I suspect the way it works is the total Owner Services expenses are allocated in some fashion between the weeks-based HOA budgets and the Trust Admin Budget. In the Trust budget the Exchange Company Dues revenue line item is exactly the same to the dollar as that administrative expense line item.
It is possible to compare the owner services expenses for individual resorts with the same expenses for the trust to see if they are proportional to the resorts'/trust's budgets.
When comparing the two budgets (both linked in post #3 above). It jumps out to me that the Management Fee goes up by $2.4M (10% of the additional reserve) under the fully funded budget. Wonder if MVC hopes the fully funded waiver fails, so they can reap the higher management fee.
It is possible to compare the owner services expenses for individual resorts with the same expenses for the trust to see if they are proportional to the resorts'/trust's budgets.
The composition of the individual resort budgets is very different than the Trust Admin Expense budget, so Owner Services will be a different proportion in those than in the Trust Admin budget. Individual resorts budget huge $$$ for housekeeping, maintenance, energy, etc., while the Trust admin has none of that. The Admin budget is simply the administrative overhead of running the points system. How the total cost of Owner Services and owner-facing systems are allocated between the resorts themselves and the trust is known only to MVW accountants and their external independent auditors.
When comparing the two budgets (both linked in post #3 above). It jumps out to me that the Management Fee goes up by $2.4M (10% of the additional reserve) under the fully funded budget. Wonder if MVC hopes the fully funded waiver fails, so they can reap the higher management fee.
Since we've owned whenever the fully-funded waiver vote has come up for my two resorts, Marriott (first Marriott, Int'l and now Marriott Vacations Worldwide) has unequivocally recommended in favor of waiving, and the individual resort Boards have concurred. It seems no matter how much they might benefit by it, they don't want the administrative nightmare of overseeing accounts with $millions parked in them to be used only to mitigate catastrophic losses that can't be predicted and may not ever happen.
(And once more I'll throw in the comment, over the years of our ownership Marriott has made a point of stating that they would not be collecting their 10% Management Fee on every Special Assessment they've collected following a catastrophic event, for my two resorts as well as every other impacted Hilton Head resort.)
Does the Trustee not make the same recommendation to waive legislated full-funding?
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.
This is math - I think I'm going to regret this but here goes:
Continuing with your example that I bolded above, if only the average is assessed then won't it result in a shortfall from the $24-per difference? The costs don't disappear and the resort still needs to collect it from somebody, right?
Hi all, I just received my mailer to vote in the annual meeting. If I am understanding the form correctly, I can vote YES or NO on the agenda item to waive fully funding reserves. Beyond that only my appointed proxy holders can vote on any "non agenda" items that come up (or me if I were able...
This is math - I think I'm going to regret this but here goes:
Continuing with your example that I bolded above, if only the average is assessed then won't it result in a shortfall from the $24-per difference? The costs don't disappear and the resort still needs to collect it from somebody, right?
I would think any new inventory that is picked up and goes to the trust is probably unsold for a certain period of time. I think they have 3-4 years of inventory in the trust? If so, there are at least a year or two of maintenance fees that would need to be covered from the rental revenue of Marriott renting out the weeks through Marriott.com or revenue coming in from marketing if these go through promo packages or Encore.
A few weeks, or even a few thousand, aren't really going to move the needle by more than a few cents on the average per point fee.
I would think any new inventory that is picked up and goes to the trust is probably unsold for a certain period of time. I think they have 3-4 years of inventory in the trust? If so, there are at least a year or two of maintenance fees that would need to be covered from the rental revenue of Marriott renting out the weeks through Marriott.com or revenue coming in from marketing if these go through promo packages or Encore.
A few weeks, or even a few thousand, aren't really going to move the needle by more than a few cents on the average per point fee.
But isn't the point that Marriott should be giving meticulous attention to the budgets, and allocating expenses/MF's among the individual resorts and the Trust right down to the penny?
I think the answer to that is a resounding yes. Inflation has been at a multi-decade high since mid-2021 and resort budgets have to catch up. As Fed Chair Jerome Powell said in his Jackson Hole speech just this morning, their unprecedented rapid increase of interest rates has resulted in significant progress in bringing inflation down somewhat, but there is still much work to do. We were spoiled by the low inflation and interest rates from 2000 through 2020. The paradigm is changing.
One of my (unbranded) resorts had fees go up about 11-12% for '24. My initial reaction was "huh, that's quite a bit" but now I'm starting to think I am getting off light.
Just remember there is another side to the rising rates/inflation we are seeing.
In December 2020 at 2 year T-Bill was paying 0.123%. For a $100,000 investment, that's only $123 in interest per year, or $246 over the life of the bond.
If you bought that same $100,000 2 year Treasury right now in August 2023, you would lock in 5.025% for two years. That's $5025 per year for two years, or $10,050 over the life of the bond. Put $100k in a T-Bill and fund your maintenance fees!
So, think of that interest rate as the "maintenance fee" the US government is paying you in exchange for you lending them your money for two years. The government's interest bill has gone up a lot more than our timeshare fees. The CBO is projecting that interest on the national debt will surpass defense spending by 2029, surpass Medicare spending by 2046, and surpass Social Security by 2051. Uncle Sam may be looking for an exit company!
But isn't the point that Marriott should be giving meticulous attention to the budgets, and allocating expenses/MF's among the individual resorts and the Trust right down to the penny?
Perhaps, but they create a budget in August for the next calendar year. Between the time they create and approve the budget they may acquire deeded weeks with 2024 usage and put them into the trust. This could move the needle a few cents either way in regard to maintenance fees for the trust. I suspect the trust has extra "padding" to cover these types of situations.
True, but I think this year the volume will be even higher than normal. I wonder, if at some point the volume of MF defaults gets high enough, would that put pressure on the HOAs to find ways to reduce costs in the future, or is the death spiral kind of inevitable?
There has to be ways that individual resorts can cut some costs. We know that MVC is not in any position to want to keep costs the same or lower them. They don't want their 10% fee to go down. Anytime we are at a resort we see a bazillion golf carts going every direction with one or two people on them. The resorts are crawling with staff. Trust me, I walk around the resorts a lot and see it. I am sure they are all doing something, but they do like to putter around on the golf carts a lot. Are all of these positions 100% necessary? Do they all make sense? I don't want to seem insensitive and say fire a bunch of people, but many people leave just through natural attrition and don't have to be backfilled. I am sure we can do with one less person working the front desk. Do the sidewalks and pathways need to be hosed off every day, or would every other day work? Could we cut out a few games of bingo or music trivia at the pool? In times like these, with increases of this magnitude, we need to consider some cuts in other places to offset the increases.
probably hundreds of ideas, id imagine only a small handful would even be considered as legitimate options...and even fewer actually implemented!
Im more curious how this trend impacts the lower tier developers, or even independent resorts if they see a similar double digit increase in fees....especially in florida with the mindblowing rise of insurance costs!
Of course there are legitimate ways to cut costs, but it's not going to happen at Marriott resorts where budgets are prepared by the developer and boards are firmly controlled by the developer. Why would Marriott want to lower it's revenues? They work for the best interest of their shareholders, not the owners.
And to be fair, not all owners want those cuts to take place. All of that money is being spent on something, and for everything I might think "Well, that's dumb, we don't need that," someone else thinks "I want that, and will happily to pay for it."
For evidence, I only need to look at the kitchen renovation conversations that my dear spouse and I are having...
I believe that is what they've been doing at Harborside for years.
While the MFs there have always been high (and still are) the rate of increase has been probably among the lowest of all MVCI/Vistana timeshares. My 2023 dues for a 2BR non-lockoff were $2263 while in 2014 they were $1735 - that's just 30% in 9 years, or 2.99% annualized, and it was even better than that before the 8% increase in 2023.
I couldn't be happier with that level of increase in MFs (especially compared to MVCI weeks) because clearly the level of the dues itself is very high and brought resale prices to near-zero, despite high rental values in Platinum and Gold season that would justify much more robust resale values. It's probably little consolation for the 2BR lockoff owners who pay over $3500 in MFs, but it could be a lot worse...
That said, there is a price to the cost-cutting. Most HRA owners would probably agree that the level of upkeep of the resort has deteriorated over the past 10 years to some degree. It's little things like bathroom amenities, bedding, housekeeping quality, burnt bulbs etc. It's been maybe more noticeable to us since we go there just every 3-4 years on average.
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