Anyone hear a rumor that Marriott is raising MFs across the board 20%

[timsi]

We own a 2BR condo in an oceanfront complex on Hilton Head Island in Palmetto Dunes. The cost of the HOA common insurance policy on the buildings more than doubled year over year. Our share of the insurance assessment for 2022 was $2000. This year it was $4200. Our friends who live full time in Indigo Run are paying over $15,000 this year for property insurance on their home.

This represents an increase of approximately $42 per week, which is important but not the largest contributor to the maintenance fees.

 

[JIMinNC]

This represents an increase of approximately $42 per week, which is important but not the largest contributor to the maintenance fees.

That's certainly correct. I wasn't trying to imply that the big increase for Trust points was only due to the insurance costs. It's one element, for sure, but not the entire story. My main point is you can't just look at the overall inflation rate in the economy when assessing inflation in narrow segments like timeshare/lodging. Some things are rising at far greater rates than the overall average, and I suspect coastal insurance costs have a relatively higher impact on timeshare MFs than they do for the average consumer or business. But you are correct, there is much more to the story, and other cost elements are likely bigger contributors when looked at in aggregate.

It's also important to note that comparing a whole ownership condo like ours to a timeshare is not an apples-to-apples compare either. Timeshare HOAs have a lot more expenses than a whole-ownership condo HOA. For our 2BR condo in Hilton Head, when you add our monthly HOA dues, annual Palmetto Dunes dues, annual Common Area insurance assessment, interior contents insurance, property taxes, and electricity, it adds up to a cost to an owner of about $27,000 per year, or only about $520 per week.

As a comparison, let's look at nearby MVC Barony Beach Club, which has 2BR units similar in size to our HHI condo. The total Barony 2023 timeshare maintenance fee, however, was a lot more at $1684 per week. Why so much more for a similar unit? It's because the Barony Owners Association must cover many expenses that our HHI HOA does not:

1. Our condo HOA has no activities staff to pay salaries and benefits.
2. Our condo HOA has no housekeeping staff to pay salaries and benefits. We clean our own unit and owners who rent their units pay a cleaning service.
3. Our condo has no "front desk" and no "owner services" staff. Owners who rent their units pay a rental company for those services.
4. Our condo has no full time dedicated on site security. MVC does.
5. Our condo HOA uses contractors for landscape and maintenance, whereas MVC has dedicated staff, probably resulting in faster response and overall higher quality grounds and facility maintenance.
6. Our condo's property manager manages multiple properties for our management company, whereas MVC has dedicated on site management and admin staff.
7. Our condo bad debt/collections expense is negligible, as is credit card expense, since we have less than 150 owners.
8. The Barony HOA must accrue reserves for furniture, soft goods, appliance, HVAC, and other interior goods refreshes. At our condo, the HOA has no responsibility for the interior. That future replacement cost is the responsibility of the homeowner.

As best as I can determine from looking at the Barony budget, items 1-7 above may account for at least $650 to $700 per week in additional annual costs that our HOA does not incur and seem to be primarily related to staffing. I do not know how much of Barony's $434 replacement reserve is for the interior items that are owner responsibility at our condo, so I have no way to estimate how much more that would add.

So, given the huge rise in insurance costs and the lower, but still substantial rise in staffing costs over the last couple of years, and given that all of those costs make up a more significant portion of a timeshare's budget than they do in the overall economy, it's not hard to see how timeshare costs can rise must faster than the overall inflation rate.

 

[Bodie]

Just heard this today.

DC points are going up around 15 percent. Don't know about MFs

 

[timsi]

That's certainly correct. I wasn't trying to imply that the big increase for Trust points was only due to the insurance costs. It's one element, for sure, but not the entire story. My main point is you can't just look at the overall inflation rate in the economy when assessing inflation in narrow segments like timeshare/lodging. Some things are rising at far greater rates than the overall average, and I suspect coastal insurance costs have a relatively higher impact on timeshare MFs than they do for the average consumer or business. But you are correct, there is much more to the story, and other cost elements are likely bigger contributors when looked at in aggregate.

It's also important to note that comparing a whole ownership condo like ours to a timeshare is not an apples-to-apples compare either. Timeshare HOAs have a lot more expenses than a whole-ownership condo HOA. For our 2BR condo in Hilton Head, when you add our monthly HOA dues, annual Palmetto Dunes dues, annual Common Area insurance assessment, interior contents insurance, property taxes, and electricity, it adds up to a cost to an owner of about $27,000 per year, or only about $520 per week.

As a comparison, let's look at nearby MVC Barony Beach Club, which has 2BR units similar in size to our HHI condo. The total Barony 2023 timeshare maintenance fee, however, was a lot more at $1684 per week. Why so much more for a similar unit? It's because the Barony Owners Association must cover many expenses that our HHI HOA does not:

1. Our condo HOA has no activities staff to pay salaries and benefits.
2. Our condo HOA has no housekeeping staff to pay salaries and benefits. We clean our own unit and owners who rent their units pay a cleaning service.
3. Our condo has no "front desk" and no "owner services" staff. Owners who rent their units pay a rental company for those services.
4. Our condo has no full time dedicated on site security. MVC does.
5. Our condo HOA uses contractors for landscape and maintenance, whereas MVC has dedicated staff, probably resulting in faster response and overall higher quality grounds and facility maintenance.
6. Our condo's property manager manages multiple properties for our management company, whereas MVC has dedicated on site management and admin staff.
7. Our condo bad debt/collections expense is negligible, as is credit card expense, since we have less than 150 owners.
8. The Barony HOA must accrue reserves for furniture, soft goods, appliance, HVAC, and other interior goods refreshes. At our condo, the HOA has no responsibility for the interior. That future replacement cost is the responsibility of the homeowner.

As best as I can determine from looking at the Barony budget, items 1-7 above may account for at least $650 to $700 per week in additional annual costs that our HOA does not incur and seem to be primarily related to staffing. I do not know how much of Barony's $434 replacement reserve is for the interior items that are owner responsibility at our condo, so I have no way to estimate how much more that would add.

So, given the huge rise in insurance costs and the lower, but still substantial rise in staffing costs over the last couple of years, and given that all of those costs make up a more significant portion of a timeshare's budget than they do in the overall economy, it's not hard to see how timeshare costs can rise must faster than the overall inflation rate.

I understand your point, but there is no evidence that Marriott increased salaries by 11-15% across the board, and the insurance alone does not explain the increases. I also want to point out that many Marriott and Vistana resorts are not in areas that are high risk for hurricane damage. Orlando, for example, was chosen by Disney because of the lower risk, and the damage is typically minimal even when other areas in proximity are devastated. I assume that the insurance rates should reflect that.

On the other hand I am concerned about the reserve funds and given the current and future costs in furniture, equipment, roof replacement etc. we probably lost 35-40% of our purchasing power. Where are the reserve funds kept, by the way? If Marriott directed all the Vistana and Marriott resorts and trusts to keep the money with the same institution, they would be able to get significant concessions. I would hope that those concessions would benefit the owners who have paid for those funds, and not the corporation.

 

[JIMinNC]

I understand your point, but there is no evidence that Marriott increased salaries by 11-15% across the board, and the insurance alone does not explain the increases. I also want to point out that many Marriott and Vistana resorts are not in areas that are high risk for hurricane damage. Orlando, for example, was chosen by Disney because of the lower risk, and the damage is typically minimal even when other areas in proximity are devastated. I assume that the insurance rates should reflect that.

On the other hand I am concerned about the reserve funds and given the current and future costs in furniture, equipment, roof replacement etc. we probably lost 35-40% of our purchasing power. Where are the reserve funds kept, by the way? If Marriott directed all the Vistana and Marriott resorts and trusts to keep the money with the same institution, they would be able to get significant concessions. I would hope that those concessions would benefit the owners who have paid for those funds, and not the corporation.

I agree that it's unlikely that MVW has increased salaries by 15%, but remember, salaries are only part of personnel costs. Benefit costs - health insurance costs in particular - have been rising faster than wages for some time. A good friend of ours is a VP of HR for a large company and my wife spent over 40 years in healthcare management, so when we get together, the conversation sometimes turns to health insurance, and the HR VP often comments on how their healthcare benefit costs rise double digits every year.

While Orlando is certainly somewhat lower risk than coastal areas, if you talk to people in Florida, I think you will find out the large rise in property insurance premiums has been felt statewide. More in coastal areas I'm sure, but quite a few insurers have left the state entirely. Heck even here in Charlotte, roughly 150 miles from the nearest ocean, we saw our homeowners insurance rise by over 40% from 2022-2023. Part of that was due to our insurer increasing our insured amount to better reflect the increased replacement cost of our home, but I'm sure MVW has had to increase insurance valuations, too. While that's a lot less than the 100% increase we saw in Hilton Head, it's still very significant.

MVC is increasing reserve accruals to account for future replacement costs. Here is how they explained the Trust increase in their Owner Letter:

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.

I don't mean to minimize a 15% maintenance fee increase - it's significant - but when I look how our cost of ownership for our condo is increasing, how the cost of ownership of our home is increasing, and how the many other costs we incur day-to-day are increasing, I can't get all that concerned about paying $1,000 or so a year more for our timeshare weeks and points. Unfortunately, it seems in line with what I'm seeing in the rest of our economic life. For the last two years, we have been in an inflationary environment like we haven't seen since the late-1970s/early-1980s. While the Fed is doing all they can to bring inflation under control with monetary policy, the lack of meaningful action on fiscal policy will likely mean inflation will hang around a lot longer than we all would like. It may take a significant recession to reduce demand and bring it down to a more manageable level.