Bad Debt, Is this typical?

[rboesl]

I just received my statement for the proposed 2021 budget for Vacation Village at Bonaventure. One thing that really jumped out at me was the "Reserve for Bad Debt". On a per Timeshare Week the reserve is being proposed at $359.19 of a total of $966.53. That's over 30% of the total maintenance fee. This was single largest expense, by far, listed on the proposed budget. There wasn't any other expense listed that exceeded $65.

That seemed high to me but really don't know. Is this a typical percentage for bad debt reserve?

 

[am1]

Not sure but a fact of timeshares that a lot of owners do not pay costing us all. Same in other aspects of life as well. Prepare for it to get worse with the economy the way it is.

 

[bbakernbay]

Absolutely happened to us in Kissimmee and 40 year sunset has kicked in with very few paying owners. Most of the units are now rented to permanent residents and likely will be sold to someone getting a great cash flow for pennies on the dollar. MFees doubled due to bad debt. We refused to pat any more on our 4 weeks.

 

[easyrider]

It's kind of hard to spread out a cost to a limited number of deeded members. That is one reason I stay away from deeded timeshares and keep vacation clubs instead.

Bill

 

[elaine]

I typically see about 10%.

 

[rickandcindy23]

It is very typical and the result of high pressure sales pushing people to buy who don't really want a timeshare. Then consider the high interest rate these new owners pay to buy a timeshare because their credit is bad and they shouldn't buy that timeshare. Then there are fees on top of the mortgage and people walk away from all of it.

But it starts with a sleazy timeshare salesperson. True.

 

[Yellowfin]

The ones I own have between 0.5-3%

 

[turkel]

Absolutely happened to us in Kissimmee and 40 year sunset has kicked in with very few paying owners. Most of the units are now rented to permanent residents and likely will be sold to someone getting a great cash flow for pennies on the dollar. MFees doubled due to bad debt. We refused to pat any more on our 4 weeks.

Part of the problem or part of the solution?

I guess as consumers we are always paying for the dead beats.

@easyrider are you saying a “club” can spread bad debt over more people or they deal with the problem differently?

 

[RX8]

Are you sure this isn’t confusing the “reserve for bad debt” with the typical reserve fee found with all maintenance fees? 37% of the total MF just for bad debt seems way too high. How does the total $966 MF compare with the prior year?

 

[cman]

I just received my statement for the proposed 2021 budget for Vacation Village at Bonaventure. One thing that really jumped out at me was the "Reserve for Bad Debt". On a per Timeshare Week the reserve is being proposed at $359.19 of a total of $966.53. That's over 30% of the total maintenance fee. This was single largest expense, by far, listed on the proposed budget. There wasn't any other expense listed that exceeded $65.

That seemed high to me but really don't know. Is this a typical percentage for bad debt reserve?

It's only going to get worse as this recession progresses. A 30% bad debt reserve is ridiculously high. My advice to you would be to sell and/or give this week away.

I've stayed at this resort twice, both times I rented. I got my 2017 week for $400, and my 2018 week was $600. You can pick almost any week of the year and be assured to be able to rent it for substantially less than the annual maintenance fee. When looking at the ads, remember that the price you see is the "asking" price. If you offer $400-$600, you'll most likely be the only offer they get. Paying $963 for a week you can get for a fraction of that cost makes no sense, unless you desperately have to have a specific week. Getting out may be tough. There are several of listings offering to give their week away and play all costs. There's not a lot of demand for this resort. So, if you like and/or need a specific week, you can just rent it for $600, or continue to pay $966, knowing that it will be higher next year.

Sorry, didn't want to come off as a downer, just trying to be informative.

 

[rboesl]

Are you sure this isn’t confusing the “reserve for bad debt” with the typical reserve fee found with all maintenance fees? 37% of the total MF just for bad debt seems way too high. How does the total $966 MF compare with the prior year?

Last year's fee was $930 for my 2BR.

 

[easyrider]

Part of the problem or part of the solution?

I guess as consumers we are always paying for the dead beats.

@easyrider are you saying a “club” can spread bad debt over more people or they deal with the problem differently?

Yes, a vacation club with many properties can spread bad debt to all of the members so usually the debt passed on to the members is just part of the mf. A deeded timeshare only has so many weeks and owners to that deeded property so extra debt is passed on to a small group of owners.

Bill

 

[rboesl]

It's only going to get worse as this recession progresses. A 30% bad debt reserve is ridiculously high. My advice to you would be to sell and/or give this week away.

I've stayed at this resort twice, both times I rented. I got my 2017 week for $400, and my 2018 week was $600. You can pick almost any week of the year and be assured to be able to rent it for substantially less than the annual maintenance fee. When looking at the ads, remember that the price you see is the "asking" price. If you offer $400-$600, you'll most likely be the only offer they get. Paying $963 for a week you can get for a fraction of that cost makes no sense, unless you desperately have to have a specific week. Getting out may be tough. There are several of listings offering to give their week away and play all costs. There's not a lot of demand for this resort. So, if you like and/or need a specific week, you can just rent it for $600, or continue to pay $966, knowing that it will be higher next year.

Sorry, didn't want to come off as a downer, just trying to be informative.

No issue. I have never actually stayed at this resort. In fact we are scheduled to stay at it's sister resort, VV@Westin, this August with a $99 week from a Vacation Village promotion. I picked it up as a throw-in with another resort. I've held on to it because of the RCI points. It gives me 80,000 points which I've usually been able to use for 2 weeks plus part of a 3rd. That gives me a price point, per week's stay, that I consider reasonable.

 

[Sandy VDH]

You are basically paying about a 1/3 of a MF towards bad debt. So they are expecting 1 in 4 to not pay their MF, the remaining 3 are covering that defaulters portion.

Is it just this year's budget item because they are expecting a lot of Covid owners to be impacted and not pay the fee? Or is that the budget amount every year?

 

[DrQ]

What is the percentage of the inventory that is ether unsold or delinquent? Also examine that proper reserves are being put aside for long term expenses (roofing, parking lot paving, furniture, elevator maintenance ...)

This is what happened at Inverses by the Sea in Galveston. As delinquency increased, the HOA dug into the reserves, had a couple of huge special assessments and finally exhausted the reserves so that when the elevators broke and the taxes were due, they were in the hole to the tune to about $1.5 Mil .

They did not increase the yearly fees to replenish the reserves in fear of driving up the delinquency rate.

 

[gnorth16]

I never understand the “bad debt” item. The resort always rents out days/weeks from the pool of unpaid fees. Sometimes at a profit, other times at a loss. 30% bad debt is very high and could be contributed to COVID and those who feel they can’t travel, so won’t pay.