Fun Conjecture!

[ocdb8r]

So, all the talk about being able to combine Staroptions on resales, recent offer to some Vistana Resort owners to join SVN, as well as the thread on the Marriott board re:Marriot offering a point system has got me thinking. I thought I'd start a thread where we can all offer our conjecture on what Starwood is thinking and what they should be doing....

I'm wondering what benefit Starwood reaps by barring resales at voluntary resorts from joining SVN? Should they change this policy? (Is it in THEIR best interest, not OURS :whoopie:, that I think is obvious) WILL they change this policy?

Here are my thoughts:

1) The only benefit Starwood gets from preventing resale owners at voluntary resorts from joining SVN is the ability to tell direct buyers that they cannot get that ability on the re-sale market. This is the only benefit to Starwood that I can conceive…is there another?

2) How beneficial to Starwood is this? Really, if you think about it, how much more do they reap in sales because of this lost benefit should the buyer compare with re-sale? The price point between voluntary resort resales and developer direct is SO BIG, how many sales can they be keeping as a result of this small benefit? Any buyer who comes across the resale market and is going to compare it with buying direct is also likely to know they still have II as a trading option. It seems to me Starwood can’t be getting THAT many more sales for such a small benefit.

3) What is Starwood forgoing for having this restriction? As more units drop out of SVN, Starwood is losing out on SVN fees…right? That’s $129/year per owner….plus more for extra weeks. (Is this fee correct? The SVN Article in the sticky isn’t clear. Also, is there an additional fee when you actually exchange to another resort?)

4) What other revenue is Starwood forgoing? If they openly offer SVN to every new re-sale owner they could collect A LOT of $599 sign up/buy-in fees. They could easily structure the system so that each new owner had to join, meaning they could reap that fee over and over again as units are re-sold (is there anything preventing them from doing this for mandatory resorts as well? i.e. all new resale owners of mandatory resorts would be forced to pay a $599 joining fee).

5) Finally, these fees (initial buy-in and yearly) that they are forgoing are PURE profit. I was thinking last night…the system to use these fees is already in place. They are already getting paid for the reservation infrastructure by collecting the management fees each year…the extra fees from SVN must be PURE GRAVY (honestly I can't imagine they break out the cost of the reservation system for SVN exchanges…surely we are all already paying for it in our maint)

At the end of the day I think that Starwood could create a continuous revenue stream by allowing all resale owners to “buy-in” to the SVN network. Surely in the long run this pure profit would outweigh any additional PROFIT from direct sales they are getting by convincing people that this small benefit is worth the THOUSANDS of dollars in premium being paid over re-sale.

I’m betting that given the economy they might take advantage of this and open up SVN, if only for a “limited time offer” to collect some revenue. Surely they are going to need something to boost profits….To me it’s a win/win. SVN costs less than II (even after the “buy-in” if you spread that cost out over a few years). I’d much rather save a little $$$ AND let Starwood collect it rather than II.

What do you all think?

 

[LisaRex]

I think Starwood should concentrate on building fabulous resorts in fabulous places and the rest will follow.

The mandatory/voluntary thing is convoluted and odd, IMO. Just maintaining two databases has to be time consuming, let alone training the agents/salespeople on the distinctions. I'd dispense with it altogether, bring everyone into the SVN fold, along with their SVN annual dues, and use the profits to build more places that EVERYONE, including non-SVN folks, will want to go. Being a hot property creates hype and bolsters people's desire to own there, and that fuels sales.

As the system is now, turnover at voluntary resorts is bad for Starwood. Not only do they lose the SVN annual dues, but they lose that week for internal trading. And worse, they turn a warm, fuzzy lead into a cold, frustrated lead once the new owner realizes they've been excluded from joining the club. Why foster resentment when you can foster inclusion? Why turn away SVN dues? Why allow that resale week to be permanently removed from trades within SVN?

Opening up the system means that everytime a unit changes hands, whether it's resale or from the developer, SVO makes money. And that's a good thing.

 

[Ken555]

1) The only benefit Starwood gets from preventing resale owners at voluntary resorts from joining SVN is the ability to tell direct buyers that they cannot get that benefit on the re-sale market. This is the only benefit to Starwood that I can conceive…is there another?

This is often used as a stick to encourage prospective buyers to purchase direct. The "you'll only be able to use it as a week" and "no StarPoints" get repeated over and over. Joining SVN or not is a huge distinction, as you've accurately summarized, between voluntary and mandatory resorts.

2) How beneficial to Starwood is this? Really, if you think about it, how much more do they reap in sales because of this lost benefit should the buyer compare with re-sale? The price point between voluntary resort resales and developer direct is SO BIG, how many sales can they be keeping as a result of this small benefit? Any buyer who comes across the resale market and is going to compare it with buying direct is also likely to know they still have II as a trading option. It seems to me Starwood can’t be getting THAT many more sales for such a small benefit.

This is where I suspect you're wrong. It is my opinion (and I think the collective wisdom of this board) that relatively few Starwood timeshares get sold on the resale market as compared to developer purchase. Most buyers don't realize (until it's too late) that there even is a resale market. Hopefully more of those prospects will find TUG in time... And, many of those prospects are susceptible to the sales argument about perceived lost benefits by buying resale - most of the sales staff I've spoken with aren't educated on what's possible by buying resale, they simply repeat what they've heard (which is almost always wrong).

3) What is Starwood forgoing for having this restriction? It seems to me as more units drop out of SVN, Starwood is losing out on SVN fees…right? That’s $129/year per owner….plus more for extra weeks. (Is this fee correct? The SVN Article in the sticky isn’t clear. Also, is there an additional fee when you actually exchange to another resort?)

Second week's are only $30/year and others are at no charge.

4) What other revenue is Starwood forgoing? Seems to me if they openly offer SVN to every new re-sale owner they could collect A LOT of $599 sign up/buy-in fees. They could easily structure the system so that each new owner had to join, meaning they could reap that fee over and over again as units are re-sold (is there anything preventing them from doing this for mandatory resorts as well? i.e. all new resale owners of mandatory resorts would be forced to pay a $599 joining fee).

Yup, I agree with you here. They could continue to exclude Elite status from resale purchases, as well.

5) Finally, these fees (initial buy-in and yearly) that they are forgoing are PURE profit. I was thinking last night…the system to use these fees is already in place. They are already getting paid for the reservation infrastructure by collecting the management fees each year…the extra fees from SVN must be PURE GRAVY (honestly I can imagine they break out the cost of the reservation system for SVN exchanges…surely we are all already paying for it in our maint)

Yes, but not as much profit as they earn by selling a new unit.


Also, if StarOptions were possible on every voluntary resale purchase, the resale value for all the voluntary resorts would rise overnight. This could be argued both good and bad for Starwood... good in that "it's just a bit more and you can have Elite status, etc" and bad "we're losing sales between we can't differentiate our product any longer".

I think you're also missing the fact that Starwood has earned additional sales in the last few years by existing owners buying direct, when those owners know all about the resale market, solely for the purchase of requalifying an existing unit in order to get Elite membership. The option to get 5* Elite and Platinum status (for-as-long-as-you-own-your-SVN-weeks-and-Starwood-doesn't-change-their-mind) has been a real draw for repeat business.

Starwood has very good bean counters, I'm sure. There's a reason they don't care too much about resale purchases, and they do everything possible to encourage prospects to buy direct. After all, their focus is in trying to sell property where each unit is worth several million US$ to them, not the $100 here and there every year.

So, I didn't proof this post (too early...) - did I contradict myself? :hysterical:

 

[ocdb8r]

This is where I suspect you're wrong. It is my opinion (and I think the collective wisdom of this board) that relatively few Starwood timeshares get sold on the resale market as compared to developer purchase. Most buyers don't realize (until it's too late) that there even is a resale market. Hopefully more of those prospects will find TUG in time... And, many of those prospects are susceptible to the sales argument about perceived lost benefits by buying resale - most of the sales staff I've spoken with aren't educated on what's possible by buying resale, they simply repeat what they've heard (which is almost always wrong).

I think this only further proves my point....if VERY FEW people even know or consider re-sale...why is the differentiation SO important? It's only important to that VERY SMALL subset who learn and find out about re-sale. Further, how many of that small subset decide it's worth the thousands extra to get into SVN?

Yes, but not as much profit as they earn by selling a new unit.

True, but remeber were not talking about the profit they sell on every new unit....it's only the profit they make on those sales that occur exclusively because the person considered re-sale and still went direct in order to get into SVN. I;m not saying you're wrong...I just think it requires a more than a "first glance" look on Starwood's part. They are forgoing a sustainable revenue stream for what could be very few direct sales. The opportunity to collect $599 up front plus $129 every year from all those re-sale owners could add up to much more than any direct sales they lose (especially if they keep or expand programs like the Platinum for life).

 

[Twinkstarr]

I think Starwood should concentrate on building fabulous resorts in fabulous places and the rest will follow.

The mandatory/voluntary thing is convoluted and odd, IMO. Just maintaining two databases has to be time consuming, let alone training the agents/salespeople on the distinctions. I'd dispense with it altogether, bring everyone into the SVN fold, along with their SVN annual dues, and use the profits to build more places that EVERYONE, including non-SVN folks, will want to go. Being a hot property creates hype and bolsters people's desire to own there, and that fuels sales.

As the system is now, turnover at voluntary resorts is bad for Starwood. Not only do they lose the SVN annual dues, but they lose that week for internal trading. And worse, they turn a warm, fuzzy lead into a cold, frustrated lead once the new owner realizes they've been excluded from joining the club. Why foster resentment when you can foster inclusion? Why turn away SVN dues? Why allow that resale week to be permanently removed from trades within SVN?

Opening up the system means that everytime a unit changes hands, whether it's resale or from the developer, SVO makes money. And that's a good thing.

It makes way too much sense, so my guess is Starwood probably won't do it.

 

[tlpnet]

It makes way too much sense, so my guess is Starwood probably won't do it.

Couldn't have said it better myself!! Like many other large companies, spend time figuring out the logical solution, then go 180 degrees the opposite direction! :hysterical:

 

[Ken555]

I think this only further proves my point....if VERY FEW people even know or consider re-sale...why is the differentiation SO important? It's only important to that VERY SMALL subset who learn and find out about re-sale. Further, how many of that small subset decide it's worth the thousands extra to get into SVN?

I don't disagree. But, there's very little reason for them to make resale owners even more on par with developer purchased weeks. And I know the sales staff uses this as an argument to purchase direct - I'm not sure it works (obviously didn't with me, or us) but they do say it.

True, but remeber were not talking about the profit they sell on every new unit....it's only the profit they make on those sales that occur exclusively because the person considered re-sale and still went direct in order to get into SVN. I;m not saying you're wrong...I just think it requires a more than a "first glance" look on Starwood's part. They are forgoing a sustainable revenue stream for what could be very few direct sales. The opportunity to collect $599 up front plus $129 every year from all those re-sale owners could add up to much more than any direct sales they lose (especially if they keep or expand programs like the Platinum for life).

Do you have any idea how much money they make when they sell a unit?

 

[SDKath]

Hmm, so say Starwood lowers their prices from $40,000 for a 148,100 SO unit to $30,000.

They would sell out most resorts immediately.

No way are they going to give people who bought resale for $500 on ebay the same benefits when they can make a small adjustment to their sales price and be back in the game right away, making not $599 per person but hundreds and thousands. Take Marriott for example, who is now offering 5-10% discounts on their new units to previous owners. Their lovely new Orlando property is well priced (under $30k for a 2BR LO that is truly a 2BR). THey sold the "founders 300" units in less than 3 days!

They are NOT going to give up an inch of their profits.... If I was "the bigwig" at Starwood, I wouldn't even consider it.

K

 

[ocdb8r]

Hmm, so say Starwood lowers their prices from $40,000 for a 148,100 SO unit to $30,000.

They would sell out most resorts immediately.

No way are they going to give people who bought resale for $500 on ebay the same benefits when they can make a small adjustment to their sales price and be back in the game right away, making not $599 per person but hundreds and thousands. Take Marriott for example, who is now offering 5-10% discounts on their new units to previous owners. Their lovely new Orlando property is well priced (under $30k for a 2BR LO that is truly a 2BR). THey sold the "founders 300" units in less than 3 days!

They are NOT going to give up an inch of their profits.... If I was "the bigwig" at Starwood, I wouldn't even consider it.

K

I don't understand how this is mutually exclusive from opening SVN to re-sale owners. Why can't they do both? If fact the Marriott example just proves my point - all Marriott owners, resale or not, have the same exchange opportunities.

Exchange fees are a lasting revenue stream for Starwood...why not tap into them and differentiate direct vs. resale in other ways? I suspect this is why you see Marriott considering such a system....why let II rake in all those fees when 70%+ of your trades are Marriott for Marriott?

Do you have any idea how much money they make when they sell a unit?

I don't...BUT let's say it's an average of $20k per unit (generous given the high marketing overhead). That means every 34 resales that sign up for SVN = 1 Direct sale (profit wise, NOT counting the yearly fee they draw). Do you really think they are keeping more than 1 sale in 34 people (those who are going to buy resale or direct for sure) JUST BECAUSE resale does not offer SVN? I doubt it. Like you said, few even consider re-sale, and even fewer would still choose direct purely for receiving the benefit of StarOptions.

 

[SDKath]

Because SVN exchanging (and SPs) are the ONLY reason to buy a new TS for 10x the cost of a resale. And since they are ONLY building voluntary resorts from now on, Starwood realizes this key difference between paying $40,000 and paying $4000 for the same unit! K

 

[Ken555]

Yeah - what Kath said!

To put this in context, remember that we're talking about an organization that really doesn't even know what the Internet is, much less how to use it to their advantage to lower their overhead expenses. No online reservation system. No swim-up bar. I tell you, SVN has lots of other money making opportunities than trying to squeeze another few hundred from some of their existing owners. This just doesn't work since they can't even use economy of scale to their advantage at this time... once they automate their systems and have a few more resorts, then it would make a lot of sense to invite others into the system cheaply and distinguish them in some other manner (perhaps no phone support? or only may book in less than 4 months from reservation? call it SVN-Lite! :hysterical. There are lots of ways for Starwood to make more money, but I don't think this is going to see the light of day.

 

[SDKath]

"No online reservation system. No swim-up bar."

:rofl:

Someone has their priorities right.