High QualityTimeshare Resale Prices Plummeting

[SDKath]

I have a couple of contributions to make to the ROFR discussion.

The reason Marriott is not exercising its ROFR has nothing to do with current resale prices. Indeed, prices are lower than in the past. Marriott would get better opportunities now. They do not sell for less now, so their margins would be higher.

Nor does it have anything to do with how much inventory they do or do not need. Marriott exercised its ROFR opportunistically. They never bought for inventory. They bought when they had a buyer in hand for something they otherwise could not sell them at that moment, for various reasons. Marriott was the owner of record for 15 minutes.
That is why they would exercise at a price one day, and not the next.

They are not now exercising because they cannot sell their timeshare notes in the credit markets. They cannot monitize the loans.They must carry financed sales. The capital required to do so is huge. So, capital is being preserved. This is also the reason sales are down. Marriott is cutting expenses, not building new projects, and consolidating sales resources because they will sell themselves broke otherwise.
Starwood and every other large developer is dealing with exactly the same issue.

The debate over how ROFR impacts resale prices goes round and round.
Those that intuitively believe it props up prices will never understand the market dynamics that argue otherwise.
Problem is it is impossible to prove in the real world. If it were, it would have already happened.
It's a theoretical question, and therefore requires a theoretical answer, based on what is know of economic theory.
Fortunately, serious and credible theoretical study of the question has been made by faculty of several respected universities. All come to the same conclusion.
The best discussion/explanation I have found is here:
http://www.law.harvard.edu/programs/olin_center/papers/261_walker.php

It is 71 pages. For those that do not want to read it, it says that ROFR has a negative influence on price.

Great. So this is a paper from the HARVARD Law School subsequently published in the STANFORD Journal of Law, Business and Finance. :hysterical: No wonder we are all so confused with ROFR!

Katherine

 

[Fredm]

Great. So this is a paper from the HARVARD Law School subsequently published in the STANFORD Journal of Law, Business and Finance. :hysterical: No wonder we are all so confused with ROFR!

Katherine

Nah! it takes a Professor to explain in 71 pages what Steve Nelson summed up in a paragraph.

 

[tombo]

Great. So this is a paper from the HARVARD Law School subsequently published in the STANFORD Journal of Law, Business and Finance. :hysterical: No wonder we are all so confused with ROFR!

Katherine

Stanford didn't need to publish their own separate article. This article was a collaberation between the faculty of several universities and thus could be published by all universities involved. Nothing is confusing about the the fact that they all agreed that ROFR has a NEGATIVE influence on price. Negative influence on price translates into lowering prices, not propping them up. What is confusing is why so many owners still believe that ROFR is good for owners.

ROFR was designed for and by developers to benefit developers. It is, and always was, bad for owners.

 

[AwayWeGo]

Even Shorter Summation :

Nah! it takes a Professor to explain in 71 pages what Steve Nelson summed up in a paragraph.

ROFR = ROFL​

-- Alan Cole, McLean (Fairfax County), Virginia, USA. ​

 

[Transit]

ROFR subject RIP.Thanks to all of you who took the time to explain it to some hardheaded people around here.

 

[AwayWeGo]

The Undead.

ROFR subject RIP.Thanks to all of you who took the time to explain it to some hardheaded people around here.

RIP, maybe, for now.

But zombielike, its corpse will rise & haunt the halls of TUB-BBS again & again.

It always does.

So it goes.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[frenchieinme]

Reason for buying timeshare?

Just wondering here...I have attended my share of timeshare presentations and gotten plenty of benies for doing so. In all these presentations I do not remember in the timeshare presentation hearing timeshares marketed on increasin future real estate values. The timeshare industry realized at the onset of its marketing blitz that timeshares were best to be marketed as INVESTMENTS IN VACTIONING. When viewed in such a light the potential for drcreeasing values once bought was more easily masked.

For the life of me I do not remember timeshares marketed for real estate value but more so for INVESTMENTS IN VACTIONING for years to come. Has anyone ever attended a timeshare presentation where a pitch for increased future real estate value was the crux or part of the crux of the timeshare presentation?

I remember once having a discussion with my brother-in-law on this matter. I kept reminding him the resale price I paid for the 4BR/4BA timeshare unit afforded me an increadible benefit when compared to like non-resort lodging. I am far ahead based on a vacationing standard but not so when compared on a real estate standard. Regardless, when one takes into consideration our use of these 4BR/4BA units and the exchange values we have had over the years and continue to have and also taking into consideration the rentals we have had also over the years, heck I think I can probably make a good case when held to a real estate standard.

However, I am the first to admit this would not be so had I purchased either 1 or 2 BR timeshare units. Having 4BR/4BA lockout units which convert to 3 separate wks when exchanged really tips the scales when comparing.

frenchieinme

 

[Vacation Dude]

ROFR = ROFL​

-- Alan Cole, McLean (Fairfax County), Virginia, USA. ​

My computer display must be messed up, but what the heck does  mean?

Honestly, I don;t care about ROFR, ROFL, ROFC, etc. I just like getting a decent deal for the money and not get ripped off.

Perhaps renting is a better option then I can be ROFR = Right of Fast Renter

 

[bnoble]

That paper is very interesting. Thank you for providing a link to it. I'll have to read it more carefully, as it seems to focus on reciprocal grants rather than one-sided ones (as one would find in ROFR-based timeshares).

-brian, who speaks professorese, but not economics-professorese.

 

[bizaro86]

Has anyone ever attended a timeshare presentation where a pitch for increased future real estate value was the crux or part of the crux of the timeshare presentation?

If you marketed a timeshare as an investment, you would have to register it as a sale of a security. This would open the developer up to all sorts of nasty regulations, which would restrict their claims and add to their costs of compliance. Even condo-hotel developments (at much higher price points) didn't want to register.

Michael

 

[ace2000]

For the life of me I do not remember timeshares marketed for real estate value but more so for INVESTMENTS IN VACTIONING for years to come. Has anyone ever attended a timeshare presentation where a pitch for increased future real estate value was the crux or part of the crux of the timeshare presentation?

frenchieinme

On the very first tour I took over ten years ago, I had a sales rep tell me about this appreciation in value. I've heard that something changed in the meantime, and they are not allowed to tell you this anymore... probably grounds for a lawsuit or something along those lines.

 

[tombo]

They don't tell you that the price you can re-sell a week for will increase. They don't advertise their week as a real estate investment. However, they are very quick to tell you how much more it will cost you to purchase the same week next year if you don't buy it today.

 

[Carlsbadguy]

I just got a 5,000 point package at the Hilton City Club in New York that passed ROFR at $6,500. Probably should have tried for a little lower.