- Feb 10, 2020
- Reaction score
I can give examples of this MF arbitrage:
a) On a MF/point basis we pay more for NYC bHC points. Most owners of expensive bHC points will never use their points for club resorts because the MF per point cost is too high. So we use "NEW" NYC points for priority NYC reservations where we own. OTOH, legacy OLD owners in Vegas can arbitrage into NYC when the club window opens. They are way ahead on a MF/point basis. For example, on a studio, we pay $1600 MF for 5250 points. An "Old" Vegas owner can apply at $ 0.14/point x 5250 = $735 for the same week in the same resort. (Am I upset? No because we get priority rights to pick almost any room in the place before everyone else plus we get owner's lounge privileges that traders don't.) Why would I spend $1600 to trade NYC for a week in Vegas when I could rent for half that?
b) We trade Vegas into Hawaii annually. We pay a lower MF/point for Vegas, trading into Hawaiian properties with a high MF/point. So if it takes 7000 points for a room, say the Hawaiian owner pays $1600 MF. Our 7000 Vegas points cost us only $1000 MF/year. $1600 vs. $1000 for the same room. Who is ahead? Legacy Vegas. Of course, if the Hawaii owner decides to use their home unit, they get priority reservations. And they should because they paid a premium for this right. Just like we do in NYC.
For sure these kinds of MF/point optimizations exist regardless. Even in pure points trusts, they exist, although they're not explicit. You don't have to be a Wyndham employee to realize that the Worldmarks in Maui probably costs more to maintain on a per unit basis than the Worldmarks in Vegas. That doesn't mean that all existing owners won't be diluted if HGVC keeps on adding units with inflated points costs, due to the logic I laid out above. Sure, your HGVC in Vegas will still be a good deal as a trader, but over time, it will be less of a good deal because HGVC introduced higher point units. Thankfully, the process of building new resorts is a slow one, so the dilution will also happen relatively slowly. And there's not a whole lot owners can do in my opinion except keep enjoying their vacations and finding the best trades possible. Even Worldmark, with its nominally independent board and a fairly educated and loyal ownership couldn't stop it.
Of the big timeshare companies, it looks like DVC is the only one that doesn't make their existing owners "subsidize" (I put subsidize in quotes because people who buy retail are getting a raw deal regardless) their new owners. They do that by raising their prices every year, which AFAIK is not the case for other systems.