Marriott to Spin Off Timeshare Business [merged]

[SueDonJ]

... "At its own peril" best describes the situation. Intuitively, spinco will have to do something different to re-engage and unify their customers, because the primary drivers of the referral model - integrity, trust, reliability and confidence appear to be severely compromised.

Perhaps, the business case that favors board-level owner representation is restoration of owner trust and confidence in the brand. W/out these pearls, growing a "not so small" business that relies so heavily on owner satisfaction is most definitely "At its own peril".

While it's obvious that there's some work to be done to restore customer confidence, I'm not sure that a board-level owner position is the answer. As has been said, is it possible to find an owner who would be able to separate the specifics of what s/he expects out of his/her ownership from the "common good?" I don't think any owner could be completely unbiased, do you? Plus, presumably the position would be filled through a vote and it's very rare to find "unity" in a vote. There's certainly nothing wrong with a majority rule result, but that doesn't remove the potential for a biased individual to gain the seat. What Cmore says is correct, too - you are your own best advocate.

I think the fact that Marriott timeshares have undergone significant changes during the last year contributes much more to the owners' erosion of "integrity, trust and reliability and confidence" in Marriott, than any perceived erosion of unification. People distrust change, plain and simple. And Marriott timeshare owners haven't been unified for at least as long as I've been participating on TUG. With practically every single topic the posts run the gamut from Marriott is the devil to Marriott can do no wrong and every point in between. It seems if folks are happy with what they're getting from their ownerships, they're satisfied with Marriott's business. If they're unhappy with their ownerships, they think Marriott should make business changes to satisfy them. That's human nature.

It seems to me that the only thing that will restore whatever customer confidence Marriott has recently lost, is if owners see over a period of time that there is a commitment by the company to the product's integrity. Without that, it won't matter how many customer service/customer advocacy/owner seats on the BOD/etc positions exist.

 

[Cmore]

...Spinco has the potential to be a breakthrough response to market decline, shareholder investment pressures and polarized customer challenges.

The posts here have several common themes ranging from accolades for spinco and reorganization being long overdue to a sense of abandon and betrayal for dumping timeshares. And, owner feedback to DC here has been steadily growing for 9 months now.

"At its own peril" best describes the situation. Intuitively, spinco will have to do something different to re-engage and unify their customers, because the primary drivers of the referral model - integrity, trust, reliability and confidence appear to be severely compromised.

Perhaps, the business case that favors board-level owner representation is restoration of owner trust and confidence in the brand. W/out these pearls, growing a "not so small" business that relies so heavily on owner satisfaction is most definitely "At its own peril"

I don't think in principle we disagree, I think our difference is a matter of perspective and if I dare say practicality. I am deeply concerned what my employees think, and I am equally concerned about what my customers think. With a large enough sample size, it is very difficult, if not impossible to get 100% agreement on about anything from either group. Therein lies the problem of a position such as this being added to the BoD, it is a single opinion with no way to ever encapsulate an entire groups feelings. I think while it sounds good, it is impractical, and not likely to add any value to the business or its ability to serve and listen to its customers.

A business has to move in the direction that it believes serves the majority of its customers, as well as move where the market is. If you are selling something and the marketplace no wants it in sufficient quantity to support the cost of operations, you had better move to selling something else along with figuring out how to keep your existing base of customers. Not moving ultimately means not being around to serve anyone.

I can get all the end user experiences I want, and do so, on lots of fronts via focus groups, email feedback, social media, in-store surveys, google alerts, etc. let alone all the metrics we keep in place on what we deem as important measures. It is not hard to understand what your customers are saying, the trick is figuring out what to do with what you hear. Trust me, customers no more agree on what they want/need than any other diverse group. In my opinion, a BoD should be comprised of knowledgeable, well rounded and suffiently experienced people to contribute in the laying out the plan for management to follow, and there is no doubt they better have a firm grasp on customer satisfaction.

 

[Fredm]

Fact of the matter is that an Ombudsman seat will not happen. So, let's stop debating the issue as if anyone actually has a say in the matter. This is not a collective bargaining matter with a union.

Want a say in Spinco? Vote your shares.
Want to give your proxy to a gadfly to pursue some cloaked agenda? Go right ahead. The minute that proxy goes against the interests of the company, it will be doomed to defeat anyway. Sheeh!

Want to make a difference in your ownership where it counts?
Run for a seat on the HOA BOD of your own resort. Try to garner enough proxies to accomplish that.

 

[TJCNewYork]

I can get all the end user experiences I want, and do so, on lots of fronts via focus groups, email feedback, social media, in-store surveys, google alerts, etc. let alone all the metrics we keep in place on what we deem as important measures.

As illustrated here, spinco's parent is proactively seeking ways to engage their guests (in real time) and it appears to be pervasive across the industry. As the article notes, the practical business application is the potential for expanding opportunities to 'seek return visitors' and provide a real time channel for 'customer relations'. That said, these applications are operational and day-to-day. While the outcome (increased reservations, heightened customer satisfaction) are consolidated and reported at the board level as a matter of operations, board-level representation of the 'lodging guest' is indeed questionable. We're on the same page, here.

It is not hard to understand what your customers are saying, the trick is figuring out what to do with what you hear. Trust me, customers no more agree on what they want/need than any other diverse group.

There is no disagreement that spinco's parent heard that customers want increased flexibility, consolidation of fees and so on. The diverse feedback to the solution they came up with is self-evident.

In my opinion, a BoD should be comprised of knowledgeable, well rounded and suffiently experienced people to contribute in the laying out the plan for management to follow, and there is no doubt they better have a firm grasp on customer satisfaction.

Again, these are best practices assuming the status quo. The current situation is arguably anything but that. Let's hope the solution is among a new generation of textbook cases.

 

[SueDonJ]

Fact of the matter is that an Ombudsman seat will not happen. So, let's stop debating the issue as if anyone actually has a say in the matter. This is not a collective bargaining matter with a union.

Want a say in Spinco? Vote your shares.
Want to give your proxy to a gadfly to pursue some cloaked agenda? Go right ahead. The minute that proxy goes against the interests of the company, it will be doomed to defeat anyway. Sheeh!

Want to make a difference in your ownership where it counts?
Run for a seat on the HOA BOD of your own resort. Try to garner enough proxies to accomplish that.

Is there something similar to the Weeks-owners' HOAs, for owners who have only purchased DC Points and don't own a Week? Haven't looked closely at the sections of the docs pertaining to DC Trust Members ....

 

[Fredm]

Is there something similar to the Weeks-owners' HOAs, for owners who have only purchased DC Points and don't own a Week? Haven't looked closely at the sections of the docs pertaining to DC Trust Members ....

Not in the same sense that I am aware of.
m/f's are paid to the resort by the Trust. The resort HOA BOD administers the resort through the Ops Manager.

The Trust owns the underlying week at the resort. So, the trust votes at the resort level.

 

[TJCNewYork]

Fact of the matter is that an Ombudsman seat will not happen.

Thanks for the comment, Fredm. Board-level owner representation need not be limited to an 'ombudsman'. There are so many ways to 'skin the cat'.

So, let's stop debating the issue as if anyone actually has a say in the matter. This is not a collective bargaining matter with a union.

This is a friendly and calm exchange of ideas. An 'exploration' with hopes of discovering/uncovering a solution.

The minute that proxy goes against the interests of the company, it will be doomed to defeat anyway.

That has happened, yes. And, likely to repeat, unfortunately. The odds are that the best interests of spinco are not only the best interests of the investors but also the best interests of the owners.

Want to make a difference in your ownership where it counts? Run for a seat on the HOA BOD of your own resort. Try to garner enough proxies to accomplish that.

There are many dedicated men and women who own MVC legacy weeks who have served on their resort's COA/HOA BoD. A shout of thanks out to this group for their service. This is not to minimize their importance, rather I elevate it. Given the quality of resort experiences across MVC, it is very clear to me that active owner participation on MVC resort BoD's is one of the contributing factors to top-shelf refurbs and villa experiences we can truly enjoy.

As discussed here and elsewhere, MVCD will ultimately affect the balance in ways we can only conjecture.

 

[Fredm]

Thanks for the comment, Fredm. Board-level owner representation need not be limited to an 'ombudsman'. There are so many ways to 'skin the cat'.

Fact of the matter is that an Ombudsman any seat will not happen. So, let's stop debating the issue as if anyone actually has a say in the matter.

 

[SueDonJ]

Not in the same sense that I am aware of.
m/f's are paid to the resort by the Trust. The resort HOA BOD administers the resort through the Ops Manager.

The Trust owns the underlying week at the resort. So, the trust votes at the resort level.

Right, when existing Weeks at existing resorts have been re-acquired by Marriott and conveyed to the Trust, Marriott/the Trust gains the right to vote those Weeks and assumes the costs for them with the acquisitions. (As Marriott/MVCI does with any re-acquisitions that aren't conveyed to the Trust.)

I'm wondering about any future Trust holdings that have never been available as MVCI Weeks, though. Is there something that will give the Trust Members (straight Points purchasers) similar protections/voting rights to what Weeks Owners and Exchange Members get from their HOA affiliation? Or does Marriott hold ALL the cards with respect to the Trust?

 

[Fredm]

I'm wondering about any future Trust holdings that have never been available as MVCI Weeks, though. Is there something that will give the Trust Members (straight Points purchasers) similar protections/voting rights to what Weeks Owners and Exchange Members get from their HOA affiliation? Or does Marriott hold ALL the cards with respect to the Trust?

I don't know. I assume the Trust holds all the cards.
If one assumes that the Trust will build new resorts, I guess we will have to wait and see how the docs read.
I don't think that will happen anytime soon. Rather, I envision Spinco becoming something like DRI or Wyndham on the sales/expansion front.
And, perhaps acquire I.I. to complete its fee for service model.
Spinco's objective is to be the ultimate service consolidator, IMO.

I opined in another post that Marriott must have looked at the Cendant moves with envy.
Using the MVCI resort/owner base as a launch pad, Marriott has now created its own points equity/exchange currency.
Unshackled from Marriott's balance sheet, Spinco can be more aggressive to accomplish the rest.

Of course, this will all be done after Spinco consults with/gets agreement from the timeshare owner representative on its Board

 

[Cmore]

I'm wondering about any future Trust holdings that have never been available as MVCI Weeks, though. Is there something that will give the Trust Members (straight Points purchasers) similar protections/voting rights to what Weeks Owners and Exchange Members get from their HOA affiliation? Or does Marriott hold ALL the cards with respect to the Trust?

I will do some digging around :zzz: , as it is a good question. Off the top of my head I think the Trust would hold all the cards. That being said, the usage documents specify what limits on mvcd there is, specifically as it relates to points movement, which is the biggest issue that would affect dc members. My guess is the biggest lack of control DC members have is no input on maintenance fee increases, reserve levels, etc.

Weeks owners have a bit more input in that regard, but also bear the weight of any major issue at a single resort, wherein the trust spreads that risk over a much larger pool.

 

[wof45]

I will do some digging around :zzz: , as it is a good question. Off the top of my head I think the Trust would hold all the cards. That being said, the usage documents specify what limits on mvcd there is, specifically as it relates to points movement, which is the biggest issue that would affect dc members. My guess is the biggest lack of control DC members have is no input on maintenance fee increases, reserve levels, etc.

Weeks owners have a bit more input in that regard, but also bear the weight of any major issue at a single resort, wherein the trust spreads that risk over a much larger pool.

we need to remember that the DC has an on-going need to sell points, so it needs to keep points MF at a reasonable level.

 

[OldPantry]

we need to remember that the DC has an on-going need to sell points, so it needs to keep points MF at a reasonable level.

This bears further discussion. While there might be correlation between the MFs of the various vacation clubs in the aggregate and those charged to points owners, I doubt that it is a very close one. Spinco will have a real motive to keep the points MFs relatively low, that's clear. What that means for MFs at various clubs is far less clear. I would suspect that Spinco might exert some downward pressure on MFs at vacation clubs where they still have sizable inventory (Ko Olina, Maui, Timber Lodge, Newport, Crystal Shores, Oceana Palms), but do no such thing at the rest. They might even press for higher fees, as that would enhance their bottom line, and possibly result in returned inventory that could be repackaged into new points. I know, pretty cynical, and possibly self-destructive, but not every company operates in its own long-term best interest. Emphasis on short-term revenue might trump.

 

[Cmore]

I will do some digging around :zzz: , as it is a good question. Off the top of my head I think the Trust would hold all the cards. That being said, the usage documents specify what limits on mvcd there is, specifically as it relates to points movement, which is the biggest issue that would affect dc members. My guess is the biggest lack of control DC members have is no input on maintenance fee increases, reserve levels, etc.

OK, I dug around the MVCD multisite POS document, which describes all the governance of "the Club" and is provided to members once they join the club. The association has a BoD, comprised and controlled by the developer. The initial BoD has 3 members, it can grow, but must always maintain an odd number. There are provisions that allow for turnover or majority control of the board by the members. Which is unlikely to happen for quite some time, they basically comprise of no sales by developer for 2 years or no added inventory for 4 years. There is also another provision stating that the developer can can turn over control sooner than the above at their discretion. In such a case that the BoD is turned over to majority control of the members from the developer, The developer is entitled to to maintain at least 1 seat, and is always able to vote the number of shares it holds, similar to any other member.

If I am reading this correctly, the developer controls all seats on the BoD of the association until it is not longer actively selling or developing/acquiring inventory for the Trust ( for periods of 2yrs/4yrs described above). There is also a provision that MF's cannot increase more than 25% of prior year for any reason, and the developer has to pay for its share of MF's that have been committed to the trust.

The whole .pdf is 333 pgs long :zzz: Not all of that is in regards to BoD operation, etc. rather it is all of doc's regarding MVCD. Not sure if anyone wants to post it as a sticky in the Marriot FAQ's. or perhaps a Mod could cull out the most pertinent sections regarding the operation of MVCD for posting.

Anyway, thats the update.

 

[bogey21]

I think the fact that Marriott timeshares have undergone significant changes during the last year contributes much more to the owners' erosion of "integrity, trust and reliability and confidence" in Marriott, than any perceived erosion of unification.

"during the last year". You have to be kidding. Marriott showed their true colors about 10 years ago when they unilaterly changed the Rental and Sales Porgrams that enticed some of us to buy. These changes, and others since, were done for their own self serving reasons.

George

 

[marksue]

Not sure of all resorts, but in many the current board chooses who can run and only those peopel will appear on the proxy. If you open the election to whoever wants to run then you can

Want to make a difference in your ownership where it counts?
Run for a seat on the HOA BOD of your own resort. Try to garner enough proxies to accomplish that.

Not sure of all resorts, but in many Marriott resorts the current board chooses who can run and only those peopel will appear on the proxy. If you open the election to whoever wants to run and get them on the proxy then there could possibly be significant change. Maybe with the spinoff this could happen.

 

[SueDonJ]

OK, I dug around the MVCD multisite POS document, which describes all the governance of "the Club" and is provided to members once they join the club. The association has a BoD, comprised and controlled by the developer. The initial BoD has 3 members, it can grow, but must always maintain an odd number. There are provisions that allow for turnover or majority control of the board by the members. Which is unlikely to happen for quite some time, they basically comprise of no sales by developer for 2 years or no added inventory for 4 years. There is also another provision stating that the developer can can turn over control sooner than the above at their discretion. In such a case that the BoD is turned over to majority control of the members from the developer, The developer is entitled to to maintain at least 1 seat, and is always able to vote the number of shares it holds, similar to any other member.

If I am reading this correctly, the developer controls all seats on the BoD of the association until it is not longer actively selling or developing/acquiring inventory for the Trust ( for periods of 2yrs/4yrs described above). There is also a provision that MF's cannot increase more than 25% of prior year for any reason, and the developer has to pay for its share of MF's that have been committed to the trust.

The whole .pdf is 333 pgs long :zzz: Not all of that is in regards to BoD operation, etc. rather it is all of doc's regarding MVCD. Not sure if anyone wants to post it as a sticky in the Marriot FAQ's. or perhaps a Mod could cull out the most pertinent sections regarding the operation of MVCD for posting.

Anyway, thats the update.

Thanks very much, good info here. It sounds like Trust Members have VERY limited protections and BOD positions especially as long as Marriott is actively selling DC Points and conveying inventory to the Trust. I guess the best that can be said is, at least the Trust Members aren't completely unprotected. Thinking about it further, though, we all should have expected at least the protections for members that regulations demand.

Are there provisions for Members to put items up for a vote? Understand it may be a futile exercise with the amount of control/number of votes that Marriott holds, but is it possible?

***

If you're able to put a link in a post here to the pdf file, DaveM could lift it and put it in the DC Sticky along with the other legal docs.

 

[SueDonJ]

"during the last year". You have to be kidding. Marriott showed their true colors about 10 years ago when they unilaterly changed the Rental and Sales Porgrams that enticed some of us to buy. These changes, and others since, were done for their own self serving reasons.

George

No doubt, there have been continuous changes throughout the years to Marriott timeshares and with pretty much all of them, existing owners have suffered devaluations of some sort. I think, though, that the two biggies this year - the introduction of the DC and the recent news about the timeshares being spun off of MI - are much more significant than any others in the history. That's all I was trying to say.

 

[TJCNewYork]

I assume the Trust holds all the cards.

Quoting the Letter to Owners, "Marriott Vacation Club International (MVCI) and its affiliates will remain the exclusive developer of timeshare and fractional products for Marriott® and The Ritz-Carlton®, focused on
maximizing growth and development within this exciting industry."

Assuming the Trust holds all the cards excludes fractional ownership and presumes that lion's share of Spinco's revenue and assets resides there (in the Trust). Is it possible that the Trust could achieve that position within the year that Marriott expects to create spinco?

I opined in another post that Marriott must have looked at the Cendant moves with envy.

Great observation. Wyndham out-performed Marriott last year and earned distinction in 2010 as one of the World's Most Ethical Companies. With regret, Marriott was dropped from the 2010 list after holding that position for 3 years previous.

According to Ethisphere, there's "a high correlation between ethical business leadership and customer loyalty and satisfaction. Ethical business leadership is about keeping your customers engaged, and your stakeholders informed."

Assuming that "the Trust holds all the cards" offers a contrarian view. At the very least, spinco will have to engage legacy owners, the Trust and fractional ownership. In the best case scenario, engaging and immersion of all of these interests will be critical and contribute to spinco's success (in my opinion).

 

[SueDonJ]

Quoting the Letter to Owners, "Marriott Vacation Club International (MVCI) and its affiliates will remain the exclusive developer of timeshare and fractional products for Marriott® and The Ritz-Carlton®, focused on
maximizing growth and development within this exciting industry."

Assuming the Trust holds all the cards excludes fractional ownership and presumes that lion's share of Spinco's revenue and assets resides there (in the Trust). Is it possible that the Trust could achieve that position within the year that Marriott expects to create spinco?

Um, TJC, we were comparing the relative control between Marriott/the spin-off and the MVCI Weeks and DC Exchange Members vs. DC Trust Members; not the relative control the MVCI/DC owners will hold in the spin-off vs. all other spin-off segments.

Great observation. Wyndham out-performed Marriott last year and earned distinction in 2010 as one of the World's Most Ethical Companies. With regret, Marriott was dropped from the 2010 list after holding that position for 3 years previous.

According to Ethisphere, there's "a high correlation between ethical business leadership and customer loyalty and satisfaction. Ethical business leadership is about keeping your customers engaged, and your stakeholders informed."

Assuming that "the Trust holds all the cards" offers a contrarian view. At the very least, spinco will have to engage legacy owners, the Trust and fractional ownership. In the best case scenario, engaging and immersion of all of these interests will be critical and contribute to spinco's success (in my opinion).

I don't think anybody is saying that the spin-off won't have to "engage" the customers who own the products; we all just have different ideas of how much and what sort of engagement is necessary (and possible) for success.

That Ethisphere rating has been discussed on TUG before. How does it compare to Friday's announcement that Marriott has achieved the Fortune Magazine "World's Most Admired Lodging Company for the 12th Year" as ranked by business leaders? We have to take into consideration that neither of these rankings is specific to the timeshare product or the timeshare segment of the company, but is it reasonable to assume that any company could gain the Fortune ranking from peers if it was engaged in unethical behavior?

 

[Fredm]

Assuming that "the Trust holds all the cards" offers a contrarian view. At the very least, spinco will have to engage legacy owners, the Trust and fractional ownership. In the best case scenario, engaging and immersion of all of these interests will be critical and contribute to spinco's success (in my opinion).

I don't see a conflict.
"Holding all the cards" is not necessarily a negative.
They have always held the cards as a practical matter.
As do all the branded hospitality developers in the industry.

Marriott has done a very good job with owner satisfaction, overall. I expect that to continue under Spinco.
Marriott has handled the legacy ownership issue very well, IMO.
Shareholder satisfaction will depend on stock performance over time.
The two are somewhat linked. But, Spinco will look very different five years from now.

Today, MVCI is a development company in transition to a fee for service company.
How legacy owners interact with that fee for service model will, I suspect, evolve as the company evolves. As with everything else that changes, a few will complain and criticize. All will adapt.
Stockholders are another matter. Few will care about how the product functions. All will care about the price of the stock.

Marriott's name will be attached to the resort product, no matter what Spinco calls itself. So, MI has an interest beyond the family's 21% stake in the enterprise. They obviously think they know what they are doing.

The rest of it is us chickens clucking at one another.

 

[TJCNewYork]

We have to take into consideration that neither of these rankings is specific to the timeshare product

That's true. But, according to Ethisphere, Wyndham Worldwide outperformed Marriott in 2010. The comparative timeshare segment performance is available in the public domain and depicted, here.

 

[AceValenta]

I remember a rumor thread about Disney and Marriott merging about a year ago. I think someone heard it from a bus driver or someone in the employ Disney but not in an important role.

Isn't the President of MVCI a former Disney executive and he devised the new Marriott points system.

I know a of a phone company that spun off their cell phone company a few years ago and within a year the cell phone company was gobbled up by a much larger and more viable company.

Maybe the bus driver was right.....In time we will find out.

 

[timeos2]

$1.5 BILLION in basically what can be called "distressed inventory" for them to sell in an industry where sitting on $10-12 million is considered high. This is a huge anchor that Marriott understandably wants off their books. Moving it to a quasi independent operation doesn't magically give it better value. It just moves it to a new owner to deal with. Not a positive no matter how you try to spin it and the related costs have to be covered. It sure won't be sold any time soon so guess who will be paying? Lets see, where does the income other than sales come from? I think I can see some fees going up before long.

 

[timeos2]

I remember a rumor thread about Disney and Marriott merging about a year ago. I think someone heard it from a bus driver or someone in the employ Disney but not in an important role.

Isn't the President of MVCI a former Disney executive and he devised the new Marriott points system.

I know a of a phone company that spun off their cell phone company a few years ago and within a year the cell phone company was gobbled up by a much larger and more viable company.

Maybe the bus driver was right.....In time we will find out.

Wouldn't bet on it as Disney is fighting their own inventory issues. They don't need to be saddled with a massive cash drain (actually, who does?). Spinco as it is being called is not an attractive take over candidate.