Marriott to Spin Off Timeshare Business [merged]

[littlestar]

They will also have the ability to run the exchange system for other brand names through the new exchange company that they formed. As the largest and most respected independent timeshare company it will be interesting to see what happens. I am sure that other companies have similar issues that led to the Marriott decision. Maybe 4 Seasons, Starwood, Hilton, Disney, etc. When Marriott spun off the real estate business they funded many luxury hotels that were not Marriott branded. I would not be suprised to see future changes as most believe that the timeshare industry has to consolidate to cut costs and propsper going forward.

I could see the big brand names consolidating together or forming their own mini exchange system between one another.

We own points with Wyndham and something fascinating to me that they have been doing is adding new resorts during this down economy via their WAAM program - they've made deals for new inventory with Smugglers Notch, Reunion in Orlando, Emerald Grande in Destin, FL - it's really pretty brilliant what they are doing. (I'm sure I've forgotten some of the other new locations).

Who knows, maybe MVCI will try something like WAAM, too, for future expansion.

 

[equitax]

Not necessarily a bad thing

Spinco will need to innovate in order to make itself profitable as accountable to new shareholders. They can do it, if they want to - They have 400000 current timeshare interest owners that have a vested interest here. I suspect that Spinco will become more involved in the resale market. Don't be surprised to see the land trust issue preferreds or become a REIT...

Want to move 1.8B in inventory? Convince your 400K members that you're worth another $4500 bet by each...

I could see the big brand names consolidating together or forming their own mini exchange system between one another.

We own points with Wyndham and something fascinating to me that they have been doing is adding new resorts during this down economy via their WAAM program - they've made deals for new inventory with Smugglers Notch, Reunion in Orlando, Emerald Grande in Destin, FL - it's really pretty brilliant what they are doing. (I'm sure I've forgotten some of the other new locations).

Who knows, maybe MVCI will try something like WAAM, too, for future expansion.

 

[timeos2]

Why work when you can just bill?

Spinco will need to innovate in order to make itself profitable as accountable to new shareholders. They can do it, if they want to - They have 400000 current timeshare interest owners that have a vested interest here. I suspect that Spinco will become more involved in the resale market. Don't be surprised to see the land trust issue preferreds or become a REIT...

Want to move 1.8B in inventory? Convince your 400K members that you're worth another $4500 bet by each...

Why work at creating value when you have a captive audience/ Today the fee is 15%. Tomorrow, due to corporate changes, it's raised to 25%. Here is the bill due in 15 days. Pay or lose your week. See? MUCH easier and guaranteed income!! Need more? Fee is 35% - sorry - wee REALLY need it! You as an owner have no option except to drop tem (but you want the name) or sell. Doesn't bother them much either way. This is the nightmare and the unvarnished reality of a "new" Marriott division that has but one real source of income. You as an owner. Hold on to your wallets...

 

[Big Matt]

Watch it start showing up in II like there's no tomorrow and on marriott.com at good prices.

They need people in the units whether by selling the weeks or "renting"

Want to move 1.8B in inventory? Convince your 400K members that you're worth another $4500 bet by each...

 

[pgnewarkboy]

You got it right. I can't believe there are still some people who think this may not be a very bad deal. Things will not change at first but wait a year or two. Todays resale prices will look good. But Marriott International will get fees from the Timeshare. They have nothing to lose but alot to gain.

I don't know how much clearer this could be. A Marriott Timeshare ownership was head and shoulders above any other similar ownership because it was part of an international multi-billion dollar corporate titan in the hospitality industry. That is over and along with it the premium value of those ownerships. There is no way this pill can be swallowed no matter how they try to candy coat it.

 

[GregT]

I could see the big brand names consolidating together or forming their own mini exchange system between one another.

We own points with Wyndham and something fascinating to me that they have been doing is adding new resorts during this down economy via their WAAM program - they've made deals for new inventory with Smugglers Notch, Reunion in Orlando, Emerald Grande in Destin, FL - it's really pretty brilliant what they are doing. (I'm sure I've forgotten some of the other new locations).

DISCLAIMER: Lots of speculation following, but reflects what I think is possible

You raise an interesting point here, and again, my friends at Wyndham can provide some insight.

Wyndham manages two timeshare systems: Fairfield and Worldmark. Both completely independent systems. However, Wyndham (in addition to owning RCI) has constructed a mechanism to allow some overlap between the systems. Each year, there are a certain number of properties that are a part of The Exchange Network, that is internal to Wyndham. The properties in TEN change year to year.

As an example, last year I could use my Worldmark points to book space in Kona Hawaiian (a Fairfield property). Conversely, I could use my Wyndham points to book space in Indio (a Worldmark property). Wyndham has proven that it is possible to cross systems

Since I'm (positively) speculating on the future of SpinCo, imagine if SpinCo, the only Pure Play timeshare company out there, takes this to the next level and develops an even more impressive inter-system points exchanges.

What if I could use some of my DClub points to book space in Ritz Carlton properties? I'd certainly like to do that. I'm sure there are enrolled members, like me who'd even pay for a special membership to have that cross-system privilege ($XXX/year?). Also, that means I'm not a captive payor, I want to make that payment because I get something for it. And such a system facilitates new points sales because the system has more features.

But be even more ambitious, if you were the CEO. What if SpinCo acquires the management rights to Starwood? Eventually Starwood will realize that developer sales are dead, and managing 14 properties isn't very much fun or profitable. So....now there is a respectable buyer that won't abuse the Westin brand -- so sell/transfer the responsibility to SpinCo.

Spinco gets renamed from SpinCo Marriott to SpinCo Adventures and now has four high quality leisure brands (Marriott, Ritz, Westin and Sheraton). As a Marriott owner, I don't mind if the management company has a different name as long as my property is taken care of. Besides, SpinCo appears to be more owner friendly (big assumption).

And now my ability to cross systems is even more intriguing -- I'm glad I'm paying $XXX/yr for this version of "Interval Gold", because now I can use my SpinCo DClub points to book in Westin St. John/Harborside/Princeville, in addition to Marriott and Ritz. All the sudden, Marriott owners are more interested in enrolling and being a part of SpinCo DClub. And points sales in DClub increase because of the portfolio breadth -- and DClub can earn development fees for new sites with its financial partners -- and new locations can be added.

All, this is an interesting situation, and my comment are hypothetical -- I have no idea what SpinCo is going to do -- 1) fee us to death as captive owners, or 2) find ways to expand their business in a collaborative manner and offer us features and services that we want to pay for and are happy to be a part of.

I'm confident that SpinCo's new management team is aggressive and ambitious -- what an opportunity. I definitely agree with others that fee increases are in our future, but I'm hoping they are not ridiculous and that there may be a valuable network to participate, that is worth the cost.

Interesting stuff....

Best,

Greg

Edited: Wyndham manages, versus owns the two systems

 

[yumdrey]

Greg, I am sorry, but Wyndham may own fairfield points or RCI, but they don't own WorldMark. WM is owned by the owners and Wyndham is just a new management co.

I have no objection for your comment, just wanted to correct that.

 

[GregT]

Greg, I am sorry, but Wyndham may own fairfield points or RCI, but they don't own WorldMark. WM is owned by the owners and Wyndham is just a new management co.

I have no objection for your comment, just wanted to correct that.

All,

I'll defer to my colleague with the cute dog , since the concept in the thread remains the same. We'll figure out separately and post back what happened between Wyndham/Trendwest/Worldmark.

Best,

Greg

 

[timeos2]

Greg, I am sorry, but Wyndham may own fairfield points or RCI, but they don't own WorldMark. WM is owned by the owners and Wyndham is just a new management co.

I have no objection for your comment, just wanted to correct that.

Wyndham doesn't "own" Fairfield Points or resorts either. They manage them for a substantial fee. ZExcept for unsold inventory no real deeded (not RTU) timeshare is "owned" by the management/developer but, as you sate about Worldmark, each resort/deed has an individual owner that collectively forms the Association that manages (not owns) the resort & all it's features for the true owners and, in too many cases, gives management to Wyndham (or Marriott or whatever management the Board contracts with). So except for the short period when the vast majority of a new resort is unsold no management/developer owns any timeshare. They may manage them. They may have their name on them. But they don't own them. They may actually own the rights to sell on the property. Nothing unique about Worldmark not being "owned" but merely managed by Wyndham.

 

[davewasbaloo]

if you are paying $1000 in annual dues for a timeshare and i - as a nonowner - can rent the same week in the same unit for $400, how much value does your timeshare have?

if marriott were to raise annual dues such that they were virtually always higher than a typical rental rate, what would that suggest to you about the viability of the timeshare business model?

agreed, this is a part of my recent disappointment. When the economy was good, rental rates were nearly three times as much as my MF, so I felt I had a good investment. This easter we are going and the MF is only about 15% less than the rental, but when you add on our monthly payments (5 more years to go until it is paid off), it doesn't feel like a great deal.

I have loved every MVCI villa I have been in, and I bought for the Marriott quality (DVC had been the other option, and with the cutting Disney has been doing I am so glad we never went that route). But the fact getting a decent trade during the school holidays is so tough, I do have some buyers remorse somewhat.

We bought it hoping we could use points if we wanted or airmiles (found out Marriott hotels are poor for families in Europe needing two rooms often, and the airmile options are almost non existant in the school holidays), and the idea of swapping around resorts.

The last thing I would want is for the quality of the resort we own at to continue to go down because the owners are cheap (e.g. we used to have a free bus to Disneyland Paris as well as a good MAZE programme) but because of owner decisions, the bus is now 3 times a day and costs 2 euros each, the pool needs refurb, and the MAZE programme was virtually non existant last time. The last thing I want is a fully owner run solution.

So in short, I am very nervous. The DC system has already caused issues for European owners, and now this, not sure how it is going to go.

 

[gblotter]

live and learn

It is a well-understood fact that Marriott's timeshare division has been bleeding money. This divestment decision will only worsen the revenue picture. If the DC points program isn't already a bad-enough deal, who in their right mind would buy now amid such uncertainty. I expect any new sales in 2011 to come to a near complete halt (but there is always a sucker to be found, so perhaps...). I almost pity those sales people saddled with an ill-conceived points product in a lousy economy - and now this. Many will head for the exits.

Come 2012, Spinco will no longer have Marriott's deep pockets to save them. It should be obvious that significant changes in operations and fees are coming in 2012 as a condition of Spinco's survival as a standalone company.

If Spinco becomes too abusive with maintenance fee increases and other unpleasantries, the sold-out resorts will obviously be in a better situation to control their own destiny through their independent HOA board. Divorcing from Spinco would not be easy, but at least it could be done.

Points owners and trust resorts with lots of unsold inventory will be in tough spot though. Not so many choices if it gets bad.

As others have said, we "owners" are pretty much bystanders in this drama. Even with an HOA board, our primary way of voting is with our feet. At the end of the day, our family has gotten quite a few enjoyable years out of our two Marriott timeshares. Even if fee increases force us to walk away from our investment at some point, it won't be the end of the world. There will always be other avenues to take nice family vacations. If buying a Marriott timeshare is the biggest mistake I ever make - well, that's not too bad. Live and learn.

 

[tombo]

It is a well-understood fact that Marriott's timeshare division has been bleeding money. This divestment decision will only worsen the revenue picture. If the DC points program isn't already a bad-enough deal, who in their right mind would buy now amid such uncertainty. I expect any new sales in 2011 to come to a near complete halt (but there is always a sucker to be found, so perhaps...).
If Spinco becomes too abusive with maintenance fee increases and other unpleasantries, the sold-out resorts will obviously be in a better situation to control their own destiny through their independent HOA board. Divorcing from Spinco would not be easy, but at least it could be done.

Points owners and trust resorts with lots of unsold inventory will be in tough spot though. Not so many choices if it gets bad.

As others have said, we "owners" are pretty much bystanders in this drama. Even with an HOA board, our primary way of voting is with our feet. At the end of the day, our family has gotten quite a few enjoyable years out of our two Marriott timeshares. Even if fee increases force us to walk away from our investment at some point, it won't be the end of the world. There will always be other avenues to take nice family vacations. If buying a Marriott timeshare is the biggest mistake I ever make - well, that's not too bad. Live and learn.

Sales by Marriott will always be made to people who walk into a resort for some freebies and are told that they can own a lifetime of vacations for a small fee. Marriott will spin the numbers to show huge savings if they buy. The uinformed, uneducated (on timeshares) buyer will believe the lies and half truths they are told and own something they will more likely than not regret. Sales will never end totally until Marriott close the sales dept, but sales can slow to a crawl where the overhead is eating up the little profit they are making on fewer sales.

Even the most ardent marriott supporter here on TUG would not buy a retail points package with the current divesting of timeshares by Marriott. Is there anyone here on TUG considering buying retail points for any price? I will gladly read the reasons ANYBODY would give for buying RETAIL MARROITT POINTS now with full knowledge of the spinoff and timeshares in general. I am eagerly waiting to read this post and the reasons for buying. If none here will buy, then that shows that sales will fall even more because anyone who knows anything about the situation will not buy.

The internet is probably going to be the final death blow to retail timeshare sales because knowledge is power. no more trusting the salesman with no where to check on facts and promises. Google timeshares on the internet and the smoke and mirrors go away.

Now the change Marriott made to own the votes of any who buy points or convert to points becomes clearer. Once the spinoff starts assessing and raising fees owners might vote to remove Marriott as the mgt company. That is where the new division will make their profits, not on sales but on the backs of current powners. Even the number one cheerleader might finally have enough when their orlando annual MF's pass the $2000 mark. Marriott by owning the votes of all points owners and all weeks owners who convert(ed) will be able to vote against removing them as the mgt company. This will leave owners paying whatever marriott decides to charge them or they will have to walk away.

Marriott planned this thing out way in advance. The statement that they never planned on walking away but the last few years...... was not an off the cuff mistatement. That was a statement purposelly made in a speech written by PR dept, the legal dept, and CEO's. They said the stock will not be investment grade to cover their butts legally, not to be nice. They stripped current owners who convert of their votes and will give no future purchasers a vote on purpose, and that is to preserve their cash cow of being the managers of the resorts.

When we hear what Marriott has to say, we only hear the spin the PR and legal depts want us to hear, and usually not before they are ready for us to hear it. Walking away or selling might be the best option in the near future. Time will tell.

 

[equitax]

Land Trust?

Won't the land trust be owned by spinco?

If Marriott Inc will only own 20 pct of the common stock of spinco, won't spinco act in its own interest?

If the entire timeshare business of Marriott is worthless, you would be able to pick up the commOm stock for quite cheap once traded. Two big block investors could essentially end up withholds voting rights than Marriott Inc.

Spinco will have a lot more flexibility with the unused inventory than Marriott Inc does right now. If spinco can focus on getting the unused inventory disposed of - even at a discount, so that mf revenues are in and foreclosures down, this whole thing can turn around.


From a Marriott Inc pr standpoint, many are downright ticked off right now, but the reAlity is that the resorts ar built, and as long as those units are sold and "revenue generating" the sale price is not that relevant for spinco. Marriott did start to realize this when it created the land trust and that's why it. Ow costs "up to usd 1.00 per point" for the developer to waive rofr. So he bigger your holdings, the more developper makes when you want to head for the exits which is a brilliant move from an operational standpoint.

It won't surprise me if spinco allows us awful resale buys to upgrade into the point program just to have us on the hook for added rofr fees.

The land trust does have value, and while the timeshare interests may be worthless as resales, I am quite certain that the underlying real property owned by my 3bdr at grande vista is more than the 7000$ I paid for it. Do The math the land and building is worth more that 192 per sq ft.

Mf may be high, and I see many people moaning about all of this. Tough times don't last forever and the resale values reflect market conditions and the fact that developer overcharged.

If you can't afford to hold, walk. If you bought retail don't ever expect to get your initial outlay back.

 

[dan_hoog]

It should be noted that the financial performance on the books of Marriott Int'l and spinco can be very different. Changes in the business could have created a charge-off situation for Marriott Int'l that is better handled by this spinout.

I am annoyed at this, but actually don't think it matters as much as many suggest. The Marriott brand on the properties, reasonably consistent service from Marriott (which is already contracted by the resorts), can be maintained. Having two mouths to feed (Marriott Int'l and spinco) will likely get reflected in maintenance fees, but another 10 or 15% (one time) doesn't really change the landscape.

The overall health and viability of timeshares is another issue. This spin-out doesn't change the likely viability of timeshare sales and economics when/if the market recovers. The spinco may actually have more flexibility to adapt and change, maybe lobby for laws that set floors on rental rates at 2x maintenance fees

 

[chalee94]

They said the stock will not be investment grade to cover their butts legally, not to be nice.

just to be clear, marriott corp - the "corporate titan" with the "deep pockets" - is rated all of a BBB (even after unloading spinco). that is barely above the minimum investment grade of BBB- for those keeping score at home...

 

[Big Matt]

I really don't understand the logic here.

IMO, there was no real premium value for their weeks in the resale market other than the fact that they are really nice timeshares with a good brand. The Marriott brand is still going to be part of the new company, and I expect that Marriott will QC the resorts just like they did in the past.

People pay up for quality and a quality brand. I don't see how this move changes that.

All this spin off represents is a way for Marriott International to get a bunch of assets and offsetting debts off of the balance sheet. If they really (and I mean really) wanted to get rid of an albatross, they would have: a) written off the value in the form of impairments, or b) just sold the entire thing. If it is really and albatross, they would never let their brand stay associated with it. They are not that stupid.

I don't know how much clearer this could be. A Marriott Timeshare ownership was head and shoulders above any other similar ownership because it was part of an international multi-billion dollar corporate titan in the hospitality industry. That is over and along with it the premium value of those ownerships. There is no way this pill can be swallowed no matter how they try to candy coat it.

 

[chalee94]

If Marriott Inc will only own 20 pct of the common stock of spinco, won't spinco act in its own interest?

i might have misunderstood, but i thought it was the marriott family that would own 20% or so of the spinco. i don't think marriott inc would have any investment directly in spinco.

the natural question is whether they start divesting that ownership after the split...

 

[mclyne]

Well, now I know why my timeshares were never advertised in New York.

I should have realized something was not right when Marriott was not allowed to advertise here.

 

[timeos2]

Well, now I know why my timeshares were never advertised in New York.

I should have realized something was not right when Marriott was not allowed to advertise here.

Yup. NY is fairly good at protecting buyers rights. It was a big red flag that something was amiss when Marriott was not allowed to havve an offering there. They should be as we pay enough taxes to get seemingly very little value back!

 

[windje2000]

i might have misunderstood, but i thought it was the marriott family that would own 20% or so of the spinco. i don't think marriott inc would have any investment directly in spinco.

the natural question is whether they start divesting that ownership after the split...

You are correct, it is the family.

Immediate divestiture of the Marriott family stock interest in Spinco could easily be characterized as equivalent to a dividend and destroy the tax free (both to the stockholder and the corp.) status of the deal, because the Marriott family arguably controls the parent 'Spinner'. The Marriott family almost certainly will not start divesting until the transaction is 'old and cold.' (IRC 355 IIRC)

Marriott family stock in Spinco likely will be transfer restricted for this reason. The upcoming Form 10 disclosures will reveal the details on this.

 

[tombo]

If they really (and I mean really) wanted to get rid of an albatross, they would have: a) written off the value in the form of impairments, or b) just sold the entire thing. If it is really and albatross, they would never let their brand stay associated with it. They are not that stupid.

Their only chance to sell the timeshare division is with the Marriott brand. If Marriott changes the name they will never sell it and they will lose owners, resorts, and mgt fees during the time they are trying to sell. Plus if they do find a buyer they will want to get franchise fees from the purchasers by selling it as Marriott. Marriott franchise fees is basically income for doing nothing but making sure the franchisees keep the resorts up to the required standards. The owners will pay to do this.

You are right, they are not stupid. Marriott knows that the main value of the spin off division is the Marriott brand and they are not about to get rid of the one chance they have to sell or make profit on the spinoff.

 

[equitax]

Might be me that misunderstood.

Could have been me that misunderstood. At any rate I don't think the situ is as gloomy as some feel. Marriott still has it's name on the door and that does mean something.

i might have misunderstood, but i thought it was the marriott family that would own 20% or so of the spinco. i don't think marriott inc would have any investment directly in spinco.

the natural question is whether they start divesting that ownership after the split...

 

[OldPantry]

The spinco may actually have more flexibility to adapt and change, maybe lobby for laws that set floors on rental rates at 2x maintenance fees

Really? Are you really touting the benefits of price-fixing? Just think it through a smidgen: you want to rent your unit, but nobody is biting at your 2x maintenance fee rate. So, ...? You can't cut your price, so you can't rent at all. Maybe this great idea isn't so great. Maybe.

 

[OldPantry]

Let's not go completely nuts.

It won't surprise me if spinco allows us awful resale buys to upgrade into the point program just to have us on the hook for added rofr fees.

It would surprise me a great deal. Come on, weeks owners aren't buying points at all; they have the right to exchange their week for points, with the option of not exchanging at all. So, they have no points to sell, and no rofr fees (the dreadful $1/point) to pay if they want out.

 

[BarbS]

It would surprise me a great deal. Come on, weeks owners aren't buying points at all; they have the right to exchange their week for points, with the option of not exchanging at all. So, they have no points to sell, and no rofr fees (the dreadful $1/point) to pay if they want out.

I agree. I can't imagine any weeks owner giving up their deeded weeks, thereby losing their home resort advantage, paying higher maintenance fees, and pretty much being unable to ever sell or even give away their points without incurring a huge fee. Who would want to do that? Frankly I don't understand how they are able to con anyone into purchasing DC points in the first place. Does anyone know what they're told in the sales presentation when they ask the question.......what if I need to sell?