Marriott Vacations Worldwide 8-K Filed Outlining Workforce Reduction Plan

[controller1]

Marriott Vacations Worldwide filed an SEC Form 8-K today stating they had adopted a workforce reduction plan which is expected to impact approximately 3,300 employees as early as mid-November.

"The COVID-19 pandemic and actions taken in response to the pandemic, such as government restrictions on travel and business operations, have adversely impacted demand for the Company’s products and services. The workforce reduction plan is part of the Company’s response to the impacts of the COVID-19 pandemic on the Company’s business operations and financial position. The Company is taking these actions to re-balance its workforce to better align with the evolving needs of the business. As of the date hereof, the Company expects that job elimination pursuant to the workforce reduction will take effect in mid-November 2020 or after.

In connection with the workforce reduction, the Company estimates that it will incur approximately $25 to $30 million in restructuring and related charges primarily related to employee severance and benefit costs. The majority of these costs are expected to be incurred in the remainder of fiscal 2020. All of the $25 to $30 million of restructuring and related charges is expected to result in future cash expenditures."

8-K

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Sept 14th Letter to Employees https://www.sec.gov/Archives/edgar/data/1524358/000152435820000038/pressrelease-workforce.htm

 

[Fredflintstone]

Marriott Vacations Worldwide filed an SEC Form 8-K today stating they had adopted a workforce reduction plan which is expected to impact approximately 3,300 employees as early as mid-November.

"The COVID-19 pandemic and actions taken in response to the pandemic, such as government restrictions on travel and business operations, have adversely impacted demand for the Company’s products and services. The workforce reduction plan is part of the Company’s response to the impacts of the COVID-19 pandemic on the Company’s business operations and financial position. The Company is taking these actions to re-balance its workforce to better align with the evolving needs of the business. As of the date hereof, the Company expects that job elimination pursuant to the workforce reduction will take effect in mid-November 2020 or after.

In connection with the workforce reduction, the Company estimates that it will incur approximately $25 to $30 million in restructuring and related charges primarily related to employee severance and benefit costs. The majority of these costs are expected to be incurred in the remainder of fiscal 2020. All of the $25 to $30 million of restructuring and related charges is expected to result in future cash expenditures."

8-K

Inline XBRL Viewer

Sept 14th Letter to Employees https://www.sec.gov/Archives/edgar/data/1524358/000152435820000038/pressrelease-workforce.htm

I wonder if Marriott owners will be impacted with a whopping MF bill coming soon? If they are in such financial dire straights, big injections from owners may be the most viable solution.


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[controller1]

I wonder if Marriott owners will be impacted with a whopping MF bill coming soon? If they are in such financial dire straights, big injections from owners may be the most viable solution.


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Considering the 8-K indicated additional costs of $25 million to $30 million I anticipate they are setting the stage for an increase!

 

[jabberwocky]

And yet the stock continues to rise...

 

[Fredflintstone]

And yet the stock continues to rise...

Yes, and WYND too...

I’ve given up trying to figure that one out. Manipulation maybe?


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[dioxide45]

I wonder if Marriott owners will be impacted with a whopping MF bill coming soon? If they are in such financial dire straights, big injections from owners may be the most viable solution.


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Owners pay the cost to operate the resort. If the corporation that manages the resorts require capital, they have capital markets they can go to in order to raise cash.

 

[Fredflintstone]

Owners pay the cost to operate the resort. If the corporation that manages the resorts require capital, they have capital markets they can go to in order to raise cash.

So, who pays if the resort experiences significant revenue shortfalls from lack of occupancy resulting in less income to operate? Who pays for the resort adding sanitation protocols? Many times the developer is the manager through an arm of their company. If they triple the management fees to the resort to raise capital, who pays for that?

I think indirectly the owner does....at least in part.


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[pedro47]

So, who pays if the resort experiences significant revenue shortfalls from lack of occupancy resulting in less income to operate? Who pays for the resort adding sanitation protocols? Many times the developer is the manager through an arm of their company. If they triple the management fees to the resort to raise capital, who pays for that?

I think indirectly the owner does....at least in part.


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Sounds liked owners can look for an increase in MF for 2021 because of COVID-19.

.Food for thougjt:
Problem, was this increase approve or will be approved in advance by the HOA and owners by December 31, 2020?

 

[dioxide45]

So, who pays if the resort experiences significant revenue shortfalls from lack of occupancy resulting in less income to operate? Who pays for the resort adding sanitation protocols? Many times the developer is the manager through an arm of their company. If they triple the management fees to the resort to raise capital, who pays for that?

I think indirectly the owner does....at least in part.


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Owners obviously pay costs associated with operating the resort such as enhanced cleaning and sanitizing. However, loss of rental income by the developer is the developers problem, that income rarely comes back to the HOA as income. The developer owns that inventory and makes the profit or loss on that income. It isn't as easy to triple the management fee as you would suggest. That would require a new management agreement with new negotiated rates with the HOA. Often existing agreements go out for many years and a BOD would not be fulfilling its fiduciary responsibility to the owners if they negotiated a triple increase in management fee for the management company just because the management company needs money. If the management company needs to raise capital to keep its sales operation running, they have capital markets to borrow from.

 

[SueDonJ]

So, who pays if the resort experiences significant revenue shortfalls from lack of occupancy resulting in less income to operate? Who pays for the resort adding sanitation protocols? Many times the developer is the manager through an arm of their company. If they triple the management fees to the resort to raise capital, who pays for that?

I think indirectly the owner does....at least in part.


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They can't arbitrarily triple the Management Fee to cover anything other than how it's defined, i.e. 10% (US and Caribbean) or 15% (Euro/Asia) of the resorts' Operating Costs in the annual budgets.

I do expect to see increases in the MF's as a result of COVID's effects on the individual resorts, but I also expect to see MVW show their work in the line items in the annual budgets.

 

[Dean]

Owners obviously pay costs associated with operating the resort such as enhanced cleaning and sanitizing. However, loss of rental income by the developer is the developers problem, that income rarely comes back to the HOA as income. The developer owns that inventory and makes the profit or loss on that income. It isn't as easy to triple the management fee as you would suggest. That would require a new management agreement with new negotiated rates with the HOA. Often existing agreements go out for many years and a BOD would not be fulfilling its fiduciary responsibility to the owners if they negotiated a triple increase in management fee for the management company just because the management company needs money. If the management company needs to raise capital to keep its sales operation running, they have capital markets to borrow from.

But some rental income comes directly to the HOA such as unused weeks or weeks where fees are not paid so it could have some impact.

 

[dioxide45]

But some rental income comes directly to the HOA such as unused weeks or weeks where fees are not paid so it could have some impact.

Perhaps, but I suspect it is minimal, at least in the case of Marriott. I don't see a rental income line item on our Marriott Grande Vista budget. Marriott had buyback agreements with a lot of the HOAs, so foreclosed weeks would get sold back to Marriott with Marriott paying the past unpaid MFs. Any unsold inventory owned by the developer is rented out by them. Unused or unreserved weeks usually revert to developer control at the 75 day mark and they take the rental revenue. There would be no loss there since they got it for free. The HOA got the MF money from the owner, unless it was in default. In that case the other owners are paying for it through bad debt expenses.

The only time there would be big rental revenue losses that would need to be paid for by other owners is if the HOA is sitting on a lot of unsold weeks. Probably more so with smaller independant timeshare properties.

 

[Fredflintstone]

But some rental income comes directly to the HOA such as unused weeks or weeks where fees are not paid so it could have some impact.

Yes, that’s what I mean. The resorts rental income offshoots some MF.

Also, the few agreements I have read between the resort’s BOD and the management have a notwithstanding clause. This means if something maintenance wise happens due to unforeseen circumstances (like added protocols required by law like increased sanitation), the management company can raise fees to cover the unexpected that they are required to now do. Covid protocols would fit into this clause. Thus, jacking up management fees is possible.


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[Dean]

Yes, that’s what I mean. The resorts rental income offshoots some MF.

Also, the few agreements I have read between the resort’s BOD and the management have a notwithstanding clause. This means if something maintenance wise happens due to unforeseen circumstances (like added protocols required by law like increased sanitation), the management company can raise fees to cover the unexpected that they are required to now do. Covid protocols would fit into this clause. Thus, jacking up management fees is possible.


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There are some outs, normally around natural disasters. I'm not sure that ongoing protocol changes would fall under that clause. But they have a balance sheet also so if they have additional costs and can't meet the budget they will use reserves, cut costs elsewhere and then plan for future increases as part of the budgeting process. I guess I'm not clear on what costs would come under the management contract and what would come from the resort budget as it applies to these situations but I do agree that the end point is that members will ultimately pay for any increases and suffer any cutbacks.