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Marriott Vacations Worldwide Investor Day Presentation-October 4

JIMinNC

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Listening to this livestream this morning. In a break right now, so here are a few nuggets from the first two presenters - CEO Steve Weisz and Ovi Vitas, EVP of Brand and Digital.

Weisz
  • 50% of earnings came from vacation ownership sales a few years ago, now sales is only 28% as management and change has become a bigger part of the earnings.
  • Moving to points has allowed them to create "perpetual sales centers" that sell the system rather than location-based centers that close after sell out. They are never really sold out and it makes low cost inventory re-acquisition more viable as well.
  • Increasing their anticipated savings from ILG merger to $125 million by end of 2021.
  • The market is moving away from strict 7 night weekly stays and demand for shorter vacations and more flexible options has ballooned since 2008
  • II moving to offer shorter stays through Getaways and offering Getaways to non-timeshare owners as rentals.
Vitas
  • There has been 28% compound growth of online points transactions from 2016 to 2018
  • Online transactions now account for 40% of total transactions vs. 29% in 2016. Target is >50% by 2022.
  • The Interval International Mobile App is very highly rated and they hope to leverage that team to vastly improve the mobile experience across all of their brands
  • Plan to expand Vistana's "Community Planning Tools" across all of the brands.
  • Will be adding the ability to book sale tour packages online for prospects

More later.
 

JIMinNC

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HGVC at Sea World
News on Future Product Form.

Will be two phases:
1) Link usage between MVC, Westin, Vistana, Sheraton using a common points currency. Lots of legal and technology hurdles, but targeting announcement for mid-late 2020.
2) Will move to selling a single points-based product for all brands. No time frame disclosed. Lots of legal and technology hurdles.

Also new Costa Rica location officially announced with 24 2BR units.

More later.
 

alameda94501

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News on Future Product Form.

Will be two phases:
1) Link usage between MVC, Westin, Vistana, Sheraton using a common points currency. Lots of legal and technology hurdles, but targeting announcement for mid-late 2020.
2) Will move to selling a single points-based product for all brands. No time frame disclosed. Lots of legal and technology hurdles.

Also new Costa Rica location officially announced with 24 2BR units.

More later.
I just looked over the Oct 4 investor slide presentation before work, but nothing really on Hyatt / HRC right, Jim? Every slide looked like Hyatt was on its own, but still has World of Hyatt as a membership benefit.
 

JIMinNC

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I just looked over the Oct 4 investor slide presentation before work, but nothing really on Hyatt / HRC right, Jim? Every slide looked like Hyatt was on its own, but still has World of Hyatt as a membership benefit.
Correct. The "Future Product Form" they discussed was only for the Marriott Vacation Club, Westin Vacation Club, and Sheraton Vacation Club Brands. All indications are HRC will continue to be operated totally independent from the other brands long-term with World of Hyatt as the loyalty program for that part of their business. This slide clearly shows HRC separated graphically from the others:

Marriott 2019 Investor Day_FINAL V3 (dragged) copy.jpg


Lots more information presented on future growth areas/potential locations, but no time to post right now as the second break is almost over. More later.
 

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Listening to this livestream this morning. In a break right now, so here are a few nuggets from the first two presenters - CEO Steve Weisz and Ovi Vitas, EVP of Brand and Digital.

Weisz
  • 50% of earnings came from vacation ownership sales a few years ago, now sales is only 28% as management and change has become a bigger part of the earnings.
  • Moving to points has allowed them to create "perpetual sales centers" that sell the system rather than location-based centers that close after sell out. They are never really sold out and it makes low cost inventory re-acquisition more viable as well.
  • Increasing their anticipated savings from ILG merger to $125 million by end of 2021.
  • The market is moving away from strict 7 night weekly stays and demand for shorter vacations and more flexible options has ballooned since 2008
  • II moving to offer shorter stays through Getaways and offering Getaways to non-timeshare owners as rentals.
Vitas
  • There has been 28% compound growth of online points transactions from 2016 to 2018
  • Online transactions now account for 40% of total transactions vs. 29% in 2016. Target is >50% by 2022.
  • The Interval International Mobile App is very highly rated and they hope to leverage that team to vastly improve the mobile experience across all of their brands
  • Plan to expand Vistana's "Community Planning Tools" across all of the brands.
  • Will be adding the ability to book sale tour packages online for prospects

More later.
Thanks for summarizing. Very helpful. If you are able to obtain a copy of the slide set, please send along.

"II moving to offer shorter stays through Getaways and offering Getaways to non-timeshare owners as rentals."

This is concerning as one of the benefits of ownership is having access to discounted II stays. This is a devaluation which makes owning less attractive and renting a more viable option.

This movement to grab inventory and rent externally seems to be a trend with all of the TS companies. I am now finding Vistana rentals on Expedia and even the hotel websites for about the cost of MF for many resorts. Why own when you can rent?

Like the airlines devaluing their points currency to the point that people don't collect points or sign up for their credit cards anymore, the TS companies seem to be on a slower but similar path.

Does anyone know where they make these getaway rentals available to the public?
 
Last edited:

DannyTS

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News on Future Product Form.

Will be two phases:
1) Link usage between MVC, Westin, Vistana, Sheraton using a common points currency. Lots of legal and technology hurdles, but targeting announcement for mid-late 2020.


/QUOTE]
this is suggesting a conversion rate between DP and SO and not a specific number of DP for every Vistana resort. It also appears that the mandatory resorts are the winners. I am curious if the enrollment of the voluntary resorts is still on the table.
 

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thank you @JIMinNC for posting.
This is the page 85 of the presentation. It seems that MVC, Westin and Sheraton club are on equal basis, that Westin and Sheraton will not be absorbed by the MVC



upload_2019-10-4_12-14-35.png
 

DannyTS

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@DannyTS It could also be interpreted to mean Flex. Don't read too much into this. It's corporate speak.
I do not think it is Flex since this would disenfranchise the retail owners that bought pre-Flex from the developer.
 

JIMinNC

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HGVC at Sea World
this is suggesting a conversion rate between DP and SO and not a specific number of DP for every Vistana resort. It also appears that the mandatory resorts are the winners. I am curious if the enrollment of the voluntary resorts is still on the table.

thank you @JIMinNC for posting.
This is the page 85 of the presentation. It seems that MVC, Westin and Sheraton club are on equal basis, that Westin and Sheraton will not be absorbed by the MVC
View attachment 14457
They were not specific on what the Future Product Form would look like. There was a comment I partially missed while writing down my notes where Lee Cunningham, COO of Vacation Ownership, did mention something to the effect that they would be leveraging their experience with the Destination Club Points system in connection with his discussion of the "common points currency" that would be developed for introduction in the second half of 2020. If they post a replay or transcript of the presentation, I would love to go back and re-listen to that quote again verbatim, but I didn't pick it up completely because I was frantically writing down what he said about the development of a common points currency.

At this point, I think the term "common points currency" is the most important words we have to dissect. I interpret that to mean that they would create a common point currency across all brands - whether that is based on Destination Club, StarOptions, or something totally new is not clear. But to me, that terminology sounds like a consistent currency across all three brands, not just a conversion ratio. Any new "currency" probably implies some sort of conversion ratio to create that new currency, but since he explicitly used the term "common points currency" I think that implies we may see a more integrated exchange system than just a conversion ratio - a consistent points currency across all three brands. But that's just my interpretation of a probably intentionally vague statement.

Also, the fact that the diagram you posted shows the three current product circles combining into a "Target" single circle, implies a truly consolidated program, not just an overlay, although that might not be truly fully realized until Phase Two - selling a common points product across all brands.
 

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They were not specific on what the Future Product Form would look like. There was a comment I partially missed while writing down my notes where Lee Cunningham, COO of Vacation Ownership, did mention something to the effect that they would be leveraging their experience with the Destination Club Points system in connection with his discussion of the "common points currency" that would be developed for introduction in the second half of 2020. If they post a replay or transcript of the presentation, I would love to go back and re-listen to that quote again verbatim, but I didn't pick it up completely because I was frantically writing down what he said about the development of a common points currency.

At this point, I think the term "common points currency" is the most important words we have to dissect. I interpret that to mean that they would create a common point currency across all brands - whether that is based on Destination Club, StarOptions, or something totally new is not clear. But to me, that terminology sounds like a consistent currency across all three brands, not just a conversion ratio. Any new "currency" probably implies some sort of conversion ratio to create that new currency, but since he explicitly used the term "common points currency" I think that implies we may see a more integrated exchange system than just a conversion ratio - a consistent points currency across all three brands. But that's just my interpretation of a probably intentionally vague statement.

Also, the fact that the diagram you posted shows the three current product circles combining into a "Target" single circle, implies a truly consolidated program, not just an overlay, although that might not be truly fully realized until Phase Two - selling a common points product across all brands.
you are right, it is to vague to draw a conclusion from this and especially too vague to know how this will change our ownership experience in the future. The only solid thing here is that it confirms once and for all that the products will be integrated in the future.
 

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you are right, it is to vague to draw a conclusion from this and especially too vague to know how this will change our ownership experience in the future. The only solid thing here is that it confirms once and for all that the products will be integrated in the future.
Or that there at least will be some type of crossover option.
 

JIMinNC

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HGVC at Sea World
Here are a few more nuggets from the Investor Day that would be of interest to TUGgers on topics other than the combined program:

New Locations and Growth Focus
  • Bali Nusa Dua Terraces, located at the Renaissance hotel, opening in 2020
  • New Marriott Vacation Club at Marriott Los Suenos in Costa Rica to open in 2021. Announced signing agreement to purchase 24 two-bedroom units from their capital light development partner.
  • Owners and prospects are asking for more city-center, urban vacation destinations, and they plan to focus on providing more urban locations to meet the customer demand for these locations. My read - more Pulse locations will be coming.
  • Hawaii remains a top-requested destination, so they want to continue to offer more options there. Specifically mentioned Waikiki and the Big Island. Hawaii locations also help their Asia-Pacific division, which is a major focus (see below). My read - maybe a Pulse in Waikiki and perhaps they will eventually convert Marriott Waikoloa to 100% timeshare (just a guess).
  • Beach and Caribbean locations generally run at full capacity, so they will continue to look at any cost-effective opportunities in these kinds of locations.
  • Asia-Pacific will be a major focus for growth, with Japan, Okinawa, and Thailand as a focus.
  • Focus on conversion of existing assets for cost-effective growth.
  • Sales inventory will be generated 67% from new development and 33% from repurchases
  • Currently just over two years worth of points inventory on hand in their various programs for sale; target is 1.5 to 2 years. The current slight excess is primarily driven by excess inventory they acquired from Vistana.
Repurchases
  • Their target is spending $80 million to $85 million per year on repurchased inventory (ROFR, buy-backs, foreclosure, etc)
  • All repurchases go directly to fund their points for sale inventory and represent a below-market way to acquire inventory at a low cost and help them meet their target of inventory cost of 25% of sales.
  • CEO Weisz said they have been more aggressive in repurchases than most others in the industry, and they made a strategic decision ten years ago to be very active in the repurchase market. They intentionally structured their Land Trust to be able to accept individual weeks rather than requiring an entire unit to be deeded into the Trust (some other Trusts are structured to require full units). That was an intentional design decision to facilitate low-cost repurchases.
  • Weisz said repurchases are a win-win. For owners, it provides an easy way out of their ownership when they have life changes, and often they can exit with a check in their pocket. For MVW, they get inventory to sell at a cost that is well below the development replacement cost.
The Resale Market
During the Q&A, there was a question about why the resale market for their products is not more robust. Steve Weisz replied with several factors that cause the resale market to be difficult:
  • He said they encumber sales through their right to exercise ROFR when someone is selling at an attractive price. They can step in and replace the buyer in the transaction.
  • Certain product usage rights don't convey to resale owners, and that is an intentional product design to give them more control over the value proposition and price they can charge.
  • It's not easy to sell timeshares, so without a integrated sales model for resales, it becomes very hard for people to resale in the fragmented resale market. It's hard to just "put something on eBay and sell it" he said.
  • They monitor the resale market 24 hours a day
  • Every few years they turn on a more aggressive repurchase program to "clear out the market."
Target Markets and Sales
  • Their target market is households with a median household income of $130K and a median net worth of $1.5 million.
  • Vistana had some sales programs targeting families with incomes in the $50K to $75K range and that negatively impacted Vistana's close rate on those prospects, so MVW is terminating those programs and waiting for the remaining tour packages to be redeemed, then they will no longer market to these segments.
  • Their sales are 57% to Baby Boomers and 33% to Millennials and Gen-X
  • Gen X buyers are now outpacing Baby Boomers in average Volume Per Guest (a measure they use that averages close rate and dollar size of the sale). They said that is because the Gen X segment is age 39-55, which is the prime life-stage for their product.
  • Millennials are still not a major contributor since the oldest is 38, and Millennials are marrying later and buying homes later. They feel they will eventually move into their target market, but may want different, more flexible products than Boomers and Gen X. They are working on new "short-term products" and "membership programs" that will have a lower cost of entry and may be more attractive to Millennial lifestyles. No definition of what those were.
  • They will be using advanced analytics and machine learning to target their tour packages, incentive offers, and sales approach. Not every owner or prospect will get the same offer or sales pitch. They are mining their data on how owners use their ownership to better target them for sales.
  • A typical $30K initial sale of a vacation ownership interest will generate $60K of total revenue for MVW over the first five years. That additional $30K comes from: $20K of additional purchases, $6K in financing revenue, and $4K in management fees, ancillary rental, etc.
  • New owners sales growth was 13% from 2016 to 2018, outpacing growth of sales to existing owners.
  • Consistent 91% guest satisfaction scores since 2014.
  • It takes $0.50 in sales and marketing to generate $1 of vacation ownership sales.
  • Consumer confidence in the US has a high correlation to sales close rates. As confidence falls, so do close rates. But they have tools like "better first day benefits" and "pricing strategy" to counter downturns to some extent. But they added that owners will still use their "paid for" units, even during a recession, and their target market segments generally are not impacted by a typical recession as much as lower tier segments might be impacted.
Interval International and Exchange
  • They view Interval International and their Management and Exchange business as a stable revenue stream that does not decline during economic downturns. From 2007 through 2010, II member revenue was very stable despite GDP per capital falling precipitously during the Great Recession.
  • Interval wants to leverage its product portfolio to reach new customers, including non-timeshare owners, through non-exchange products and memberships. The example they used was their Leisure Time Passport that is being marketed to Planet Fitness members to allow them to access excess II inventory
  • There is 93% utilization of Interval International Inventory through either exchange or rental.
  • II has 88% member retention since 2014.
  • About 57% of all Exchange and Getaway transaction are now handled through digital channels
  • The Interval mobile app is highly rated and that development team will be leveraged throughout MVW to enhance the mobile experience.
 

JIMinNC

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HGVC at Sea World
Or that there at least will be some type of crossover option.
I went back and looked in more detail at the cryptic notes I scribbled when they were discussing the "New Product Form" and I may have a little more color/insight. So let me edit my original text from post #2 here. Just a couple minor additions, but they may be instructive:

New Product Form
They said their integrated product will be made a bit easier because Marriott, Westin, and Sheraton were all operating with points-based programs. While the conversion will still be complex, that makes it a bit easier. There will be two phases:

1) Phase One will be linking usage between MVC, Westin, Vistana, Sheraton using a "common points currency". Lots of legal and technology hurdles, but targeting announcement for mid-late 2020.
2) Phase Two will move them to selling a single points-based product for all three brands. No time frame disclosed. Lots of legal and technology hurdles.

In the meantime, until the single points-based product is developed, they will continue to grow resorts and sales for all brands.

---

So, after going through this again, my interpretation is Phase One will be some sort of linkage, in the form of a "common points currency" of some sort, that will facilitate cross-booking between the Marriott, Westin, and Sheraton vacation clubs, but each "club" will continue to sell their individual programs to some degree. I think the term "linkage" is key - the programs will be linked through some common currency that is TBD, but not truly consolidated.

Then, at some undetermined point after 2020, they will develop a truly consolidated points product for the entire company.

That's my 2-cents.
 

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I went back and looked in more detail at the cryptic notes I scribbled when they were discussing the "New Product Form" and I may have a little more color/insight. So let me edit my original text from post #2 here. Just a couple minor additions, but they may be instructive:

New Product Form
They said their integrated product will be made a bit easier because Marriott, Westin, and Sheraton were all operating with points-based programs. While the conversion will still be complex, that makes it a bit easier. There will be two phases:

1) Phase One will be linking usage between MVC, Westin, Vistana, Sheraton using a "common points currency". Lots of legal and technology hurdles, but targeting announcement for mid-late 2020.
2) Phase Two will move them to selling a single points-based product for all three brands. No time frame disclosed. Lots of legal and technology hurdles.

In the meantime, until the single points-based product is developed, they will continue to grow resorts and sales for all brands.

---

So, after going through this again, my interpretation is Phase One will be some sort of linkage, in the form of a "common points currency" of some sort, that will facilitate cross-booking between the Marriott, Westin, and Sheraton vacation clubs, but each "club" will continue to sell their individual programs to some degree. I think the term "linkage" is key - the programs will be linked through some common currency that is TBD, but not truly consolidated.

Then, at some undetermined point after 2020, they will develop a truly consolidated points product for the entire company.

That's my 2-cents.
too bad there was no TUGger there to ask more precise questions. The devil of course is in the details and we are no further in our guess game about how each program (MVC and the 3 Flex plus the VSN) will access inventory of the other programs
 

TXTortoise

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Vail Streamside Birch
Here are a few more nuggets from the Investor Day that would be of interest to TUGgers on topics other than the combined program:

New Locations and Growth Focus
  • Bali Nusa Dua Terraces, located at the Renaissance hotel, opening in 2020
  • New Marriott Vacation Club at Marriott Los Suenos in Costa Rica to open in 2021. Announced signing agreement to purchase 24 two-bedroom units from their capital light development partner.
  • Owners and prospects are asking for more city-center, urban vacation destinations, and they plan to focus on providing more urban locations to meet the customer demand for these locations. My read - more Pulse locations will be coming.
  • Hawaii remains a top-requested destination, so they want to continue to offer more options there. Specifically mentioned Waikiki and the Big Island. Hawaii locations also help their Asia-Pacific division, which is a major focus (see below). My read - maybe a Pulse in Waikiki and perhaps they will eventually convert Marriott Waikoloa to 100% timeshare (just a guess).
  • Beach and Caribbean locations generally run at full capacity, so they will continue to look at any cost-effective opportunities in these kinds of locations.
  • Asia-Pacific will be a major focus for growth, with Japan, Okinawa, and Thailand as a focus.
  • Focus on conversion of existing assets for cost-effective growth.
  • Sales inventory will be generated 67% from new development and 33% from repurchases
  • Currently just over two years worth of points inventory on hand in their various programs for sale; target is 1.5 to 2 years. The current slight excess is primarily driven by excess inventory they acquired from Vistana.
Repurchases
  • Their target is spending $80 million to $85 million per year on repurchased inventory (ROFR, buy-backs, foreclosure, etc)
  • All repurchases go directly to fund their points for sale inventory and represent a below-market way to acquire inventory at a low cost and help them meet their target of inventory cost of 25% of sales.
  • CEO Weisz said they have been more aggressive in repurchases than most others in the industry, and they made a strategic decision ten years ago to be very active in the repurchase market. They intentionally structured their Land Trust to be able to accept individual weeks rather than requiring an entire unit to be deeded into the Trust (some other Trusts are structured to require full units). That was an intentional design decision to facilitate low-cost repurchases.
  • Weisz said repurchases are a win-win. For owners, it provides an easy way out of their ownership when they have life changes, and often they can exit with a check in their pocket. For MVW, they get inventory to sell at a cost that is well below the development replacement cost.
The Resale Market
During the Q&A, there was a question about why the resale market for their products is not more robust. Steve Weisz replied with several factors that cause the resale market to be difficult:
  • He said they encumber sales through their right to exercise ROFR when someone is selling at an attractive price. They can step in and replace the buyer in the transaction.
  • Certain product usage rights don't convey to resale owners, and that is an intentional product design to give them more control over the value proposition and price they can charge.
  • It's not easy to sell timeshares, so without a integrated sales model for resales, it becomes very hard for people to resale in the fragmented resale market. It's hard to just "put something on eBay and sell it" he said.
  • They monitor the resale market 24 hours a day
  • Every few years they turn on a more aggressive repurchase program to "clear out the market."
Target Markets and Sales
  • Their target market is households with a median household income of $130K and a median net worth of $1.5 million.
  • Vistana had some sales programs targeting families with incomes in the $50K to $75K range and that negatively impacted Vistana's close rate on those prospects, so MVW is terminating those programs and waiting for the remaining tour packages to be redeemed, then they will no longer market to these segments.
  • Their sales are 57% to Baby Boomers and 33% to Millennials and Gen-X
  • Gen X buyers are now outpacing Baby Boomers in average Volume Per Guest (a measure they use that averages close rate and dollar size of the sale). They said that is because the Gen X segment is age 39-55, which is the prime life-stage for their product.
  • Millennials are still not a major contributor since the oldest is 38, and Millennials are marrying later and buying homes later. They feel they will eventually move into their target market, but may want different, more flexible products than Boomers and Gen X. They are working on new "short-term products" and "membership programs" that will have a lower cost of entry and may be more attractive to Millennial lifestyles. No definition of what those were.
  • They will be using advanced analytics and machine learning to target their tour packages, incentive offers, and sales approach. Not every owner or prospect will get the same offer or sales pitch. They are mining their data on how owners use their ownership to better target them for sales.
  • A typical $30K initial sale of a vacation ownership interest will generate $60K of total revenue for MVW over the first five years. That additional $30K comes from: $20K of additional purchases, $6K in financing revenue, and $4K in management fees, ancillary rental, etc.
  • New owners sales growth was 13% from 2016 to 2018, outpacing growth of sales to existing owners.
  • Consistent 91% guest satisfaction scores since 2014.
  • It takes $0.50 in sales and marketing to generate $1 of vacation ownership sales.
  • Consumer confidence in the US has a high correlation to sales close rates. As confidence falls, so do close rates. But they have tools like "better first day benefits" and "pricing strategy" to counter downturns to some extent. But they added that owners will still use their "paid for" units, even during a recession, and their target market segments generally are not impacted by a typical recession as much as lower tier segments might be impacted.
Interval International and Exchange
  • They view Interval International and their Management and Exchange business as a stable revenue stream that does not decline during economic downturns. From 2007 through 2010, II member revenue was very stable despite GDP per capital falling precipitously during the Great Recession.
  • Interval wants to leverage its product portfolio to reach new customers, including non-timeshare owners, through non-exchange products and memberships. The example they used was their Leisure Time Passport that is being marketed to Planet Fitness members to allow them to access excess II inventory
  • There is 93% utilization of Interval International Inventory through either exchange or rental.
  • II has 88% member retention since 2014.
  • About 57% of all Exchange and Getaway transaction are now handled through digital channels
  • The Interval mobile app is highly rated and that development team will be leveraged throughout MVW to enhance the mobile experience.
Awesome summary. Thanks
 

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Westin FLEX

Fasttr

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Jim....the bigger question, are you buying, holding or selling VAC stock?? ;-)
 

StevenTing

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After reading all of this and the language about a common point currency, this leads me to believe there will be a big amnesty period where all resales post 2010 will be put into the new system. Anyone else get the similar vibe?

With Westin/Sheraton going to a new point system, seems only natural to include the rest of the Marriott weeks as well, regardless of status. The big question will be to see if they try to monetize this access to the common point currency. Charge too much and owners will balk, especially Marriott owners that may have already paid a fee. Charge nothing and they'll see rapid adoption and see point/reservation activity increase.
 

mjm1

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JiminNC, thank you for listening and sharing your notes and insights. I had hoped to listen, but just couldn't get up early enough (5am PT). So, another 9-12 months of speculation regarding what they will develop. At least we do know that they are working on linkage of the programs and ultimately a combined program. It will be interesting to see what the sales people will have to say during their presentations. Of course, they won't know any more than we do. Fun times!

Best regards,

Mike
 

SteelerGal

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Thanks @JIMinNC . I always look forward to your insight.
 

teddyo333

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Thank you @JIMinNC. The summary was very helpful. I wonder if this will cause an increase in the resale prices for Vistana Mandatory resorts.
 
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