Marriott Vacations Worldwide (VAC) purchase of Interval Leisure Group (ILG) discussion!

[JIMinNC]

The Starwood thread on this same topic is also interesting. A question for Marriott owners —-> do we really care about the access to the Starwood portfolio?

St John is nice, but so is St Thomas
Mission Hills is nice, but so is Palm Desert
Maui is nice, but we have that.
Kauai is nice, but we have that.

Mexico is new and is a cool addition

Bahamas is new, that’s also a cool addition.

So...just curious if we strip away the interesting news — what is most attractive to Marriott owners about Starwood?

(This is Starwood focused, because I personally am skeptical about getting access to Hyatt other than thru II, as we do today. I could be wrong on that.)

I look forward to comments of others.

Best,

Greg

Here are the properties within the VSE portfolio that interest me the most as a supplement to our current Marriott ownership, and where I would place real value if DC points could ever be used to book there:

- Westin Los Cabos (stayed there in February and loved the resort)
- Westin St John (once it reopens in 2019 or after, but I would suspect any combined program would be after that point anyway)
- Harborside at Atlantis
- Westin Princeville (for an option on the north shore of Kauai as a change of pace from the locations where Marriott is)
- The three Westin properties on Maui could provide an alternative/change of venue versus Maui Ocean Club - mainly if we wanted to go in an even year in addition to our odd year MOC ownership

If DC points could be used to access these properties, it would make me more interested in finding a way to acquire more DC points.

 

[Marathoner]

(This is Starwood focused, because I personally am skeptical about getting access to Hyatt other than thru II, as we do today. I could be wrong on that.)

There is a large location overlap between VSE and Marriott - although some differences exist as you've noted. In contrast, the HRC properties are quite upscale, more distinctive, and are in more unique locations - all qualities which would complement Marriott far more than almost any other timeshare system which they could acquire. The smaller scale of Hyatt properties and the scarcity of the available intervals makes them far more valuable to the DC Trust. As a result, I predict that MVC management will expend much more effort to somehow integrate HRC properties into the DC Trust. For similar reasons, I predict that MVC will exercise ROFR much more aggressively on the HRC weeks which are submitted. As an owner of both MVC and HRC weeks, I hope that this is not the case. I would much rather see Hyatt stay independent of the DC Trust in order to maintain exclusivity and avoid the competition for internal exchanges into the available HRC weeks. Unfortunately, I expect that MVC management will see the HRC properties as real gems that they'll want to add aggressively to the portfolio of Marriott properties by offering DC enrollment options as well as by exercising ROFR on Hyatt owners.

 

[mjm1]

The Starwood thread on this same topic is also interesting. A question for Marriott owners —-> do we really care about the access to the Starwood portfolio?

St John is nice, but so is St Thomas
Mission Hills is nice, but so is Palm Desert
Maui is nice, but we have that.
Kauai is nice, but we have that.

Mexico is new and is a cool addition

Bahamas is new, that’s also a cool addition.

So...just curious if we strip away the interesting news — what is most attractive to Marriott owners about Starwood?

(This is Starwood focused, because I personally am skeptical about getting access to Hyatt other than thru II, as we do today. I could be wrong on that.)

I look forward to comments of others.

Best,

Greg

Greg, we have stayed at St John, Harborside, WKORVN and Lagunamar, and enjoyed each of the properties. We have also visited, but never stayed at, Princeville. That is also of interest. We own at Kierland Villas, but ironically haven’t stayed there yet. Only visited. We will stay there in December. That is also a very nice property. While we own some time with Vistana, having the additional flexibility to use DC points for additional stays would be a nice option.

There is a large location overlap between VSE and Marriott - although some differences exist as you've noted. In contrast, the HRC properties are quite upscale, more distinctive, and are in more unique locations - all qualities which would complement Marriott far more than almost any other timeshare system which they could acquire. The smaller scale of Hyatt properties and the scarcity of the available intervals makes them far more valuable to the DC Trust. As a result, I predict that MVC management will expend much more effort to somehow integrate HRC properties into the DC Trust. For similar reasons, I predict that MVC will exercise ROFR much more aggressively on the HRC weeks which are submitted. As an owner of both MVC and HRC weeks, I hope that this is not the case. I would much rather see Hyatt stay independent of the DC Trust in order to maintain exclusivity and avoid the competition for internal exchanges into the available HRC weeks. Unfortunately, I expect that MVC management will see the HRC properties as real gems that they'll want to add aggressively to the portfolio of Marriott properties by offering DC enrollment options as well as by exercising ROFR on Hyatt owners.

I can see this being a great value to MVC as well if they can work through any complexities with Hyatt Corp. We have visited Highlands Inn, Piñon Point and High Sierra in NorthShore Lake Tahoe, and all of them are very nice properties. Whether it be by an internal trade or higher priority via an II trade, having greater access to their portfolio of properties would be a great option too.

Best regards.

Mike

 

[JIMinNC]

There is a large location overlap between VSE and Marriott - although some differences exist as you've noted. In contrast, the HRC properties are quite upscale, more distinctive, and are in more unique locations - all qualities which would complement Marriott far more than almost any other timeshare system which they could acquire. The smaller scale of Hyatt properties and the scarcity of the available intervals makes them far more valuable to the DC Trust. As a result, I predict that MVC management will expend much more effort to somehow integrate HRC properties into the DC Trust. For similar reasons, I predict that MVC will exercise ROFR much more aggressively on the HRC weeks which are submitted. As an owner of both MVC and HRC weeks, I hope that this is not the case. I would much rather see Hyatt stay independent of the DC Trust in order to maintain exclusivity and avoid the competition for internal exchanges into the available HRC weeks. Unfortunately, I expect that MVC management will see the HRC properties as real gems that they'll want to add aggressively to the portfolio of Marriott properties by offering DC enrollment options as well as by exercising ROFR on Hyatt owners.

I think the complicating factor is Marriott International now controls the Marriott, Westin, and Sheraton brand families, but not Hyatt. I think it is logical for Marriott Vacations Worldwide to view Marriott, Westin, and Sheraton timeshares as part of the same "family", since the related hotel brands are also part of the same hotel family. While I agree that the Hyatt locations add more variety to the current MVC offerings than does Vistana, the brand complication can't be ignored.

 

[Marathoner]

I think the complicating factor is Marriott International now controls the Marriott, Westin, and Sheraton brand families, but not Hyatt. I think it is logical for Marriott Vacations Worldwide to view Marriott, Westin, and Sheraton timeshares as part of the same "family", since the related hotel brands are also part of the same hotel family. While I agree that the Hyatt locations add more variety to the current MVC offerings than does Vistana, the brand complication can't be ignored.

Disagree. The physical properties are far, far more important than the Hyatt name. MVC is set to assume the license to use the HRC brand once the ILG acquisition closes. If there is a clause which does allow Hyatt to revoke its license and Hyatt were to invoke its right, then MVC could simply take the former HRC properties and rebrand them under one of its existing labels - Westin, Marriott, Ritz-Carlton, or St Regis. Or simply create a new brand. As an HRC owner, I don't really care what my Hyatt property is called, as long as the property is managed well and the resale value remains decent. An upscale brand like Hyatt simply signifies that a certain standard of care will be maintained, but a number of other high-end brands will also carry the same imprimatur.

I highly doubt that Hyatt would terminate MVC's license to use the HRC brand anyway. Licensing the HRC brand is free money to Hyatt and I don't seeing Hyatt doing anything which risks this particular revenue stream. The only thing that Hyatt cares about is that MVC doesn't do anything with the HRC properties which dilutes the brand strength of their Hyatt hotel franchise - which MVC would take care not to do anyway.

In fact, if I were MVC management, I would work to terminate the licensing of the HRC brand with Hyatt and rebadge the HRC properties to one of their existing MVC high-end labels in order to save millions in license fees paid to Hyatt each year.

 

[VacationForever]

The Starwood thread on this same topic is also interesting. A question for Marriott owners —-> do we really care about the access to the Starwood portfolio?

St John is nice, but so is St Thomas
Mission Hills is nice, but so is Palm Desert
Maui is nice, but we have that.
Kauai is nice, but we have that.

Mexico is new and is a cool addition

Bahamas is new, that’s also a cool addition.

So...just curious if we strip away the interesting news — what is most attractive to Marriott owners about Starwood?

(This is Starwood focused, because I personally am skeptical about getting access to Hyatt other than thru II, as we do today. I could be wrong on that.)

I look forward to comments of others.

Best,

Greg

For us Marriott owners, we have no interest in going to Vistana properties. We love Lagunamar, which is favorite Vistana property, but with the increasing violence in the area, it is now off our list. The only resort that we go to regularly, even though we feel that the quality of the resort is inferior to Marriott Desert Springs, is Westin Mission Hills because of its first class golf facility next door. We have more than enough Staroptions to book into it each year, and we elect to convert to Starpoints every other year.

We sold off all of our Vistana ownership past couple of years and kept just one week because we decided that Marriott has more to offer us than Vistana.

 

[bdh]

I think the complicating factor is Marriott International now controls the Marriott, Westin, and Sheraton brand families, but not Hyatt. I think it is logical for Marriott Vacations Worldwide to view Marriott, Westin, and Sheraton timeshares as part of the same "family", since the related hotel brands are also part of the same hotel family. While I agree that the Hyatt locations add more variety to the current MVC offerings than does Vistana, the brand complication can't be ignored.

Disagree. The physical properties are far, far more important than the Hyatt name. MVC is set to assume the license to use the HRC brand once the ILG acquisition closes. If there is a clause which does allow Hyatt to revoke its license and Hyatt were to invoke its right, then MVC could simply take the former HRC properties and rebrand them under one of its existing labels - Westin, Marriott, Ritz-Carlton, or St Regis. Or simply create a new brand.

When the Marriott press release includes the statement of "With respect to its Hyatt business, the combined company will have rights to develop, market and sell under the Hyatt Vacation Ownership programs", it sounds like HRC will remain a separate brand/entity and there may actually be new properties/locations added to the HRC brand.

 

[CalGalTraveler]

Hmm...Perhaps this DC overlay is all wrong. Marriott also acquired II, Trading Places, VRI and Aqua-Aston Hospitality. I was reading on another MVC thread that it is cheaper (and more convenient) for Marriott owners to enroll in DC than to exchange via II if you have multiple trades. This incentive for DC was designed in a day when Marriott wanted to receive some exchange $ instead of giving it all to II. Now they own both methods and they should not care because they receive $ either way.

With this acquisition, they might prefer to send owners to II because it is more lucrative (read more expensive for Marriott owners) than enrolling in DC.

The exchange and rental business comprises 28% of current revenue. It is likely their highest margin business because operating and capex costs are minimal compared to sales of VOI and Resort Operations. These resort systems already participate in II so incremental cost is minimum. This business does not damage their reputation and have all the headaches of foreclosure and deedbacks. It is also a recurring revenue stream vs. VOIs which are one-off sales. Wall St. likes recurring revenue...

Perhaps they put II on steroids to boost the II exchange and rental business. They encourage more exchange inventory trades by incenting owners to exchange via II. Marriott already make their MFs from owners, but exchange fees are incremental revenue. This would simplify the model immensely without dealing with unraveling the legal hairballs of each system. They could also boost getaways and rentals if more inventory was in the system. They could also roll this out very quickly since II is already in place with each of these systems.

Over time, they could also add (or transition) a "super DC points" model based on II for incremental revenue. This becomes part and parcel of II and they could assign points values for each resort and transition away from legacy points systems long term.

 

[Fasttr]

Hmm...Perhaps this DC overlay is all wrong. Marriott also acquired II, Trading Places, VRI and Aqua-Aston Hospitality. I was reading on another MVC thread that it is cheaper (and more convenient) for Marriott owners to enroll in DC than to exchange via II if you have multiple trades. This incentive for DC was designed in a day when Marriott wanted to receive some exchange $ instead of giving it all to II. Now they own both methods and they should not care because they receive $ either way.

With this acquisition, they might prefer to send owners to II because it is more lucrative (read more expensive for Marriott owners) than enrolling in DC.

The exchange and rental business comprises 28% of current revenue. It is likely their highest margin business because operating and capex costs are minimal compared to sales of VOI and Resort Operations. These resort systems already participate in II so incremental cost is minimum. This business does not damage their reputation and have all the headaches of foreclosure and deedbacks.

Perhaps they put II on steroids to boost the II exchange and rental business. They encourage more exchange inventory trades by incenting owners to exchange via II. Marriott already make their MFs from owners, but exchange fees are incremental revenue. This would simplify the model immensely without dealing with unraveling the legal hairballs of each system. They could also boost getaways and rentals if more inventory was in the system. They could also roll this out very quickly since II is in place.

They could also add (or transition) a "super DC points" model based on II for incremental revenue. This becomes part and parcel of II and becomes similar to RCI points values for each resort.

But none of that sells DC points.

 

[CalGalTraveler]

Revenue is revenue. It sells II superpoints and increases exchange revenue due to better/more exchange inventory. This way they can also upsell DC in addition to ILG.

Also less scary for ILG owners to convert to an II brand that is known vs. unknown Marriott DC brand. This will result in more conversions to points and super exchanges which is the goal.

 

[CalGalTraveler]

Strategically if revenue and margins increase substantially from this segment of the business they could make this and TS operations their core business and eventually look more like a TS hotel chain and eventually spin off the TS assets with LT II and operational agreements to get them off their balance sheet and lock in recurring revenue. Wall St. would love that.

In addition, they must get a lot of pushback from the hotel brands for negative timeshare practices. This grows revenue and keeps them out of trouble with hotel brands.

 

[VacationForever]

I agree with @CalGalTraveler up to a certain extent. Many posts here and on the Vistana thread are from owners being optimistic about getting enrolled into DC for little to no money and have access to DC and VSE inventories without going through II. This will create negative revenue for VAC.

This acquisition is all about increasing future revenues for VAC, which means generating more developer sales. The access across systems will be given to developer-bought weeks/points access to other systems at a shorter period compared with owners within the same system. VAC will likely keep 3 systems separate to maximize sales opportunities.

In the meantime, if you are not in the internal trading systems, you are at the mercy of continuing to trade through II, and the price of exchanges is going to keep increasing. The exchange costs will continue to make resale owners consider requalifying their units at high costs, similar to the HPP model or the occasional offer by Marriott to buy points to enroll their post June 2010 weeks. The junk fees will also keep increasing.

 

[dioxide45]

I agree with @CalGalTraveler up to a certain extent. Many posts here and on the Vistana thread are from owners being optimistic about getting enrolled into DC for little to no money and have access to DC and VSE inventories without going through II. This will create negative revenue for VAC.

This acquisition is all about increasing future revenues for VAC, which means generating more developer sales. The access across systems will be given to developer-bought weeks/points access to other systems at a shorter period compared with owners within the same system. VAC will likely keep 3 systems separate to maximize sales opportunities.

In the meantime, if you are not in the internal trading systems, you are at the mercy of continuing to trade through II, and the price of exchanges is going to keep increasing. The exchange costs will continue to make resale owners consider requalifying their units at high costs, similar to the HPP model or the occasional offer by Marriott to buy points to enroll their post June 2010 weeks. The junk fees will also keep increasing.

Of course, anyone's speculation is always as good as the others. I love speculation...

 

[SueDonJ]

I think it's worth noting that in the speculation leading up to the DC introduction the majority TUG consensus was that MVW would have to be mindful of what any new products would do to Weeks resale values, and, offering low-to-no fee structures to entice existing Weeks owners into playing the new game via low purchase prices for any Points product and low-cost uninhibited participation by Weeks Owners. TUGgers warned that MVW couldn't continue their pattern with existing Weeks of implementing ongoing increases in purchase prices and transaction fees, couldn't do anything with any product that would in any way counter the Weeks values that they'd historically established via purchase prices, couldn't differentiate between developer-direct and external-resale Weeks in any way, couldn't infringe in any way on the established values of Weeks exchanged via II, couldn't be successful if they didn't - at least in the beginning - prioritize their focus on value for existing owners as opposed to the company itself, etc etc etc.

Yet with and since the DC introduction the company has continued to increase its bottom line despite having disproved the overwhelming majority of the TUG warnings, while the popularity of the DC continues to gain momentum even here on TUG where the established game is "Beat The Developers."

I've seen value in MVW products and their various incantations throughout our ownership but that doesn't mean that everything they've ever done has increased the usage value of my particular ownership, and it's for sure that the monetary value has been devalued. Whatever they do with this acquisition in whatever forms it may be implemented, we'd all be smart to temper any expectations that they "can't" or "won't" do something because we won't like it. Study up on the legalities of what you own so as to protect your ownership, and be prepared for the onslaught of (sometimes irrational) negative reaction that's going to happen no matter what MVW does.

 

[CalGalTraveler]

+1 @VacationForever Why would VAC give people easy access to exchange with the entire system and leverage their investment ($) when they could offer to sell them additional developer deeds ($$$) in each of the three+ systems (MVC, Vistana, HHR) with preference to that system through internal trading systems (perhaps an elite type of ownership if they buy two or from all three etc..).

Although this is all speculation, one thing is for certain: VAC will select whatever option makes VAC the most money in the shortest amount of time, with the least amount of legal, hotel brand and owner disatisfaction exposure. The possibilities from this merger are many; the strategic planners and legal experts will be working overtime on profit scenarios. As @SueDonJ accurately points out - some will win and some will lose. They will not please everyone.

 

[Steve A]

Changes in the system are designed to make the Marriotts richer not to enhance our happiness.

 

[BocaBoy]

This incentive for DC was designed in a day when Marriott wanted to receive some exchange $ instead of giving it all to II. Now they own both methods and they should not care because they receive $ either way.

Of course, Marriott wants to make as much money as they can, but one major force driving the introduction of a points system (which was under development for years before it was introduced) was owner dissatisfaction with II trades, especially from owners of premium MVCI properties with important view categories (e.g., ocean front in Hawaii). Many of us with those properties were very vocal for years about the inability to keep a view in a trade and Marriott listened. Their challenge was how to implement an internal exchange system to make owners happy and at the same time make it profitable. As chance would have it, DC was introduced at a time when the economy was horrible and they needed a boost, but the idea was hatched long before.

 

[frank808]

I have never experienced II skim on my trades into MKO. I have always traded my studio and 1br units at Willowridge, grand vista, harbor lake, etc for minimum 1br all the way to 3br at MKO. I have been lucky enough to do 100's of trades into MKO and love the system.

Now if I can enroll all my post 2010 weeks into DC points for a reasonable price i would be ecstatic. Would love to save on all the lockoff and trade fees.

Sent from my SM-N950U using Tapatalk

 

[JIMinNC]

Disagree. The physical properties are far, far more important than the Hyatt name. MVC is set to assume the license to use the HRC brand once the ILG acquisition closes. If there is a clause which does allow Hyatt to revoke its license and Hyatt were to invoke its right, then MVC could simply take the former HRC properties and rebrand them under one of its existing labels - Westin, Marriott, Ritz-Carlton, or St Regis. Or simply create a new brand. As an HRC owner, I don't really care what my Hyatt property is called, as long as the property is managed well and the resale value remains decent. An upscale brand like Hyatt simply signifies that a certain standard of care will be maintained, but a number of other high-end brands will also carry the same imprimatur.

I highly doubt that Hyatt would terminate MVC's license to use the HRC brand anyway. Licensing the HRC brand is free money to Hyatt and I don't seeing Hyatt doing anything which risks this particular revenue stream. The only thing that Hyatt cares about is that MVC doesn't do anything with the HRC properties which dilutes the brand strength of their Hyatt hotel franchise - which MVC would take care not to do anyway.

In fact, if I were MVC management, I would work to terminate the licensing of the HRC brand with Hyatt and rebadge the HRC properties to one of their existing MVC high-end labels in order to save millions in license fees paid to Hyatt each year.

How many HRC locations are co-located with Hyatt hotels? In those situations it would be much tougher to rebrand a HRC property to something else, since another entity likely controls the associated hotel property and its branding and management.

I understand that MVW will have full license to the HRC brands, but my broader point was that I could see the Marriott Vacation Club/Westin Vacation Club/Sheraton Vacation Club properties eventually integrated into some kind of integrated Points system due to the common brand ownership/loyalty program from Marriott International; while the HRC properties could be operated in a less integrated fashion, more as a standalone entity (with maybe preferential trading through II).

Another issue would be if the transaction gets any anti-trust scrutiny, could HRC be a bargaining chip that they sell or spin-off to negotiate any anti-trust complaints?

 

[gaspasser]

Marriott told me that if I buy an enrolled deeded week from them, they count how many points it is worth in addition to how many actual DC Trust Points I own, and then I would qualify for the member level of the total combination, even if I never convert. For example, let’s say I have 7000 DC points and I own an enrolled MKO week (using MKO just as an example), which is worth a little under 5000 points. The combination would be approximately 12,000 points and push me from Executive Level to Presidential Level, even if I never convert MKO to points. I have not actually bought an enrolled deeded week from Marriott so I am wondering if others have been able to achieve a higher membership level in this way?

That is true

 

[bizaro86]

I don't think anti-trust will be a problem, as their market share is still relatively low - Wyndham, Diamond, Bluegreen, Hilton, DVC, Westgate, etc are all still in active sales and big, and their market share won't be enough to cause an issue. Also, I think timeshare sales aren't a politically popular thing to "protect competition" in anyway.

 

[chemteach]

The other thing VAC could do is turn II into an exchange points system in the same way RCI has gone to "tpu" points for their weeks program. They could create an internal exchange preference period between Marriott, Vistana, and Hyatt weeks. (I believe right now that Hyatt owners cannot exchange into Hyatt properties with their Hyatt points via II - they do this throught the non II Hyatt exchange program similar to Vistana's Star Options.) Or, of course, VAC could leave the II system as it is now - with a Marriott internal preference period and a Vistana internal preference period.

 

[Carlsbadguy]

I have a feeling what Marriott may do is increase the points needed for Chairman and maybe some of the higher levels and only those higher levels will have access to a super system. Possibly even make a higher level than Chairman. I do think if already at those levels you would be grandfathered in. A point value will be assigned to all weeks and people not currently with Destination Points can buy a low number of new points and their week will be enrolled.

 

[Ewiike]

Wow! That's a big one!

 

[Swice]

My prediction is: We will have to wait at least two years before we know anything. First, the sale has to actually go through. Second, it will take them time to figure out how to cut internal duplication and realize some quick cost savings (let's put out bids to suppliers for toilet paper, etc for cost savings). Third, they'll need time to decide if they'll continue to run different programs or combine into one (that will take a LOT of thought). Fourth, they dream up ways to "enhance" each program (somehow they'll give us access to additional properties). Then they'll have to actually design/merge computer systems or at least get them to talk to each other. At that point, they'll start throwing a few crumbs our way. And at a later date they'll actually start "selling" the new program. Remember, it wasn't until a month ago that we found out how Marriott and Starwood programs were going to merge (and there were no deeds/purchase contracts with customers involved) and that took two years.