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

[bazzap]

Maybe I'm confused. Certainly we should all look at where these type of things end up and make decisions as to what works best for us but your post seems to think it's owed or you'd be upset with MVC, rather than MR, if it changed negatively. We should buy timeshares, chose our hotels and use CC for the best choice for us, but to expect certain options or be overly upset if things change seems unreasonable. These are essentially separate companies and we could see the entire program go away completely from a MVC standpoint. If buying a timeshare doesn't work without these options, it shouldn't work with them, their peanuts. Personally I wouldn't expect them to announce the exact nuances of how it'll work, I don't think they ever do for these type of issues unless their using some change as a sales or participation enticement.

I agree that as MVC owners we can’t expect or depend on these options going forward, although they probably will continue in a similar form.
I wouldn’t describe them as peanuts though. For us, these benefits have been substantial over the years in both financial terms and in the perks they have given us.

 

[Dean]

I agree that as MVC owners we can’t expect or depend on these options going forward, although they probably will.
I wouldn’t describe them as peanuts though. For us, these benefits have been substantial over the years in both financial terms and in the perks they have given us.

The point there was if MVC doesn't make sense without the benefit, it doesn't with it either.

 

[bazzap]

The point there was if MVC doesn't make sense without the benefit, it doesn't with it either.

For sure, I agree with you there.

 

[Ralph Sir Edward]

Good Point. I guess the issue is who owns the properties. Hopefully ILG and eventually Marriott. If Hyatt wants to exit their name so be it. Here is the list of properties. It looks like some of them are attached to a Hyatt hotel but not all. Maybe someone knows.

Hyatt Residence Club
Hyatt Residence Club At Park Hyatt Beaver Creek Avon, Colorado Mountain
Hyatt Residence Club Beaver Creek, Mountain Lodge Beaver Creek, Colorado Mountain
Hyatt Residence Club Bonita Springs, Coconut Plantation Bonita Springs, Florida Beach
Hyatt Residence Club Breckenridge, Main Street Station Breckenridge, Colorado Mountain
Hyatt Residence Club Carmel, Highlands Inn Carmel, California Beach
Hyatt Residence Club Dorado, Hacienda del Mar Dorado, Puerto Rico Beach
Hyatt Residence Club Grand Aspen Aspen, Colorado Mountain
Hyatt Residence Club Key West, Beach House Key West, Florida Beach
Hyatt Residence Club Key West, Sunset Harbor Key West, Florida Beach
Hyatt Residence Club Key West, Windward Pointe Key West, Florida Beach
Hyatt Residence Club Lake Tahoe, High Sierra Lodge Incline Village, Nevada Mountain
Hyatt Residence Club Lake Tahoe, Northstar Lodge Truckee, California Mountain
Hyatt Residence Club Maui, Kāʻanapali Beach Lahaina, Hawaii Beach
Hyatt Residence Club San Antonio, Wild Oak Ranch San Antonio, Texas Country
Hyatt Residence Club Sarasota, Siesta Key Beach Siesta Key, Florida Beach
Hyatt Residence Club Sedona, Piñon Pointe Sedona, Arizona Desert

Hyatt Residence Club San Antonio, Wild Oak Ranch San Antonio, Texas Country is a stand alone.

 

[JIMinNC]

I think, from an owners perspective, it’s VERY easy to make a case for MF and nights counting. It would be very easy to view this as contractually pre-paid nights/stays. For MVC it’s guarenteed income whether or not you actually stay in a MVC property

Maintenance fees go to each resort HOA, and do not represent income to MVC's bottom line. The only income MVC gets from maintenance fees is the management fee, which I think is 10% of the resort operating budget. So at most, you could argue that 10% of your maintenance fee should count toward the spend. But the fact that MVC is a separate company, and not a part of Marriott International even complicates that. Marriott International gets $0 from your maintenance fee, so for it to count toward spend, MVC would have to pay Marriott International for that perk for MVC owners. Not sure 10% would be worth it.

 

[tschwa2]

Maintenance fees go to each resort HOA, and do not represent income to MVC's bottom line. The only income MVC gets from maintenance fees is the management fee, which I think is 10% of the resort operating budget. So at most, you could argue that 10% of your maintenance fee should count toward the spend. But the fact that MVC is a separate company, and not a part of Marriott International even complicates that. Marriott International gets $0 from your maintenance fee, so for it to count toward spend, MVC would have to pay Marriott International for that perk for MVC owners. Not sure 10% would be worth it.

I think MVC does pay MI for the use of the Marriott name and for program perks like status for chairman's club and all of the others. I don't know exactly where they build that in but its in there somewhere.

In addition to the 10% management fee there are all kinds of small ways that Marriott - not sure if MVC or MI or both benefit from the management and control of the boards. Contracts for goods and services are steered toward Marriott owned or related products like Marriott mattresses, the marketplace, food services, spa, etc. The staff at least front desk, are they MVC employees or MI employees? The little name badges make me think MI. I doubt most MVC resorts take bids for services like hk and laundry all in the name of keeping up Marriott standards.

 

[JIMinNC]

I think MVC does pay MI for the use of the Marriott name and for program perks like status for chairman's club and all of the others. I don't know exactly where they build that in but its in there somewhere.

In addition to the 10% management fee there are all kinds of small ways that Marriott - not sure if MVC or MI or both benefit from the management and control of the boards. Contracts for goods and services are steered toward Marriott owned or related products like Marriott mattresses, the marketplace, food services, spa, etc. The staff at least front desk, are they MVC employees or MI employees? The little name badges make me think MI. I doubt most MVC resorts take bids for services like hk and laundry all in the name of keeping up Marriott standards.

Yes, of course MVC pays MI for the perks we get, but if they were to add counting MF in the spend, they would have to increase that payment. Why would they do that since 90% of the MF goes to the resort HOA for resort expenses? The payment for the marketing licenses and these perks shows up on the income statement for Marriott Vacations Worldwide, not the individual resorts. The resorts pay their share of that fee through the 10% management fee paid to MVW.

And yes, MVW does earn some $$ to the bottom line from food and beverage and other resort spend, but that is direct revenue that I think may count toward resort spend. The point being discussed is MF, though, and that clearly doesn't count.

MVC has a license to use the MI brands, so the name tags can say Marriott/Marriott Vacation Club, or whatever. I'm pretty sure the resort employees are employed by MVW or the resorts themselves, at least that is where their salaries come from. I think in the hospitality business the employees are typically employed by the management company, so for hotels managed by Marriott International, the hotel employees work for MI. For the Marriott timeshares, Marriott Vacations Worldwide is the management company, so they would either be employed by MVW with the resort HOA paying for their salaries/benefits, or perhaps they are direct employees of the resort. Not sure about that, but I'm pretty sure they are not employed by MI. All MI has is a marketing and branding license agreement with MVW.

 

[Sapper]

JIMinNC said -I wonder what those "other actions" are that Hyatt has the right to take? The way that is worded, it seems they could at least opt to terminate their license agreement, meaning VAC would have to take the Hyatt name off of those properties and wouldn't be able to market to Hyatt guests/loyalty members. It would be simple enough to rebrand them as Marriott Vacation Club or Westin Vacation Club, but that would seem to be significantly complicated by Hyatt timeshare locations that are co-located with Hyatt hotels.

How many of the Hyatt timeshares share facilities/grounds with a Hyatt hotel?

Good Point. I guess the issue is who owns the properties. Hopefully ILG and eventually Marriott. If Hyatt wants to exit their name so be it. Here is the list of properties. It looks like some of them are attached to a Hyatt hotel but not all. Maybe someone knows.

Hyatt Residence Club
Hyatt Residence Club At Park Hyatt Beaver Creek Avon, Colorado Mountain
Hyatt Residence Club Beaver Creek, Mountain Lodge Beaver Creek, Colorado Mountain
Hyatt Residence Club Bonita Springs, Coconut Plantation Bonita Springs, Florida Beach
Hyatt Residence Club Breckenridge, Main Street Station Breckenridge, Colorado Mountain
Hyatt Residence Club Carmel, Highlands Inn Carmel, California Beach
Hyatt Residence Club Dorado, Hacienda del Mar Dorado, Puerto Rico Beach
Hyatt Residence Club Grand Aspen Aspen, Colorado Mountain
Hyatt Residence Club Key West, Beach House Key West, Florida Beach
Hyatt Residence Club Key West, Sunset Harbor Key West, Florida Beach
Hyatt Residence Club Key West, Windward Pointe Key West, Florida Beach
Hyatt Residence Club Lake Tahoe, High Sierra Lodge Incline Village, Nevada Mountain
Hyatt Residence Club Lake Tahoe, Northstar Lodge Truckee, California Mountain
Hyatt Residence Club Maui, Kāʻanapali Beach Lahaina, Hawaii Beach
Hyatt Residence Club San Antonio, Wild Oak Ranch San Antonio, Texas Country
Hyatt Residence Club Sarasota, Siesta Key Beach Siesta Key, Florida Beach
Hyatt Residence Club Sedona, Piñon Pointe Sedona, Arizona Desert

The Park Hyatt in Beaver Creek is a commingled facility. The Mountain Lodge (basically across the street) is seperate. The Park Hyatt Hotel is owned by an independent group that has some other hotels, Marriott could approach them to buy them out or make a deal to rebrand. Grand Hyatt Aspen is is it's own facility which Hyatt rents rooms out as if it were a hotel. Highlands Inn in Carmel is part hotel, part timeshare, and must remain so per some agreement with the California Coastal Commission. ILG became the Hyatt concession holder for the hotel portion when they bought HRC from Hyatt. I would imagine Marriott would have no problem changing names there (besides agnst among the owners). Tahoe Northstar has some kind of deal with Welk. Some of the properties have facility sharing agreements, and while i can see Marriott cancelling them, it will irritate the owners. The ownership for some properties is RTU and others is deed. There is also a disaster called the Hyatt Points Program that was semi-rolled out about a year ago. Hyatt management basically took all of the unsold units and dumped them into a trust, then sold points in the trust. Anyway, it's one more thing Marriott will have to deal with.

 

[BigMac]

During the MVC earnings call this morning they stated that basically all approvals have been obtained for the merger with the shareholder votes scheduled for August 28th. Because of their progress, they are scheduling the closing date for the transaction for August 31st - one month earlier than previously announced.

 

[JIMinNC]

Found the IJG/MVW merger prospectus on the SEC website and skimmed it. Fascinating read, especially the chronology of the merger discussions between Steve Weisz and Craig Nash which actually date back to May 2016 just before the ILG acquisition of Vistana closed.

The SEC site also had several of the regulatory filings, one of which included the internal communications about the executive management changes in the combined company and discussion of when other employees would learn their place in the new organization during the integration process. That included a timeline of major events, that I thought TUGgers might find interesting and could offer insight into the pace of change we might expect. Here is that section:

What are the next steps in the design of the future organization? When will I know about my job?

• MVW’s new leadership team will build out the rest of the organization using a thoughtful and consistent process.
• The first step will be to build out the senior leadership team, which we expect to complete and communicate by end of November.
• After that, our goal is to communicate additional details about the organization and have decisions around the future design of the organization and related roles and responsibilities by the end of the first quarter of 2019.
• As with all integrations, plans will continue to evolve in the coming year, as we continue to refine our strategic direction.
• We will provide updates on the process as additional decisions are made.

----
Having been involved in many corporate mergers over my career, I would be surprised if there are any substantive changes to ILG's operations prior to the new organization being put into place, and it looks like that may take until the end of first quarter 2019. It may be difficult to even start serious work on any significant changes until after the new organization is in place. That may not prevent some minor incremental change/integration, but I don't think anyone should be getting ready to use their Destination Points for Vistana properties any time soon. Just my opinion.

 

[JanT]

I'm curious as to what everyone thinks will happen to Hyatt timeshares in this merger, i.e., will they have a lot of value within the system since there really are so few of them. We currently own a Sunset Harbor (Key West) platinum week and I've been toying with the idea of selling it in order to pick up one or two resale Marriott weeks. But, my gut tells me to hang onto the Hyatt week because it could become valuable once the merger is complete and shakes out a bit. Thoughts?

 

[JIMinNC]

I'm curious as to what everyone thinks will happen to Hyatt timeshares in this merger, i.e., will they have a lot of value within the system since there really are so few of them. We currently own a Sunset Harbor (Key West) platinum week and I've been toying with the idea of selling it in order to pick up one or two resale Marriott weeks. But, my gut tells me to hang onto the Hyatt week because it could become valuable once the merger is complete and shakes out a bit. Thoughts?

Don't think anyone knows. Marriott may not even know for sure. Based on things written in the merger prospectus, this "change of control" of ILG gives Hyatt Hotels the right to terminate certain agreements with ILG pertaining to the timeshares. Marriott Vacations Worldwide has not disclosed what discussions have been held with Hyatt so far, and no one knows how Hyatt Hotels feels about a Marriott-affilliated company owning marketing rights to the Hyatt-branded timeshares. Some have speculated that the Hyatt properties will eventually be sold to another entity since they don't have the synergy with the other Marriott-owned brands and are affiliated with another hotel company. But that is just speculation.

 

[bazzap]

Don't think anyone knows. Marriott may not even know for sure. Based on things written in the merger prospectus, this "change of control" of ILG gives Hyatt Hotels the right to terminate certain agreements with ILG pertaining to the timeshares. Marriott Vacations Worldwide has not disclosed what discussions have been held with Hyatt so far, and no one knows how Hyatt Hotels feels about a Marriott-affilliated company owning marketing rights to the Hyatt-branded timeshares. Some have speculated that the Hyatt properties will eventually be sold to another entity since they don't have the synergy with the other Marriott-owned brands and are affiliated with another hotel company. But that is just speculation.

Speculation with a fair degree of logic attached though. I agree.

 

[Sapper]

Don't think anyone knows. Marriott may not even know for sure. Based on things written in the merger prospectus, this "change of control" of ILG gives Hyatt Hotels the right to terminate certain agreements with ILG pertaining to the timeshares. Marriott Vacations Worldwide has not disclosed what discussions have been held with Hyatt so far, and no one knows how Hyatt Hotels feels about a Marriott-affilliated company owning marketing rights to the Hyatt-branded timeshares. Some have speculated that the Hyatt properties will eventually be sold to another entity since they don't have the synergy with the other Marriott-owned brands and are affiliated with another hotel company. But that is just speculation.

Just a guess... either:
A) This is pure profit for Hyatt. As long as Marriott agrees to not diminish the Hyatt brand in any way, I can see them going along with a Marriott deal.
B) Hyatt does not go along with the deal, and Marriott rebrands all of the Hyatt properties into some specific sub-brand (ie, Marriott H Collection).
C) Hyatt does not go along with the deal, and pushes (legal threat) for the properties to not be under Marriott control. Marriott spins them off back into an independent company with an IPO to fund it. Marriott would control a large percentage (49%), and would mandate specific ties to use II for trading. This would both keep the Hyatt properties under Marriott's thumb and continue to allow trading from all other Marriott owned properties (so they could use trading into them for marketing purposes).

I doubt that Marriott will sell the Hyatt properties to any competing companies.

 

[GregT]

All,

I reached out to my sales executive and asked if there was any activity going on regarding integrating the Marriott and Starwood systems. He indicated there was no big news and that management was targeting a late Q1 2019 announcement of whatever the next phase of integration is going to be. Nothing actionable here, but will be curious to see if this holds.

Best,

Greg