- Joined
- Jun 6, 2005
- Messages
- 4,894
- Reaction score
- 4,450
- Points
- 599
- Resorts Owned
-
Marriott:
Maui Ocean Club
Waiohai Beach Club
Barony Beach Club
Abound ClubPoints
HGVC:
HGVC at Sea World
I think we would all be well served to try to avoid implying that a developer like Marriott Vacations Worldwide has a "revenue stream in maintenance fees." As I know you are well aware, the maintenance fees themselves actually go to the HOA, and show up on the HOA income statement. The reliable revenue stream to MVW actually comes from the management fee that shows up as an expense item on that HOA income statement. I realize this is a nuance that is sort of nit-picky for folks like us who understand how all this stuff actually works - and I've made similar comments myself in the past - but I've seen many discussions over the years where it's been a source of confusion for some people. So, when we are talking about the developer themselves, I would suggest that it's more technically accurate to state our point like this:
They have a reliable revenue stream in management fees...
yes. I made the short form claim for maintenance fees going to the developer. They do end up going to them indirectly through the HOA. Since they make a % off the total, I don't see any incentive for them to keep fees low. But since they also own units until they are sold as points/weeks, they have some incentive to keep the fees low. Otherwise why wouldn't they increase the MF as much as possible so they can get get a bigger revenue?
ski_sierra makes a good point, so I will offer one clarification...I believe the maintenance fees collected do actually appear on Marriott Vacations Worldwide's corporate income statement, since there is a large income line item on the 10-K "Cost Reimbursements" ($925 Million in 2018, second only to Sales Revenue), but the key is, that Revenue line is directly and exactly offset by an expense item also called "Cost Reimbursements" ($925 Million also in 2018). The 10-K defines "Cost Reimbursements" as:
Cost reimbursements include direct and indirect costs that are reimbursed to us by customers under management contracts. All costs, with the exception of taxes assessed by a governmental authority, reimbursed to us by customers are reported on a gross basis. We recognize cost reimbursements when we incur the related reimbursable costs. Cost reimbursements consist of actual expenses with no added margin.
I interpret these offsetting revenue/expense line items as the Maintenance fees collected on behalf of the HOAs by MVW Corporate and the expenses paid out on behalf of the HOAs. So, while the Management Fee is the only component of maintenance fees that truly flows to the bottom line of MVW, it's probably incorrect on my part to imply that the maintenance fees are totally independent of the MVW income statement - they may be there, but only on a pass-thru basis since MVW handles the collection of fees and disbursements to vendors.
Here is some additional color on that topic, also from the 10-K:
We provide day-to-day-management services, including housekeeping services, operation of reservation systems, maintenance and certain accounting and administrative services for property owners’ associations, condominium owners and hotels.
We generate revenue from fees we earn for managing vacation ownership resorts, clubs, owners’ associations, condominiums and hotels. In our Vacation Ownership segment, these fees are earned regardless of usage or occupancy and are typically based on either a percentage of the budgeted costs to operate the resorts or a fixed fee arrangement (“VO management fee revenues”). ... In addition, we receive reimbursement of costs incurred on behalf of our customers, which consist of actual expenses with no added margin (“cost reimbursements”). Vacation Ownership segment cost reimbursements revenues exclude amounts that we have paid to the property owners’ associations related to maintenance fees for unsold vacation ownership products, as we have concluded that such payments are consideration payable to a customer.
Last edited: