Jason, this is a quote from your last post.
Hilton customer with 7000 points converts 2000 points via a club perk. Should those points be treated as platnum, silver, gold or bronze when using them for open season inventory reservations?
That is a good question to ask HGVC. Since an owner/member depositing points for Perks could have numbers of timeshare contracts which resort, season, unit size does HGVC take the availability from? I would hope HGVC takes it from one of the resorts with loads of availability during a low season so that the highly sought after Club Reservation Inventory is not reduced for owner/member point reservations. Of course, as I have stated before, if the Open Season inventory is from inventory that was not reserved during the Club Reservation window it is a moot point.
The reality is:
Open season is from inventory that was not reserved during the club reservation window for a variatiy of reasons probably primarily:
1. Transfers to Club perks or HH.
2. The "rescue" of points for an additional year by people.
3. Hilton owned inventory
What people keep forgetting is that if you rescue your points, you will are taking a week or portion thereof from next year that could have been used by HGVC as either open season, a rental, or by a club member.
When you borrow points from next year, you are doing a similar thing but in inverse.
From my understanding (reviewing all the information I can), the system works as below:
There are a set number of points in the entire HGVC system (for simplicity sakes, I am going to say 1 Million points of time/year).
Of that one million points, HGVC owns in unsold inventory a portion (lets say, 300, 000 points which they are required to pay maint fee on.
During the year, customers transfer points to club partner perks or HHonors which cost real money for HGVC to provide (Yes, HH costs HGVC money, they are buying those points from Hilton hotels). Lets say for simplicity, that the cost is $0.10 per point. Lets also say that 100,000 points are used for this purpose (so HGVC pays $10,000 for owner benefits outside of the HGVC product mix for 100,000 points being added to their pool).
Now HGVC has a pool of 400,000 points of their inventory (part of which they paid cash for to owners who paid their maint fee).
They allow people to borrow from next year points and bring to current year and also allow people to rescure points from current year for future year. Lets assume that people borrow 100,000 points (free) and rescue 50,000 points (they generate some revenue from this).
This leaves them with 400,000 points - 100,000 non owner owned points borrowed + 50,000 points pushed into next year = 350,000 points of flexability in the system.
Lets assume that all rCI reservations outbound = RCI inbound so that nets to nothing.
Hilton also issues bonus points out to retail buyers like candy. Lets assume for my example that they issue 100,000 in bonus points or VIP packages etc and sell 50,000 in points to new customers.
Remaining pot of points in the HGVC controlled points bucket is 350,000 - 100,000 - 50,000 = 200,000 points.
Hilton also Spends money either exercising ROFR or through construction to add more points under its control (lets say they do that for 50,000 points)
So at the end of the day they end up with 250,000 points in the HGVC controlled bucket (they are just like you and me, an owner of points in the HGVC system).
Lets also (for simplicity sake) assume that all the owners use 100% of the points that are not traded or used for clubperks. If the points arn't used in current year they will be either rescued or traded into RCI (the logical thing that owners would do for any material amount of points).
HGVC now looks for ways to monitize the points similar to the way that many people here look to do it only they have more limitations (they can not borrow points, rescue points, and only have access to inventory that isn't reserved by club members [eg. they arn't holding on to the "hot weeks" to try to rent them for significant profit like some of the exchanges have been accused of doing].
Their process is probably something like this:
30 day window:
Unreserved inventory is immediatly marketed through all available channels.
If reserved with points by a member = No revenue, and all the marketing expense and administrative expense posting the night on Hilton.Com and Open season goes to waste.
If rented by a non-member - HGVC decreases their controlled points for that time interval and they get the cash for this and they get the highest cash in for that rate but also have to incure additional expenses (they need to pay an expense for the HH earned by the customer , probably have to pay the hilton unit and/or third party reservation site some type of comission, have to provide status benefits etc, etc...). This is probably the most expensive type of customer to rent to.
If rented to a HGVC member (the ideal cash customer) - HGVC decreases their points and gets cash. These customers are the least expensive to serve as they don't get HH points, the marketing is free, there is no comission to be paid on the room reservation etc.
If the room is not rented (worst case scenario) - Hilton loses the points assoiated from that week in their bucket and has paid either MF or cash for something that they received no benefit from.
Does this add the clarity as to how this process works? The non member rate might seem high, but the costs associate with it (commission (don't know the current rates, but I assume it is somewhere in range of 10%, HH point purchase to cover the rental, and additional benefits, as well as the extra houskeeping cost that they need to pay the HOA to cover for hotel style guests who expect daily housekeeping), might make that $400 room only return $200 cash in HGVC pocket.
This post might also help some on the board understanding that HGVC buys the HH points from Hilton hotels at some rate per point. If Hilton makes the points worth less benefit but still charges the same rate to HGVC per point and HGVC is only willing to give 10 cents per points in cash, the 25/1 ratio stays the same. If Hilton decreases the cost per point by 50%, all of a sudden you will see HGVC increase the ratio to 50/1.
Again, the above is my high level understanding of how HGVC system works based on the information I have been able to gather (phone reps and PR people are paid to present things in simplified ways that can more or less get you off their back ASAP, explaining the above to every single customer who asks would take hours).
If there is something I am missing, or some type of document or understanding I am confused about, please feel free to point it out.
