Perhaps our weeks exchange requests WILL be successful (title edited)

[RedDogSD]

Think about this. The Marriott has to sell Timeshares. They have lots of inventory.

Let me make a few assumptions and tell me if my logic holds.

1.) Just for the sake of argument, lets assume that Marriott builds no new resorts for the next 5 years.
2.) Lets assume that they sell 100,000 new units in the next 5 years.

So, we have a 100,000 unit increase in demand, and no increase in supply. If the Points program did not come out, what would have happened.

1.) Some portion of the 100,000 people would be pulling good weeks out of the inventory from Marriott (MOC weeks that were sold, etc) and some portion of the 100,000 people would be in Interval competing with us for the prime weeks (because they bought stuff we didn't want to exchange into, but are now competing with us for prime weeks)

So, because they are going into a seperate pool, most of the time they will not be competing with us in Interval for good weeks. Now, Marriott has to give them some inventory to play with, but they cannot give all 100,000 people the prime weeks. Many of them do not have enough, or want to spend enough points to use the prime weeks. Who is buying enough points to go to Maui every year at $9.20/point. One of the benefits to their points program is that they will have the incentive to use the lower demand weeks.

So, my logic says that Marriott will still have prime weeks available. Of course they will try to rent them out. However, they do that now. They don't give them to Interval out of the goodness of their heart. They don't have success renting all of the weeks out that they would like to, so they take the pressure off and get some cash by giving a good chunk to Interval. So, why would they stop doing that? They will be left with way too much inventory if they don't do that.

Unless the points program is so successful that they are selling 10x as many units as they would have under the old program, the demand for the prime weeks will not go up much more than it would have.

Ok, I don't want to re-read and edit my post, so let me know if I have any logic flaws here.

 

[RedDogSD]

To follow up on my earlier thought.....in the old world, guy walks into Branson or Sable Palms and buys low season week. He is excited because he "should" have a decent chance at getting Maui weeks. You always hear about people getting Maui weeks in Flexchange....so this new owner, even though he owns something low in value....will directly compete with the rest of us to get prime Maui and other weeks.

In the new world, he buys enough points to go to Branson or Sable Palms in off season. He does not bother to try to get Maui because he has seen the points chart. He know that he will have to save up for 2 years on 2 of his properties to go there. So, he will try to go somewhere else.

Maybe Marriott did us a favor.

 

[cp73]

Reddog I agree with your logic. Today there is no demand for those units in the new points pool so Marriott has to do something with them. They wont just sit idle. Logically it makes sense they will only take what they need and relinquish the rest back to II. I guess the question becomes if they take exactly what they need and no more than how is that in proportion to the total demand for those both with and without the new points program. We know today that there are not enough units in prime locations to satisfy the demand of those that want them. Thats why there is the one year wait at some reports to snag one.

I guess I agree with you and dont think the sky is falling. We may never notice an impact of this.

 

[MOXJO7282]

I think there is some validity to your position, but the one wild card that we don't know is how Marriott will allocate prime float weeks that they own in the trust.

If we knew they were only going to take a small percentage then I would say you may have a point, but without knowing its tough to say definitively.

The other positive that I think is entirely possible is resale prices going up, especially if your position is accurate.

If the points cost to get to the prime weeks is steep, which it is, what better way to get value then to buy resale. Sure the price to enroll and perhaps additional points is a negative for someone who wants a trader, but for those that just want Maui or Aruba just to go where they own, there will be less available weeks and pricing should rise for high demand resorts.

 

[pwrshift]

With all the fuss over this change on TUG ... what about all the Marriott owners that have never even heard of this board? I haven't received anything from Marriott telling me about it, not even an email or snail mail with contracts and other information. Seems very odd. How will they get people to join this way?

Brian

 

[RedDogSD]

I think there is some validity to your position, but the one wild card that we don't know is how Marriott will allocate prime float weeks that they own in the trust.

If we knew they were only going to take a small percentage then I would say you may have a point, but without knowing its tough to say definitively.

.

Take? What do you mean take? Does Marriott want to have the prime weeks on their books just for fun? No, they want to make money on them. So, what will they do with them if they take them? Give them to points owners? Sure....they will do that...but the great thing about the new points system is that many owners don't have enough or want to use enough points to get the prime weeks. If any points owner could take a stab at getting NCV in the summer for nothing, you would be right. Those points owners who bought at just about every other resort other than Hawaii or NCV will not have enough points....

So, Marriott is going to try to rent them out. Great....good luck Marriott. They have been doing that for years. Go online and try to book Maui Ocean Club. You can get any week you want...ANY WEEK. You always could......but you will have to pay $650/night for a 1 bedroom, up to $1000/night for a 3 bedroom. Who is going to pay $7000/week. Not many people....so Marriott has to do something with the inventory. They are not going to give it away cheap, or allow Interval to do so either, so they will allow Interval to use it in the Exchange pool. That way, no one knows what it really cost to rent, and they can keep the "perception" of being a high end, very expensive property.

 

[SueDonJ]

With all the fuss over this change on TUG ... what about all the Marriott owners that have never even heard of this board? I haven't received anything from Marriott telling me about it, not even an email or snail mail with contracts and other information. Seems very odd. How will they get people to join this way?

Brian

The deadline for the offer at this price with this 800-point incentive is 12/31/10. There is plenty of time for them to send email/snail mail to every owner, plus the introductory info is right there when you sign in on the website. We TUGgers might have a jump on thinking about all this, but all owners will get an opportunity with plenty of time. I'd guess that for the very small percentage of owners who might not be found in time to learn about this before the deadline, because they've gone to the moon or something, Marriott will extend the same offer if they can prove they've not been personally notified.

 

[pacheco18]

I am really upset with this program on its face and I cannot imagine joining BUT I have a fabulous VOA to give me guidance. He is beyond honest. He is laughing at some of the TUG posts as being far off. He is so swamped now he asked me to call him in a few weeks so we could discuss the program intelligently. I will certainly do that. I have not even looked up what my units are worth in points.

I am mostly concerned about the conflicting information on the TUG boards - no one's fault - just the nature of the newness of it all.

MY biggest concern is that Marriott can change those point values at will. Not a contract that is good for owners.

 

[NboroGirl]

I got an (informal) notice

The deadline for the offer at this price with this 800-point incentive is 12/31/10. There is plenty of time for them to send email/snail mail to every owner, plus the introductory info is right there when you sign in on the website. We TUGgers might have a jump on thinking about all this, but all owners will get an opportunity with plenty of time. I'd guess that for the very small percentage of owners who might not be found in time to learn about this before the deadline, because they've gone to the moon or something, Marriott will extend the same offer if they can prove they've not been personally notified.

I got the following email from one of my salesmen, who now sells at a different Marriott resort than where I bought:

Dear Owners

As you may be aware by now Marriott Vacation Club just announced the biggest product enhancement of our Ownership program since 1984…The new Destination Points will allow owners to use any Villa Size, any Resort, any Season, any view, any check in date from one night at a time to as many as your Destination Points will allow you to do that year…. Attached is a Power Point Presentation that will show you four examples of vacations that you can book with our new Destination Points and now you will deal exclusively with Marriott for Marriott to Marriott exchanges.

We are simplifying the booking process as well, one call, that’s all…Best of all the new enrolled owners will pay a simple $165 or $199 yearly club fee and that will include practically everything…no more nickel and dime fees for lock off, Internal Exchange. II Membership, exchange for Marriott rewards etc ….

With our new Explorer Collection you can book exciting vacations as well from Alaskan Cruises, to African Safaris or closer to home a weekend in NY or New Orleans…You gain all of this without losing any of your current usage options….If you will like to discuss the special introductory offer please e-mail or call me so I can assess your current situation and offer you a personal analysis of your Vacation Portfolio…It will be my pleasure to welcome you to New Day, New Dreams

 

[RedDogSD]

Off topic already? How did this happen?

 

[BocaBum99]

Red,

I reviewed your post and I think you are missing a couple of macro level points. I believe that if the old system were in place over the next 5 years and they added 100,000 new owners, then your conclusion would be correct. But, in the new system, it will be completely different for reasons I outline on another message board.

Here is that post:

There are 2 big macro level issues that the new Marriott points program will have on current owners.

1) Marriott is doing exactly what I expected. They are seizing control of inventory so that they are responsible for determining who gets priority to which units. When Marriott originally created their weeks Club, they made a huge mistake in delegating the exchange function to II thereby losing control of inventory assignment. They are now seeking to get it back.

The net result of this is that owners who have learned to work the current II system will lose that ability until they sign onto the Marriott program.

Flexchange availability will most likely be much less rich than it has been in the past. Mostly because those units will be held for internal points exchangers first. What will remain will be the lower quality and demanded units in Flexchange. This actually makes sense for most Marriott owners, but it is at the expense of smart timeshare exchangers who learned how to maximize usage of the legacy Marriott system.

2) Marriott is now unlinking the unit you own from the unit you buy. That is a huge problem for current owners of the highest demanded units in the Marriott system. What this does for Marriott is make it much easier to sell points at ALL Marriott sales sites without regard to where inventory is actually available. If, for instance, MOC is fully sold out and there is demand for new owners at MOC, Marriott no longer must purchase back from the resale market existing MOC units. They can purchase the cheapest units in Florida or Branson, add them to the Trust and sell them at MOC as if they actually had more MOC deeds. This will inevitably make the competition for the hardest to get units in Marriott.

This is why their VIP program will be important. It will encourage owners to upgrade to get even better privileges to gain access to a zero sum game of booking reservations across the Marriott system.

There are 2 program elements that I expected to be in it that aren't. First, I thought that Marriott would allow resale weeks to be enrolled into the program in the future. Clearly, they don't want smart timesharers to learn to best units to buy to lower their costs. I am still investigating ways to get in for cheap, but Marriott has tried to keep these avenues closed.

Second, I expected some type of discount program within a 60-day window. They don't have it. So, something has to happen with expiring inventory. My guess is that it will end up in II as in the past, however, the deposits will be for lowest demand units.

 

[BocaBum99]

As a side note, the CEO of one of the independent exchange companies wrote to me to tell me that I have it exactly right.

Marriott is seeking to control the inventory. In timesharing, inventory is like gold. Remember the golden rule. He who has the gold, makes the rules.

 

[Old Hickory]

With all the fuss over this change on TUG ... what about all the Marriott owners that have never even heard of this board? I haven't received anything from Marriott telling me about it, not even an email or snail mail with contracts and other information. Seems very odd. How will they get people to join this way?

Brian

Slowly.

Maybe, there is no rush for Marriott. Heck, they're offering a sign-on bonus through the EOY. That's a long time, isn't it?

I'm gonna wait and let the early adopters smooth out the crinkles.

 

[RedDogSD]

Red,

Flexchange availability will most likely be much less rich than it has been in the past. Mostly because those units will be held for internal points exchangers first. What will remain will be the lower quality and demanded units in Flexchange. This actually makes sense for most Marriott owners, but it is at the expense of smart timeshare exchangers who learned how to maximize usage of the legacy Marriott system.

Here is that post:

You are right that they are trying to control inventory, but you are overestimating their ability to create demand. In the past, most of the II Deposits that were far away probably came from owners and most of the Flexchange probably came from Marriott.

So, what changed? I like to use Maui simply because it takes so many points on the chart. Lets use an example:

Pretend they have 100 units. Pretend that they were 75% sold out. In the past, Marriott would have allowed owners the chance to reserve 75% of weeks in the system and kept 25% of weeks for themselves. They probably kept 25% of the prime weeks and 25% of the bad weeks. I doubt they manipulated it too much. Also, whenever weeks were traded in for MR points, they added that to their percentages and controlled those also. Lets assume 10% MR conversion rate. So, 65% of prime weeks are controlled by the owners, and 35% are controlled by Marriott. They would have tried to rent those 35% of prime weeks, and drop whatever they cannot rent into II which resulted in the Flexchange weeks that you were getting.

So, the difference is that they will get the 25% they own, the 10% of MR conversions and also some percentage of owners who also will trade their weeks for points. So, Marriott will control more inventory. You are correct there.

However, don't forget basic economics. They need the demand to TAKE the weeks. Who are the ones who are going to take them? Weeks owners cannot take them at first because Marriott is going to control them in the Points inventory. So, who is next? Points Owners right? However, Marriott has created a system that is no different than cash. Points owners have to be willing to spend the same amount to get into Maui for one week that they could get 2 weeks in the Desert in prime season, or 4 weeks in Branson or 3 weeks in Florida. The system will be perfectly efficient (as most markets are) and since Marriott did not create a dynamic way to lower the points needed to book closer to the date (like HGVC and DVC did), they will end up with lots of inventory that is not taken. They will try to rent them...but I keep saying, good luck. They always have tried to rent Prime weeks at Marriott.com. They charge soooooo much money for prime weeks at Prime locations. I remember trying to rent Maui Ocean Club and they wanted $650/night for the 1 bedroom and I think $1000/night for the 3. Nothing in the new points program will be able to make people willing to pay more money for those nights. Also, they cannot discount those nights much without doing damage to their Hotel properties, so they will not do that.

Ok, so no weeks owners to take the prime weeks, and only a limited number of points owners willing to pay the premium and only a limited number of cash customers willing to pay those prices.....and what is left. A heck of a lot of prime weeks with no one to take them. Marriott has to dump them, and II will be the dumping ground. I think we will see plenty and possibly more Flexchange inventory. I do expect a reduction in the availability that is 2-13 months out, because I think that Marriott will try to hold on to those longer to get more time to rent them or let points owners have them. But, at the 60 day mark....be ready for big drops of inventory.....

Or Marriott just lets their employees take the nights for free.

 

[SueDonJ]

Off topic already? How did this happen?

:hysterical: You didn't expect it? Ah, you underestimate TUGgers.

 

[CapriciousC]

I think your logic is sound, RedDog. I think that at a minimum, there will be less competition at Interval for those resorts which are outside the points system. Once people figure out that 1) it will take a ridiculous amount of points to get a week in Maui, but 2) they could get perhaps 2 weeks somewhere else for the points they DO have, I think they'll start putting in for some of the less "desired" resorts. Of course, that desire is all relative, but if it means that there's suddenly more demand for say, Branson, and less demand for Phuket, I say bring it on.

 

[pharmgirl]

might be more available for MR points also. I usually extend my weeks in hawaii at front and end of our weeks by using MR points to 'rent' same size/view villa

 

[RedDogSD]

I think your logic is sound, RedDog. I think that at a minimum, there will be less competition at Interval for those resorts which are outside the points system. Once people figure out that 1) it will take a ridiculous amount of points to get a week in Maui, but 2) they could get perhaps 2 weeks somewhere else for the points they DO have, I think they'll start putting in for some of the less "desired" resorts. Of course, that desire is all relative, but if it means that there's suddenly more demand for say, Branson, and less demand for Phuket, I say bring it on.

If the system is efficient, there should be equal demand for both places. This means more demand for Branson and less demand for Maui. If they cannot get that right, then they will increase the points needed to get into Maui and decrease the points needed for Branson until they get it right.

People have to remember that the Economic term for Demand is not the same as liking something better. All things being equal, anyone would want to go to Hawaii, Phuket, St. Kitts over Branson, Palm Desert and Phoenix. However, the demand curve shows how much demand there is at each price point and vacations have an elastic demand curve. That means that as the price moves up, demand moves down. Some goods have an inelastic demand curve. Most people who buy diapers are not very price sensitive. They need diapers for their kids. They will switch brands to save money, but they can't stop using diapers. So, the demand curve for diapers is inelastic.

Marriott is going to muck with the points categories until they get what they want. However, since the amount of points you get TODAY for giving them your week probably won't change, owners will get screwed.

Now, there is no reason that the Marriott cannot change that as well. Maybe they will. Maybe they will need to get more inventory in the system from weeks owners, so they will offer "bonus" points in years that they have requests. So, even though you feel slighted right now....maybe they will offer you 500 to 800 extra points to deposit your Maui or NCV week with them in future years so that they can give them to other points owners. Then you will have enough to go back to your home resort later, or go elsewhere.

This system was definitely designed by an economist.

 

[CapriciousC]

If the system is efficient, there should be equal demand for both places. This means more demand for Branson and less demand for Maui. If they cannot get that right, then they will increase the points needed to get into Maui and decrease the points needed for Branson until they get it right.

People have to remember that the Economic term for Demand is not the same as liking something better. All things being equal, anyone would want to go to Hawaii, Phuket, St. Kitts over Branson, Palm Desert and Phoenix. However, the demand curve shows how much demand there is at each price point and vacations have an elastic demand curve. That means that as the price moves up, demand moves down. Some goods have an inelastic demand curve. Most people who buy diapers are not very price sensitive. They need diapers for their kids. They will switch brands to save money, but they can't stop using diapers. So, the demand curve for diapers is inelastic.

Marriott is going to muck with the points categories until they get what they want. However, since the amount of points you get TODAY for giving them your week probably won't change, owners will get screwed.

Now, there is no reason that the Marriott cannot change that as well. Maybe they will. Maybe they will need to get more inventory in the system from weeks owners, so they will offer "bonus" points in years that they have requests. So, even though you feel slighted right now....maybe they will offer you 500 to 800 extra points to deposit your Maui or NCV week with them in future years so that they can give them to other points owners. Then you will have enough to go back to your home resort later, or go elsewhere.

This system was definitely designed by an economist.

Hmmm.....excellent points. I sometimes forget to take a step back and realize that many people may choose to go to resorts they can drive to because it's significantly cheaper than flying. My husband racks up around 400,000 frequent flier miles a year, so we rarely pay for airfare. The "how are we going to get there?" issue is generally not much of an issue for us. Based on his last few business trips, though, it seems that airfares are skyrocketing. That, combined with the economy, could be motivating a lot of people to vacation closer to home.

 

[BocaBum99]

You are right that they are trying to control inventory, but you are overestimating their ability to create demand. In the past, most of the II Deposits that were far away probably came from owners and most of the Flexchange probably came from Marriott.

So, what changed? I like to use Maui simply because it takes so many points on the chart. Lets use an example:

Pretend they have 100 units. Pretend that they were 75% sold out. In the past, Marriott would have allowed owners the chance to reserve 75% of weeks in the system and kept 25% of weeks for themselves. They probably kept 25% of the prime weeks and 25% of the bad weeks. I doubt they manipulated it too much. Also, whenever weeks were traded in for MR points, they added that to their percentages and controlled those also. Lets assume 10% MR conversion rate. So, 65% of prime weeks are controlled by the owners, and 35% are controlled by Marriott. They would have tried to rent those 35% of prime weeks, and drop whatever they cannot rent into II which resulted in the Flexchange weeks that you were getting.

So, the difference is that they will get the 25% they own, the 10% of MR conversions and also some percentage of owners who also will trade their weeks for points. So, Marriott will control more inventory. You are correct there.

However, don't forget basic economics. They need the demand to TAKE the weeks. Who are the ones who are going to take them? Weeks owners cannot take them at first because Marriott is going to control them in the Points inventory. So, who is next? Points Owners right? However, Marriott has created a system that is no different than cash. Points owners have to be willing to spend the same amount to get into Maui for one week that they could get 2 weeks in the Desert in prime season, or 4 weeks in Branson or 3 weeks in Florida. The system will be perfectly efficient (as most markets are) and since Marriott did not create a dynamic way to lower the points needed to book closer to the date (like HGVC and DVC did), they will end up with lots of inventory that is not taken. They will try to rent them...but I keep saying, good luck. They always have tried to rent Prime weeks at Marriott.com. They charge soooooo much money for prime weeks at Prime locations. I remember trying to rent Maui Ocean Club and they wanted $650/night for the 1 bedroom and I think $1000/night for the 3. Nothing in the new points program will be able to make people willing to pay more money for those nights. Also, they cannot discount those nights much without doing damage to their Hotel properties, so they will not do that.

Ok, so no weeks owners to take the prime weeks, and only a limited number of points owners willing to pay the premium and only a limited number of cash customers willing to pay those prices.....and what is left. A heck of a lot of prime weeks with no one to take them. Marriott has to dump them, and II will be the dumping ground. I think we will see plenty and possibly more Flexchange inventory. I do expect a reduction in the availability that is 2-13 months out, because I think that Marriott will try to hold on to those longer to get more time to rent them or let points owners have them. But, at the 60 day mark....be ready for big drops of inventory.....

Or Marriott just lets their employees take the nights for free.

Your whole argument falls apart because you have a fundamental misunderstanding of how Marriott manages inventory before and after the new points system is implemented and how the market of exchangers find each other.

Marriott does NOT have to create demand to control inventory. All they need to do is control where it is presented and it changes everything. When I say everything, I mean everything. How it is sold, how it is exchanged, what inventory gets presented to Interval International customers and internal customers and where value is extracted. This gives them tremendous bargaining power with their customers and their suppliers and exchange partners.

Marriott made 2 big mistakes. First, skimming. They didn't need to do it, now they have a PR nightmare and will have to address it or retract it. Either way, an ugly situation. All they needed to do was increase MF by 7% and give full value for weeks. Nobody would have noticed. Second, no bonus time. It not only reduces the amount of inventory that would go to Interval International, but it is a feature that owners will spend extra to get (like me).

 

[BocaBum99]

This system was definitely designed by an economist.

That's the problem. It should have been designed by a timeshare points expert with knowledge of how all the exchange systems and points systems work.

Timesharing is the single most distorted market on earth. It has tremendous inefficiencies mostly due to the fact that Resort Developers have NO INCENTIVE to have an educated customer base. They want them ignorant and bliss. They throw so much misinformation out there that it is extremely difficult for an average consumer to tell the truth vs. the non-truth.

Don't believe me? What other market on earth do you regularly find consumers who will pay $40,000 for a product that another consumer will pay $2000 for the exact same product? And, it has been that way for 40 years. There just isn't the diffusion of information and knowledge to the general population of users.

What other market would force resort developers to build new inventory in the exact areas where there already is a huge surplus of supply vs. demand? They do it so that they can get access to ignorant consumers who don't check the details of what they are purchasing.

What other market does the same owner get ripped of 2, 3, 4 times over and over again coming and going? Where they pay money to get rid of a real estate interest simply because they are tired of paying upfront fees to brokers who promised them that they could sell their timeshare for more than they bought?

 

[RedDogSD]

Your whole argument falls apart because you have a fundamental misunderstanding of how Marriott manages inventory before and after the new points system is implemented and how the market of exchangers find each other.

Marriott does NOT have to create demand to control inventory. All they need to do is control where it is presented and it changes everything. When I say everything, I mean everything. How it is sold, how it is exchanged, what inventory gets presented to Interval International customers and internal customers and where value is extracted. This gives them tremendous bargaining power with their customers and their suppliers and exchange partners.

Marriott made 2 big mistakes. First, skimming. They didn't need to do it, now they have a PR nightmare and will have to address it or retract it. Either way, an ugly situation. All they needed to do was increase MF by 7% and give full value for weeks. Nobody would have noticed. Second, no bonus time. It not only reduces the amount of inventory that would go to Interval International, but it is a feature that owners will spend extra to get (like me).

As always, I respect your opinion. However, in this case, you are presenting rhetoric and not facts or examples. Give me an example of how the Marriott units are going to get taken if they cannot create demand. What you are talking about sounds like Ferrari. They control everything and they have a very high price, high value product and they completely control it. Guess what? Very little demand. Everyone would like to have one, no on is willing to fork out that much money. For Ferrari, that works because they just make very few cars. Marriott already has tons of inventory. They need to sell and rent, and get people into these units. THey NEED to create demand. Show me how they are going to do that. Don't tell me I have a fundamental misunderstanding, and then just spout theory. Explain it to me. I think I explained my point pretty clearly and it holds up to the common sense water test.

 

[dioxide45]

Realize that the new points charts were developed using the only system they had, weeks. I am sure the points allocations will get a big reworking in 2013 based on historical point redemption and reservations.

 

[m61376]

Boca-
As usual, your logic an analysis is great. The only flaw I see is that regarding Flexchange availability. I think a lot of Flex deposits come from leftover Marriott inventory as you point out, but a lot also come from last minute cancellations. Life intervenes. Emergencies happen. Work takes precedence. So I don't think that the Flexchange inventory will be primarily for lower demand units.

In fact, if Marriott misjudged the market by its level of skimming, you could see some of the higher demand units lying fallow. I'm guessing that Flexchange deposits will remain pretty similar to what they now are and, unless Marriott introduces a point equivalent, the week owner will be in a better position to capture them.

 

[thickey]

Boca and RedDog

Both of you make outstanding points, and your analysis is wonderful, and VERY MUCH appreciated! However, RedDog gives us some common-sense examples/explanations, not just the analysis, that brings his thoughts to life, right down where us "commoners" can understand!