Speculation About Marriott's New Timeshare Structure [merged]

[DanCali]

probably we'll be all ears.

IF they come up with a points system that's exactly what they would be couning on. Nobody will sell the pitfalls... Whatever they sell you on will sound super attractive: "Trade your Platinum week for 10 summer days in Gold season in the Carribean!".

The problem is that everybody wants to hear that (well, maybe not Gold owners in the Carribean) and there is no way you can get that trade in a points system if you call 15 minutes after the booking window opens... and those reservations are not going back to II for subsequent trades.

According to Fletch (an insider, remember) the number one complaint from owners is II's system.

There is always a "no. 1 complaint" - in any system. But I've seen the pitfalls of a points system too (Starwood) and that's the main reason I bought Marriott in the first place. Marriott owners are extremely happy - I'm sure you've seen the owner satisfaction survey for Marriott on TUG (less than 15% define themselves dissatisfied) - most systems should envy that... and Marriott should protect that at all costs, especially in these economic times. It took them a couple of decades to build this reputation. It will take one idiotic idea to ruin it all.

So now that I got tempted to reply in the thread I recommended letting die I'm going to follow my own advice...

 

[m61376]

That's a matter of opinion, isn't it? According to Fletch (an insider, remember) the number one complaint from owners is II's system. It's great that you're happy with your exchanges - you're one of the lucky ones. I've been satisfied so far, too, but that's only because I knew from the beginning that "like for like" wouldn't be possible most of the time. If they can roll out a new exchange system that gives me and others like me value equal to what we're depositing, then probably we'll be all ears.

The reality is that people like to complain. Unless they get what they want as soon as they want it, people will complain.

I agree with DanCali- there are a lot of potential pitfalls. Starwood is another high end developer and look at how their point system works and how "easy" it is to get reservations. Not exactly the freedom that one envisions as being ideal.

And, before Disney and their successful system is cited- I don't think it would logistically be reasonable to expect a Disney-like system. Disney started as a points system and, even IF Marriott goes completely into a points based system (like the Asia Pacific) and not an overlay system, there will always be separate inventory because at least some (and likely initially at least most) owners will remain in the current system. That alone will make any new system difficult at best.

Sue- I agree- IF Marriott develops a system than is easy to make reservations in and guarantees me equal value both now at introduction (when they are making things look enticing) and in the future (when they introduce new resorts), then it would be very attractive. That's a huge IF though. The only way I would be convinced that Marriott was offering me equal value and would continue to do so in the future was IF, akin to Perry's suggestion, point valuations of what you owned and point cost of desired weeks to trade into were determined by the fair market rental rates (averaged for the dates across the season owned or being traded into). I'd like to be assured that there was an equitable system in place for now and that will place future resorts into their proper valuation, and not subject to whatever valuation Marriott places on them to entice sales (because I want to be able to trade into newer resorts 5 or 10 years sown the road). To put it simply- if I am giving up a week that Marriott would be happy to rent for $800 a night, then I'd want $5600 worth of rental- whether that's 5 nights in a more luxurious or larger accommodation or 14 nights elsewhere, or even 3 or 4 weeks perhaps in a smaller unit, off-season, or a less in demand locale.

Marriott should be valuating timeshares by some objective criteria- and fair market rental rates are an objective criteria that reflect costs to build, costs to run and demand; it reflects resort quality and destination demand.

btw- That's what I'd consider fair. I am not sure if the Orlando owner who beforehand enjoyed trading into Hawaii, the Caribbean, ski weeks, etc., would be so happy. The new system might be their number one complaint....

 

[Fredm]

Marriott Mountainside has been sold out for some time. I have owned there for 4 years now, and there has not been an on-site sales office during any of that period. A year or so ago, the sales office on Main Street in Park City closed.

Today, I received in the mail the meeting minutes from the Jan 26, 2010 Board meeting. One item that piqued my curiosity was a reference to a discussion by the general manager of "a potential new Portfolio Sales Gallery operated by Marriott Ownership Resorts Inc inside the resort". No further details were given.

Anyone care to guess what they are likely to be trying to sell? Since they don't have any units left at Mountainside to sell?

hipslo,

I do not have a definite answer to your question. However, Marriott has selectively resumed its ROFR activities. Specifically, they have exercised two Summit Watch week 52 transactions. One at $40,000, and one at $45,000, this past week.

BTW, Marriott has a published price of $85,000 (68k after the temporary 20% discount) for these units. So, they are selling what they choose to buy (as opposed to accumulating them for a points program).

As the recent credit market dislocations have abated somewhat, my guess is that Marriott's capital expenditure freeze that has been in place for the past 16 months is beginning to thaw.

 

[SueDonJ]

The reality is that people like to complain. Unless they get what they want as soon as they want it, people will complain. ...

That's stating the obvious - just look at how many posts this topic generates when we don't even know the details of what we're complaining about! The difference, though, is that the owners who are complaining about II are complaining about a system that they already know isn't equitable or easy for them to use.

IF Marriott develops a system than is easy to make reservations in and guarantees me equal value both now at introduction (when they are making things look enticing) and in the future (when they introduce new resorts), then it would be very attractive. That's a huge IF though. ...

That huge IF exists now with exchanges through II. For one thing, there is no guarantee (and it's stipulated in the governing docs) that Marriott will continue a relationship with II, or if they do, that II will not change its system at any point. As well, in the existing system II does use a quality rating system wherein older resorts lose trade value as newer resorts are added to the inventory. IMO, it's unreasonable to demand or expect a guarantee of future exchange success no matter if they roll out a new system or not.

As far as exchange point values being correlated to rack rental rates if a new system is rolled out, we'll just have to agree to disagree. As demonstrated, those rates are temporary and fluctuate according to factors that do not apply to timeshare ownership; presumably, Marriott would set exchange point values on a permanent basis (similar to MRP exchange values).

 

[SueDonJ]

Marriott Mountainside has been sold out for some time. I have owned there for 4 years now, and there has not been an on-site sales office during any of that period. A year or so ago, the sales office on Main Street in Park City closed.

Today, I received in the mail the meeting minutes from the Jan 26, 2010 Board meeting. One item that piqued my curiosity was a reference to a discussion by the general manager of "a potential new Portfolio Sales Gallery operated by Marriott Ownership Resorts Inc inside the resort". No further details were given.

Anyone care to guess what they are likely to be trying to sell? Since they don't have any units left at Mountainside to sell?

I think a "Portfolio Sales Gallery" is what's currently in place at the preview center at SurfWatch. It used to showcase only SurfWatch; now there are giant lighted photos of MVCI resorts all over as well as dioramas of the newest resorts. The changeover happened before they announced the closure of sales centers due to the economy, so perhaps this is the sales model that they're intending to put in place wherever sales offices (re)open. It's correct, though, that the model would work nicely to showcase a new internal exchange system alongside the resorts themselves.

 

[hipslo]

hipslo,

I do not have a definite answer to your question. However, Marriott has selectively resumed is ROFR activities. Specifically, they have exercised two Summit Watch week 52 transactions. One at $40,000, and one at $45,000, this past week.

BTW, Marriott has a published price of $85,000 (68k after the temporary 20% discount) for these units. So, they are selling what they choose to buy (as opposed to accumulating them for a points program).

As the recent credit market dislocations have abated somewhat, my guess is that Marriott's capital expenditure freeze that has been in place for the past 16 months is beginning to thaw.

thats very interesting, thanks fred

 

[m61376]

That huge IF exists now with exchanges through II. For one thing, there is no guarantee (and it's stipulated in the governing docs) that Marriott will continue a relationship with II, or if they do, that II will not change its system at any point. As well, in the existing system II does use a quality rating system wherein older resorts lose trade value as newer resorts are added to the inventory. IMO, it's unreasonable to demand or expect a guarantee of future exchange success no matter if they roll out a new system or not.

As far as exchange point values being correlated to rack rental rates if a new system is rolled out, we'll just have to agree to disagree. As demonstrated, those rates are temporary and fluctuate according to factors that do not apply to timeshare ownership; presumably, Marriott would set exchange point values on a permanent basis (similar to MRP exchange values).

I didn't mean to imply that they would be guaranteeing anything- just that the system that they choose to evaluate weeks should be transparent and reflect true value (which is a combination of both resort quality and location). I know you don't feel that rental rates are an adequate assessment, but overall I think they reflect value pretty acurately, especially when averaged over a season. And, while I expect exchange point values to remain stable and rental rates increase over time, if Timeshare A was awarded AX points in 2010, when timeshare B is added a few years down then road, a comparison between the 2010 and the then current rental rates can be used to allot timeshare B the same relative value BX in points, despite the passage of time.

 

[timeos2]

As an owner do you want to pay for the sales area(s)?

I think a "Portfolio Sales Gallery" is what's currently in place at the preview center at SurfWatch. It used to showcase only SurfWatch; now there are giant lighted photos of MVCI resorts all over as well as dioramas of the newest resorts. The changeover happened before they announced the closure of sales centers due to the economy, so perhaps this is the sales model that they're intending to put in place wherever sales offices (re)open. It's correct, though, that the model would work nicely to showcase a new internal exchange system alongside the resorts themselves.

And are they paying for that space or are the owners being hit for the costs? Many developers seem to feel that they have forever rights to use space at no charge and worse have the resort pay for the ongoing upkeep and expenses. Is that the case here?

 

[hipslo]

And are they paying for that space or are the owners being hit for the costs? Many developers seem to feel that they have forever rights to use space at no charge and worse have the resort pay for the ongoing upkeep and expenses. Is that the case here?

good point - don't know

 

[AwayWeGo]

No El Freebo Sales Facilities On Site Once The Timeshare Is Sold Out.

And are they paying for that space or are the owners being hit for the costs? Many developers seem to feel that they have forever rights to use space at no charge and worse have the resort pay for the ongoing upkeep and expenses. Is that the case here?

OK, so maybe the timeshare company reserves the exclusive right to sell timeshares on site without paying anything for the office space, sales rooms, freebies window, cubicles, utilities, etc., involved in the sales effort. That's not optimum for the owners, but it's understandable & maybe even tolerable.

But then if the timeshare company quits selling timeshares on site & instead starts selling club memberships or point-based exchange systems or something else instead of selling straight timeshares on site, then that's something else again.

By me, when the timeshare resort is sold out, then that ends the timeshare company's exclusive right to sell timeshares on site on an el freebo basis.

Once the resort is sold out, it's sold out. After that, if the timeshare company wants to keep on using the sales room, etc., on site for other kinds of selling (points, clubs, etc.), then they can jolly well pay for the privilege.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[Fredm]

By me, when the timeshare resort is sold out, then that ends the timeshare company's exclusive right to sell timeshares on site on an el freebo basis.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

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I agree. But, what they will do is call it a "resale" office. Owners will like that.

 

[timeos2]

Sold out - then be gone or pay to stay

Once the resort is sold out, it's sold out. After that, if the timeshare wants to keep on using the sales room, etc., on site for other kinds of selling (points, clubs, etc.), then they can jolly well pay for the privilege.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

AMEN to that. Well said and often tough to achieve.

 

[SueDonJ]

OK, so maybe the timeshare company reserves the exclusive right to sell timeshares on site without paying anything for the office space, sales rooms, freebies window, cubicles, utilities, etc., involved in the sales effort. That's not optimum for the owners, but it's understandable & maybe even tolerable.

But then if the timeshare company quits selling timeshares on site & instead starts selling club memberships or point-based exchange systems or something else instead of selling straight timeshares on site, then that's something else again.

By me, when the timeshare resort is sold out, then that ends the timeshare company's exclusive right to sell timeshares on site on an el freebo basis.

Once the resort is sold out, it's sold out. After that, if the timeshare wants to keep on using the sales room, etc., on site for other kinds of selling (points, clubs, etc.), then they can jolly well pay for the privilege.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

And are they paying for that space or are the owners being hit for the costs? Many developers seem to feel that they have forever rights to use space at no charge and worse have the resort pay for the ongoing upkeep and expenses. Is that the case here? ... AMEN to that. Well said and often tough to achieve.

That might be your perfect world, Alan, but it's not Marriott's. And yes, John, it's pretty much that the sales offices are only subject to whatever other fees Marriott pays for Common Elements, and I'd guess it's next to impossible to force anything more or change the structure with Marriott.

Marriott contracts stipulate that they, as the developer, have the right to keep a sales office on any MVCI property for that and any other MVCI resort. Here's that provision from SurfWatch's Master Deed (Barony's, and I'm sure others, are similar):

Declarant's Use For Sales Activities. The Declarant, and its successors and assigns, shall be entitled to use one or more of the units and/or Common Elements, including the future improvements in the CFB, both during the time period that the Phase I Property and all or a portion of the Future Phase Property is developed by Declarant and subsequent to those time periods for sales activities, for a sales model, for guest and sales prospect accommodations, for ongoing management and resale real estate services, and similar activities, such services and said activities not necessarily relating or limited to the Property comprising this Regime, but also to any other project(s) or properties either developed or managed by Declarant (but not necessarily owned) or its affiliated entities, or as part of a cluster plan as referenced below in Section 10, or for which Declarant or its affiliated entities serves as a selling or listing brokerage firm. Declarant shall not be assessed any cost for such use of the Common Elements. ...

 

[AwayWeGo]

Shame On Marriott For Stacking The Deck.

That might be your perfect world, Alan, but it's not Marriott's.

Then shux upon'm.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[SueDonJ]

Shame On Marriott For Stacking The Deck.

Then shux upon'm.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

I dunno, Alan. Why "shame on Marriott?" They're not doing anything that any of the other big multi-resort timeshare companies aren't doing. When you buy a Marriott week, if the salesperson has done his/her job correctly and/or (more importantly, IMO) the buyer has done due diligence, then it's understood that the contracts provide benefits for and obligations from the owners as well as Marriott (as developer and management company.) They're not doing anything underhanded or shady, so why should they be shamed?

It's one thing to say that the Marriott model/structure isn't what you would want in a timeshare - that's perfectly understandable. But to say that Marriott shouldn't run its timeshare business the way you don't like? I don't get that. Different strokes, right?

 

[DanCali]

I dunno, Alan. Why "shame on Marriott?" They're not doing anything that any of the other big multi-resort timeshare companies are doing. When you buy a Marriott week, if the salesperson has done his/her job correctly and/or (more importantly, IMO) the buyer has done due diligence, then it's understood that the contracts provide benefits for and obligations from the owners as well as Marriott (as developer and management company.) They're not doing anything underhanded or shady, so why should they be shamed?

But isn't that like saying that if you join a new workplace and they make you sign a non-compete that's ok too?

Most non-compete agreements are entered into with little, if any, negotiation between the employer and the employee. They usually are signed at the outset of an employment relationship where the employee may have very little bargaining power and when the employee is generally not too concerned about limitations on future employability when beginning a new job (Does this sound familiar if you replace a few of the words?) . It can become a problem when the employee becomes dissatisfied...

Yet, some of these are so draconian that courts deem them unenforceable. Not everything they put in front of you to sign is valid just because you sign it. Sometimes things don't pass a simple reasonableness test.

 

[AwayWeGo]

Timeshare Company Should Bow Out When The Resort Sells Out.

But to say that Marriott shouldn't run its timeshare business the way you don't like? I don't get that.

It's not just Marriott.

Once the units are all sold & an independent, owner-controlled HOA takes over, then the Developer Of Record needs to get out of the way -- Marriott, WestGate, DRI, mox nix.

Running a timeshare business is 1 thing. Hanging on in owner-unfriendly ways after a timeshare is sold out is something else again.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[bdh]

Timeshare Company Should Bow Out When The Resort Sells Out.

But if they pull out, how will they be able to sell the weeks at a full freight price that they picked up via ROFR?

 

[SueDonJ]

But isn't that like saying that if you join a new workplace and they make you sign a non-compete that's ok too?

Most non-compete agreements are entered into with little, if any, negotiation between the employer and the employee. They usually are signed at the outset of an employment relationship where the employee may have very little bargaining power and when the employee is generally not too concerned about limitations on future employability when beginning a new job (Does this sound familiar if you replace a few of the words?) . It can become a problem when the employee becomes dissatisfied...

Yet, some of these are so draconian that courts deem them unenforceable. Not everything they put in front of you to sign is valid just because you sign it. Sometimes things don't pass a simple reasonableness test.

Whether any of us thinks it's shameful or unreasonable for Marriott to use space at existing resorts for sales offices is, I guess, a matter of opinion. I responded to John and Alan only to say that it is what it is - Marriott does have that right - but then Alan's "shameful" comment surprised me. I happen to think the provision is not unreasonable, because if Marriott isn't able to sustain its business model then all of the resorts are at risk for devaluation. What better place to put a sales office than somewhere at a resort which is successful? You disagree, I think, but neither of us is wrong. It wouldn't matter anyway if we were, because until someone decides to challenge the unreasonableness of it in Court and wins, Marriott's right will stand.

 

[Transit]

It's not just Marriott.

Once the units are all sold & an independent, owner-controlled HOA takes over, then the Developer Of Record needs to get out of the way -- Marriott, WestGate, DRI, mox nix.

Running a timeshare business is 1 thing. Hanging on in owner-unfriendly ways after a timeshare is sold out is something else again.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

Alan, Has any chain brand timeshare ever relinquished HOA to owners? I thought when you bought a chain brand resort the connection would always remain even after the resort sold out.

 

[AwayWeGo]

OK, Shame On'm Is Too Strong. (Shux Upon'm Is Strong Enough, No?)

I happen to think the provision is not unreasonable, because if Marriott isn't able to sustain its business model then all of the resorts are at risk for devaluation.

Biz model would be stronger if it did not depend (assuming it does -- I don't know) upon hanging around & exacting free salesroom space & calling the shots after the timeshare resort is sold out.

I mean, shux, once a particular resort is sold out, then shouldn't the biz model focus on strong sales at the next resort that's not yet sold out ?

Too simple, I suppose.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[SueDonJ]

Biz model would be stronger if it did not depend (assuming it does -- I don't know) upon hanging around & exacting free salesroom space & calling the shots after the timeshare resort is sold out.

I mean, shux, once a particular resort is sold out, then shouldn't the biz model focus on strong sales at the next resort that's not yet sold out ?

Too simple, I suppose.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

But we need to remember that Marriott isn't only the developer of MVCI resorts, they're also the management company. They won't relinquish that position easily because it offers them a ready-made sales model and site, and, their management fees amount to 10% of the annual m/f in addition to whatever revenue they generate at onsite stores, through the activity fees, etc.

As an owner I don't want Marriott to dissolve their management contract with my resorts because I like what Marriott offers its owners - upscale resorts for home use, a variety of similar-quality resorts for exchanging (whether through a new internal system or the existing external II system,) MRP exchange for access to Marriott hotels all over the world, etc.

You just have to know what you're getting into when you buy a Marriott (or any other big multi-resort timeshare player) week. I think that if someone's unhappy with Marriott's contract protections, it would be easier for them to sell their Marriott week(s) than to fight the contracts as unreasonable.

 

[AwayWeGo]

I'm Beginning To Get The Picture.

You just have to know what you're getting into when you buy a Marriott (or any other big multi-resort timeshare player) week.

What you're getting into . . .

1. Prominent upscale name in the hospitality field.

2. ROFR.

3. Developer that does not relinquish resort management & that keeps on collecting cost-plus management fees even when resorts are sold out.

4. Timeshare chain that may or may not soon superimpose points-based internal exchange system on top of current straight-weeks reservation system.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[m61376]

But...at the end of the day, you still know what the quality of the resort and the amenities are going to be when you arrive. People who are willing to pay up front for Marriott quality by and large want the security of knowing that quality is going to be maintained and things haven't been let go. They don't want any unpleasant surprises when they arrive.

For some people, the extra 10% in management fees and perhaps a few dollars a year per week in lieu of sales space rent is worth the security of knowing that your vacation won't be a disappointment.

Clearly, it's not worth it to some people, and that's why there are lots of other systems to choose from.

 

[SueDonJ]

Alan, Has any chain brand timeshare ever relinquished HOA to owners? I thought when you bought a chain brand resort the connection would always remain even after the resort sold out.

Frank, there are several resorts which were previously MVCI properties but aren't any more - the ones I know of are Swallowtail and Spicebush on Hilton Head, and I think only two of the buildings at Streamside at Vail, CO. From reading about those here on TUG it appears that the owners no longer wanted the resorts to be run according to the Marriott management standard, but I don't know whether those dissolutions came about because the owners voted Marriott out or because Marriott chose to not renew the management contracts. More recently (2008?,) I think some folks believe that Beach Place was at risk for Marriott dissolving that management contract but things eventually worked out.

With Marriotts there isn't any guarantee of a forever connection; the term limits and renewal options of the management contracts are stipulated in the governing docs.