Spin off HRC from MVC?

[Sapper]

Just a thought for discussion. Should the owners of the HRC product (US!) assist MVC in spinning off HRC? By this, I mean we would buy it from MVC either through a private offering, a public offering, or a combination of debt and stock. I understand this may sound a bit crazy, but it solves some problems for both MVC and the HRC ownership, so may be a win/win.

HRC is a problem for MVC. Due to the Master Licensing Agreement with Hyatt, MVC cannot simply integrate HRC into their other products. I think MVC has some options here, but not with out destroying equity in the system or costing them more money than it’s worth. Either way, I do not believe that MVC has a solid plan for the HRC system.

MVC is a long term problem for HRC owners. MVC has a long history of new and innovative ways to screw their owners out of money. They have a pure profit motive, not a quality product motive. Their only interest is short term profits for their shareholders and management. This is directly opposed to the fiscally conservative system most of us bought in to. You can see this reflected in the apx 20% increase in our maintenance fees in the first year under MVC control. Expect this to not only continue, but get worse.

As much as we owners love the HRC system and product, to MVC it’s just another line item in the massive ILG purchase. It’s value to MVC is just a fraction of the ILG purchase and diminishing in value daily as they cannot integrate it, the Hyatt Points Program is a massive headache, the owners are complaining and creating lawsuits, and now it’s becoming a financial burden with COVID destroying the hotel side bookings.

I think MVC would be open to spinning off the entire HRC system. It gets a big problem off their hands, it reduces debt and injects liquidity during a period in time where they are financially hurting.

We, the HRC ownership, should be interested in taking advantage of the current short term economic situation to solve a long term problem.

I would rather not discuss numbers in public as it would give MVC management an advantage in any future negotiation (yes, I agree the odds are slim). To be blunt, it would require a large quantity of money that I doubt any of us individually has in the petty cash drawer. There are approximately 30,000 owners, many who hold more than one week. To take it private, the majority of the ownership would have to come up with quite a bit of cash each. Even a debt plus private cash would be a large number, but more realistic. Making a public offering would probably be more complex, expensive, etc.... and at the end of the day, I am unsure of the public apatite for this type of company. Debt plus public offering would be the most complex. Honestly, of the options, I like private plus debt the most. The cost of borrowing money right now is low. Making it private would allow the return of a fiscally conservative management style with a focus on quality and owner enjoyment as opposed to pure profit. The owners who participate would have to make money off the project, I can see a small dividend plus increase in equity as the debt load is reduced or the system is grown through new property development. I can see it being a long term stability play similar to a utility company. Possibly make it an REIT?

Like I said in the beginning, this is just a thought for discussion. I’d like to hear what folks think, hopefully positive constructive ideas. Thanks.

 

[Kal]

That's a very interesting issue. In short, I don't think there would be sufficient interest in moving forward. Here are some thoughts:
1. The entire timeshare industry is no longer as favorable as it was in the past.
2. Airbnb has become a favorite without the need for an "investment" and life-long MFs into pre-paid vacations.
3. Ownership on the books today is an older group. I don't see a replacement generation entering into a fixed week system.
4. Resale prices are substantially decreasing showing that owners just want to rid themselves of a life-long obligation.
5. The resorts are getting older thereby requiring higher and higher MF for renovation and upkeep.
6. It would be extremely difficult to finance the construction or financing of any new properties for the ownership group.
7. A large company has the leverage to keep insurance premiums low. Many of the HRC resorts are located in regions where insurance is very important and expensive.
8. For years it has been a real challenge to get HRC owners to vote on anything. This would likely carry forward on any new major action thereby negatively impacting resolution of a change.
9. The presence of the HPP would entangle any action as those owners have a vested interest in maintaining status quo. My guess is those HPP owners would use any opportunity to walk away. At this point they are stuck with no HPP assets (i.e. deeded weeks) and only a handful of points.
10. If the action is successful at first, there would almost certainly expose the participants to legal challenge and very big legal costs.
11. Given Climate Change, 4 resorts in Florida have an increasing probability of significant loss due to sea level increases and hurricane damage. Texas and Arizona properties have a very questionable future due to long term weather issues.
12. My guess is maintaining the connection to Interval would cease to exist in dealing with Marriott.

 

[alameda94501]

I did not appreciate the increase in fees, but it seemed (at least in my properties) to go to specific improvements rather than padding the MVC management pockets. I think it's worth a closer look.

And I disagree that AirBnB is going to wipe out timeshares post-pandemic, as they layoff a quarter of their workforce and reach $1 billion in losses. Seems like the business has more substantive issues than something less sexy like VRBO. Having said that, VRBO has been around for 25 years without displacing timeshares, so I think there is still a place for timeshares. I know I wouldn't want to be in someone's home but enjoy being in a Hyatt property.

I would definitely be interested, @Sapper. But I think a forever-problem with all forms of shared ownership, whether condominiums or timeshares, is the apathy of members. I don't get it myself, I would think if one were interested enough to spend $6,000 (or $36,000 new) on a timeshare one would sign up for TUGBBS and vote at every meeting. But it never seems to work that way, there always seems to be friction to get even ~30% of any membership to organize. (How can you tell that I'm on several boards for condominium associations?)

I think if MVC is smart they will *reduce* friction in their favor. The easiest thing is to offer a zero HPP point membership for a low dollar amount that doesn't give WoH developer benefits, but permits an HRC legacy owner to annually opt-in to HPP, while reducing or eliminating the annual opt-in fee. If they can make it a "no-brainer" for HRC legacy owners to sign up and continually opt-in to the HPP it will at least validate the HPP membership and make both HRC and HPP members happy with the improved booking/point system.

Long-term, I agree with @Sapper that MVC is a large shareholder-driven organization that does not operate to our best interests but unless the forever-problem is solved there are a lot of headwinds to organizing a buy-out. Slightly easier might be to find a like-minded big-money (lesser of two evils?) organization to champion our side. Hey, TUGBBS takes all those $15 membership fees, maybe they are up to a billion dollars in their war chest!

 

[Sapper]

That's a very interesting issue. In short, I don't think there would be sufficient interest in moving forward. Here are some thoughts:
1. The entire timeshare industry is no longer as favorable as it was in the past.
2. Airbnb has become a favorite without the need for an "investment" and life-long MFs into pre-paid vacations.
3. Ownership on the books today is an older group. I don't see a replacement generation entering into a fixed week system.
4. Resale prices are substantially decreasing showing that owners just want to rid themselves of a life-long obligation.
5. The resorts are getting older thereby requiring higher and higher MF for renovation and upkeep.
6. It would be extremely difficult to finance the construction or financing of any new properties for the ownership group.
7. A large company has the leverage to keep insurance premiums low. Many of the HRC resorts are located in regions where insurance is very important and expensive.
8. For years it has been a real challenge to get HRC owners to vote on anything. This would likely carry forward on any new major action thereby negatively impacting resolution of a change.
9. The presence of the HPP would entangle any action as those owners have a vested interest in maintaining status quo. My guess is those HPP owners would use any opportunity to walk away. At this point they are stuck with no HPP assets (i.e. deeded weeks) and only a handful of points.
10. If the action is successful at first, there would almost certainly expose the participants to legal challenge and very big legal costs.
11. Given Climate Change, 4 resorts in Florida have an increasing probability of significant loss due to sea level increases and hurricane damage. Texas and Arizona properties have a very questionable future due to long term weather issues.
12. My guess is maintaining the connection to Interval would cease to exist in dealing with Marriott.

Thank you for your thoughts. All are valid points.
1-3 seem like marketing problems. The new generation may want points instead of weeks (HPP needs to be fixed anyway, may as well do it right this time)... and at non resort locations (see my point on new locations, #6).
4. This seems like a combo of ever inflating maintenance fees plus garbage fees to feed the profits of the management company combined with a failure to address the user exit issue (no buy back program).
5. No getting around this one.
6. Instead of building large new resorts, why not tie with existing properties? For example, talk with Hyatt about making a long term lease on one floor of an existing hotel in NY, Chicago, SFO, LAX, etc. Leverage the existing infrastructure, build out the one floor and make it part of the HPP (for a few reasons). If it works, expand the idea globally. This will increase the system footprint, give a boost to the HPP, cater to what the next generation wants, and is a low cost way to expand.
7. Once free of MVC, work with Hyatt to get a better system wide insurance premium under their policy. They might be interested as it would further diversify their risk pool and provide additional income to their group policy. If that does not work, possibly create a self funded insurance pool with reinsurance by a major underwriter (like Lloyd’s of London).
8. HRC owners would not need to vote on anything. Just like when HRC was sold to ILG, or again to MVC, the owners did not get a say in the transaction.
9. HPP is a disaster. We have all discussed this here. Fixing the program and making it better (doing darn near anything to HPP would be a positive at this point) is a good reason for current HPP owners to stay.
10. I doubt there would be a legal challenge if the HPP is made a better program. If something comes up, it’s cheaper to not fight someone trying to leave. Allow them to exit the program. In fact, one of the items that must be addressed is an exit program.
11. While I believe climate change is real and happening (I have some stories about retreating glaciers in Alaska, but another time), I do not think it will be an issue that will directly impact the properties in the next couple of decades.
12. Not necessarily. Some members really like the relationship with II. I think I would like to negotiate a better arrangement with II/MVC, but killing the current arrangement with II would negatively impact some owners.

Thank you Kal.

 

[Sapper]

I did not appreciate the increase in fees, but it seemed (at least in my properties) to go to specific improvements rather than padding the MVC management pockets. I think it's worth a closer look.

And I disagree that AirBnB is going to wipe out timeshares post-pandemic, as they layoff a quarter of their workforce and reach $1 billion in losses. Seems like the business has more substantive issues than something less sexy like VRBO. Having said that, VRBO has been around for 25 years without displacing timeshares, so I think there is still a place for timeshares. I know I wouldn't want to be in someone's home but enjoy being in a Hyatt property.

I would definitely be interested, @Sapper. But I think a forever-problem with all forms of shared ownership, whether condominiums or timeshares, is the apathy of members. I don't get it myself, I would think if one were interested enough to spend $6,000 (or $36,000 new) on a timeshare one would sign up for TUGBBS and vote at every meeting. But it never seems to work that way, there always seems to be friction to get even ~30% of any membership to organize. (How can you tell that I'm on several boards for condominium associations?)

I think if MVC is smart they will *reduce* friction in their favor. The easiest thing is to offer a zero HPP point membership for a low dollar amount that doesn't give WoH developer benefits, but permits an HRC legacy owner to annually opt-in to HPP, while reducing or eliminating the annual opt-in fee. If they can make it a "no-brainer" for HRC legacy owners to sign up and continually opt-in to the HPP it will at least validate the HPP membership and make both HRC and HPP members happy with the improved booking/point system.

Long-term, I agree with @Sapper that MVC is a large shareholder-driven organization that does not operate to our best interests but unless the forever-problem is solved there are a lot of headwinds to organizing a buy-out. Slightly easier might be to find a like-minded big-money (lesser of two evils?) organization to champion our side. Hey, TUGBBS takes all those $15 membership fees, maybe they are up to a billion dollars in their war chest!

The increases I noticed seemed to be a combo of honest inflation items, ie employee pay increase driven by an existing contract, and things I question like new line items that sound real... but they did not exist the previous year. When I sent a question about the new line item, I never received a response. Then MVC gets 10% on top of it... which is fair, but 10% on new line items plus it gives MVC no reason to keep the costs in check on existing items makes me believe that the ownership is getting hosed.

I see Air BnB / VRBO with their own issues, and while competition, not necessarily direct competition. Their product is people’s homes, which lacks a specific standard. Then, when problems occur, you are kind of on your own. Ie, I had a VRBO rental in Hawaii and this COVID thing hit. I went crazy trying to deal with VRBO, who flat out said my reservation did not exist! I finally worked it out with the individual owner, who was great by the way, but VRBO was crap at handling the situation.

I think ownership apathy is what Kal was getting at with his item #8. I misinterpreted what he was saying there in my response to him. Y’all are probably correct. Direct action by the ownership is a difficult situation. It might be 30-50% of the ownership even cares enough to discuss this, much fewer will be willing to participate financially.

I think there are a number of things MVC COULD do... I am not sure they are willing because it would negatively impact their bottom line, and I believe they are purely profit driven.

Thank you alameda for adding to the discussion.

 

[bizaro86]

I think you'll find that wholly impractical. ILG paid $220 MM for the Hyatt business in 2014, and it had 30,000 owners at that time. If you assumed those numbers were still good, you'd have to get every owner to pay in $7300. Given how few would be interested, I think the actual number person would be much higher, which would then drive interest even lower.

 

[Sugarcubesea]

I would love if HRC was spinoff, I’m hopeful that with the downturn in the economy some other good company would be interested in buying it

 

[Kal]

From my perspective, the entire basis of the HRC program has substantially incurred a negative change. When I look back at the arithmetic used in my original resale purchase, it made sense TO ME. The original capital cost was manageable on the assumption of pre-paid vacations at a fair market price. The best scenario was the units would be favorably marketable i.e. I could get most of my money back. Other features were:
- MFs were reasonable and consistent with great value
- There were many new resorts in the planning horizon
- Smart use of the reservation system would provide good access to desired unit/weeks
- Resale options were definitely available
- The resorts were favorable for family use

Fast forward to +20 years, every single criteria would not pencil out:
- MFs have tripled
- No new resorts
- Extremely difficult to obtain reservations at prime resorts in prime seasons
- Resale but at depressed pricing
- The family has matured and children are off to their own vacation choices/limitations
- My wife and I are +20 years older and our lifestyle has changed

So what does this mean to me? The numbers do not pencil out to put more money on the table. Then we roll in the Covid-19 issues and the entire concept is upside down.

 

[vacationtime1]

I think you'll find that wholly impractical. ILG paid $220 MM for the Hyatt business in 2014, and it had 30,000 owners at that time. If you assumed those numbers were still good, you'd have to get every owner to pay in $7300. Given how few would be interested, I think the actual number person would be much higher, which would then drive interest even lower.

+1

I have no idea whether these numbers are accurate, but the analysis is spot on. Many, many, many TS owners want out -- including Hyatt owners -- which is why all of those shady exit companies exist. Although Hyatt is a good system with good properties, there are September owners at Key West, summer owners in Arizona, and 1400 point owners everywhere who would probably rather pay $7,300 to exit rather than "invest" another $7,300 into a property they would prefer to sell.

Timeshare management companies are frequently bought and sold by private equity groups, and when they are, they are valued at a multiple of their free cash flow, not their assets. That free cash flow is based of maximizing management profits which is usually contrary to the interests of the owners paying management fees. This is not an inherent conflict of interest (co-ops of all kinds succeed), but the co-op will have to bid against these private equity groups and other profit maximizers to buy the management company and I don't see the financial backup to do so. Ever.

 

[bizaro86]

+1

I have no idea whether these numbers are accurate, but the analysis is spot on. Many, many, many TS owners want out -- including Hyatt owners -- which is why all of those shady exit companies exist. Although Hyatt is a good system with good properties, there are September owners at Key West, summer owners in Arizona, and 1400 point owners everywhere who would probably rather pay $7,300 to exit rather than "invest" another $7,300 into a property they would prefer to sell.

Timeshare management companies are frequently bought and sold by private equity groups, and when they are, they are valued at a multiple of their free cash flow, not their assets. That free cash flow is based of maximizing management profits which is usually contrary to the interests of the owners paying management fees. This is not an inherent conflict of interest (co-ops of all kinds succeed), but the co-op will have to bid against these private equity groups and other profit maximizers to buy the management company and I don't see the financial backup to do so. Ever.

I got the numbers from the deal press release. I think it's pretty likely they were accurate.

Interval Leisure Group Completes Acquisition of Hyatt Residential Group

Miami and Chicago, October 1, 2014 – Interval Leisure Group (“ILG”) (NASDAQ:IILG), a leading global provider of non-traditional lodging across a broad spectrum of the vacation industry,...

newsroom.hyatt.com

Obviously things have changed a bit since then, but they'd be in the right ballpark I bet.

 

[CalGalTraveler]

@Sapper Thanks for a thoughtful post and interesting idea.

I agree that this is a headache for MVC and Hyatt restrictions on branding and sales makes this an outcast for MVC strategy. Also agree that MVC will milk it for MF not only to offset this inconvenience but also as a way to promote MVC offerings to Hyatt owners in a passive aggressive way. MVC may already be considering spin-off; one way to make it more attractive for purchase and to get the most money is to increase the MF cash flow. Window dressing.

For all the reasons you stated a public offering, or a buyout by owners of the entire system is low probability. Who are likely suitors? (my apologies for the long post that follows)

1) HOA vote: The only way for owners to buy out would be for each HOA to vote out MVC as the management company. It has been done but not easy. At that point each property would be independent. There also may be limitations in the HOA documents.

2) Existing Timeshare Operators: HGVC, Diamond/Apollo, Wyndham, Bluegreen, HICV

- HGVC would be a fantastic combination because the properties are all high-end, HGVC is good to their owners, very MF efficient, and the locations are complementary. (I would love to see this happen) However Hilton and Hyatt would have same conflicting branding issues as MVC. Also doubt that MVC would easily hand over Hyatt to a top competitor.

- Diamond/Apollo - This could happen. Diamond/Apollo (PE fund) are actively searching for a timeshare network to acquire/merge and have been in active talks with HGVC (but no deal yet.) I wouldn't be surprised if MVC has been approached. No hotel brand to worry about (Diamond desperately needs a hotel brand for deal intake). Hyatt would not object other than Diamond doesn't have a good reputation. (Hilton expressed such views). Diamond and Apollo have acquired many timeshare properties. The downside of this is that Diamond/Apollo have a history of jacking up maintenance fees (well beyond MVC standards) and they have a horrible reputation toward owners.

- Wyndham: Would add to high end offerings. Their acquisition of Worldmark went well. Stock price is highly depressed so not sure if they have the means. May be a takeover target by Diamond/Apollo. Branding issues.

Bluegreen, HICV, other: I don't know enough about these systems, but perhaps others could comment.

3) Private Equity Firms:

- Other than Apollo (which desperately wants out of Diamond investment): The problem is that there are few assets to leverage for debt into the buyout because deeds are owned by TS owners. They would be soley in it for the money so would jack up maint fees to dress it up for sale into public or other markets.

4) Hyatt: Hyatt would need to be a partner in making this happen to ensure the license continues. They are not likely in a position to make acquisition given Covid economy effects on hospitality. I like your residence floor of Hyatt idea. Hilton has been pursuing this in some of their hotels in NYC, Cabo. Perhaps an RC owners group could meet with Hyatt to discuss options for suiters?

5) Home rental networks: AirBnB, VRBO, Homeaway although they are also facing Covid pressures, adding the stable income of a timeshare MF system may offset the ups and downs of hospitality. They already have the network and mechanisms for ST rentals. Also comfortable with not owning units they rent out. Could be a potential ally. Doesn't Hyatt has a relationship with a home rental network? Who will sell the timeshares to new buyers?

Other ideas? I will have to noodle on this further. Hope this helps.

 

[Sapper]

@Sapper Thanks for a thoughtful post and interesting idea.

I agree that this is a headache for MVC and Hyatt restrictions on branding and sales makes this an outcast for MVC strategy. Also agree that MVC will milk it for MF not only to offset this inconvenience but also as a way to promote MVC offerings to Hyatt owners in a passive aggressive way. MVC may already be considering spin-off; one way to make it more attractive for purchase and to get the most money is to increase the MF cash flow. Window dressing.

For all the reasons you stated a public offering, or a buyout by owners of the entire system is low probability. Who are likely suitors? (my apologies for the long post that follows)

1) HOA vote: The only way for owners to buy out would be for each HOA to vote out MVC as the management company. It has been done but not easy. At that point each property would be independent. There also may be limitations in the HOA documents.

2) Existing Timeshare Operators: HGVC, Diamond/Apollo, Wyndham, Bluegreen, HICV

- HGVC would be a fantastic combination because the properties are all high-end, HGVC is good to their owners, very MF efficient, and the locations are complementary. (I would love to see this happen) However Hilton and Hyatt would have same conflicting branding issues as MVC. Also doubt that MVC would easily hand over Hyatt to a top competitor.

- Diamond/Apollo - This could happen. Diamond/Apollo (PE fund) are actively searching for a timeshare network to acquire/merge and have been in active talks with HGVC (but no deal yet.) I wouldn't be surprised if MVC has been approached. No hotel brand to worry about (Diamond desperately needs a hotel brand for deal intake). Hyatt would not object other than Diamond doesn't have a good reputation. (Hilton expressed similar views). Diamond and Apollo have acquired many timeshare properties. The downside of this is that Diamond/Apollo have a history of jacking up maintenance fees (well beyond MVC standards) and they have a horrible reputation toward owners.

- Wyndham: Would add to high end offerings. Their acquisition of Worldmark went well. Stock price is highly depressed so not sure if they have the means. May be a takeover target by Diamond/Apollo. Branding issues.

Bluegreen, HICV, other: I don't know enough about these systems, but perhaps others could comment.

3) Private Equity Firms:

- Other than Apollo (which desperately wants out of Diamond investment): The problem is that there are few assets to leverage for debt into the buyout because deeds are owned by TS owners. They would be soley in it for the money so would jack up maint fees to dress it up for sale into public or other markets.

4) Hyatt: Hyatt would need to be a partner in making this happen to ensure the license continues. They are not likely in a position to make acquisition given Covid economy effects on hospitality. I like your residence floor of Hyatt idea. Hilton has been pursuing this in some of their hotels in NYC, Cabo. Perhaps an RC owners group could meet with Hyatt to discuss options for suiters?

5) Home rental networks: AirBnB, VRBO, Homeaway although they are also facing Covid pressures, adding the stable income of a timeshare MF system may offset the ups and downs of hospitality. They already have the network and mechanisms for ST rentals. Also comfortable with not owning units they rent out. Could be a potential ally. Doesn't Hyatt has a relationship with a home rental network? Who will sell the timeshares to new buyers?

Other ideas? I will have to noodle on this further. Hope this helps.

Thank you for contributing to this discussion.

I am sure that there was some discussion about what to do with Hyatt before MVC gave ILG a $1. While I would have loved to have been in the room for that discussion, what ever they may have planned has not really happened yet. Unless it was to continue to pay Hyatt a lot of money in licensing fees and let the system sit outside of the rest of MVC and just collect maintenance fees... in which case, they are doing a great job (sarcasm). So, my guess is that what they thought they could do (integrate it with the rest of MVC?), they can’t and this system is becoming a liability for MVC.

1. I don’t think each individual HOA voting out MVC is going to happen. Even if it did, I think it would destroy the system, and reduce the value substantially. The value of the whole is more than the value of the individual parts.
2. Any hotel affiliated system will have the same issues as MVC regarding the MLA with Hyatt. While I believe the Hyatt system would dovetail nicely with the HGVC system, I just don’t see it happening.
3. Blackstone has a history with HGVC. Not sure they would be interested though. Either way, as you state, any PE will want to maximize profit, which would be the same or worse as our current situation under MVC.
4. I also like the idea of Hyatt partnering on this, but they sold it for a reason. They also have a sweetheart deal for the name that brings them cash with little effort on their part. They might be willing partners if they believe their licensing fee is at risk. They might also be a willing partner if they saw a different way to benefit (long term contracts on existing properties). I like the idea of partnering with Hyatt, but not sure they would be interested in partnering with us.
5. The Air B&B / VRBO is an interesting idea. It would go a long way toward solving one of their biggest problems, consistent quality of a known product. Currently, if you book something through them, there is no guarantee that what you get matches with what you thought you were paying for. If you have a problem, they will tell you to talk to the owner... which is another problem, because like a box of chocolates (yes, I’m totally stealing the line from Forest Gump), you never know what you are going to get. Air B&B / VRBO May really just want to be the facilitator and stay asset light, or they may be interested in exploring it.

 

[CalGalTraveler]

+1 agree with your assessments. Four more ideas. If this is a albatross, they could spin it off to:

1) A mid-tier luxury hotel group like Omni Hotels. RC would lose Hyatt brand and take on the Omni Brand name. Any other brands come to mind? This would be less of a threat to MVC/Marriott since these brands are niches.

2) Luxury fractional ownership groups like Montage. They could consolidate some of the rooms in each resort into fractionals and keep the weeks. Whether they keep the Hyatt brand or not depends on the negotiation.

3) Rental condo developers who would buy back TS ownerships and convert to full ownership condos over time or keep as a hybrid full ownership and timeshare. The problem with this scenario is whether it could happen quickly enough for them to make a profit since they are about selling condos and not managing them. They would more likely push for complete conversion over a few years making RC not a TS anymore.

4) Rental Condo/Home Management companies like Vacassa. Are there any large enough to take this on as a network other than Vacassa? They are not equipped to deal with selling/defaults/mortgages.

BTW...Blackstone is interesting and has had a big stake in Hilton and HGVC in the past. They were reportedly involved with the HGVC Diamond Apollo negotiations since the Hilton brand is involved.

 

[WalnutBaron]

It's an interesting idea, @Sapper, but as a potential investment, I'm not interested. First, we have to face the fact that the timeshare industry is swimming against the demographic tide. Our childen and grandchildren tend not to be attracted as we have been to re-visiting familiar places during their vacation time. They're more interested in eco-adventures, exotic locales, and getting deeply in touch with nature. I don't know what the average age is, for example, of the TUG universe, but I'm guessing it's well above 50 and perhaps well above 60.

Layer on top of that the devastating effects of COVID-19 on the timeshare industry and the crumbling business proposition begins to collapse. Yes, we all expect that travel will begin to pick up sometime in the next 12 months or so, but who knows for sure? And even when it does pick up, how long will it be before people really feel comfortable getting on a long-haul flight in a tightly-packed aluminum and carbon tube with wings to visit a place beyond driving distance?

Third--and not insignificantly--it's most likely the same demographic that owns most timeshare units (the Baby Boomers) who are both most vulnerable to the virus and likely most reluctant to jump back in to the deep end of the pool when it comes to long trips by plane to a vacation destination.

One thing I find interesting is that--as the travel companies (whether airlines, hotel chains, cruise lines) more deeply discount their services to past travelers, the deals seem to be getting better and better. I could be wrong, but I'm guessing the reason that's happening is that earlier enticements weren't enough to get people to sign up--even when such deals offer complete refunds if the buyers decide not to travel after all.

Finally as @Kal has pointed out, the value proposition for HRC has changed significantly--and has been markedly devalued by Marriott. I agree with you that Marriott is probably looking for a graceful way out as far as HRC is concerned--and we all have to hope that if Marriott does decide to spin it off, we don't wind up in the hands of an even more opportunistic and rapacious owner like DRI (heaven forbid).

I applaud your out of the box thinking, but throwing good money after bad is not something I want to do--and I'm afraid that's what we'd be buying if the owners tried to take HRC private.

 

[CalGalTraveler]

Why doesn't MVC drop the Hyatt branding agreement and rebrand the units Ritz Carlton or Marriott or Westin? For example, they could rename Hyatt Residence Kaanapali to Ritz Carlton Residence Kaanapali. It's right next door to Marriott Maui Kaanapali anyway. This way they can integrate HRC into the network similar to Vistana/Westin/Sheraton. This would seem to be the easiest approach and avoids paying cash to Hyatt for licensing and the hassle of negotiating and managing two licensing partners.

Could there be a time element in the agreement with Hyatt branding that they are just waiting out from the acquisition deal to expire so they can pursue above?

(My apologies if this has been discussed before, but thought I would ask since I have not followed this closely.)

 

[Sapper]

+1 agree with your assessments. Four more ideas. If this is a albatross, they could spin it off to:

1) A mid-tier luxury hotel group like Omni Hotels. RC would lose Hyatt brand and take on the Omni Brand name. Any other brands come to mind? This would be less of a threat to MVC/Marriott since these brands are niches.

2) Luxury fractional ownership groups like Montage. They could consolidate some of the rooms in each resort into fractionals and keep the weeks. Whether they keep the Hyatt brand or not depends on the negotiation.

3) Rental condo developers who would buy back TS ownerships and convert to full ownership condos over time or keep as a hybrid full ownership and timeshare. The problem with this scenario is whether it could happen quickly enough for them to make a profit since they are about selling condos and not managing them. They would more likely push for complete conversion over a few years making RC not a TS anymore.

4) Rental Condo/Home Management companies like Vacassa. Are there any large enough to take this on as a network other than Vacassa? They are not equipped to deal with selling/defaults/mortgages.

BTW...Blackstone is interesting and has had a big stake in Hilton and HGVC in the past. They were reportedly involved with the HGVC Diamond Apollo negotiations since the Hilton brand is involved.

1. Because some properties are co-located with (Lake Tahoe / Bonita Springs) or are inside a Hyatt (Park Hyatt Beaver Creek), there may be some issues with this one. Omni would be an interesting match. I wonder if a company who has more properties outside the US and is looking to expand inside the US might be interested in this. A few that come to mind are Peninsula Hotels, Rosewood Hotels, and Mandarin Oriental. Montage would be interesting, but it might be a tough to fit their business model.

2 & 3 are difficult as both the specific unit and week are deeded to owners.

4. I do not know enough about Vacasa. A quick look at their site makes me think it’s a small VRBO / Air B&B. How are they different?

Blackstone came to mind because of their experience with HGVC

 

[CalGalTraveler]

1. Because some properties are co-located with (Lake Tahoe / Bonita Springs) or are inside a Hyatt (Park Hyatt Beaver Creek), there may be some issues with this one. Omni would be an interesting match. I wonder if a company who has more properties outside the US and is looking to expand inside the US might be interested in this. A few that come to mind are Peninsula Hotels, Rosewood Hotels, and Mandarin Oriental. Montage would be interesting, but it might be a tough to fit their business model.

2 & 3 are difficult as both the specific unit and week are deeded to owners.

4. I do not know enough about Vacasa. A quick look at their site makes me think it’s a small VRBO / Air B&B. How are they different?

Blackstone came to mind because of their experience with HGVC

1) Co-location/Co-floors are where HGVC likely ran into branding issues with Diamond/Apollo.

Interesting thoughts on Peninsula, Rosewood etc. and potential foreign buyers. I could envision Anantara from Asia would be interested if they would like to expand their timeshare footprint to the USA. However I don't think MVC would want to enable another competitor to the U.S.A. market

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2&3) That's a specific problem for HRC. The points program may hold inventory that could be used and expanded over time.

4) Vacasa is a large vacation home management company that markets through AirBnB, VRBO etc. They are the back-end operational mgt and AirBnB is the front end listing website. Vacassa produces the listing photos and text, take the calls from potentials renters, manages their stay i.e. get the plumber if needed at 2 am, arrange cleaning after checkout and have local resources to check on the rental if renters are unruly etc. AirBnB is merely the classified ad page.

 

[Kal]

...Third--and not insignificantly--it's most likely the same demographic that owns most timeshare units (the Baby Boomers) who are both most vulnerable to the virus and likely most reluctant to jump back in to the deep end of the pool when it comes to long trips by plane to a vacation destination....

This is a fascinating observation. By far, the majority of owners are in a "risk category". I am anxious to see how this demographic responds to Covat-19 in terms of both continued ownership and occupancy of the HRC units. I believe we will see an increase in resales and CUP points availability. The thought of getting into a packed aluminum tube to enjoy a vacation of co-mingling with many other folks might further support a stay-at-home approach. All the while, we are paying MFs and watching our points move into LCUP. Then too what if the bottom drops out of the resale market due to personal financial issues or simply herd mentality.

As a sad note, I have a good friend who in late February became infected with Covad-19 while enjoying their vacation at a high demand Hyatt resort. Fortunately, they got thru it without severe consequences.

 

[AJCts411]

What an interesting concept. Buying HRC. Here is a thought, concept, but specifically aimed at Key West, rather than all of HRC. And even sharpening the point to Sun Set Harbor. The idea could also be applied to other individual locations. In KW there is another small resort the Banyan, to compare with. I do not personally own at Banyan, but have visited friends there. The concept of if a single HRC resort such as Sun Set were to opt out of Marriot/HRC I think the splash back would not be very noticeable...that is to say the occupancy rate will remain very high. Property mangers or a AirBnB type could handle rentals of available weeks, I'm 100% sure that the maintenance fees would be much lower, just by comparing to Banyan. (not exactly apples to apples, I agree.) This does assume that most owners at SS did not buy to trade points, and I can not say that is true, but an assumption based on the lower maintenance fees, acquisition costs else where within HRC. I am one that thinks so long as the maintenance, amenities stays comparable, I place low value on the HRC name on the sign, since I personally bought to use.

 

[Kal]

What an interesting concept. Buying HRC. Here is a thought, concept, but specifically aimed at Key West, rather than all of HRC. And even sharpening the point to Sun Set Harbor....

Nice idea to kick around. To do so would likely require 100% affirmative vote by all the Sunset Harbor deed holders. IMHO, it would be easier to herd a flock of cats than to meet that 100% goal. Currently it's a challenge to get 30% of the HSH owners to vote on anything.

 

[GTLINZ]

The easiest thing is to offer a zero HPP point membership for a low dollar amount that doesn't give WoH developer benefits, but permits an HRC legacy owner to annually opt-in to HPP, while reducing or eliminating the annual opt-in fee. If they can make it a "no-brainer" for HRC legacy owners to sign up and continually opt-in to the HPP it will at least validate the HPP membership and make both HRC and HPP members happy with the improved booking/point system.

What an interesting thought. I am thinking this could go a bit further with all of the current uncertainty. I would gladly turn my unit in if Hyatt offered a comparable number of points for xx years (say 10 for this example) and if I could opt out at any point (turning in my deed). They could make the points conversion full for diamond and maybe platinum then diminish the percentage increasingly for lower seasons (say bronze 2br std gets 1000 points instead of 1300). They could get hold of SO MUCH inventory this way in a relatively short period of time. Some folks would still hold on if they use their week, but it sounds like a win-win for both sides. Hyatt gets back inventory, and the "at risk" generation that we discussed owning so much of the inventory gets an out - but still has time to use what we bought into.

That does however put Hyatt or any new owners into a longer term commitment for change to happen - as opposed to short term profits.

 

[Pathways]

Buying HRC. Here is a thought, concept, but specifically aimed at Key West, rather than all of HRC. And even sharpening the point to Sun Set Harbor.

Buying HRC would have no practical affect on HSH. All you would be buying is the management contract and points system. HRC doesn't own any weeks at HSH. The association owns all the foreclosed weeks and is selling them as weeks. There may be a few points weeks, but very few.

To do so would likely require 100% affirmative vote by all the Sunset Harbor deed holders.

There continues to be a lively discussion within owners and elected owners about dumping HRC and standing alone. This would not take anything close to a 100% vote. In fact, I think the board itself could do it.

The question/answer I don't know (as I have not been active in these discussions) is how getting rid of the HRC management would affect owners trying to utilize their points. For example, at Sunset Cove on Marco Island and other resorts who were HGVC and now changed management, the original Hilton owners can still use the HGVC points system.

 

[GTLINZ]

HRC doesn't own any weeks at HSH.

I suspect that you meant HPP does not own any weeks at HSH ....

 

[Pathways]

I suspect that you meant HPP does not own any weeks at HSH ....

No, I did mean Hyatt Residence Club (HRC)

HRC and HPP (Not to be confused with HPP/Hyatt Pinon Point) are one and the same

HRC owned unsold weeks (and the weeks at the new buildings under construction) that they then 'dumped' into the points program to put some lipstick on to try to sell. We have 'assumed' they put ALL their unsold weeks into the points program, but I don't think we really know 100%.

They may have bought a few weeks at HSH with ROFR and turned them into the points program, but very few.

Again, the association there is refusing to turn over the weeks they have foreclosed on and taken back and they are selling them independently. I assume you know the broker and website they are selling them through. As owners, we all get the list of available units first in case we want to buy more.

 

[Pathways]

Now, there are some owners at HSH who have purchased points which also converts their week at Sunset Harbor to points on a Y2Y basis. But that didn't change the ownership. It is still a deeded week owned by the original person. It just gives them the right to convert. That week is not 'owned' by HRC(HPP).