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Spin off HRC from MVC?

GTLINZ

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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
What I was referring to is whose control those points are under (inventory) - which is why I do not think of HRC and PP as the same even though it is the same company overseeing both. When you go to make a reservation, you see availability from Hyatt Residence Club and from the Portfolio Program. They keep the 2 separated, which is why I assumed you meant PP.

And if I understand this correctly - HRC inventory is from deeded weeks. PP inventory is either from PP points owners (and the deeds owned by Hyatt instead of the PP owners) - or it is from weeks that have been turned over (opt-in) to PP from their deeded owners on a given year. At least with the latter you can decide not to participate (opt-in).

I also love hearing the the HSH board is taking weeks back and selling them - which means they stay out of the PP inventory.
 

Pathways

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When you go to make a reservation, you see availability from Hyatt Residence Club and from the Portfolio Program. They keep the 2 separated,
Agree with that distinction. But from the overall corporate entity, they are one and the same. When the discussion is buying HRC, that is a discussion of buying both.


I also love hearing the the HSH board is taking weeks back and selling them - which means they stay out of the PP inventory
Not sure most points owners would agree with that. :) , After all, between HKB and HSH, those are the two main resorts they all want to trade into. And good luck with either!
 

Sullco2

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As to the task of finding a “purchaser partner” here’s an idea that may now be viable: Many decades ago labor unions in the US provided vacation facilities for their members. Today unions are struggling to retain members. While it is an extreme longshot to suggest that a giant national labor organization acquire HRC with an eye toward expanding it through subsidized sweetheart offerings to its members, the concept of an in-house vacation program for employees might appeal to giants like Amazon. Incorporating HRC ownership into employee benefit programs would be voluntary but think of how giant corporations could streamline every aspect of ownership for employees. No more “first day Incentive” sales pressure to unwary prospects. Favorable financing through captive credit unions. Integration into exchange companies to satisfy employees who don’t want to vacation with co-workers. The opposite approach wherein companies could trumpet pride and satisfaction in owning with fellow employees. Companies could develop regional drive to destination properties that would serve as combination vacation and training centers by using the lesser value weeks for training and not selling them to employees. This eliminates one of the worst timeshare flaws wherein developers saddle buyers with worthless weeks to make profits or create nonsensical points programs to paper over the lack of inherent value in off season weeks. Amazon Vacation Club could be launched almost overnight through buying HRC as the platform. Think of the marketing power of Amazon if Bezos wants something bigger than just an employee benefit program. I could go on but let this idea percolate a moment.
 

Sullco2

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And the Amazon Vacation Club could include low cost travel by Prime. You just have to have a big box to fit yourself into.
You know what a salesperson would say, Kal...If you don’t get a periodic vacation from your stressful job the big box you’ll be in prematurely will be a coffin. LOL
 

Kal

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Yes, but if they sign up for the Premium Prime, you will get a "multi-function comfy box". It can be easily converted to a lovely coffin. If you purchase TODAY, they will provide you with TWO boxes for the price of one. Handling and shipping costs are extra. (Not available in the country of Monrovia)
 

Sullco2

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Yes, but if they sign up for the Premium Prime, you will get a "multi-function comfy box". It can be easily converted to a lovely coffin. If you purchase TODAY, they will provide you with TWO boxes for the price of one. Handling and shipping costs are extra. (Not available in the country of Monrovia)
Okay, we both qualify as joke writers! Now consider this concept seriously for a moment. My impression of you in particular has been that you are in favor of well-designed, financially reasonable yet sustainable programs, and non-weaselly sales approaches. If both the seller and the buyer had goals in alignment by virtue of a benevolent employer-employee relationship, the (“in-house) Vacation Club could protect the consumer/employee by virtue of the improvements over the current model I cited earlier and provide a recruiting and retention benefit to the developer/employer. Not unlike a health benefits program. Surely the lawyers among us would see liability issues when the first Amazon employee crashes her jet ski into the row of beach chairs on Amazon Vacation Club’s Coconut Plantation’s island, but the Liability Devil is omnipresent. Since the employees of corporation and governments have been buying timeshare nakedly since the Dawn of Time (share) perhaps its time to facilitate a vastly better product and process for the same people via employer initiative. No joke.
 

Sapper

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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.
Sorry for my delay in responding, work was very busy this last week. A good problem to have in these times, so was “making hay” so to speak. Thank you, WalnutBaron, for responding.

Maybe the twenty year old age group with some $$$ will travel to exotic eco locations, however, I suspect that as people start having kiddos they will want to change their travel plans to something more inline with what timeshares offer. Specifically, that is a known entity with more space than a hotel room at a reasonable cost in a nice location with family activities nearby. I say this because as a 40ish year old couple with two younger kiddos, this is exactly what we want. This is why we own two Hyatt properties. Unfortunately, it feels like MVC May be attempting to change the equation by increasing the maintenance fees. This hurts the “reasonable cost” factor above. I see the “next generation of timeshare owners” as a marketing problem. However, if MVC continues to increase cost, even good marketing will fall on deaf ears because the cost component will make the timeshare proposition a non starter.

Your second point is the reason I think MVC will be open to spinning HRC off. HRC is a pain in their side, and if they can make their books look better by spinning it off, right now they might be more receptive to the idea. That being said, any plan will need to make certain assumptions regarding an increase in unpaid maintenance fees and increased resale (at low prices) activity.

Third, agree, getting back into a narrow metal tube with a bunch of strangers and recirculating air is a problem. But we already accept the risk of hurtling through atmosphere that has such low pressure that you have only seconds of consciousness to get an oxygen mask on in the event of a depressurization at roughly 80% the speed of sound, not to mention the vehicle was probably maintained in the least expensive method that would pass an inspection and operated by one pilot because the other is taking a nap. No airline will ever hire me for marketing. Despite the risks, and headache of the TSA and irritated airline employees, we accept it. I think folks will get back on airplanes before we start piling on the floating petri dishes known as cruise ships (they don’t like my marketing either). I do think that people will want to travel, and because the floating Petri dishes may be off the table, time sharing will be an option.

Your fourth (and part of your fifth) point goes back to the “reasonable cost” factor. If a viable alternative to timeshares is available at a lower cost due to increased incentives, at least in the short term, it will negatively impact the timeshare market.

I don’t like throwing good money after bad either. Not that I have the millions of $$$ laying around to throw at this kind of project to begin with. So, for the most part, this whole conversation is just theoretical. However, sometimes an interesting viable idea comes from a fun theoretical discussion. Add to that I am nervous of the prospect of being tossed out of the frying pan of MVC into the fire of DRI. Creating a viable alternative for MVC would be a win / win. I am, unfortunately, coming around to the fact that the majority of the ownership would rather just pay their maintenance fee and enjoy their week than participate in the actual management of their owned weeks.
 

travelhacker

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Personally, I think the best landing spot is for HRC to return back to Hyatt, but I'm sure that came up with the negotiations with MVC for continuing on with the Hyatt licensing.

Also, none of the majors own their timeshare companies anymore so I know it would be unlikely to happen.

Does anyone know what the reasoning is behind all of the major hotel players spinning off their timeshare interests?
 

Sapper

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As to the task of finding a “purchaser partner” here’s an idea that may now be viable: Many decades ago labor unions in the US provided vacation facilities for their members. Today unions are struggling to retain members. While it is an extreme longshot to suggest that a giant national labor organization acquire HRC with an eye toward expanding it through subsidized sweetheart offerings to its members, the concept of an in-house vacation program for employees might appeal to giants like Amazon. Incorporating HRC ownership into employee benefit programs would be voluntary but think of how giant corporations could streamline every aspect of ownership for employees. No more “first day Incentive” sales pressure to unwary prospects. Favorable financing through captive credit unions. Integration into exchange companies to satisfy employees who don’t want to vacation with co-workers. The opposite approach wherein companies could trumpet pride and satisfaction in owning with fellow employees. Companies could develop regional drive to destination properties that would serve as combination vacation and training centers by using the lesser value weeks for training and not selling them to employees. This eliminates one of the worst timeshare flaws wherein developers saddle buyers with worthless weeks to make profits or create nonsensical points programs to paper over the lack of inherent value in off season weeks. Amazon Vacation Club could be launched almost overnight through buying HRC as the platform. Think of the marketing power of Amazon if Bezos wants something bigger than just an employee benefit program. I could go on but let this idea percolate a moment.
Okay, we both qualify as joke writers! Now consider this concept seriously for a moment. My impression of you in particular has been that you are in favor of well-designed, financially reasonable yet sustainable programs, and non-weaselly sales approaches. If both the seller and the buyer had goals in alignment by virtue of a benevolent employer-employee relationship, the (“in-house) Vacation Club could protect the consumer/employee by virtue of the improvements over the current model I cited earlier and provide a recruiting and retention benefit to the developer/employer. Not unlike a health benefits program. Surely the lawyers among us would see liability issues when the first Amazon employee crashes her jet ski into the row of beach chairs on Amazon Vacation Club’s Coconut Plantation’s island, but the Liability Devil is omnipresent. Since the employees of corporation and governments have been buying timeshare nakedly since the Dawn of Time (share) perhaps its time to facilitate a vastly better product and process for the same people via employer initiative. No joke.
Now this is out of the box thinking! It solves a lot of problems. Amazon is interesting as it could either rent (y’all joked about Prime, but it could be a viable marketplace) or allow their employees the use of (basically Amazon covering the rent) un used units. Other big corporations could be interesting, but would have to really care about their employees to do this (ie, Zappos might, IBM might not). A few speed bumps might be the lack of an exit strategy (ie, it’s not working, how do they get rid of it?), outside of core business, mitigating cost of unused units, lack of control at sold out properties, explaining the costs to shareholders, and competition between corporate owned and individual owned units (ie, individuals will never be able to trade into a ski season ski property using points as the corporate folks may manipulate the system to meet their own goals). Not that these issues could not be overcome, it just takes some planning.
 

Sapper

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Personally, I think the best landing spot is for HRC to return back to Hyatt, but I'm sure that came up with the negotiations with MVC for continuing on with the Hyatt licensing.

Also, none of the majors own their timeshare companies anymore so I know it would be unlikely to happen.

Does anyone know what the reasoning is behind all of the major hotel players spinning off their timeshare interests?
I’d love the system to return to Hyatt. I’m not sure how that happens though.

The speculation I remember was the 2008 “Great Recession” showed the systems as a substantial liability on their books.
 

Kal

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In an acquisition, the certain questions are:
- Is it viable into the future i.e. sustainability and legs
- What is the ROI
- What is the growth in profit margin

IMHO, I don't see positive answers to any of those issues. A buyer wants to see great financial results sooner than later. Maybe 5 years?? Moreover, future profit increases largely come from sales (new capital investments), and increase in MFs. That doesn't sound good for existing owners.
 

Sapper

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In an acquisition, the certain questions are:
- Is it viable into the future i.e. sustainability and legs
- What is the ROI
- What is the growth in profit margin

IMHO, I don't see positive answers to any of those issues. A buyer wants to see great financial results sooner than later. Maybe 5 years?? Moreover, future profit increases largely come from sales (new capital investments), and increase in MFs. That doesn't sound good for existing owners.
Honestly, I am not sure it would be viable as a straight public stock / REIT type of play. This is one reason I was suggesting owners come together to buy it and make it a privately held company. The owners have a vested interest in making sure the management is sound. Having a demand by shareholders for ever increasing profits places the management company’s goals in direct competition with the owners. I think @Sullco2 came up with an interesting alternative for the same reason, his solution solves the conflict of interest issue by placing the management company’s fiscal goals in alignment with the owners.

- Is it viable? I think the system can be viable. If we have a Great Depression type of environment, less so. If we have a period of rapid inflation, more so.
- what is the ROI and growth potential? Not great, another reason for owners to take it private because conservative fiscal management is good for the owners, but tough on margin growth. Sullco2’s idea works here as well because it changes the metrics a bit. One way to increase the ROI / growth would be to fix the HPP, create an exit program for current owners, ROFR everything that comes through the door (less expensive than building new properties) and dump that inventory into the (now fixed) HPP. Then change the marketing on the HPP to attract new owners.
 

SunandFun83

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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.
Kal,

Always interested in your take on Hyatt Residence Club. we signed a deal to build a new Trex deck at the house because we will be traveling less / staycation more. I cancelled my vacation in November to Marriott Canyon Villas in Phoenix and booked Marriott Ocean Pointe in Florida (two day drive). I think the over 70 crowd at timeshares will be very concerned.

Maybe re-opening goes well, a vaccine saves us in 2021. Maybe the timeshare world crashes and burns.
 

Kal

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Let me take a different view of the approach.

Owners might be a little nervous about their current financial portfolio. It is assumed the portfolio is well diversified and includes cash, bonds, stocks, mutual funds, ETFs, silver/gold and real estate. The composition definitely varies by age where the more mature the age, the portfolio becomes more conservative.

So here we are in the middle of Covid where a conservative AAA bond is paying pennies. The option of "investing" a chunk of the portfolio into a new concept time share would likely be very quickly discarded as highly risky, non-liquid and good for discretionary "throw-away" capital. I wonder how many HRC owners would spring for the option or simply take their money off the table?

The preferred approach could be to sit back and let some other well funded enterprise take the risk. I would sit back sipping on a drink with little umbrellas hoping my MFs don't skyrocket, all the timeshare benefits rapidly improve and I look forward to the next owners update meeting. :) Let me think.
 
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