Starwood Spinning off Timeshare Division - Vistana Signature Experiences

[Beefnot]

I completely agree. Having just reached 5*, I would certainly be somewhat disappointed if something happened to significantly devalue StarOptions, Starpoints, or Elite benefits, but that was never our primary reason for purchasing. We love all the resorts in our portfolio and would be happy even if everything else went away.

Although if the Starpoints and Elite benefits went away, I imagine you'd be a little ticked at having made developer purchases for the purpose of getting to 5*.

 

[Henry M.]

I didn't get to 5* just for the SPG Plat benefits. I got there before I even knew TUG existed, and I don't regret owning what I currently have, even though I could have saved some money following a different order of purchases. I would have still purchased the same number of weeks at the exact same properties.

I assumed going in the worst could happen, and each property would have to stand on its own outside of Starwood. I also assumed the resale price of the property could go to $0 (it hasn't in Hawaii and St. John), so I'm good with what I did.

I wouldn't like losing SPG Plat, and other 5* benefits, but I'm not going to worry about it until there are actual details of what is going to happen. Maybe they get replaced by another chain's top tier benefits (e.g. Hilton), maybe not. In any case, worrying and getting angry between now and the time the changes are announced isn't going to be helpful and isn't going to change anything. Why waste time and energy being angry or worried until there is something that can actually be acted upon?

 

[rhailey]

Is there any speculation how (or whether) this will affect how Starwood exercises its rights of first refusal on resales?

 

[okwiater]

Although if the Starpoints and Elite benefits went away, I imagine you'd be a little ticked at having made developer purchases for the purpose of getting to 5*.

It's true that if the Starpoints and Elite benefits go away, purchasing from the developer would not make a lot of sense in hindsight. But, we always knew that all of those perks could be stripped away at any time, so we didn't focus too closely on obtaining 5* for the cheapest cost and instead purchased ownerships we actually enjoy. WKV, WSJ, and WLR are some of our favorite resorts anywhere, and are easy traveling distance from the East Coast. We've got island, beach, desert, and mountain ownerships, as well as SBP/SVV which we can drive to.

All that said, I don't think there is a very significant risk right now that VSE will lose its affiliation with Starwood (or other parent hotel company, if the rumors of merger/acquisition are true). The VSE management team knows that one of their most effective sales techniques is the ability to sell access to the larger network of hotels, especially with only 22 resorts. As such, it seems unlikely to me that "Starpoints" conversions and Elite status are going away anytime soon. Much more likely in my opinion is the risk of points devaluation if SPG is overhauled or replaced.

 

[vistana101]

I see others post about the hotel side being bought by another chain or merger. What about the new timeshare company being bought, merged with another timeshare entity?

I am also interested to see, if a merger or acquisition occurs, what will happen to the timeshare companies, assuming the new brand has a timeshare group. I know Marriott's group is separated like VSE is going to be, but I don't know about Hilton's or IHG's, so it would be interesting to see how that would work.

Another interesting piece of info from the document regarding Aruba: "Certain entities, which historically have been included in Starwood’s vacation ownership and residential business, and whose operations are included in Vistana’s combined financial statements, will be retained by Starwood after the spin-off, as follows: Two legal entities comprising Vistana’s ownership interests in Aruba, which consist primarily of land held for development."

 

[dioxide45]

I knew about Starwood's plans to spin off their timeshare unit, but haven't really followed it. We were looking in to buying a Starwood unit a couple years back, but never pulled the trigger. I have read through this thread and have a few thoughts.

• Like others, I am not big on the name of the new company. Vistana seems like they are taking a step backward. Isn't that the name of the company that Starwood acquired when they got in to the timeshare biz? It just seems old fashioned with little brand awareness.
• It does seem that they will still market their properties as Westin, Sheraton, or Vistana. I would suspect with a $30MM licensing fee that they will still market themselves as the Starwood Vacation Network. The Vistana name is just the name of the parent. Brand marketing will be a lot different.
• Marriott spun off their timeshare division out of necessity. It seemed with Marriott, that each division was holding each other back. The inventory assets that Marriott held were more of liabilities to Marriott International in the real estate crisis. Marriott International was taking huge write downs on this inventory.
• Starwood seems to be in a different and peculiar position. With the crisis behind us, it doesn't seem that they need to spin off out of necessity. They don't seem to have the same inventory issues that Marriott did back in 2010. Perhaps there are other reasons behind it, who knows. Are they trying to make their hotel division look more attractive for a potential suitor? This seems to make the most sense since Starwood has announced they are considering options to increase shareholder value, which some could read that they are considering a sale of themselves. Though this also set the timeshare division up for an acquisition?
• The $30MM licensing fee seems rather obsessive (much like the $50MM fee for Marriott did), though with Starwood, it seems even more so in that their net income isn't enough to cover the fee. So they will be operating at a loss from day one. (Marriott's fee was $50MM ever year with an additional percentage of every sale going to Marriott International). Is Starwood's brand worth 60% of Marriott? Is their timeshare division 60% of the size of Marriott's. Wonder where they came up with the number?

 

[LisaRex]

[*]The $30MM licensing fee seems rather obsessive (much like the $50MM fee for Marriott did), though with Starwood, it seems even more so in that their net income isn't enough to cover the fee.

Acc to Canesfan, "That $25 million is for first qtr. 2015. They made over $100 mil in 2014 and on track to make $135 mil in 2015."

So while I guess we can afford it, it seems like a really high price to pay for a name.

 

[dioxide45]

Acc to Canesfan, "That $25 million is for first qtr. 2015. They made over $100 mil in 2014 and on track to make $135 mil in 2015."

So while I guess we can afford it, it seems like a really high price to pay for a name.

Okay. That sounds a lot better then. Marriott Vacations Worldwide had net income in 1Q15 of $57M, so it doesn't seem that the $30M that Starwood will be paying is that far off from Marriott. Though VACs number is probably adjusted to include that royalty payment.

We also thought the $50M was excessive for Marriott. Thought, at least so far, it seems to be working out for them.

 

[tahoeJoe]

That does seem excessive. Does anyone know how many units there are across the 22 properties that will become a part of VSE? My SWAG is that this will cost approximately $150 per 1/52 ownership. But would it be better not to have the Starwood/Westin/SPG affiliation in place and save the $150? Probably not...

The annual MF on my SDO unit around $700. $150 (for esentially nothing) is a huge increase.

I really resent paying any license fee. It is like buyimg a Mecedes with the 3 pointed star, only to have Mercedes come back in a few years and demand you pay them EVERY year to keep your hood ornament.

 

[SueDonJ]

The annual MF on my SDO unit around $700. $150 (for esentially nothing) is a huge increase.

I really resent paying any license fee. It is like buyimg a Mecedes with the 3 pointed star, only to have Mercedes come back in a few years and demand you pay them EVERY year to keep your hood ornament.

I believe in Marriott's case the licensing fee that Marriott Vacations Worldwide (the spun-off timeshare company) is paying Marriott, Int'l. (the license issuer) is coming primarily from the Management Fee with very little impact on the timeshare owners' Maintenance Fees. The governing docs for Marriott timeshares stipulate a Management Fee of 10% of the operating/reserve costs. Prior to the spin-off that fee went direct to MI, since the spin-off it goes direct to MVW.

We simply haven't seen measurable increases in our MF's that can be attributed to the spin-off. (Although we are seeing slight upticks in Housekeeping fees that may be due to the less-than-7-nights stays that are available through MVW's DC Points program, introduced the year prior to the spin-off, despite MVW's assurances that any such upticks are covered by the DC Members' dues.)

 

[tschwa2]

I wonder if this will have any implications for Harborside. It doesn't have the name Westin, Starwood, or Vistana.

 

[suzannesimon]

I wonder if this will have any implications for Harborside. It doesn't have the name Westin, Starwood, or Vistana.

I was afraid of the same thing, but since it's never had the brand name, we probably won't miss it. I think it is enough that we have "Atlantis" in the resort name.

 

[paluamalia]

Starwood name dropping

As long as we are all speculating....I think the Starwood name will be dropped...the Florida time shares will all be Vistana (new name), Westin and Sheraton names will remain....

I think Starwood will acquire intercontinental and begin to use that name..
No resorts or hotels are currently Starwood...
They have Elements, Aloft, W, and four points...they also have the luxury collection.they will add Intercontinental to their brands

I think the Starwood name is just confusing.....I hope they do drop it.
SPG will probably cease to exist and be called something else.....

Again....all speculation, no real Knowledge!

 

[russby68@yahoo.com]

Diamond buying Vistana?

Diamond resorts has been telling investors they would like to consolidate the timeshare industry. How would we feel about being acquired by Diamond?

 

[dioxide45]

As long as we are all speculating....I think the Starwood name will be dropped...the Florida time shares will all be Vistana (new name), Westin and Sheraton names will remain....

I think Starwood will acquire intercontinental and begin to use that name..
No resorts or hotels are currently Starwood...
They have Elements, Aloft, W, and four points...they also have the luxury collection.they will add Intercontinental to their brands

I think the Starwood name is just confusing.....I hope they do drop it.
SPG will probably cease to exist and be called something else.....

Again....all speculation, no real Knowledge!

I think that makes sense. Starwood is an oddity, they have not hotels carrying the brand of "Starwood". Unlike Hilton, Wyndham and Marriott. Marketing the timeshares as Sheraton, Westin and Vistana makes sense. I think this is all part of a bigger plan for Starwood. Even if they are acquired or merge with another in the industry, the Westin and Sheraton brands will live on. Keeping those names on the timeshares makes sense.

 

[dioxide45]

Diamond resorts has been telling investors they would like to consolidate the timeshare industry. How would we feel about being acquired by Diamond?

I don't own Starwood, but I think this would be the worst thing that could happen. While Diamond is known for buying distressed properties and upping the MFs, they really can't do that with Starwood/Vistana. MFs are high enough and the properties are probably a step above many Diamond properties.

Diamond seems to be one of those in acquisition mode, if they aren't careful, they could get burnt come another recession. We know another recession will happen, it is never a matter of if but when. These things are always cyclical. It could may or may not be as bad as the Great Recession.

 

[LisaRex]

Marketing the timeshares as Sheraton, Westin and Vistana makes sense.

There are only 3 outliers that don't have Westin or Sheraton in their name: Lakeside Terrace, Harborside and Vistana's Beach Club. The other resorts with Vistana in their name are Sheratons, including the one I own (SVV). Choosing to take the name shared by their lower tier resorts is a stupid marketing move, IMO. Yes, they are nice, but the name has no cache.

 

[Transit]

Just wandering. How long after Marriott made their spinoff announcement were the actual usage details made to owners?

 

[dioxide45]

Just wandering. How long after Marriott made their spinoff announcement were the actual usage details made to owners?

Marriott didn't change usage details with their spinoff. They announced changes to their usage, DC Program, in June 2010 and announced the spinoff in 2011.

 

[trexmdr]

Spoke with a secondary sales rep

I'm now at the WKORV. Went to the owners update and they did the full court press for mr to upgrade to elite 4 which I politely declined.
Anyway there was no mention of the name change or about the new property until I asked. Only asked about the new property.
She glossed over the master trust of the new property and that it would not be fee simple. Also that they would be more expensive so I should buy a studio at WKORV for 34k to bump me up to 4 star. They just happened to have, and in very limited supply supposedly, a unit that would fit the bill.
So I do believe they have properties and are holding back on them for the upgrades to elite 4 or 5.
In fact if you wanted to buy anything from the developer they would sell it to you at these obscene prices.
Plenty of OV 2bdr WKOVR for 25k on the open market. Especially with first right of refusal by Starwoods.
Also the new property will not be lock off. 2 or 3 bdr and you have to use the whole unit. No separate entries and kitchens. Maui says too many cars due to lock off studios being rented out.

 

[Larry M]

There are a number of risks associated with the spin-off and ownership of Vistana common stock. We discuss these risks under “Risk Factors” beginning on page 22.

That's a "Safe Harbor" section required by the Securities and Exchange Commission (SEC) on all Forms 10-K, 10-Q, etc. They have to list every possible risk that "might" happen, to forewarn potential stock purchasers. You often see things like:

• Although our business is not located near a fault line and there has never been an earthquake near here, we could suffer an earthquake and resultant financial losses.
• Although we have always had excellent labor relations, we could suffer a strike and resultant financial losses.

Read the Risks section--there might be something about real risks there, like pending lawsuits or class action suits--but take most of it with a grain of salt.

 

[bankr63]

Interesting read....

I am not a fan of the new name.

Vistana Signature Experiences (VSE) does not roll-off the tongue or gives me that warm fuzzy.

What was old is new again......Not.

Perhaps they should have chosen Vistana International Signature Experiences (VISE)

Vise (noun)

1: any of various tools with two jaws for holding work that close usually by a screw, lever, or cam

2: something likened to a vise <economic vise of slow growth and rampant price increases — David Milne> (Merriam-Webster)

3: where VSE would like to keep your wallet until every dollar is squeezed out.

 

[gdlipp]

Breach of Contract

I happen to disagree with the terms of Starwood's spinning off their timeshare division. Question to the readership is, does this constitute a breach-of-contract? If so, is there a legal justification to do a quit-claim-deed transfer with Starwood?

 

[okwiater]

I happen to disagree with the terms of Starwood's spinning off their timeshare division. Question to the readership is, does this constitute a breach-of-contract? If so, is there a legal justification to do a quit-claim-deed transfer with Starwood?

No. You don't have a contract with Starwood; your homeowners association does.

 

[daviator]

SVN and SPG are important...

I'm pretty nervous about the spin-off. We are four star elite and own at WKORV, WKORVN, and WDWV. But unlike, apparently, a lot of people, my decision to buy into SVO had everything to do with the ability to use the ownership at any of the other SVO properties (and future properties) as well as to convert to SPG points and access the hotel network. I first bought into WKORV more than a decade ago and have stayed there maybe three or four times. We never wanted or intended to go back to the same resort year after year. It was the flexibility of the program that sold me. (Although the conversion to SPG points isn't a GREAT deal, it's sufficient to get decent value out of the points in those years where we choose to exchange for them.)

But now that Starwood and SVO (to be Vistana, again) will be separate companies, it seems inevitable that SVO/Vistana will have to "buy" SPG points from the hotel company when owners trade for them. The hotel company will have an interest in maximizing revenue and increasing the cost after the initial terms expire. It seems almost inevitable that the option to trade for hotel points will either go away at some point, or be significantly devalued. And for us, that guts a big part of the value of ownership.

We'll probably be fine on the SVN trades – by whatever name they end up being known – unless the new company sells out or sells resorts off piecemeal, in which case all bets are off.

There was earlier discussion in this thread about the name of the new company, and personally I don't think it's that important. Clearly, for a variety of possible reasons I can think of, Starwood doesn't think they should share their corporate name with the new company, and although the value of the Vistana brand is not huge, it's probably better than choosing some new, made-up name that would start out with zero brand recognition.

The real value is in the resort branding – particularly Westin – and another key reason I chose SVN was because I felt the resorts would be operated and maintained to the Westin standard, because to do otherwise would tarnish their valuable brand. I still think that. Timeshares used to have a lousy reputation, and one of the many reasons was that many were poorly operated and maintained. I felt, and feel, that putting a well-respected name on the property provides a lot of security to owners that their investments will be well kept and renovated when appropriate. Once the initial term of the agreement between the two companies expires, will it still be in Starwood's interest to share their brand with Vistana? That's a scary question too.