Sunset Harbor to vote on terminating Hyatt management contract

[magicjourney]

It's coming... Just received the email:

Dear Sunset Harbor Owners:

The Board of Directors of Sunset Harbor Resort Condominium Association requests your support for major, positive change at our resort. After many years of struggling with our management company (Hyatt Vacation Management) predominantly with pushback, the Board has determined that we need to move in a new direction that will benefit all owners.

Following much consideration, your Board recommends to owners to vote “yes” on two significant questions: (1) whether to terminate our Hyatt Management Contract and (2) whether to terminate our Hyatt Residence Club Resort Agreement.

These two questions will be on the ballot for a Special Meeting of Members of our Association to be held on Thursday, July 14th at 1:00pm EDT.

The Board has noted the following important reasons to terminate our contracts:

• A vote to terminate the Management Contract is a vote:

1. to take back full control of our property;
2. to eliminate excessive management fees; and
3. to contract with new management which will work solely for the benefit of owners.

• A vote to terminate the Club Resort Agreement is a vote:

1. to eliminate substantial Club Fees which the Board believes do not benefit most owners;
2. to eliminate the Club’s use of our property for transient 1-to-2-night reservations;
3. to eliminate the Club’s requirement each year for owners to reserve or lose the right to use their deeded Unit Weeks; and
4. to terminate owner use of the Club’s points-based reservation and exchange system and related services which is reviewed in the Appendix to this letter.

The Board believes that termination of the Management Contract and Club Resort Agreement will allow our Association to market our Resort and the benefits of ownership as we seek to improve the demand for and value of Unit Weeks.

The Board also projects that termination of the Management Contract and Club Resort Agreement will eliminate meaningful expense, including $325,000 of annual Club Fees and a significant portion of current management fees and management overhead.

A more in-depth review of the Board’s reasoning in recommending termination of both contracts, and responses to questions you may have, are set forth in an Appendix to this letter.

 

[ScoopKona]

I think the only real question is just how overwhelmingly the owners will vote Hyatt out.

If I were wagering, I'd put the over/under at 65%.

 

[JanT]

I don’t see myself voting for this without more information. I hate this kind of crap and wish I’d gotten rid of my weeks.

 

[vacationtime1]

The answer will be resort specific, but I wonder what the quorum is for a vote such as this, and how difficult will it be for the Board to get owners to vote. The post immediately above suggests the problem.

 

[AJCts411]

An owner here. Two weeks. I'm not a trader nor do I use points. I think that context by commenters is important. Non_ owners goals are different than week owners. That said I will be in support of both a new management company and leaving HRC. In my opinion the portfolillo operations have been determental to those who own weeks to use at sunset. Example is the sales pitch that pushes the idea we owners are the problem with portfolio a availability.
The club also restricts my lock out unit use by forcing one side to be deposited. I own this week and I object to this.
And as detailed, our costs are not being controlled adequately by management. Now look in old town...the property values...compare Galleon and Banyon our values are lagging. As you can it's a thumbs up for me.. yes. Editied to add...Never use points and yet wecan not opt out of II. We pay II fees twice one fee per week, with zero benefits.

 

[TravelTime]

I used to own a Hyatt week. I would absolutely hate if this happened to one of my weeks. The ability to do internal trades is going to disappear. I guess you can only trade using II going forward. I would hate if any of my units were taken out of any point system.

If there is extra space and non-owners are trading in through the points system, then wouldn’t that mean owners are wanting to go to other Hyatt properties?

This will still not prevent the problems of owners renting out their units and having renters trash the units. In fact, it might get worse if owners have no choice but to rent or exchange using II.

 

[Kal]

For decades, Hyatt has been pushing buy the Beach House and stay at Sunset Harbor. So that encourages "renter occupancy". Owners pay careful attention to resort specific issues, while the renter motto is "whatever". On one of the first remodels, Hyatt wanted to make HSH interiors look like Aspen. What's wrong with that picture for a Caribbean resort???? Hyatt also insisted on a specific line of area rugs and sofa. A new sofa was installed in my unit while I was there and the fabric ripped the first time I sat on it. The area rug was trashed within 2 months. But the portion of MF's paid to Hyatt Management increased every year, without any justification.

I really hope this effort passes. Owner occupancy at HSH is the highest in the system so hopefully they don't sit on their hands.

 

[Sapper]

Interesting email, thank you for posting it. I’m not an owner at Sunset, so I do not have a horse in the race. However, a board of directors should be presenting both sides of the situation along with their recommendations.

 

[ScoopKona]

Interesting email, thank you for posting it. I’m not an owner at Sunset, so I do not have a horse in the race. However, a board of directors should be presenting both sides of the situation along with their recommendations.

Owners were grumbling about Hyatt management back when I worked for Hyatt. The basic objection is "riff-raff are trading into our resort on the cheap and trashing the place."

They own some of the most-expensive real estate in Key West. Beach House isn't even on the island and Windward Point abuts an airport. People who own at SH tend to use what they own. And they're sick of coming in after the college kids using daddy's points or the maniac who snuck a cat into the unit just left.

 

[GTLINZ]

Interesting email, thank you for posting it. I’m not an owner at Sunset, so I do not have a horse in the race. However, a board of directors should be presenting both sides of the situation along with their recommendations.

Please note the end of the original post, which I do not believe has been posted (yet):

"A more in-depth review of the Board’s reasoning in recommending termination of both contracts, and responses to questions you may have, are set forth in an Appendix to this letter."

 

[Sapper]

Owners were grumbling about Hyatt management back when I worked for Hyatt. The basic objection is "riff-raff are trading into our resort on the cheap and trashing the place."

They own some of the most-expensive real estate in Key West. Beach House isn't even on the island and Windward Point abuts an airport. People who own at SH tend to use what they own. And they're sick of coming in after the college kids using daddy's points or the maniac who snuck a cat into the unit just left.

Beach House is on the island, just the other side from SH.

If people are using points to get in, then that means owners are trading their unit to go elsewhere.

As I said, I don’t have a horse in the race, my thoughts are that the board is failing to present both sides and then give their recommendations. They present a strong argument for one thing.

 

[Sapper]

Please note the end of the original post, which I do not believe has been posted (yet):

"A more in-depth review of the Board’s reasoning in recommending termination of both contracts, and responses to questions you may have, are set forth in an Appendix to this letter."

Thank you for highlighting that, and I do hope the appendix will be posted. However, the board email only presents the benefits of leaving the Hyatt management and club in the body of this email.

 

[ScoopKona]

Beach House is on the island, just the other side from SH.

It's on the edge of the old Cow Key bridge. That's so far away it may as well be Miami to a Conch. Back when that place was built, Stock Island is where all the dregs were -- it's cleaned up considerably in 20 years thanks to gentrification. But it's not "throw a baseball to Mallory Pier."

 

[Sapper]

It's on the edge of the old Cow Key bridge. That's so far away it may as well be Miami to a Conch. Back when that place was built, Stock Island is where all the dregs were -- it's cleaned up considerably in 20 years thanks to gentrification. But it's not "throw a baseball to Mallory Pier."

And yet, it is still on the island. It’s also a nice property.

 

[Kal]

For years it was "buy the Beach House and stay at Sunset Harbor". So if HSH terminates out of the HRC program, the people who bought the Beach House and always stayed at HSH will not be happy. They would have lost their link to HSH. They don't have skin in the game because they don't have a vote at HSH. However, if people own the Beach House AND HSH, they would not likely vote to terminate.

 

[Sapper]

I would love to have a look at the Hyatt sales agreement when they pitched the system to II.… or a renegotiated contract with MVC. Specifically to see if there is some kind of provision for loss of properties. Hyatt Hotels corporate cannot be happy about loosing Aspen (lost revenue from rent and licensing, loss of a high profile location for their name), now a looming vote at Sunset Harbor.

I also wonder how much attention this is generating at MVC. First Aspen, now HSH. Either way the vote goes, how does Hyatt/MVC management change their practices to appease owners?

 

[ScoopKona]

And yet, it is still on the island. It’s also a nice property.

Beach House is where I own. That's ALSO where I used to go fishing as a kid.

But saying that's Key West is the same as saying that Tuckahoe is the Upper East Side.

Sunset Harbor is as good as it gets in Key West. Seriously. If I could pick any real estate, that's what I'd pick. And Hyatt hasn't been treating the owners like they own as good as it gets FOR DECADES.

 

[Digdot]

I used to own a Hyatt week in Key West. I would absolutely hate if this happened to one of my weeks. The ability to do internal trades is going to disappear. I guess you can only trade using II going forward.

I don’t see myself voting for this without more information. I hate this kind of crap and wish I’d gotten rid of my weeks.

An owner here. Two weeks. I'm not a trader nor do I use points. I think that context by commenters is important. Non_ owners goals are different than week owners. That said I will be in support of both a new management company and leaving HRC. In my opinion the portfolillo operations have been determental to those who own weeks to use at sunset. Example is the sales pitch that pushes the idea we owners are the problem with portfolio a availability.
The club also restricts my lock out unit use by forcing one side to be deposited. I own this week and I object to this.
And as detailed, our costs are not being controlled adequately by management. Now look in old town...the property values...compare Galleon and Banyon our values are lagging. As you can it's a thumbs up for me.. yes. Editied to add...Never use points and yet wecan not opt out of II. We pay II fees twice one fee per week, with zero benefits.

Your lockout can be rented or used to extend your stay depending upon availability

 

[Pathways]

Your lockout can be rented or used to extend your stay depending upon availability

This is a 'theoretically true' statement. And in all practicality, false.

Hyatt continues to refuse to split your lockout into two reservations, (some reports here of success if you reach the 'right' CS agent or argue enough). The only practical way to rent half of the lockout is to be on-site and get the keys done separately yourself. (and that's NOT practical)

Use half the lockout to extend your stay? Of course you can, 'based upon availability'. Now that's a real timeshare salesperson comment. The odds of being able to occupy half for your HRPP and use the other half for the preceding/following week? NOT happening at SH. The
Hyatt system takes all that out of the owner's hands.

 

[magicjourney]

It seems some people are interested in the rational of board's recommendation. Here you go

APPENDIX INCLUDING ANSWERS TO POSSIBLE QUESTIONS​ Please note the Management Contract provides for the day-to-day management, maintenance, and operation of Sunset Harbor Resort, the Club Resort Agreement provides for our Resort property to be in the Hyatt Residence Club, and for our owners to make reservations using the Club’s exchange program. An owner vote approving terminations will end these arrangements, subject to a reasonable transition period to be set by the Board. REASONS TO TERMINATE THE MANAGEMENT CONTRACT 1. CONTRACT HISTORY ·The Management Contract was entered into in 1994 prior to Developer’s sale of any Unit Weeks and the 1995 opening of Sunset Harbor Resort. As there were no owners at that time, this Contract was signed on behalf of the Association by an executive of the management company. Prior to this Contract becoming effective, independent legal counsel for the Association was not engaged to represent and look after the interests of future Unit Week owners. In the view of the Board, owner interests were not addressed and represented. 2. NO CONTROL OF OUR PROPERTY and MAJOR COSTS The Management Contract provides that the management company has all the powers and duties of the Association as set forth in the Condominium Documents. The result in practice is that this Contract provides for a near-complete delegation to our management company of all the powers and duties of our Association and its Board of Directors. In effect, in the Board’s view, the Management Contract provides the management company with overly broad, virtually exclusive control over every aspect of our Resort and its operation, leaving Unit Week owners with insufficient input and little to no control. In 2018 Marriott Vacations Worldwide (MVW) acquired the Hyatt Residence properties. With this acquisition, MVW continues to exercise and maintain virtually exclusive control over our Resort and its operation. In the view of the Board, Sunset Harbor Resort benefits MVW substantially more than MVW benefits our owners. An example of MVW’s insufficient regard for Sunset Harbor interests is the landscaping contract which MVW negotiated to cover all three Hyatt Residence Club Key West properties. Sunset Harbor’s allocated share was $51,000. At the Board’s insistence, the management company terminated our participation in that contract and solicited new bids solely for our property. Our new landscaping contract costs $22,000 - a savings of $29,000. Another example of MVW’s insufficient regard for Sunset Harbor interests is the housekeeping contract which MVW negotiated after approval of Sunset Harbor’s 2021 budget. These contracts cover all three Hyatt Residence Club Key West properties. Sunset Harbor’s 2021 housekeeping budget was $421,000; however, with no warning from management or any input from the Board, housekeeping expense under the new contract ballooned to $719,000, a $298,000 increase, 58% over budget. MVW never solicited bids solely for our property. The Board has been unable thus far to determine if there may be a lower cost option tailored exclusively for Sunset Harbor as was the case with our new landscaping contract. To have efficient, cost-effective management focused on the best interests of our owners, the Board recommends termination of the Management Contract and the return of responsibility and control of operations to our Association. 3. EXCESSIVE MANAGEMENT FEE The Management Contract provides for a non-negotiated management fee up to 15% of the Association’s annual operating budget, excluding reserves and property taxes. The actual management fee has been 13% since our Resort opened in 1995. The management company has announced that it intends to increase the fee to 14% in 2023 and 15% in 2024. The 2022 budgeted management fee is $325,000. This contract has no incentives for reducing operating costs. The Board understands another Hyatt Residence Club property terminated its management contract and secured highly qualified replacement management at a fee approximately one-half of the 15% rate. Such a competitive rate could reduce our management fee significantly per Unit Week. Our current management fee is above-market and has cost Owners substantially since 1995. This will continue unless our Management Contract is terminated. 4. CRITERIA FOR NEW MANAGEMENT There are numerous highly qualified, independent management companies, several of which manage luxury properties in Key West and the Florida Keys. Pursuant to a detailed Request for Proposal, the Board will seek competitive proposals, control the selection and engagement process, approve the hiring of key personnel, and set high performance standards and expectations. A new management company will be required to be completely transparent to owners and your Board. Our new management company will perform contracted management services for a competitive management fee and will be required to deliver superior service. Our property can and should be positioned to be among the most desirable independent properties in Key West. REASONS TO CANCEL THE CLUB RESORT AGREEMENT 1. CONTRACT HISTORY The Club Resort Agreement was entered into in June 1995. As with the Management Contract, this was prior to Sunset Harbor Resort’s opening and was signed on behalf of our Association by an officer of the Developer, which is also a party to this Agreement. As with the Management Contract, prior to entering into the Club Resort Agreement, independent legal counsel for the Association was not engaged to represent and look after the interests of future Unit Week owners. In the view of the Board, owner interests again were not addressed or represented. 2. CLUB PROGRAM ISSUES The Board believes that a very substantial majority of Sunset Harbor owners make Home Resort Reservation Period (HRRP) reservations and use their Unit Weeks for personal enjoyment and not for exchange purposes. These owners pay substantial annual Club fees without deriving benefits from Hyatt Residence Club membership. Some Sunset Harbor owners elect to rent their Unit Week and not visit the property. These owners also do not use their Unit Weeks for exchange purposes and pay annual Club fees without deriving benefits from Hyatt Residence Club membership. The Club Resort Agreement requires owners to reserve (or lose) each year the Unit Week which they bought and to which they have deeded title. The Board believes in owners’ rights to their property interests without a “reserve it or lose it” requirement. Post termination this requirement will be eliminated. The Hyatt Residence Club, without any Sunset Harbor owner or Association input, entered into a Club-to-Club Exchange Agreement with the Portfolio Club which provides for 1-to-2-night stays at Club properties. In the Board’s view, such transient use is inconsistent with the intended use of our Sunset Harbor Resort as a “residence club” property. Consider that Sunset Harbor Resort is not a hotel, and our Club is branded the Hyatt Residence Club. As a result of transient use, our Units incur extra wear and our Association has additional housekeeping expense, for which our owners pay. 3. SUBSTANTIAL FEES The Hyatt Residence Club Dues for Sunset Harbor is $320,000. When the 13% management fee is applied, the total Club cost is $362,000, or $177 for each Unit Week regardless of whether an owner uses or derives any benefit from the Club. Sunset Harbor owners who do use the Hyatt Residence Club website incur additional transaction fees such as $41 for certain reservations, $57 for cancellations and $30 for guest certificates. The Club has periodically raised these fees and will likely continue to do so. Sunset Harbor owners’ annual cost for the Hyatt Residence Club is substantial and may soon approach $400,000 or about $200 for each Unit Week. The Board believes that this cost is not justified in terms of benefits to our owners. 4. TERMINATION OF CLUB’S POINTS-BASED RESERVATION AND EXCHANGE SYSTEM, POSSIBILITY OF CLUB PARTICIPATION FOR OWNERS, AND POSSIBILITY OF OWNER PARTICIPATION IN NEW EXCHANGE PROGRAM Termination of the Club Agreement terminates the current points-based reservation and exchange system which allow an owner to reserve and use Club properties, to access Interval International or to convert to World of Hyatt hotel points. The Club Resort Agreement provides that following the termination of this agreement, the Hyatt Residence Club at its sole discretion may allow Sunset Harbor owners to participate in the Club. The Board will encourage the Hyatt Residence Club to allow Sunset Harbor owners that opportunity; however, owners should not assume the Club will do so. If the Hyatt Residence Club elects not to allow owners that opportunity, the Board will seek a new, cost-effective exchange program for the benefit of owners who seek an exchange option. If owners vote to terminate the Club Agreement, the Board plans to set a termination date of December 31, 2022, to protect Sunset Harbor owner use of all Club Points, including so-called COVID points, through year-end. If owners vote to terminate the Club Agreement, the Board also plans to consider a Sunset Harbor only website with a password protected portal for owners to post their Unit Weeks exclusive trade or rent with other Sunset Harbor owners. SIGNIFICANT LOSS OF UNIT WEEK VALUE In 1995 when our Resort opened, the Board estimates that the average value of a Unit Week was approximately $20,000. Now, 27 years later, the Board estimates that the average value of a Unit Week is approximately $10,000 - a loss of about 50% in Key West where property values have soared during this period. Sunset Harbor’s Developer, as of December 31, 2021, had conveyed 127 legacy, deeded Unit Weeks to the Portfolio Club which uses them for its points-based program. With additional conveyances, the Portfolio Club’s inventory will continue to grow and to erode personal ownership of Unit Weeks to the detriment of our owners. The Portfolio Club has sales offices and aggressively markets its points-based program; however, there is no marketing of Unit Weeks. This negatively impacts the market for Sunset Harbor resales with little demand and depressed values The Board believes that if our Resort were independent of the Hyatt Residence Club and affiliated Hyatt management, the market value for Unit Weeks would improve.

 

[Digdot]

An owner here. Two weeks. I'm not a trader nor do I use points. I think that context by commenters is important. Non_ owners goals are different than week owners. That said I will be in support of both a new management company and leaving HRC. In my opinion the portfolillo operations have been determental to those who own weeks to use at sunset. Example is the sales pitch that pushes the idea we owners are the problem with portfolio a availability.
The club also restricts my lock out unit use by forcing one side to be deposited. I own this week and I object to this.
And as detailed, our costs are not being controlled adequately by management. Now look in old town...the property values...compare Galleon and Banyon our values are lagging. As you can it's a thumbs up for me.. yes. Editied to add...Never use points and yet wecan not opt out of II. We pay II fees twice one fee per week, with zero benefits.

An owner here. Two weeks. I'm not a trader nor do I use points. I think that context by commenters is important. Non_ owners goals are different than week owners. That said I will be in support of both a new management company and leaving HRC. In my opinion the portfolillo operations have been determental to those who own weeks to use at sunset. Example is the sales pitch that pushes the idea we owners are the problem with portfolio a availability.
The club also restricts my lock out unit use by forcing one side to be deposited. I own this week and I object to this.
And as detailed, our costs are not being controlled adequately by management. Now look in old town...the property values...compare Galleon and Banyon our values are lagging. As you can it's a thumbs up for me.. yes. Editied to add...Never use points and yet wecan not opt out of II. We pay II fees twice one fee per week, with zero benefits.

Hey, I am an owner too. Just to let you know, I use my one bedroom and use the lock out points for extra time there or I rent it out. Sounds like these options will not be available?

 

[magicjourney]

Hyatt has a relatively small portfolio. There are very few choice that make sense to owners of premier resorts (Aspen, Sunset harbor, Maui etc.). That's why point system is not attractive to them. If Hyatt/MVC doesn't make any change/improvement for those owners, sooner or later they will try to follow suite of Aspen.

I think there are a couple of thing Hyatt can learn from MVC to increase the value and reduce MFs for the owners:
1. Assign more points to premier resorts to encourage the owners to try the other resorts.
2. Eliminate the club dues for each contract. I used to own 3 HSH weeks, sold one recently. I seldomly use the points, but have to pay ~$500 club fees. That's one reason I will vote YES.

 

[dioxide45]

Even the Appendix is very one sided and doesn't show what will be lost if owners vote to drop MVW as the management company. My guess is that the board will also opt to affiliate with RCI and not push II as an option since it too is owned by MVW. This will leave SH owners with no real name brand timeshares to trade in to except HGVC and its $25 per day resort fees for inbound exchangers.

 

[ScoopKona]

My guess is that the board will also opt to affiliate with RCI and not push II as an option since it too is owned by MVW. This will leave SH owners with no real name brand timeshares to trade in to except HGVC and its $25 per day resort fees for inbound exchangers.

There's always Dial-an-exchange.

Most SH owners use what they own. So they really don't care about exchange possibilities. And exchanging into SH is one of the big gripes they have. SH is top-three for "highest trading power in the Hyatt system." They're not going to have any difficulty exchanging if they choose to do so.

 

[bizaro86]

Even the Appendix is very one sided and doesn't show what will be lost if owners vote to drop MVW as the management company. My guess is that the board will also opt to affiliate with RCI and not push II as an option since it too is owned by MVW. This will leave SH owners with no real name brand timeshares to trade in to except HGVC and its $25 per day resort fees for inbound exchangers.

I think dual affiliated almost always benefits owners - more choice isn't a bad thing as long as both options are available. Something like Third Home would probably also be an option given the location/quality.