Supply is shrinking....look for higher prices in 2009

[BocaBum99]

First you assume every buyer will offer to buy 2 times. Once was all I tried and all I ever will.

That's YOU. One person does NOT make a market. I've personally seen PRICES rise directly due to ROFR. That is a DIRECT market observation, NOT my personal opinion. Do you seriously believe it has NO effect?

I've laid out the pre-conditions for ROFR to raise prices. I also lay out the conditions where it won't be true. It is possible for ROFR to be exercised and resales to drop.

The bottom line is that if Marriott is buying back any units via ROFR, that is increasing demand for cheap units. I STRONGLY believe that the demand created by that process is FAR greater than the reduction is demand caused by buyers droppping out after losing a unit to ROFR.

Could I be wrong that resale prices will firm up when Marriott exercises ROFR? Absolutely, because not all of the pre-conditions could come back into existence. But, I could also be RIGHT.

The one thing I am ABSOLUTELY Positive about is that when Marriott is exercising ROFR that resale prices increase over the nominal resale prices that would exist if there is no ROFR. The only question is whether or not there is enough buying back to raise resale prices. It DOES happen and is likely to happen again.

 

[joepreston]

I agree with Boca Bum completely. Why wouldn't anyone continue to to try to repurchase another unit if their original planned purchase was ROFR'd? Do you actually feel that Marriott stole it from you?

I am planning on buying and if by chance (slim) Marriott exercises ROFR...I'll continue until I get my week at my desired price. In the end I may have to pay more but that's the market....supply and demand. It will be significantly lower than developer cost.

 

[thinze3]

... The bottom line is that if Marriott is buying back any units via ROFR, that is increasing demand for cheap units. I STRONGLY believe that the demand created by that process is FAR greater than the reduction in demand caused by buyers droppping out after losing a unit to ROFR ...

Why is it that this simple statement so difficult to understand?

Terry

 

[larue]

"There's a sucker born every minute" (PT Barnum) . . . . Anyone who would raise their bid after losing to ROFR really hasn't a clue . . . . Flies in the face of "must have it NOW" society we seem to have become.

I guess this is my christening as a lowly guest, huh? Someone who makes ad hominem arguments to make their point identifies the underlying weakness of his or her position.

In any case, my scenario was that I had been taking annual vacations to Oahu for three years since my daughter was born, paying a minimum of $3,000 a week for accomodations that were not close to those at Ko Olina. Both my wife and I have stressful jobs (two attorneys) and came to the conclusion that we needed to force ourselves to take time away from work with our daughter in order to ensure that we wouldn't find an excuse to cancel each year. As such, a timeshare purchase at a high end development was exactly what we felt (and which we have since confirmed) we needed.

I had a trip booked with the prospect of hotel reservations that were going to cost me $3,500for the week that I had purchased, reserved, and which was ROFR'd by Marriott. As such, if I did not buy pretty much immediately when I did, I was goinng to be out another year's worth of hotel charges.

So, raising my offer by $1,000 (still $16,000 below what Marriott was selling for at developer prices) meant that I got to stay in my 1 bedroom villa for nothing (my offer included the seller paying the year's maintenance fees) and I traded in the hotel efficiency unit for a 2 bedroom at Newport Coast Villas the following April that allowed me to cancel my $325 per night room reservation at the Huntingon Beach Hyatt. All told, raising my offer by $1,000so that I could close the deal saved me around $6,000 in room rates for vacations I had already booked, which netted out to $5,000 after raising my offer.

Not a clue? Hardly.

 

[AwayWeGo]

Ad Hominem, Shmad Hominem.

I guess this is my christening as a lowly guest, huh?

Not at all.

Guests get ad hominemmed around here just the same as veteran members.

TUG-BBS features equal opportunity ad hominemming -- no special treatment for guests.

If you're signed up here, you're 1 of us.

Welcome.

And Happy New Year.

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

 

[tombo]

That's YOU. One person does NOT make a market.

Could I be wrong that resale prices will firm up when Marriott exercises ROFR? Absolutely, because not all of the pre-conditions could come back into existence. But, I could also be RIGHT.

QUOTE]

Prices dropped all spring and summer while Marriott was exercising ROFR. Why would they suddenly rise if they started ROFR'ing again? Prices will firm up and rise when the economy improves and demand increases. When demand increases Marriott will want to steal more inventory because they will have buyers. The prices will increase without ROFR just as they fell while Marriott was using ROFR.

Why is this so hard to understand? Does anyone here want to say that the resale prices in August of 2008 were anywhere close to the resale prices of August 2007? The fact is that the prices were much lower this year than they were at the same time last year, and we all know that Marriott was ROFR'ing the whole time. Please explain how the prices could have fallen so low while the wonderful ROFR was being exercised in all of it's price propping glory.

 

[gmarine]

Why is it that this simple statement so difficult to understand?

Terry

They will never get it. No matter how much you explain it or how much evidence you show, they will never get it. I gave up trying to explain it.

Remember the the movie City Slickers. " The cows could program a VCR by now".

 

[m61376]

That's YOU. One person does NOT make a market.

Could I be wrong that resale prices will firm up when Marriott exercises ROFR? Absolutely, because not all of the pre-conditions could come back into existence. But, I could also be RIGHT.

QUOTE]

Prices dropped all spring and summer while Marriott was exercising ROFR. Why would they suddenly rise if they started ROFR'ing again? Prices will firm up and rise when the economy improves and demand increases. When demand increases Marriott will want to steal more inventory because they will have buyers. The prices will increase without ROFR just as they fell while Marriott was using ROFR.

Why is this so hard to understand? Does anyone here want to say that the prices in August of 2008 were anywhere close to the prices of August 2007? Since the prices were so much lower this year over the same time last year, and we all know that Marriott was ROFR'ing the whole time, please explain how the prices could have fallen so low while the wonderful ROFR was being exercised in all of it's price propping glory.

Unless ROFR is always exercised at a certain level. it will not prevent prices from declining in a market where supply far exceeds demand. We are in an unheralded economic situation and people just are not making these types of discretionary purchases, while others need cash because of job losses, tightening credit lines, etc.. Since supply exceeds demand, prices will naturally fall, unless Marriott was to buy back a tremendous number of units. Similarly, their demand and available cash have both fallen, so exercising ROFR at this point is not a good business decision.

At such a time when demand increases, prices will again stabilize and ROFR will help, over time, elevate the price floor in so far as desperate sellers will not offset the market value pricing (as determined by supply and demand).

 

[Latravel]

Larue, you make perfect sense. It is so easy to understand. If someone wants a unit, they will offer more to get it if they know a lowball price will make them lose the deal.


"Please explain how the prices could have fallen so low while the wonderful ROFR was being exercised in all of it's price propping glory."

Only until recently has Marriott seemingly completely stopped exercising ROFR. Before then, Marriott was buying some, leaving others so some lesser priced units may have passed. The decrease was gradual and now that ROFR has stopped, prices have dropped significantly and people who were not willing to pay for a Marriott have suddenly become owners.

 

[BocaBum99]

Why is this so hard to understand? Does anyone here want to say that the resale prices in August of 2008 were anywhere close to the resale prices of August 2007? The fact is that the prices were much lower this year than they were at the same time last year, and we all know that Marriott was ROFR'ing the whole time. Please explain how the prices could have fallen so low while the wonderful ROFR was being exercised in all of it's price propping glory.

Yes, I can explain it. It's actually quite simple. For any given market and any given set of market conditions, there are a set of forces acting on that market that either increases or decreases demand or increases or decreases supply. ALL of those forces change the nature of the equilibrium point where the supply and demand curves for the market meet. That equilibrium point is the price point at which the number of buyers equals the number of sellers.

If you change any of the variables in the market, aggregrate supply or demand can change. When it does, it changes the equilibrium point of the market.

For instance, the advent of PCCs shifted the supply curve by making it easier for timeshares to be put onto the market where some sellers could never figure it out. In addition, since they were paid upfront, the sales prices that they would be willing to accept in a sale tended to lower the average resale price. This is a macro economic force impacting the supply curve shifting it toward lower prices given a fixed demand curve.

Another item that effects resale demand are number of tours provided by resort developers. Most resale brokers with experience will tell you that a certain percentage (some use as much as 10%) of tour no buy clients end up buying a resale. So, if the number of tours provided by resort developers increases significantly, so will overall demand for resale product.

ROFR is also a driver of demand. There is debate on this message board whether or not the amount of ROFR buy backs is enough to change the demand curve. Some on this board believe it does. Others don't.

So, just because you have seen prices decrease over the period you have been watching just means that those other forces are more powerful in changing either the supply or the demand curve such that average resale prices decrease during that time period. It doesn't mean that ROFR isn't lifting prices. It is just saying that it isn't lifting it enough to overcome other forces which are much more powerful at that time.

In order to believe that ROFR will at certain resorts lift resale prices, you just have to believe that the amount of buying is large enough to soak up the available supply to a point that prices rise. It can happen. It has happened. And, it is likely to happen again. Time will tell.

 

[tombo]

So, just because you have seen prices decrease over the period you have been watching just means that those other forces are more powerful in changing either the supply or the demand curve such that average resale prices decrease during that time period. It doesn't mean that ROFR isn't lifting prices. It is just saying that it isn't lifting it enough to overcome other forces which are much more powerful at that time.
QUOTE]

Reversing your theory works the same way. You claim ROFR was raising prices as the market fell, but just not enough to overcome the bad economy.You also feel that when the market goes up, ROFR will help reverse the downard spiral. I feel that ROFR lowers prices, but not enough to notice in the face of the more powerful forces of supply, demand, and the overall economic conditions.

I say that the economy which shifts supply and demand, not ROFR, determines the price. ROFR alienates some potential buyers and gets some buyers to offer more than once to buy a week. Overall I feel that ROFR lowers prices because less people want to try to buy a week after they had one stolen from them. Reducing the number of buyers in a pool reduces demand which lowers price. Simple economics.

TUGGERS are rare exceptions since most people rarely think about timeshares and owning a Marriott (or any timeshare) is not a must do. They need a car, a home, and food, but timeshares are a luxury item that is nice but not necessary.

You have no proof that the majority of buyers will continue to try to buy a week after losing one to ROFR, and I have no proof that the majority of buyers will throw in the towel after one or two tries. My personal experience was once was more than enough. My feel and the results from an Ivy League economics expert's article (the link is on tug) is that ROFR lowers prices. We are both guessing, but the PHD has hard facts, so I will take his word that says ROFR lowers prices since he is an expert.

When the market is tanking the downard spiral of resale prices due to ROFR is multiplied making them drop more than they would without ROFR. The price drops this year were worse with ROFR than they would have been in the abscence of ROFR because it limited the number of buyers in a poor market. When ROFR was ceased recently by Marriott, many new buyers entered the market increasing demand and increasing prices. The prices did go up higher than they would have been if they were exercising ROFR, it is just that the other forces are too powerful to see the price increase caused by the lack of ROFR. How many from the limited TUGGER pool became potential buyers (or actual buyers) when people started posting that Marriott had stopped using ROFR? Many here who weren't even considering buying a Marriott week before are now buying or at least considering buying. More buyers equals increased demand, which increases prices. This stuff is simple basic econ 101.

When the economy improves, demand will increase for both retail and resale weeks. Marriott will have more buying customers and less inventory to sell them, so ROFR will begin again. This will drive many buyers from the resale market lowering prices because of ROFR. How many here who didn't buy a week when there was no ROFR will actually try to beat Marriott when they start stealing weeks again? No one if they are honest will do that. Of course prices will be rising before ROFR starts to be exercised again, but ROFR advocates won't notice that. ROFR will lower prices from the peak prices that could be obtained if ROFR was forever abandoned, ROFR just won't be powerfull enough to lower the overall price increases due to the more powerful forces of decreased supply and increased demand.

To the ROFR believers the fact that the prices have fallen all year while ROFR was used means that they would have been worse without it. The fact that they have fallen since ROFR stopped means that the prices are falling due to lack of ROFR. When the economy increases after years of deflated prices and prices start to rise, Marriott will ROFR again, and the whole reason for price increases will be ROFR. It is like when the Indian medicine man did the rain dance for weeks and it didn't rain, it wasn't his fault, the rain dance worked, the rain gods were unhappy for some reason with the tribe. Of course when it finally rains it is all thanks to the medicine man and his rain dance. Many seem feel the same about the magic of ROFR.

 

[ondeadlin]

Prices dropped all spring and summer while Marriott was exercising ROFR. Why would they suddenly rise if they started ROFR'ing again? Prices will firm up and rise when the economy improves and demand increases. When demand increases Marriott will want to steal more inventory because they will have buyers. The prices will increase without ROFR just as they fell while Marriott was using ROFR.

Why is this so hard to understand? Does anyone here want to say that the resale prices in August of 2008 were anywhere close to the resale prices of August 2007? The fact is that the prices were much lower this year than they were at the same time last year, and we all know that Marriott was ROFR'ing the whole time. Please explain how the prices could have fallen so low while the wonderful ROFR was being exercised in all of it's price propping glory.

Winner winner, chicken dinner.

Even when Marriott was exercising ROFR, prices were dropping, and dropping fast.

ROFR has become some folks almost mystical hope of recovering thousands lost on timeshares, but for the vast majority of those folks, it ain't going to happen, even if - and it's a big if right now - ROFR ever comes back.

 

[AwayWeGo]

Theories, Shmeeories.

Whoa !

You guys are overthinking & overcomplicating this whole ROFR deal.

It doesn't take that much brainpower to figure it out.

The claim is that ROFR keeps resale prices from going "too low."

It doesn't do that. No way José.

Resale prices can & sometimes do go way low -- bargain-basement, fire sale, panic sale, distress sale, call it what you will.

When that happens & the best price some seller can get for some timeshare that's offered for sale is "too low," the excessively low price is all that the seller receives. There's no price support there. The minimal price is still "too low" any way you shake it. All ROFR does is prevent anybody except the timeshare company from buying those "too low" resales.

ROFR does nothing to prevent resale prices from going "too low."

ROFR says nothing about prices 1 way or another -- too low, too high, or just right.

All ROFR says is that nobody but the timeshare company gets to buy the lowball resales -- if the timeshare company chooses at its own whim, with the timeshare company & only the timeshare company deciding what is or isn't lowball.

ROFR is not a price floor.

ROFR is not guaranteed buyback.

ROFR = ROFL.

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

 

[BocaBum99]

So, just because you have seen prices decrease over the period you have been watching just means that those other forces are more powerful in changing either the supply or the demand curve such that average resale prices decrease during that time period. It doesn't mean that ROFR isn't lifting prices. It is just saying that it isn't lifting it enough to overcome other forces which are much more powerful at that time.
QUOTE]

Reversing your theory works the same way. You claim ROFR was raising prices as the market fell, but just not enough to overcome the bad economy.You also feel that when the market goes up, ROFR will help reverse the downard spiral. I feel that ROFR lowers prices, but not enough to notice in the face of the more powerful force of economics.

I say that the economy which shifts supply and demand, not ROFR, determines the price. ROFR alienates some potential buyers and gets some buyers to offer more than once to buy a week. Overall I feel that ROFR lowers prices because less people want to try to buy a week after they had one stolen from them. Reducing the number f buyers in a pool reduces demand which lowers price. Simple economics.

TUGGERS are rare exceptions since most people rarely think about timeshares and owning a Marriott (or any timeshare) is not a must do. They need a car, a home, and food, but timeshares are a luxury item that is nice but not necessary.

You have no proof that the majority of buyers will continue to try to buy a week after losing one to ROFR, and I have no proof that the majority of buyers will throw in the towel after one or two tries. My personal experience was once was more than enough. My feel and the results from a harvard economics expert's article (the link is on tug) is that ROFR lowers prices. We are both guessing, but the PHD has hard facts, so I will take his word that says ROFR lowers prices since he is an expert.

When the market is tanking the downard spiral of resale prices due to ROFR is multiplied making them drop more than they would without ROFR. When ROFR was ceased recently by Marriott, many new buyers entered the market increasing demand and increasing prices. The prices did go up higher than they would have been if they were exercising ROFR, it is just that the other forces are too powerful to see the price increase caused by the lack of ROFR. How many from the limited TUGGER pool became potential buyers when people started posting that Marriott had stopped using ROFR? More buyers equals increased demand, which increases prices. This stuff is simple basic econ 101.

When the economy improves, demand will increase for both retail and resale weeks. Marriott will have more buying customers and less inventory to sell them, so ROFR will begin again. This will drive many buyers from the market lowering prices because of ROFR. How many here who didn't buy a week when there was no ROFR will try to beat Marriott when they start stealing weeks again? No one if they are honest will do that. Of course prices will be rising before ROFR starts to be exercised again, but ROFR will be lowering the prices once is starts being used from the higher price levels that would have been reached in the abscence of ROFR. ROFR will lower prices, it just won't be powerfull enough to lower the overall price increases due to the more powerful forces of decreased supply and increased demand.

To the ROFR believers the fact that the prices have fallen all year while ROFR was used means that they would have been worse without it. The fact that they have fallen since ROFR stopped means that the prices are falling due to lack of ROFR. When the economy increases after years of deflated prices and prices start to rise, Marriott will ROFR again, and the whole reason for price increases will be ROFR. It is like when the Indian medicine man did the rain dance for weeks and it didn't rain, it wasn't his fault, the rain dance worked, the rain gods were unhappy for some reason with the tribe. Of course when it finally rains it is all thanks to the medicine man and his rain dance. Many seem feel the same about the magic of ROFR.

You can believe what you want and take actions accordingly. So will I. We will see who is right in a few years. You believe that ROFR doesn't impact overall demand. I believe it does under the right circumstances.

All I am saying is that ROFR adds another buyer into the market that can be big enough to influence the demand curve for one or many resorts. You either believe this premise or you don't. I believe it. You and many others don't.

For a small resort that is popular, where Marriott is selling a lot of developer units and the normal resale supply is low, Marriott can have a material impact on the resale prices. If Marriott is in full sales mode at a specific resort, it can sell 10 times as many developer units in a year as the entire resale market at that resort. If it shifts 10% of its inventory acquisition to a specific resort, that is an immediate doubling of demand with the same supply of inventory. That impacts prices.

I am NOT claiming that ROFR is a panacea. I am not claiming that it keeps prices high. I am not claiming that it replaces normal law of supply and demand. What I am claiming is that when ROFR exists that resale prices firm up when the right conditions are met. I claim it has happened in the past and it will happen again. Because of this belief system, I am actively looking for opportunities to pick up some Marriott Platinum weeks for cheap and test my hypothesis about the market.

The worst case scenario for my purchase will be that I upgrade my bronze Marriotts to platinum for a few thousand dollars which I will fully recover in a few years of usage. The best case is I am right and I sell them for a nice profit that pays for all the vacations I took. This experiment really has no downside. I either get cheap vacations or free vacations. Both work for me.

 

[BocaBum99]

Winner winner, chicken dinner.

Even when Marriott was exercising ROFR, prices were dropping, and dropping fast.

ROFR has become some folks almost mystical hope of recovering thousands lost on timeshares, but for the vast majority of those folks, it ain't going to happen, even if - and it's a big if right now - ROFR ever comes back.

Just to make it clear. I am not in the camp that believes those who bought at a high price will be saved by ROFR. I never argued that point and I did not recommend purchasing Marriotts when ROFR was being executed since I could never get a below market deal.

The bottom line is that when the prices were falling, supply overwhelmed resale demand and no matter how much buying Marriott did, prices dropped.

There will be a time when supply and demand conditions change where Marriott buying back via ROFR WILL impact the price. Not all resorts and not across the board, but it will happen. I'm sure of it.

By the way, I am NOT recommending this as an investment strategy. I am recommending this as a buy to use/exchange strategy. You can't make a lot of money doing this buy and hold. You'll run out of capital before you make enough to earn a living. The general principle in timesharing is that prices decrease over time. The best this strategy does is reduce the overall cost of your vacations over time. My goal is zero cost vacations. And, I've done that for years.

If you want to make money in timesharing, you have to buy and flip quickly or broker transactions. Then, it doesn't matter if the prices are declining or rising. It only matters that you can find inventory and you have access to buyers. This is very easy to do in virtually any market for timeshares since the standard deviation of purchsae price is so high. If a timeshare has a $5000 market price, you can always buy them for $2000 and sell them for $4000 to leverage the inefficiency of the resale market.

 

[tombo]

All I am saying is that ROFR adds another buyer into the market that can be big enough to influence the demand curve for one or many resorts. You either believe this premise or you don't. I believe it. You and many others don't.

QUOTE]

ROFR doesn't add another buyer into the market. If Marriott was buying inventry I would agree with you 100%. All Marriott is doing is stealing already consumated sales. If a week sold for $5000, Marriott steals the same week for $5000 from the rightful buyer. No additional weeks were sold, and the price the week sold for didn't increase one penny.

I saw previously where you said that the current lack of ROFR made you a potential buyer of a platinum week that you weren't in the market for when Marriott was ROFR'ing. You are an example of increased demand due to lack of ROFR. Increased demand increases prices.

When the economy improves and Marriott starts ROFR'ing again, won't that honestly knock you out of the market as a potential buyer? If you didn't buy a week when you didn't have to worry about them stealing it from you, would you consider one after they resume their ROFR? If the answer is no, then ROFR decreased demand which decreases prices.

 

[BocaBum99]

All I am saying is that ROFR adds another buyer into the market that can be big enough to influence the demand curve for one or many resorts. You either believe this premise or you don't. I believe it. You and many others don't.

QUOTE]

ROFR doesn't add another buyer into the market. If Marriott was buying inventry I would agree with you 100%. All Marriott is doing is stealing already consumated sales. If a week sold for $5000, Marriott steals the same week for $5000 from the rightful buyer. No additional weeks were sold, and the price the week sold for didn't increase one penny.

I saw previously where you said that the current lack of ROFR made you a potential buyer of a platinum week that you weren't in the market for when Marriott was ROFR'ing. You are an example of increased demand due to lack of ROFR. Increased demand increases prices.

When the economy improves and Marriott starts ROFR'ing again, won't that honestly knock you out of the market as a potential buyer? If you didn't buy a week when you didn't have to worry about them stealing it from you, would you consider one after they resume their ROFR? If the answer is no, then ROFR decreased demand which decreases prices.

This debate once again boils down to one issue.

You do NOT believe that when Marriott exercises ROFR that a significant increase in total demand is ever possible. You believe the general case is that a person who loses a unit to ROFR will drop out of the market until they can find one at that price. You probably concede that some of it happens, but just not enough to materially impact demand and therefore pricing.

I claim that willingness to pay is such that lots of owners who lose units to ROFR will come back with higher offers to pass ROFR. And, when that happens in sufficient quantity that the demand curve shifts and prices rise. If I didn't see for myself how some brokers leverage this buy back process, I wouldn't believe it either. I am talking about hundreds of units bought back by individual brokers.

In addition, one thing that hasn't been pointed out that comes out in your message is that you believe that a unit stolen in ROFR is simply sold to another buyer by Marriott. So, they are merely taking a unit of demand from a lower priced customer and selling it to the higher priced customer, therefore the overall demand is the same.

I claim that there are two different supply demand curves. One for the general resale market and a separate one for the developer. There is some leakage from those in the developer market that leak down to the resale market, but for the most part they are separate and distinct markets. Those who buy from the developer tend to keep buying from the developer over time until they buy on the resale market in which case they switch to primarily resale buyers. They, by design, behave as separate and distinct markets with some cross correlation.

The mean price of a developer sale is much higher than the resale market. So, my belief is that when a unit of inventory is taken from the resale market and sold to the developer market, that is actually reducing the supply to the resale market therefore increasing resale price.

It's all theory anyway. I think I might try to model supply and demand of an individual Marriott resort. I might choose Ko'Olina because I like that resort and I can get a lot of data on it for resale, developer units, pricing, rentals, etc. It will be much easier to make claims with real data than the opinions we are shooting off on a message board.

 

[tombo]

You totally ignore where I show that YOU, not an imaginary buyer, became a potential buyer only after ROFR was stopped. This is from your own posts. Then you ignore the fact that we both know that most TUGGERS (if not all) will no longer be in the market as a buyer once Marriott starts using ROFR again.

ROFR reduces the number of buyers (like yourself), lowering demand, which lowers prices.

Removing ROFR increases the number of buyers, increasing demand ,increasing prices. Simple eco 101 stuff here, and you are a perfect example of one who wants to buy only after ROFR is removed.

 

[BocaBum99]

You totally ignore where I show that YOU, not an imaginary buyer, became a potential buyer only after ROFR was stopped. This is from your own posts. Then you ignore the fact that we both know that most TUGGERS (if not all) will no longer be in the market as a buyer once Marriott starts using ROFR again.

ROFR reduces the number of buyers (like yourself), lowering demand, which lowers prices.

Removing ROFR increases the number of buyers, increasing demand ,increasing prices. Simple eco 101 stuff here, and you are a perfect example of one who wants to buy only after ROFR is removed.

I am NOT ignoring it. There is a percentage of buyers whose willingness to pay is less than the ROFR rate. Those buyers drop out of the market. But, their demand is NOT removed from the market because Marriott replaces it by purchasing the unit and selling it to the developer market. If anything, the Marriott buyback is reducing supply to the resale market.

In addition, some buyers, who lost their unit to ROFR, end up making additional offers for a higher price. Their total demand is equal to the number of units that Marriott bought from sellers plus the one they ultimately buy.

So aggregate demand for the resale market = total demand without ROFR + excess units bought back by Marriott. That is a net INCREASE in demand.

Given stable total demand without ROFR and constant supply, Resale prices INCREASE when net increase in demand is a high percentage of total demand.

When there isn't stable total demand due to economic conditions. Or, if supply is dramatically increased due to new market entrants such as PCCs, then those factors dominate. In other wise stable conditions and Marriott is making sales at a very high multiple over resales, then ROFR increases prices.

I am directly addressing your issues. You are not acknowledging that my logic can be true. I believe it is. Why don't you set up a thought experiment and tell me what would have to be true for my logic to become reality. It's not sufficient to say it can never happen. Prove it logically.

I set up the experiment that can prove it one way or another. You just make claims that it isn't true. Let's see your proof.

 

[thinze3]

You totally ignore where I show that YOU, not an imaginary buyer, became a potential buyer only after ROFR was stopped. This is from your own posts. Then you ignore the fact that we both know that most TUGGERS (if not all) will no longer be in the market as a buyer once Marriott starts using ROFR again.

The reason Boca and I and many others here on Tug are now in the market is because prices are extremely cheap, not because Marriott is not exercising its ROFR. It is probably more accurately stated that prices are cheap partly because of the fact that Marriott has stopped executing ROFR.

Truth is, if Marriott were still executing ROFR and prices had fallen to where they are now, I would have still gone into contract on two more Marriotts just the same. My decision was based soley on cost, not ROFR.

I do hear yours and John's points but don't agree with most of them.
Funny how people see things so differently.

Terry

 

[BocaBum99]

The reason Boca and I and many others here on Tug are now in the market is because prices are extremely cheap, not because Marriott is not exercising its ROFR. It is probably more accurately stated that prices are cheap partly because of the fact that Marriott has stopped executing ROFR.

Truth is, if Marriott were still executing ROFR and prices had fallen to where they are now, I would have still gone into contract on two more Marriotts just the same. My decision was based soley on cost, not ROFR.

I do hear yours and John's points but don't agree with most of them.
Funny how people see things so differently.

Terry

People have the right to their opinions. If the goal is merely expressing a strongly held view on a message board, then that's one purpose for posting them. And, it can be very entertaining. Others make real life decisions based on that logic which is when it becomes much more important to get it right and to minimize the risk of any decision. It is important for each person to know which category they fit in. And, if you are making life decisions that you understand what you are getting involved in and why. When it makes sense and when it doesn't.

In every business I have been in, I have made a living based on my ability to predict the future. So, I spend an extraordinary amount of time setting up models for what is likely to happen under various circumstances. Then, I place huge bets on them and do my best to protect the downside risk.

This whole debate has actually helped me to refine my thinking about ROFR. I understand why those who believe ROFR has no impact on prices believe what they do. And, that has helped me to clarify in my mind when it actually will vs. when it won't. I found that to be very helpful.

I find it to be very naive for either side to say that something is true in all cases. The reality is that ROFR sometimes has an impact and sometimes doesn't. Hopefully everyone reading these threads are more clear under what circumstances that is true in a way tha helps them make their own decisions whether it to buy, sell, not buy, not sell or simply avoid problems.

 

[thinze3]

These discussions have made me think about it as well. "Maybe I shouldn't have pulled the trigger on the second unit (DSV)." But, knowing the market, I thought that the price was just too good to pass.

I plan on using the BeachPlace I just purchased much more often than the DSV unit. I actually bid over $10K last year for a BeachPlace alone and wasn't even the winner. Now I just bought TWO platinum 2BR units for less than $10K.

Because DSV offers AC's and rents well, I have figured that it will work out well for me. I, like you would probably do, wrote it all out on a spreadsheet and realized that if all goes as planned (big if), I can actually have one free vacation, an AC for a second, and 100K MR points each odd year for free by simply splitting and renting a few units. On even years I could get the same without the MR points. That includes all MF's, taxes, trading fees, AC fees, and advertising fees.
NOT BAD


Terry

 

[tombo]

People have the right to their opinions.

I find it to be very naive for either side to say that something is true in all cases. The reality is that ROFR sometimes has an impact and sometimes doesn't. Hopefully everyone reading these threads are more clear under what circumstances that is true in a way tha helps them make their own decisions whether it to buy, sell, not buy, not sell or simply avoid problems.

I agree. I never said that prices are never raised thanks to ROFR, sometimes they are. I also never said that more weeks are never sold thanks to ROFR, because that happens too. My main point is that OVERALL I feel like ROFR reduces prices by reducing the number of buyers.

I decided to not buy based on ROFR because of the week stolen from me, and because of a week I sold that the rightful buyer never got. I really wanted the guy that offered me a fair price to be the owner because if it were not for his offer I might still own it, but the developer stold it. By the way he also has sworn to never buy another week at a resort that has ROFR even though he owns another week at this resort.

I advise others against buying a resort with ROFR just like I would advise them against buying a car, a home, or anything of value if the seller put a clause in there prohibiting the owner from selling it to who they want for any price they want. If you lease you don't own, so no control, no problem. However if I am going to buy anything with my money, I am going to own it, and I can sell it to a friend or family member for $1 if I want to because I own it. I also don't advise people to buy ROFR resorts because I think ROFR reduces not only the price but the number of offers or bids you will receive if you ever need to sell it. These are my feelings, I don't expect everyone to agree.

As far as proving the point, would someone please re-post the link to the article detailing how ROFR hurts prices which was authored to the best of my recollection by several Ivy League professors. After that is posted please feel free to disprove all of the facts in the article.

I don't have any more time right now to look for that link as I am packing for a long weekend in New Orleans and getting ready for the Sugar Bowl where I will cheer loud and hard for the Crimson Tide. Will debate again after vacation. Hope it doesn't get too boring in the forums with me not here to stir the pot.

John I leave the stirring to you.....

Roll Tide Roll

 

[BocaBum99]

Over the past 4 years, my opinion of ROFR has evolved. And, it has evolved just in the past 2 weeks given these threads.

At first, I believed that ROFR was the worst thing ever created and that all it ever did was hurt sellers and distort the market. I claimed that it should be illegal and I made arguments for how it could be viewed as restraint of trade.

Then, after I saw what happened to HGVC points when they started their ROFR program. I had to concede that ROFR indeed had an impact on prices.

Then, when I met several resale brokers and companies who represent thousands and thousands of sales per year and how they were actually selling, I concluded that there was absolutely a way to make significant money when ROFR is and isn't being exercised. And, that ROFR was impacting the resale prices and there was a way to navigate ROFR in a way that educated buyers and brokers could work together to outsmart the resort developers with their own ROFR program.

Then, we had this debate, where I had to think through all of the experiences I had and synthesize all of the data and arguments into a coherent industry view.

My grand unified theory of ROFR is now this:

1) The laws of supply and demand rule over everything else. In general, ROFR and standard macroeconomic theory prevails when it comes to predicting what will happen when ROFR is vs. isn't exercised in any given market. All predictions for what will happen must start here with puts and takes based on the market specifics of the timeshare industry and the single resort economics.

2) The timeshare industry is unique in 2 ways which provide outlier cases in which ROFR actually can and does help resale prices more so than would be predicted by general macroeconomic theory. Those two attributes are:
a) There are distinct markets that are mostly independent for developer vs. resales of timeshare units. The developer exercises ROFR under certain market conditions in a way that removes supply from the resale market and offers it to the developer market instead. That action moves the demand curve. It's possible where that demand can be a significant portion of total resale demand.
b) The timeshare industry is one of the most inefficient markets known to human kind. After 40 years of existence, there is still a tremendously high standard deviation from mean of sales prices on any given day of the week.
This lack of an organized market is positively impacted by ROFR because it reduces the standard deviation of prices in an articial way. That market making function can be helpful to smart owners.

3) ROFR absolutely hurts uneducated sellers because it does remove buyers from the market increasing their likelihood of dumping their units at firesale prices. However, it helps educated sellers and brokers who know how to leverage the ROFR game against the developer so that their program turns more into a buy back program. Just like buying back stock, it offers some price support to these smart buyers.

4) Although demand is increased by ROFR, it isn't always large enough to impact the demand curve. To determine which markets are likely to be impacted, the overall market for developer units vs. the resale market needs to be analyzed to see when the buyback program can be large enough to actually impact demand. Sometimes it is. Sometimes it isn't.

5) It's a good time to buy if and when the price point an individual is willing to pay results in a potential deal. This could be above or below the ROFR rate. If your price point is below the ROFR rate, you will be removed from the market until ROFR is eliminated. The only time a person can buy below ROFR is when exercising stops. So, latent demand can is will be satisfied in these periods. It could be the best time to buy for many market participants.

6) Buyers who purchased when ROFR is being exercised will see their resale prices take a greater than average hit when ROFR stops being exercised. So, if you want to buy at that level, just make sure you use a greater than average depreciation factor to cost justify the purchase. Those who buy below the exercise rate can use a lower depreciation factor. I don't recommend planning for appreciation, but there is some upside potential in certain circumstances.

7) When evaluating the likelihood of whether or not resale prices will firm, it is very important to evaluate the overall circumstances of a given resort. It is possible to make a low risk purchase by buying to use. Any upside reduces the cost of using.