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The Marriott ROFR Debate: helpful to sellers or not?

BocaBum99

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I don't think this business model would work for Marriott. There is only a limited supply of resale weeks. Say only 5% of all weeks owned are on the resale market at one time. Less than 5% of those sellers are serious about their asking price. I don't think Marriott could sustain this model very long before it would max out. Also if as you state ROFR drives up prices, then they wouldn't be able to buy them for half of building new, they would quickly be having to ROFR at prices close to developer.

New construction privides profit growth, buying and reselling will only sustain some profits for a period of time before it runs out and is no longer provides a profit base.

I think you are exactly right on these points. I believe that for certain Marriott resorts and more normal economic conditions that the supply of resale weeks is so small that it cannot meet the demand that the resort developer is creating through its tour program. Therefore, they would be wise to soak up every unit of inventory that is either below their construction costs or is below the price at which they have a deficit of product to sell. When this happens, it is ripe for resale prices to rise since the actions of a single large player is single handedly shifting the demand curve.

What I have never understood completely is why Wyndham doesn't implement an ROFR program. They have so much excess inventory in the resale market the price points have dropped to nearly zero. It seems that even though they can buy on the open market without ROFR at prices well below their construction costs, they have always seemed to favor new development over recycling of resale points package. If they did this from the start, I believe that resale prices for Wyndham resorts would be significantly higher. And, what concerns me about their business model is that they don't appear to care about what happens to the resale value of points. So, they just drop toward zero with no end in sight. It seems to me that their own intersts would be far better served by strengthening the resale market while at the same time having higher margins by having lower cost of inventory. What I am missing with Wyndham?
 
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dioxide45

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Debate Resolved

Okay okay okay. I will resolve this debate. No, ROFR does not help sellers. Now we can move on. :D
 

dioxide45

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LOL. I think you just started it all over.

I say this because I maintain the ROFR database and that qualifies me to provide the final end all and be all answer. :p
 

timeos2

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NOW what are we going to do?
 

dioxide45

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NOW what are we going to do?

Sorry, didn't realize I would rain on everyone's fun.

Well since this debate is over, we probably need to start a new one on the merits of weeks vs. points systems. I have forgotten on the arguments on which system is better.

I don't think I have experienced that debate yet. I guess I am from the weeks camp, only because I don't own a points TS. Gotta pick sides early.
 
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BocaBum99

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I don't think I have experienced that debate yet. I guess I am from the weeks camp, only because I don't own a points TS. Gotta pick sides early.

We will have to call back Carolinian from eastern Europe to join in the fun. Those debates always resulted in 100+ post threads. We used to have them about every couple months.

It would also get intermixed in with debates about RCI and renting spacebank weeks and how that relates to the RCI points program. Maybe I'll take and defend the Carolinian position. I think I may be able to do it. But never with his passion, energy and drive. He is one of a kind who never backs down from an argument that he believes in.
 

AwayWeGo

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[triennial - points]
Pressing The Hot Buttons.

We will have to call back Carolinian from eastern Europe to join in the fun. Those debates always resulted in 100+ post threads. We used to have them about every couple months.
As I recall, 1 of his favorite hobby horses is Raiding The Weeks Inventory.

Is this a great web site or what ?

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

BocaBum99

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As I recall, 1 of his favorite hobby horses is Raiding The Weeks Inventory.

Is this a great web site or what ?

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

My favorite parody of the debate was hatrack's old MacDonald story. I wish that didn't get deleted. It was the single funniest thread ever on this message board.
 

dioxide45

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How about start a new database!

One that shows the cheap prices now that Marriott is NOT exercising ROFR and the comparable prices when Marriott IS exercising ROFR in the future! Dioxide?

Terry :D

The current database will do this. Though I have a feeling when the economy turns around and prices start to go up and then Marriott begins to exercise ROFR all those ROFR proponents will say "see, now that Marriott is exercising prices are up" when it simply a turn around in the general market and prices went up before they begun exercising.
 

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Once timeshare slum lords think they can make money renting, they will load up on timeshares and put in a price floor for timeshares. As long as resorts don't follow this advice, there will remain loads of timeshares with negative values since the price of renting will be below annual maintenance fees and dues.
Jim, I have lost you now but will ask you once in person what you mean. Are there timeshare slum lords too? I never heard that before. :eek: Nothing amazes me anymore.
 

taffy19

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My favorite parody of the debate was hatrack's old MacDonald story. I wish that didn't get deleted. It was the single funniest thread ever on this message board.
Yes, I remember his post and it was hilarious and so true! I was looking for it but can't find it but I found your thread here and it is almost four years later now. Quite interesting to read it again, Boca, but off topic a little. :eek:

The RE bubble has burst and even CA is hit hard. Who would have thought that in May 2005? If you want to buy real estate, I would invest in CA pretty soon again as prices will go back up sooner or later because people are living and working here at many different companies.

For rental properties you need to invest in the basic 3 BR houses so it is easy to rent them out and hope to get the appreciation too while someone else is paying for it. I don't think that homes on the beach have suffered that much yet but I may be wrong as I haven't kept track of it lately. We have six weeks on the beach every year at a fraction of the cost of what it would cost us to buy one of these homes today. When we first married, the price of a home on the beach was about what a brand name developer charges today for a single week oceanfront timeshare condo! Who would have ever thought that this would happen? :eek:

This is INFLATION for you and we will get a lot more of it coming so buying rental property is not a bad idea at all! JMHO. Timeshares are a luxury item and not an investment except for quality vacations with the people you love. :)
 

taffy19

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It will never end. Just be happy we aren't discussing weeks vs. points against Carolinian. That would be a few hundred point thread. It would have PerryM, John and me all on the same side barely holding our own against Carolinian. We actually need these debates every now and then. They rehash the exact same arguments over and over and it makes the message board interesting again. Most just roll their eyes and ignore it. Others love the debate.

At least we aren't discussing Global Warming. In that discussion, Carolinian and I would be in the same camp. It's fun being on his side. He does all the posting and I just cheer him on. LOL.
I enjoy reading these debates and am reading this multiple page thread over again.

Carolinian must have owned timeshares since the 70's so that is why he feels that way and I agree with him, if you bought a red week. The system was good for red week owners but not for people who bought the blue weeks. He must have bought a red week too so had excellent trading power. The people, who bought the blue weeks, are the ones who were really unhappy. They may have paid less for the week in the beginning and thought they were smart but they got the short end of the stick because they paid the same maintenance fees every year but got very poor trading power.

The point system is more fair in this respect and more flexible too but what do you own as the developers can make changes any time they feel like it. This is one drawback of the point system. JMHO. Did I start this debate again? ;)

Isn't the Marriott the only resort left that is still selling weeks and weekly stays versus points and daily stays? We keep reading rumors that they may go over to points but how could they have daily stays if we have the right to a full week? They would have to let the people, who want to stay a whole week, reserve first and then let the people reserve who want a partial week or a daily stay. I wonder how they can make this change successfully and keep everyone happy?

This industry keeps changing constantly but is it for the better? I am not so sure. :confused:
 

Seth Nock

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I said nothing about Seth specifically (and he does hold a sterling reputation here) or anything about criminal. I have never spoken to him or tried to purchase anything from his services.

I do have a serious problem with anyone who would give advice to pay more for anything they stand to profit from in the guise of "helping". If in fact Seth or anyone else does that without serious, fully detailed qualifications as to the reasoning then that is someone I would feel is taking unfair advantage of a client/customer. Again I don't know how Seth conducts business and given your description of the satisfied clients I hope it is clearly stated what he is recommending and why. If a fully informed buyer decides based on truthful information to make a bid for a higher amount then there is no issue. If the "help" is the typical timeshare presentation type of self-serving "facts" designed to get the sale then I would have serious problems with it.

I have nothing to retract.

I just happened to notice the questions on ROFR, so I figure I would respond. A year ago, about 35% of my Marriott's were bought back under right of First Refusal. I present all offers and let my buyers know whether or not I think it will pass right of first refusal. In the last month, only 1 of my Marriott units was bought back. As a result, I have gotten many of my buyers very good deals recently.

Hilton and Disney are both still actively buying units back. About 25 % of my Hiltons and over 40% of my Disneys are being bought back.
 

thinze3

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... (Marriott) We keep reading rumors that they may go over to points but how could they have daily stays if we have the right to a full week? They would have to let the people, who want to stay a whole week, reserve first and then let the people reserve who want a partial week or a daily stay. I wonder how they can make this change successfully and keep everyone happy? ...

Daily stays may come at 3 months out when all weekly vacations should have already been booked. I think Marriott would be banking on the fact that MANY MANY points would go unused each year.


... Hilton and Disney are both still actively buying units back. About 25 % of my Hiltons and over 40% of my Disneys are being bought back.


It does appear from Seth's post that as we suspected ROFR is all but absent within Marriott. I assure you that if Hilton and Disney are still buying Marriott will too soon enough. (Well, I guess it could go the other way and Hilton and Disney STOP buying. Haha)

Also, both Starwood's and Marriott's stock has just about doubled from their mid-November lows. As soon as Marriott starts buying IMHO there will be a solid bounce in prices at those resorts.
 

dioxide45

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How about a what is better: points vs deed?

I think you may mean deeded vs RTU? Since points can be deeded and deeds can also be weeks.
 
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dioxide45

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To not hijack another thread, I will post here. Also it is good for society to stir this up every once and a while.

http://www.tugbbs.com/forums/showpost.php?p=762534&postcount=18

ROFR, if it works, can only work if it is being exercised. The current climate isn't proof of anything, since Marriott has stopped exercising ROFR.

While we may need to agree to disagree, I think the current economic environment proves exactly that ROFR doesn't protect prices in any way.

While you say that it only works when it is being exercised, that isn't how ROFR works. The developer always has the option to never exercise, sometimes exercise or always exercise. You can't have it both ways. To say it only works when it is being exercised is meaningless because developers don't and as we can see now, at times almost never exercise their right.

We paid $7500 for a resale gold MGV week two years ago, what is ROFR doing for me now? Similar weeks now regularly sell for ~$4000 on E-Bay. ROFR isn't helping the resale price of our week one bit. To say it doesn't matter since Marriott isn't exercising ROFR right now doesn't make me feel any better. There is no guaranty that Marriott will ever exercise ROFR in any high volume again, but ROFR still exists, you can't deny that.
 
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Pit

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This is a reply to another thread, so as not to hijack said thread.

I believe that when a develoer exercises actively ROFR that it does provide price supports for the resorts. Are they articifial? Yes. When they start exercising it again, prices will firm up for those resorts.

Boca, I think you put the proverbial cart before the horse. Resale prices will not increase until real demand increases. Demand is the price driver, not rofr. As I'm sure you know, price will increase with demand. Likewise, price will fall in the face of weak demand, rofr or no rofr. If by "firm up," you mean to suggest increase to pre-recession levels, I disagree.

Some here have argued that rofr increases demand, as there is now another buyer in the market. I don't believe this view is accurate for two reasons. First, Marriott is not an active participant in price discovery between buyer and seller. They do not bid against other prospective buyers. They simply step in, or not, after price has been negotiated. Second, every week they purchase via rofr is presumably sold to another buyer. In effect, they have simply substituted one buyer for another. This does nothing to increase real demand, any more than a resale broker increases demand. They are a pass-through entity wrt resales.

While I believe Marriott will resume its exercise of rofr in 2010, I don't expect demand for resale weeks to improve significantly. Thus, Marriott can resume its exercise of rofr - but at price points much lower than in years past. I believe those who are counting on a rofr comeback to restore prices to 2007 levels will be disappointed. It's my opinon that resale prices will continue to decline from current levels, in spite of rofr.

Of course, this is all just my opinion, to which I am entitled.
 
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BocaBum99

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This is a reply to another thread, so as not to hijack said thread.



Boca, I think you put the proverbial cart before the horse. Resale prices will not increase until real demand increases. Demand is the price driver, not rofr. As I'm sure you know, price will increase with demand. Likewise, price will fall in the face of weak demand, rofr or no rofr. If by "firm up," you mean to suggest increase to pre-recession levels, I disagree.

Some here have argued that rofr increases demand, as there is now another buyer in the market. I don't believe this view is accurate for two reasons. First, Marriott is not an active participant in price discovery between buyer and seller. They do not bid against other prospective buyers. They simply step in, or not, after price has been negotiated. Second, every week they purchase via rofr is presumably sold to another buyer. In effect, they have simply substituted one buyer for another. This does nothing to increase real demand, any more than a resale broker increases demand. They are a pass-through entity wrt resales.

While I believe Marriott will resume its exercise of rofr in 2010, I don't expect demand for resale weeks to improve significantly. Thus, Marriott can resume its exercise of rofr - but at price points much lower than in years past. I believe those who are counting on a rofr comeback to restore prices to 2007 levels will be disappointed. It's my opinon that resale prices will continue to decline from current levels, in spite of rofr.

Of course, this is all just my opinion, to which I am entitled.

By firming up, I mean higher than they would otherwise be. Not necessarily to levels of 2008, but certainly higher than today.

Perhaps the main difference between our views is whether or not there is ONE or TWO markets for Marriott's. I believe there are 2 markets. One for resale demand of weeks without the effects of Marriott as a buyer. The second is the effect of Marriott as the buyer. If you view the market in this way, then it is obvious that whenever Marriott exercises ROFR, prices firm up because there are new demand or they reduce supply. Either way you look at it, prices firm up.

Now, the question is to prove whether or not there are 2 distinct markets. I claim that more than 90% of buyers of Marriott's purchase directly from Marriott. And, that when someone makes a resale purchase, they rarely go back to buy from the developer. And, conversely, most buyers just keep buying directly from the developer. If this is true, then the markets for developer vs. resale weeks are in fact distinct. In only rare circumstances does a resale buyer become a developer buyer. The product and even the prices are different. It's not readily apparent today since the products look pretty much the same with only the Marriott Rewards program differentiating them.

Now, envision the developer product being a points product like in Dave M's new thread today. I don't think anyone would argue that the points product is the same as the weeks product. Then, it is very obvious that the products and the markets are different. In that case, when Marriott wants to buy back inventory, it can any time it wants. It's reduction of the supply of weeks in the resale market therefore increases price.

Marriott doesn't have to do price discovery. It has a census of all prices paid via the ROFR submissions. All it needs to do is take the distribution of the resale prices, create a mean and standard deviation to that price distibution and it has a full price census of the market. It can then determine the price point it will exercise at based on how many units it thinks it needs to fullfill its demand for developer inventory. That pretty much takes out the low end of the supply curve increasing prices. Prices are therefore higher than they would have otherwise been.

Cart before horse? I think not. The nominal market for resales is determined by how many current sellers there are in the market and how many current resale buyers there are. That gives you a price point albeit with a very high standard deviation due to the inefficiency of the market. If something as simple as financial markets normalizing and credit becomes available for developer purchases, that alone is enough to put Marriott into a situation where developer weeks are sold in greater numbers. Marriott is doing nothing to stimulate resale demand by increasing in such as situation. There is exactly the same population. Rather, there is less supply because Marriott is draining off inventory via ROFR that would otherwise be available to the resale market. Marriott decreasing supply means the resale market increases prices. So, for prices to increase, it does NOT require that resale demand increases. There is no cart. There is no horse. QED.
 

Pit

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Now, the question is to prove whether or not there are 2 distinct markets. I claim that more than 90% of buyers of Marriott's purchase directly from Marriott.

You may be correct about this. I have no data with which to validate or refute this claim.

Now, envision the developer product being a points product like in Dave M's new thread today. I don't think anyone would argue that the points product is the same as the weeks product. Then, it is very obvious that the products and the markets are different. In that case, when Marriott wants to buy back inventory, it can any time it wants. It's reduction of the supply of weeks in the resale market therefore increases price.

I agree with your premise, but not your conclusion (increasing prices). I believe the product differentiation that results from a point system will further devalue resale weeks. Thus, I expect resale prices to further weaken from here, not to increase. I believe this is precisely the effect Marriott wants to produce with their point system introduction, and it will allow them to exercise rofr at even lower prices in the future.

Marriott doesn't have to do price discovery. It has a census of all prices paid via the ROFR submissions. All it needs to do is take the distribution of the resale prices, create a mean and standard deviation to that price distibution and it has a full price census of the market. It can then determine the price point it will exercise at based on how many units it thinks it needs to fullfill its demand for developer inventory. That pretty much takes out the low end of the supply curve increasing prices. Prices are therefore higher than they would have otherwise been.

I'm not suggesting that Marriott is unaware of resale prices, but rather that Marriott does not act as an interested buyer in the market. They do not participate in price negotiation, as would you or I. Thus, the seller does not benefit from price competition between Marriott and other prospective buyers.

Some argue that there exists a psychological affect of rofr that causes buyers to increase their offer prices. Based on the comments of some owners here, that appears to be true. Yet, based on other comments, it seems there are just as many prospective resale buyers who avoid Marriott altogether because of rofr.

Taking out the low end of the supply curve, as you put it, does not increase prices. It makes no difference who the buyer is. Note that the high end of the price curve is also taken out, by other buyers. In each case, the seller gets only the negotiated price. Thus, the exercise of rofr on low-priced units, does not move the mean price one iota. Moving the mean requires an increase in demand.

I agree that with the introduction of a point system, the markets are distinct and Marriott rofr acts to increase demand in the resale market (Marriott has no control over resale supply). Yet, I believe the Marriott increase will be more than offset by a decrease in demand from other prospective buyers. The net effect will be lower, not higher, prices - in spite of rofr.

That's my 2010 forecast - a further decline in resale prices and the return of rofr. Now, I'll wait and see what becomes of this point system.
1974_eating_popcorn.gif
 

Bill4728

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PIT said:
Marriott rofr acts to increase demand in the resale market (Marriott has no control over resale supply). Yet, I believe the Marriott increase will be more than offset by a decrease in demand from other prospective buyers. The net effect will be lower, not higher, prices - in spite of rofr.
Interesting idea.

I too thought since Marriott will start using ROFR again, that anyone wishing to buy a Marriott will have to increase their offers to get pass ROFR, therefore increasing price.

BUT if you're saying that the new point based system, may seem to most buyers a complete new and different system than what is offered resale, then maybe there will be even fewer buyers and even less demand, therefore lower prices.
 

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ROFR - its a good/bad thing

I believe the ROFR is a good thing for owners - that's my opinion.

I know of no way to prove the ROFR acts as price support - my contention is that every buyer in the market adds to increasing prices; lack of buyers reduces prices.

What's the alternative? A developer who cares little about resales. That's what Wyndham does and why their resales are 5% of current developer's sales prices.

If you believe that the ROFR is harmful to owners then you should feel victorious - Marriott is not exercising the ROFR now; you got your wish.

But notice that when the ROFR is in effect resale prices are steady or increasing and when the ROFR is not in effect resale prices are falling.

I don't know if the ROFR is causing this but that's what is happening.

So should you be happy that the ROFR is not in effect right now?
 
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