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.
