Trouble - Marriott Grand Residence Tahoe [Management Agreement in Jeopardy?]

[WBP]

WBP:

Do you know the difference between the East - West Partners, and East West Hospitality?

East West Hospitality is at this link:

Best Resorts & Property Management Company in CO, HI & CA | East West Hospitality

Legendary skiing and extraordinary hiking all set above a village with shopping, restaurants, and entertainment. While Vail is most notably known for it's

eastwest.com

East West Hospitality is who I thought you were talking about until I looked at the link and pdf you supplied for East-West Partners. They both seem to be based in Colorado, and both seem to manage high end real estate that includes timeshares, but also other residential properties and property management services.

Yet their list of properties is different from each other, and they don't seem to be the same company.

East West Hospitality shows a photo that looks like the Hyatt Aspen to me, which they say they manage, but they don't call it Hyatt. Perhaps they took over management from Hyatt but Hyatt owners still own a fair number of units there?

There seems to be a fair amount of overlap between geographic locations that these two firms named East West manage, but the individual properties they manage look to be different. They both seem to have a mix of timeshares and maybe privately owned residences that they rent out for owners, but I can't tell for sure by reviewing their websites.

The overlap between these two, and how they work as timeshare management vs. rental systems for privately owned residences within small complexes is somewhat confusing to me.

Either way, relating this to the GRC situation, both seem to have a very upscale selection of properties, but limited in number and locations compared to the Marriott system, which allows much more extensive internal trading options in terms of locations and number of properties.

You raise a great question. I’d have to ask about this, as I do not recall the relationship between the two. I know leaders at both.

See the attached Press Release RE the reciprocal usage options that 100 Bachelor Ridge (the former Ritz-Carlton Club, Bachelor Gulch) owners enjoy with Elite Alliance.

 

[WBP]

WBP:

Do you know the difference between the East - West Partners, and East West Hospitality?

East West Hospitality is at this link:

Best Resorts & Property Management Company in CO, HI & CA | East West Hospitality

Legendary skiing and extraordinary hiking all set above a village with shopping, restaurants, and entertainment. While Vail is most notably known for it's

eastwest.com

East West Hospitality is who I thought you were talking about until I looked at the link and pdf you supplied for East-West Partners. They both seem to be based in Colorado, and both seem to manage high end real estate that includes timeshares, but also other residential properties and property management services.

Yet their list of properties is different from each other, and they don't seem to be the same company.

East West Hospitality shows a photo that looks like the Hyatt Aspen to me, which they say they manage, but they don't call it Hyatt. Perhaps they took over management from Hyatt but Hyatt owners still own a fair number of units there?

There seems to be a fair amount of overlap between geographic locations that these two firms named East West manage, but the individual properties they manage look to be different. They both seem to have a mix of timeshares and maybe privately owned residences that they rent out for owners, but I can't tell for sure by reviewing their websites.

The overlap between these two, and how they work as timeshare management vs. rental systems for privately owned residences within small complexes is somewhat confusing to me.

Either way, relating this to the GRC situation, both seem to have a very upscale selection of properties, but limited in number and locations compared to the Marriott system, which allows much more extensive internal trading options in terms of locations and number of properties.

I have calls into my friends at both, seeking clarification.

There are a substantial presence of Slifer, Smith, and Frampton alumnus at both.

I did discover this, to gain some insight into who’s who:

Jobs | East West Family of Companies

Explore Jobs for East West Family of Companies.

jobs.eastwest.com

 

[ocdb8r]

As an owner at GR Tahoe I have followed this closely and am trying to have all the facts before responding to both the BOD and MVC Management. I to wondered about this $850K donation - to be honest I dont think it is. I am wondering if this is a PM surcharge added to all week rentals - 5% at present - increasing to 10% per BOD letter. It applies to all weeks rented by either MVC-their owned weeks or those offered up by owners to their system, or weeks directly rented by owners. Saddly this is always collected and remitted by MCV but not always by individual renters.
If anyone can confirm this is where the $850K came from I would appreciate the information.

I asked about this a few years ago and was told this is effectively MVC rebating a portion of the commission they charge for renting out weeks via the rental program they administer. I agree that calling it a "donation" is a bit rich, but they are not under a contractual obligation to provide the association with any portion of the fee they charge for rentals (and at the time, no one could tell me what portion of the revenue MVC was realizing this represented....so no idea how "generous" of a cut it is). My take at the time was that this was MVC trying to counter concerns about the increased expenses realized by renting out "nights" vs full weeks (which results in increased housekeeping and other resources due to more room turnover). Regardless, the associate could negotiate some sort of "cut" from rental proceeds with a new management company. The only question in my mind is if an independent could realize a similar volume and rates for rentals.

 

[Dean]

My guess is the commission is 40 to 50% of the rental price before taxes which would not be uncommon from what I've seen where timeshare rentals are involved. I know DVC used to be 50%, not sure if it is currently. This is one of the biggest reasons that a cash type exchange option will not be viable.

 

[vikingsholm]

I have calls into my friends at both, seeking clarification.

There are a substantial presence of Slifer, Smith, and Frampton alumnus at both.

I did discover this, to gain some insight into who’s who:

Jobs | East West Family of Companies

Explore Jobs for East West Family of Companies.

jobs.eastwest.com

.

Will be interesting to see this one sorted out.

 

[bnoble]

The only question in my mind is if an independent could realize a similar volume and rates for rentals.

I think the answer to that question is pretty clear: RevPAR will go down.

 

[davidvel]

Interesting thing on the settlement I have not seen mentioned: "Marriott" is paying $1.2M, plus they claimed they loaned $800K to the HOA for prior budget. This amounts to a $2M settlement by Marriott where they deny any wrongdoing. A pre-trial settlement of this magnitude shows that the HOA had something pretty threatening to Marriott, or Marriott thought so. Little has been disclosed about the value of the foreclosure claims, but the budget claims seemed to be on more shaky ground.

Also, the HOA should sue Marriott again for the letter(s) they sent out. Marriott as agent is a fiduciary to the HOA and their letter seems to place their interests above the HOA's, and is very adversarial.

 

[SteveinHNL]

Regarding insurance cost increases, I attended an owner's meeting with the GM at the Hyatt High Sierra in Incline Village last year. She informed the owners that while casualty/fire insurance premium rates for Lake Tahoe have had huge increases for obvious reasons, HHS has been insulated from a lot of those increases because the property is covered under a blanket policy covering Hyatt's (or more likely Marriott's) properties that effectively spreads the risk out so the underwriting isn't based solely on the risk of loss (fire) in Lake Tahoe, but the risk of the combined portfolio. This is what I understood from the meeting, which made a lot of sense and obviously benefits owners in higher premium resorts like Lake Tahoe than owners in resorts that would presumably have less risk. I would think this same concept would apply to Grand Residence, although it doesn't seem so if owners are being told that insurance costs are a big part of the uncontrollable increases.

 

[VacationForever]

Interesting thing on the settlement I have not seen mentioned: "Marriott" is paying $1.2M, plus they claimed they loaned $800K to the HOA for prior budget. This amounts to a $2M settlement by Marriott where they deny any wrongdoing. A pre-trial settlement of this magnitude shows that the HOA had something pretty threatening to Marriott, or Marriott thought so. Little has been disclosed about the value of the foreclosure claims, but the budget claims seemed to be on more shaky ground.

Also, the HOA should sue Marriott again for the letter(s) they sent out. Marriott as agent is a fiduciary to the HOA and their letter seems to place their interests above the HOA's, and is very adversarial.

The question is whether it's true that Marriott is paying $1.2M for the litigation, since it's only reported by the board. My guess is that $800K is part of the reported $1.2M that is now credited to the financials.

 

[davidvel]

The question is whether it's true that Marriott is paying $1.2M for the litigation, since it's only reported by the board. My guess is that $800K is part of the reported $1.2M that is now credited to the financials.

I would think if it were not true Marriott would have mentioned this in their letter.

 

[ocdb8r]

Also, the HOA should sue Marriott again for the letter(s) they sent out. Marriott as agent is a fiduciary to the HOA and their letter seems to place their interests above the HOA's, and is very adversarial.

I didn't read the letter MVC sent as placing their interests above the HOA, but perhaps above the BOD. They are not one in the same....all owners are members of the HOA, which is who the letter was sent and addressed to. To me they are trying to assert that the BOD is not acting in the true interests of the (total membership) of the HOA.

The question is whether it's true that Marriott is paying $1.2M for the litigation, since it's only reported by the board. My guess is that $800K is part of the reported $1.2M that is now credited to the financials.

Whether they are "paying" it or releasing their $800k claim for the loan, MVCI is still settling to the tune of 1.2M. Now, I suspect you're correct....this "loan" is part of the settlement. I wouldn't be surprised if it's likely MVC erred in advancing funds to pay the HOA costs that weren't in the approved budget. Sadly, they likely should have let the bills go unpaid until the HOA approved funds for them. Perhaps they received legal advice they'd struggle to recoup that "loan" in the given circumstances....this, plus the value of the foreclosed fractionals is likely what comprises the 1.2M.

In my mind, it's not a good look for either party. Everything still points to the Board insisting the budget is too high, despite everything pointing to the extra costs being insurance and utilities (and the most recent letter and survey doesn't point to anything else probable). In fact, I find the most recent "survey" from the BOD a bit laughable...they ask if owners would be in favor of a reduction of services such as: Valet, bingo, Wine Tasting, Crafts, Fitness Classes, Guided hikes, Karaoke, Mid-week Tidy - can any combination of these actually add up to any meaningful amount in the budget??!!? On the flip side, clearly MVC has been sloppy here, in their relationship with the BOD, in their management of foreclosures and in how they addressed the budget shortfalls. What a total mess on both sides!

Regarding insurance cost increases, I attended an owner's meeting with the GM at the Hyatt High Sierra in Incline Village last year. She informed the owners that while casualty/fire insurance premium rates for Lake Tahoe have had huge increases for obvious reasons, HHS has been insulated from a lot of those increases because the property is covered under a blanket policy covering Hyatt's (or more likely Marriott's) properties that effectively spreads the risk out so the underwriting isn't based solely on the risk of loss (fire) in Lake Tahoe, but the risk of the combined portfolio. This is what I understood from the meeting, which made a lot of sense and obviously benefits owners in higher premium resorts like Lake Tahoe than owners in resorts that would presumably have less risk. I would think this same concept would apply to Grand Residence, although it doesn't seem so if owners are being told that insurance costs are a big part of the uncontrollable increases.

First, we have no idea if GR Tahoe is or can be covered by such a policy. Second, the increases in insurance costs are not unique to Tahoe; yes, Tahoe may be seeing higher than average increases sue to the fire risks, but property insurance has gone through the roof "on average". Finally, don't forget Hyatt High Sierra is on the NV side and GR Tahoe is on the CA side. I know it may be ludicrous, but I would not doubt that this results in an even higher premium for property insurance given the state of the insurance industry in CA.

 

[SteveinHNL]

First, we have no idea if GR Tahoe is or can be covered by such a policy. Second, the increases in insurance costs are not unique to Tahoe; yes, Tahoe may be seeing higher than average increases sue to the fire risks, but property insurance has gone through the roof "on average". Finally, don't forget Hyatt High Sierra is on the NV side and GR Tahoe is on the CA side. I know it may be ludicrous, but I would not doubt that this results in an even higher premium for property insurance given the state of the insurance industry in CA.

Good point, property and casualty insurers are fleeing CA, and I haven't heard the same about NV.

 

[daviator]

I own apartment complexes, not in California, and my property and liability insurance costs for those have roughly doubled over the past five years too, all while providing less coverage (like no more coverage for hail or windstorm damage.) So I completely believe that the Tahoe property's insurance has also doubled, especially given the significant risk given the close proximity to forested areas. One need only to look at what happened to the town of Jasper in Canada just a few weeks ago – nearly a third of the town burned to the ground despite massive efforts to prevent and stop it from happening – to see that the risks to insurers in this kind of location have greatly increased. Heck, look what happened in Lahaina, which wasn't even a wilderness or forested area. Whether a doubling of rates is justified or not, I can't say, but certainly the risk has increased and prices have to rise along with the risk. I won't be surprised to find that the losses in Canada result in even more rate increases here in the U.S.; many of our insurers play on both sides of the border and will be impacted by the Jasper losses, along with their reinsurers who back them up.

I am not an owner at GR Tahoe but have been following as some of these issues can occur at other properties. While I am happy to see a board that is willing to stand up to MVC, it seems like this one may need to take off their rose-colored glasses and be more realistic about what has happened to real costs. You can't achieve lower MFs through denial of reality.

 

[okwiater]

I did find it interesting that the letter mentioned mitigating the underfunding by eliminating 5.5 FTEs, and that this was accomplished *without* a meaningful reduction in the resort experience.

Seems to me in an environment of 8-10%+ MF increases, year after year, this sort of judicious frugality would be appreciated across the rest of the resort portfolio.

 

[Dean]

I did find it interesting that the letter mentioned mitigating the underfunding by eliminating 5.5 FTEs, and that this was accomplished *without* a meaningful reduction in the resort experience.

Seems to me in an environment of 8-10%+ MF increases, year after year, this sort of judicious frugality would be appreciated across the rest of the resort portfolio.

I went back and reread the letter and I did not see a statement that this was done without impacting the resort experience, maybe I missed it. I read it was done and that the resort was below staffing for other comparable resorts. Hopefully that's the case but as I read the letter, I got the undertone that this would be felt by the guests. It would seem to me that some of the best and easiest opportunities for savings would come from the questions posed by the BOD.

What services and activities would you be willing to give up to keep maintenance fees lower?
Refreshements in the lobby
Valet
bingo
Wine Tasting
Crafts
Fitness Classes
Guided hikes
Karaoke
Mid-week Tidy

IMO none of these are for items I see as core to a resort experience and most are definitely outliers not found at most MVC resorts. And there are some opportunities for real savings which would also interplay with the stated reduction in staff and possibly lead to further staffing reductions without other impacts as well.

 

[vikingsholm]

I went back and reread the letter and I did not see a statement that this was done without impacting the resort experience, maybe I missed it. I read it was done and that the resort was below staffing for other comparable resorts. Hopefully that's the case but as I read the letter, I got the undertone that this would be felt by the guests. It would seem to me that some of the best and easiest opportunities for savings would come from the questions posed by the BOD.

IMO none of these are for items I see as core to a resort experience and most are definitely outliers not found at most MVC resorts. And there are some opportunities for real savings which would also interplay with the stated reduction in staff and possibly lead to further staffing reductions without other impacts as well.

As an owner there, I did not notice any issue from staffing levels of the lodging facility itself during visits this summer. Though we do not typically use the extra frills they have provided in the past, like events and classes.

The one thing that was a bit noticeable though was a bit of short staffing in valet services to retrieve your car, at peak check in and check out times, compared to prior years over the past decade. Am not sure if this is due to ongoing cuts, or just happened on the days we were there. I don't see this as a big problem though, and it can be planned around when checking out. If it's a cost cutting measure, it's worth the short extra wait time to me.

 

[Dean]

As an owner there, I did not notice any issue from staffing levels of the lodging facility itself during visits this summer. Though we do not typically use the extra frills they have provided in the past, like events and classes.

The one thing that was a bit noticeable though was a bit of short staffing in valet services to retrieve your car, at peak check in and check out times, compared to prior years over the past decade. Am not sure if this is due to ongoing cuts, or just happened on the days we were there. I don't see this as a big problem though, and it can be planned around when checking out. If it's a cost cutting measure, it's worth the short extra wait time to me.

So you did notice one issue that might have been related. I'm guessing the changes were relatively recent and possibly by attrition rather than firing. I would expect some would see issues and others not and that often one would not be able to tell since housekeeping has already been an issue at many locations. Ultimately I'm doubting people will be able to tell even if there are delays in room ready, check in, etc. That doesn't necessarily mean the impacts were not there affecting the situation.

 

[Eric B]

I did find it interesting that the letter mentioned mitigating the underfunding by eliminating 5.5 FTEs, and that this was accomplished *without* a meaningful reduction in the resort experience.

Might be a savings at present but that will wind up being 5.5 people that aren't gaining the resort experience when the current staffing decides to retire or depart. Similar thing happens in a lot of places where short term planning is more important than long term strategic staffing.

 

[okwiater]

I went back and reread the letter and I did not see a statement that this was done without impacting the resort experience, maybe I missed it. I read it was done and that the resort was below staffing for other comparable resorts.

Here is the portion of the letter I was referring to, emphasis mine:

“In an effort to help mitigate, where possible, the impact of the failure to adequately budget for these expenses, the management company has made cuts to other line items in the budget without materially impacting the quality of the resort. In fact, the management company reduced staffing by five and one-half full-time associates in housekeeping, front desk, engineering, concierge, and activities in an effort to mitigate some of the impact of GRCLT Condominium’s uncontrollable expense increases.”

 

[okwiater]

Might be a savings at present but that will wind up being 5.5 people that aren't gaining the resort experience when the current staffing decides to retire or depart. Similar thing happens in a lot of places where short term planning is more important than long term strategic staffing.

I’m not saying you’re wrong, but I am saying it’s hard to know if those 5.5 FTEs were truly necessary—even for cross-training or continuity purposes—or if they were just staffing “fluff.”

Keep in mind the owners pay the salaries, while the management company not only makes the hiring decisions but also collects a profit on each FTE. The conflict of interest is inherent in this arrangement.

 

[Dean]

Here is the portion of the letter I was referring to, emphasis mine:

“In an effort to help mitigate, where possible, the impact of the failure to adequately budget for these expenses, the management company has made cuts to other line items in the budget without materially impacting the quality of the resort. In fact, the management company reduced staffing by five and one-half full-time associates in housekeeping, front desk, engineering, concierge, and activities in an effort to mitigate some of the impact of GRCLT Condominium’s uncontrollable expense increases.”

I read those as independent but you may be correct. I'd point out that even if that was what they meant, that doesn't make it true for everyone. As I stated though, some of the things on the survey from the BOD to consider cutting could certain reduce the need for staffing. I wonder who's budget the concierge are normally charged to since part of what they do, and their compensation, is related to sales at many resorts.

 

[SueDonJ]

New letter from MVC manager of GRC

First, thanks for sharing with TUG. While this is understandably more personal for owners than any other interested parties, many of us here are fascinated by the legalities and ramifications of similar situations.

Second, I'll note that MVW's response letter isn't from a resort employee/manager but from a President at the highest company tier, understandable considering the seriousness of the situation. The letter does a pretty good job of attempting to flesh out the financials that IMO the resort board has made quite confusing, and also in making clear the risks involved with the resort's loss of MVW as the management company while signifying that the possibility hasn't been avoided yet. It should be appreciated that it delineates exactly what will be lost by Owners if such a separation occurs.

Technically what I find most interesting is the change in language related to the brand standard from what we've seen in past similar situations compared to this one:

"... The reality is that we do not own the Marriott brand or control the brand standards required to keep that brand on your property. We license the brand from Marriott International and are responsible for maintaining THEIR brand standards or risk jeopardizing our rights (and derivatively, your benefits) under that agreement."

I could be wrong but I don't remember as detailed a TUG discussion about a management separation possibility since Marriott's timeshare segment (MVW) became a stand-alone company. And while the corporate ladder/structure would make practically no difference for Owners in the event of a management separation, it's notable that the brand standard component of this particular situation puts MVW in the position of middle-man rather than in complete control.

 

[Dean]

First, thanks for sharing with TUG. While this is understandably more personal for owners than any other interested parties, many of us here are fascinated by the legalities and ramifications of similar situations.

Second, I'll note that MVW's response letter isn't from a resort employee/manager but from a President at the highest company tier, understandable considering the seriousness of the situation. The letter does a pretty good job of attempting to flesh out the financials that IMO the resort board has made quite confusing, and also in making clear the risks involved with the resort's loss of MVW as the management company while signifying that the possibility hasn't been avoided yet. It should be appreciated that it delineates exactly what will be lost by Owners if such a separation occurs.

Technically what I find most interesting is the change in language related to the brand standard from what we've seen in past similar situations compared to this one:

"... The reality is that we do not own the Marriott brand or control the brand standards required to keep that brand on your property. We license the brand from Marriott International and are responsible for maintaining THEIR brand standards or risk jeopardizing our rights (and derivatively, your benefits) under that agreement."

I could be wrong but I don't remember as detailed a TUG discussion about a management separation possibility since Marriott's timeshare segment (MVW) became a stand-alone company. And while the corporate ladder/structure would make practically no difference for Owners in the event of a management separation, it's notable that the brand standard component of this particular situation puts MVW in the position of middle-man rather than in complete control.

Weren't the Beachplace towers and Aruba Ocean Club issues after the spin off?

 

[SueDonJ]

Weren't the Beachplace towers and Aruba Ocean Club issues after the spin off?

Aruba Ocean Club issues began in 2008 and the spin-off was 2011. (And it's worth remembering, since you brought up AOC, that Marriott also contributed monies to offset Owner costs in that situation despite not being legally required to do so.)

BPT issues were 2012/2013 but I don't remember that MVW made that same MVW-beholden-to-MI-for-brand-standards distinction in any notices to Owners.

 

[Dean]

Aruba Ocean Club issues began in 2008 and the spin-off was 2011. (And it's worth remembering, since you brought up AOC, that Marriott also contributed monies to offset Owner costs in that situation despite not being legally required to do so.)

BPT issues were 2012/2013 but I don't remember that MVW made that same MVW-beholden-to-MI-for-brand-standards distinction in any notices to Owners.

I recall seeing a threat letter to BPT from MVC but don't recall any specifics.