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

[SueDonJ]

New letter from MVC manager of GRC

Pulling out the contact info for the benefit of Owners who want their voices to be heard:

"... If you have any specific questions related to this matter, we encourage you to reach out and follow up with the GRCLT board using the following email address:

GRCBOD@vacationclub.com

or, if you have questions about the contents of this letter, please feel free to contact the management company at

Tom.McCormack@vacationclub.com. ..."

 

[daviator]

I hope none of us are expressing surprise at the idea the MVC properties have to meet brand standards set by Marriott Hotels and Resorts. That’s certainly not a surprise, it’s obvious. The hotel company owns the brands and any brand licensing obviously comes with requirements to meet brand standards.

I’m not sure, however, how diligently Marriott policies those brand standards. In my own experience, there are many Marriott hotel properties which probably don’t meet the standards in recent years.

 

[dougp26364]

I hope none of us are expressing surprise at the idea the MVC properties have to meet brand standards set by Marriott Hotels and Resorts. That’s certainly not a surprise, it’s obvious. The hotel company owns the brands and any brand licensing obviously comes with requirements to meet brand standards.

I’m not sure, however, how diligently Marriott policies those brand standards. In my own experience, there are many Marriott hotel properties which probably don’t meet the standards in recent years.

If that’s the case, I bet collectively this group could name dozens of Marriott branded hotels that don’t meet their “standard “. I’ll start with the Residence Inn in Longmont Co and the Residence Inn on The Plaza in Kansas City, MO. We recently stayed at the Westin Denver International Airport and the pool appears to have an allege and issue on the bottom. In short it looked nasty.

 

[dioxide45]

Brand is mainly about bedding, towels, lobby scent and customer survey scores.

 

[bizaro86]

Brand is mainly about bedding, towels, lobby scent and customer survey scores.

And the hotel owner is the customer - MVW absolutely makes their brand standards flexible to avoid losing properties.

 

[dougp26364]

And the hotel owner is the customer - MVW absolutely makes their brand standards flexible to avoid losing properties.

But not with timeshares, who’s owners are a captive audience in their eyes

 

[SueDonJ]

I hope none of us are expressing surprise at the idea the MVC properties have to meet brand standards set by Marriott Hotels and Resorts. That’s certainly not a surprise, it’s obvious. The hotel company owns the brands and any brand licensing obviously comes with requirements to meet brand standards.

I’m not sure, however, how diligently Marriott policies those brand standards. In my own experience, there are many Marriott hotel properties which probably don’t meet the standards in recent years.

I’m not surprised that Marriott, Int’l dictates the brand standards for MVW - both companies made sure to publicize that fact at the time of the spin-off. But here it did strike me that for the first time in my memory of (rare) threats by MVW to sever the management agreement with a timeshare property over issues including the brand standards, they specifically mentioned their lack of total control in a letter sent to Owners. I read it as a warning/reminder that the resort board isn’t incurring the wrath of only one controlling interest.

 

[SueDonJ]

Brand is mainly about bedding, towels, lobby scent and customer survey scores.

Those are about the only things from which we can expect consistency across the hotel properties but IMO the expectations from Marriott-branded timeshares are much more extensive.

I don’t check online reviews for Marriott timeshares because I know what to expect - well-kept units with well-stocked kitchens including decent cookware and good quality dishware, decent furniture that’s not being kept beyond reasonable usefulness or design, decent artwork and floor plans, higher-quality linens compared to midrange timeshare companies, full staffing with pleasant employees, a daily Activities Schedule with multiple free and paid options for all ages, etc. (I only wish for better knives and to not be hounded by too-pushy sales personnel, which luckily hasn’t been our experience across the majority of all our stays.)

IOW I expect a total experience that requires healthy realistic budgets and cooperative resort boards, balancing the standards expected by Marriott to be fulfilled and the Owners’ pocketbooks. Neither of those considerations appear to have been top of mind for this particular resort’s board. And realize, this is a Grand Residence, not a lower tier Vacation Club, so my expectations of the brand standards might be the least rather than the most!

 

[davidvel]

I’m not surprised that Marriott, Int’l dictates the brand standards for MVW - both companies made sure to publicize that fact at the time of the spin-off. But here it did strike me that for the first time in my memory of (rare) threats by MVW to sever the management agreement with a timeshare property over issues including the brand standards, they specifically mentioned their lack of total control in a letter sent to Owners. I read it as a warning/reminder that the resort board isn’t incurring the wrath of only one controlling interest.

It strikes me as nothing other that a threat, coupled with a "it's not our fault" claim. While there are technical corporate differences between the various "Marriott" entities, no logical person would think they are independent entities not acting in a common alliance. (I am not talking about independently owned hotels, managed by Marriott.) In the end Marriott is Marriott.

 

[SueDonJ]

It strikes me as nothing other that a threat, coupled with a "it's not our fault" claim. While there are technical corporate differences between the various "Marriott" entities, no logical person would think they are independent entities not acting in a common alliance. (I am not talking about independently owned hotels, managed by Marriott.) In the end Marriott is Marriott.

How have you missed the many TUG posts from longtime owners who have been steadfastly berating the Marriott timeshare company, MVW, since its spin-off from Marriott, Int’l, because according to them the timeshare business has been severely devalued due to it no longer being a Marriott entity that performs as highly as it did under the MI umbrella??

I do agree with you that there’s very little practical separation between the two companies. Again, it’s the blatant statement in that letter that surprises me rather than the truth of it. But I think that logic is difficult to find on either side of this issue.

 

[WBP]

How have you missed the many TUG posts from longtime owners who have been steadfastly berating the Marriott timeshare company, MVW, since its spin-off from Marriott, Int’l, because according to them the timeshare business has been severely devalued due to it no longer being a Marriott entity that performs as highly as it did under the MI umbrella??

Accurately stated:

"How have you missed the many TUG posts from longtime owners who have been steadfastly berating the Marriott timeshare company, MVW, since its spin-off from Marriott, Int’l, because according to them the timeshare business has been severely devalued due to it no longer being a Marriott entity that performs as highly as it did under the MI umbrella??"

 

[Likes to Travel]

GRC Newsletter just sent by the management company-maybe someone can shrink down the pdf.
1https://s3.amazonaws.com/mvc-email-static/2024/pdf/GRC_QT_Newsletter_Fall_2024.pdf


Couple of things that stood out...
1. Marriott projects cost to almost double from 2024 to 2029 or in just 5 years. That's a 20%/year average.
2. 49% of those that have enrolled weeks opt for points.

 

[Likes to Travel]

 

[LeslieDet]

Not a surprise. The old BOD's insistence on keeping budget increases tied to some irrelevant CPI for so many years is coming back to bite them in the behind.

 

[SueDonJ]

GRC Newsletter just sent by the management company-maybe someone can shrink down the pdf.
1https://s3.amazonaws.com/mvc-email-static/2024/pdf/GRC_QT_Newsletter_Fall_2024.pdf


Couple of things that stood out...
1. Marriott projects cost to almost double from 2024 to 2029 or in just 5 years. That's a 20%/year average.
2. 49% of those that have enrolled weeks opt for points.

Thanks for sharing this with TUG; it's much appreciated.

[Moderator Note: I don't know why the TUGBBS system slated your post for "Approval" by a moderator/administrator, possibly because of the attachment? Anyway, it's been approved and should be readable, and the PDF accessible, to everyone now.]

 

[jshriber]

I am glad as a Grand Residence owner that our board is independent and not stuffed with directors who are owned by MVW. Make no mistake about it, MVW’s objective it to maximize shareholder value and in many cases this is in direct conflict with the resort owners’ objective to manage a fiscally responsible budget. MVW is trying to takeover the Grand Residence board just like it owns the board for most MVW resorts. MVW management fees are driven off of the operating budget and MVW has every incentive to stuff resorts with astronomical operating costs. Without an independent board owners have no control over their ownership cost base full stop. Yes a an argument can always be made about cost increases to protect brand quality. Brand quality at the GRC is definitely up to par. As someone with a University Chicago Finance degree having projected five year proforma financials for the resorts of a fortune five hundred entertainment company, the above proposed doubling of expenses over a five year period is outrageous. Do not fall for the posturing that it is due to historical underfunding…while yes to a small extent it might be but not to the tune of a doubling of the budget. I anticipate that some here will continue the argument it is driven by underfunding and incompetence of the board. This is not my conclusion as an owner who has followed this situation closely.

 

[ocdb8r]

I am glad as a Grand Residence owner that our board is independent and not stuffed with directors who are owned by MVW. Make no mistake about it, MVW’s objective it to maximize shareholder value and in many cases this is in direct conflict with the resort owners’ objective to manage a fiscally responsible budget. MVW is trying to takeover the Grand Residence board just like it owns the board for most MVW resorts. MVW management fees are driven off of the operating budget and MVW has every incentive to stuff resorts with astronomical operating costs. Without an independent board owners have no control over their ownership cost base full stop. Yes a an argument can always be made about cost increases to protect brand quality. Brand quality at the GRC is definitely up to par. As someone with a University Chicago Finance degree having projected five year proforma financials for the resorts of a fortune five hundred entertainment company, the above proposed doubling of expenses over a five year period is outrageous. Do not fall for the posturing that it is due to historical underfunding…while yes to a small extent it might be but not to the tune of a doubling of the budget. I anticipate that some here will continue the argument it is driven by underfunding and incompetence of the board. This is not my conclusion as an owner who has followed this situation closely.

For someone with a University Chicago Finance degree, you should try to look at the actual details of the finances before you post. If you look at the budget projection, the operating fees are only going up approximately 34% over the projected five year period. The primary driver of the total budget increase over the projected period is for the three "Reserve Fee" categories (something that can at least be partially explained by a depletion/underfunding of the reserves by the previous Boards). It would also likely be useful to read the whole report which outlines why the resort (which is now approaching 22 years old) is facing a need for significant investment due to the "useful life" of many items coming to an end - the justification for the drastic increases in reserve needs. There is an independent third-party useful life study referenced that will be available to owners.

Now, if you want to argue these reserve studies are overly conservative and/or that fully funding the recommended reserves of such studies is foolhardy, by all means feel free to make those arguments. However, waiving your degree in people's faces wreaks of DYKWIA and adds little substance to the conversation if you don't actually engage on any of the details. Rest assured, if things continue to play out as they have, the Board will fight Marriott and refuse to fund reserves in line with the proposed budget in order to keep annual MF artificially low.

 

[jshriber]

Why attack me for my opinion on the budget line items? Why attack my credentials which are legitimate? As you well know each budget line item can be argued endlessly. I would be interested in your opinion on whether the GRC board should remain independent from a majority of MVW affiliated members and whether this is a conflict of interest.

 

[ocdb8r]

Why attack me for my opinion on the budget line items? Why attack my credentials which are legitimate? As you well know each budget line item can be argued endlessly. I would be interested in your opinion on whether the GRC board should remain independent from a majority of MVW affiliated members and whether this is a conflict of interest.

I didn't attack your credentials, I attacked the value of waiving them in front of us as if to say "DYKWIA no one should question my conclusions" (which provided no discussion or consideration of any of the line items). Making the statement that "...the above proposed doubling of expenses over a five year period is outrageous" without actually looking at or discussing what is driving the majority of that "doubling" provides little to no value. You effectively ignore the significant explanation given in the newsletter outlining the need to better fund reserves due to the projects needed at the resort (and the reserve study conducted by an independent third-party).

I think MVC should have as many Board representatives as the byelaws allow. Contrary to your unsupported statement, MVC does not "own" (or control) the Board at most resorts in the portfolio. Yes, it wields significant power at those resorts where a) it has significant residually owned developer inventory (few if any...perhaps only they few being newly developed) or b) where there is significant ownership by the Trust (which MVC manages and thus casts their votes). However, this is actually a minority of resorts across the whole MVC portfolio. I no longer have access to the GRC byelaws, but the byelaws of the MVC associations I am still a part of include provisions that guarantee the Board remains majority controlled by "Owners".

 

[daviator]

I didn't attack your credentials, I attacked the value of waiving them in front of us as if to say "DYKWIA no one should question my conclusions" (which provided no discussion or consideration of any of the line items). Making the statement that "...the above proposed doubling of expenses over a five year period is outrageous" without actually looking at or discussing what is driving the majority of that "doubling" provides little to no value. You effectively ignore the significant explanation given in the newsletter outlining the need to better fund reserves due to the projects needed at the resort (and the reserve study conducted by an independent third-party).

I think MVC should have as many Board representatives as the byelaws allow. Contrary to your unsupported statement, MVC does not "own" (or control) the Board at most resorts in the portfolio. Yes, it wields significant power at those resorts where a) it has significant residually owned developer inventory (few if any...perhaps only they few being newly developed) or b) where there is significant ownership by the Trust (which MVC manages and thus casts their votes). However, this is actually a minority of resorts across the whole MVC portfolio. I no longer have access to the GRC byelaws, but the byelaws of the MVC associations I am still a part of include provisions that guarantee the Board remains majority controlled by "Owners".

MVC has pretty strong control of the boards at a lot of resorts, from what I’ve seen. They also decide or strongly influence who gets chosen to be on the ballot as board candidates. Only a minority of those who apply to run for the board of their property are chosen to appear on the ballot, and there is no transparency around the criteria that is used.

The properties where I own weeks are largely owned by weeks owners, but I would not call the boards independent even though they have a couple of independent members on each of them. MVC picks the candidates they like best and, of course, they vote their memberships to influence the elections in the way they prefer.

i don’t mean this as a criticism of MVC, I’d do the same thing if I were them. But I think that most of the resorts have boards that are not very independent. In some ways this may work to the benefit of owners but in other ways it does not.

 

[Dean]

i don’t mean this as a criticism of MVC, I’d do the same thing if I were them. But I think that most of the resorts have boards that are not very independent. In some ways this may work to the benefit of owners but in other ways it does not.

While there are disadvantages of MVC having a lot of control and influence, there are also advantages. I think this thread highlights some of the advantages. I think a healthy balance is the perfect scenario but for the non MVC people on the BOD, their abilities are extremely important long term. Then there's the Aruba Ocean Club Fiasco which may have had even more drama.

 

[ocdb8r]

MVC has pretty strong control of the boards at a lot of resorts, from what I’ve seen. They also decide or strongly influence who gets chosen to be on the ballot as board candidates. Only a minority of those who apply to run for the board of their property are chosen to appear on the ballot, and there is no transparency around the criteria that is used.

The properties where I own weeks are largely owned by weeks owners, but I would not call the boards independent even though they have a couple of independent members on each of them. MVC picks the candidates they like best and, of course, they vote their memberships to influence the elections in the way they prefer.

I can't speak for all MVC properties, but I have engaged in the application process for two separate MVC Board's. In that engagement, it was the wider Board that interviewed and selected the candidates. Yes, there were clearly MVC people on those Board's, but the majority were other owners. Even where MVC may have some ability to "decide" who goes on the ballot, that assumes they have some magic crystal ball to be able to know which owner is going to be MVC friendly and which is not.

I don't disagree that MVC has a great deal of influence and power over many of the Board's; by simple virtue of being the developer (of most) and manager of the resort there is a great deal of power to shape the HOA. However, this idea that they are sitting in a dark smoky room, pulling all the strings at each and every HOA meeting just isn't believable to me. I think the reality is that the majority of owners at most resorts WANT MVC to be running the resort and WANT many of the things MVC proposes.

....and yes, that means there are some real risks when conflicts of interest arise where there are not sufficient checks and balances in place to protect the HOA/resort. I don't deny that in the case of Grand Residence Tahoe there were some things going on that shouldn't have (and as a result MVC paid a 1.2mn settlement). I applaud the Board for getting that resolution....but that alone doesn't mean they are right to artificially hold the budget to a CPI measure that doesn't reflect the costs of running a resort in Lake Tahoe.

 

[jshriber]

I like your point about there also being a benefit about with MVW affiliates on the Board. I would not however want my board dominated by MVW - there needs to be a healthy balance with the operator to push back and question expenses. I will give you just one quick example from the above numbers. The fractional reserve fees above that were produced by Marriott as the operator ramp to approximately $5 million year five. This particular reserve line is for the renovation costs of the villas. Assuming this is steady state going forward this would amount to $55 million of additional reserves in the allowance every 11 years when renovations are necessary - seems a bit rich does it? There are 184 units in the resort so this would amount to about $300k per unit. Even accounting for kitchens and bathrooms in larger units the back of the envelope for this seems inflated. To do it right - you need to get into renovation costs per square foot - which will still come probably somewhere $200-$300 sf - still very high for a renovation cost. (I do not have aggregate villa square footage numbers - just a best guess). There is also a parallel question about how will GRC pay for the villa update in the next couple years. Last I looked GRC had about $10 million in the fractional fee allowance back at the end of 2023. Assuming GRC goes for villa renovation in 2026 it will probably add about $2million to the reserve over three years landing at around $16 million when we are ready for the renovation. Hopefully this will be enough for the renovation - around $85k a unit - seems realistic but merits further conversation- again I would rather have done this reality check in square footage than by unit.

Putting on my finance analyst hat I would push back that maybe the $5 million fractional reserve fee in year 2029 is a sand bag number by the operator. I would definitely poke hard at this number.

I imagine this is a super boring conversation for most people. Anyone working numbers definitely knows you can definitely massage numbers to support your argument. It is not my interest to do this - the conversation that is much more interesting is board control. I would be interested in finding out from the above responders if they are owners at GRC? Different stakeholders definitely have different objectives.

 

[jshriber]

As a side note, at GRC we do have a bylaw that you need to be an owner to be on the board. MVW has done an end run around this to make the case that a Vacation Club points owner is an owner at GRC (maybe to get their candidate on the board and change the balance of power on the board?). Why would MVW redefine the definition of owner? Clearly a fractional owner has a lot more skin in the game than a points owner.

 

[daviator]

As a side note, at GRC we do have a bylaw that you need to be an owner to be on the board. MVW has done an end run around this to make the case that a Vacation Club points owner is an owner at GRC (maybe to get their candidate on the board and change the balance of power on the board?). Why would MVW redefine the definition of owner? Clearly a fractional owner has a lot more skin in the game than a points owner.

That is a bit shady. But I think MVC has internal people that sit on multiple boards, and if they need to personally own weeks at those properties, it's going to prevent them from serving at resorts with those requirements.

But I guess I'd view it this way: the trust, presumably, owns a bunch of weeks at GRC, and the MVC person or people are essentially supposed to be representing those owners. But to me, this is one of the most insidious things about points programs: points owners have zero representation at the resort level, because any MVC-employed board members are clearly representing MVC's interests and not those of owners. It's yet another way in which "deeded ownership" of points is not the same as deeded ownership of weeks.