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

vacation dreaming

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There are a limited number of management companies that can support such a system. Timbers is one, whoever took over the former Ritz property in Jupiter Florida is another (I don't remember who that was). Certainly they will have to pay another resort management company, I don't know how much of a savings that will be. That said, another independent management company may be better to work with when it comes to expense management. The HOA will probably have a lot more control of the budget than they currently do with MVW.

The 10% isn't pure fluff. Any fee they would pay another company would eat into any savings of the 10%.
I thought the Jupiter Ritz became Timbers?
 

Fasttr

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vikingsholm

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As a Timber Lodge Owner I would be against the use of the facilities by the Grand Residence owners/guests using the facilities even if they pay a fee. Seems to be trying to transfer cost you don't want to pay to us.
I own at Timber Lodge too. Suggesting that the payment would cover the cost.
 

BigDawgTUG

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Here is the Board's response. If allegations are true, what does it say about the Management Company's actions in other properties???

December 6, 2023

Dear Fellow Grand Residence Club Lake Tahoe Owners,

As President of GRCLT Condominium, Inc. and on behalf of the Board of Directors, I am writing to you in response to the unfortunate and misleading letter that was sent to the membership on December 4, 2023, by Tom McCormack, purportedly on behalf of the Management Company (i.e. Marriott Resorts Hospitality Corporation). Mr. McCormack’s letter does not accurately represent the facts of the current budget situation, and, because of the Management Company’s unauthorized and unprecedented decision to send his misleading letter to all Grand Residence Club owners, we feel compelled to respond.

The Board of Directors is comprised of individuals that have been elected by you. We take very seriously our duty to make decisions that individually and collectively we believe in good faith to be in the best interests of the Association, including you as owners and members. Serving the Association as a Director is voluntary and without compensation yet requires a significant time commitment. Fortunately, several Board Members have served the Association for well over a decade and have garnered what I believe is invaluable institutional knowledge regarding Grand Residence Club operations, including financial and budgetary matters.

One of the primary duties of the Board is to approve an annual budget. Beginning approximately 15 years ago, the Board and Management Company agreed that a reasonable benchmark to aid the Board in its deliberations to approve a budget for the following year was the San Francisco Consumer Price Index for August. The Board would typically approve a budget with a percentage increase, year-over-year, that was higher than the San Francisco CPI, based on the Board’s reasoned judgment of what the anticipated basic expenses of the Association for the following year would be.

As part of this deliberation process, the Management Company historically has prepared a pro forma budget for the Board to consider that included the San Francisco CPI as a comparative benchmark, but which typically included a budget recommendation by the Management Company with a year-over-year increase that was significantly higher than the benchmark. It is important to understand that the Management Company is incentivized to have a larger budget approved by the Board because under the terms of the Management Agreement, the Management Company’s fee is 10% of the Association’s basic expenses. Although the Board values the Management Company’s input in its deliberations to approve a budget, the Board historically has approved a budget that is greater than the San Francisco CPI but less than the Management Company’s recommendation, again based on the Board’s reasoned judgment of the estimated basic expenses for the following year. We believe this prudent fiscal approach to budget deliberations and approval has served and continues to serve the Association and its owners very well.

In September of this year, we discovered in the minutia of the Association’s 2022 Tax Return prepared by the Management Company that indicated the Management Company had overspent the 2022 Budget by $238,000 without ever disclosing it to the Board and without ever obtaining the prior written consent of the Board, as required by law. The Management Company has ignored our request to reimburse these funds.

Consequently, the Board recently authorized the filing of a lawsuit against the Management Company in El Dorado County Superior Court (Case No. 23CV2018) seeking, among other relief, reimbursement of the $238,000 improperly taken by the Management Company. This lawsuit also seeks the Court’s intervention as to the 2023 Budget and even 2024 Budget that were approved by the Board. As you know from Mr. McCormack’s letter, the Management Company essentially has admitted that it has overspent (or is about to) the Board-approved 2023 Budget by approximately $550,000, which we believe violates the Association’s governing documents, the Management Agreement, and applicable law. What the Management Company characterizes as a “shortfall” would be more accurately described as unauthorized overspending by the Management Company in excess of the fully funded and Board-approved 2023 Budget.

The intent to engage in this same overspending has been admitted to by the Management Company for 2024. As to the 2024 Budget, in October of this year the Management Company presented a pro forma budget to the Board that intentionally omitted the San Francisco CPI benchmark and instead included an astonishing year-over-year increase of 19.7%. Even with increased utility and insurance costs, which the Board recognizes may be significant, the Board concluded that such a drastic increase was excessive and unnecessary to meet the anticipated basic expenses for 2024. Ultimately, the Board approved a 2024 Budget with a year-over-year increase of 4.8% (the San Francisco CPI was 3.4%). A similar variance between what the Management Company presented to the Board and what the Board ultimately approved occurred for 2023. We believe it is noteworthy that the last two years which have seen such a deviation by the Management Company from the historical San Francisco CPI benchmark in the budgets it has recommended to the Board coincide with a persistent gradual decline in the stock price (presently at 2-year lows) of the Management Company’s affiliate, and we believe the Management Company may be under significant pressure to increase revenue, which may explain what we believe to be unwarranted and unlawful strong-arm tactics presently on display by the Management Company.

We want to assure you that the Association is financially secure. However, should an actual cash shortfall occur with respect to the Association’s operating account, we believe that because the Management Company apparently decided to exceed the Board approved 2023 Budget, the Management Company should shoulder responsibility for any shortfall until this issue is resolved in the recently filed lawsuit, instead of having the Board authorize a short term transfer of funds from the Association’s reserve accounts or levy a special assessment against the owners to cover the forecasted shortfall. Additionally, we believe the threats in Mr. McCormack’s letter to reduce or eliminate Grand Residence Club owner services or benefits is disingenuous, ill-advised, and reckless.

While the Board has strived to have good working relations with the Management Company over the years, the recent lawsuit is not without precedent. In 2021, we were forced to file suit against the Management Company for reimbursement of money that the Management Company unilaterally and without authorization took from Association accounts to pay for legal costs associated with other claims, including a class action lawsuit, against the Management Company that did not even involve the Grand Residence Club. The Management Company ultimately agreed to reimburse the Association and the lawsuit was dismissed.

Similarly, from approximately 2015-2017, the Association was involved in a lawsuit against South Lake Tahoe Public Utility District in connection with utility charges that the District had been double billing the Association for more than ten years. Because the Management Company also manages Timber Lodge next door, the disparate utility charges of the adjacent resorts was something that we believed the Management Company should have discovered long before it came to light. However, instead of reimbursing the Association for what we believed was caused by the Management Company’s gross negligence, the Management Company forced the Association to spend years in litigation against the District before a settlement was reached on the eve of trial. It was only after a settlement with the District was reached that the Management Company agreed to reimburse the Association a fraction of the damages it had sustained over more than a decade.

Now, in addition to the pending lawsuit against the Management Company regarding the budget issues described above, the Board may be compelled to file another action against the Management Company related to foreclosed fractional interests. The Management Company was recently forced to admit that it improperly conveyed title to at least six (and perhaps more than ten) fractional interests to Marriott affiliates instead of to the Association upon nonjudicial foreclosure for unpaid delinquent assessments. Not only has the Association suffered hundreds of thousands of dollars in actual damages as a result, but we also believe that the Management Company and its affiliates have been unjustly enriched by these improper conveyances in excess of three million dollars.

It is our hope that this letter provides you with more context and a better understanding of the budget issue we have been trying to resolve with the Management Company. Unfortunately, as described above, we have been compelled to take legal action against the Management Company over the years to enforce the Association’s legal rights under the governing documents and applicable law. This budget dispute is another example of that, and we ask for your continued support to see this through.

I can assure you that your Board of Directors will do everything in its power to protect your investment and all that comes with that, despite the false accusations and threats made by the Management Company.

Sincerely,

James M. Deatherage
Board President
GRCLT Condominium Inc.
 

vol_90

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Thanks for sharing the BOD response. What a mess. Definitely grab a bag of popcorn this is going to take a while :cool:
 

VacationForever

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I just cannot see a good ending to this. When the management company and HOA board are in direct financial conflict, owners ultimately pay for it. Any lawsuit taken up by HOA board is paid by owners. If Marriott is divorced from the property, owners who have paid alot of money to bring their quarter share into Abound would lose the Abound point conversion, making it a costly investment that comes to naught. I also cannot see the HOA board winning this lawsuit.
 

WBP

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I have two thoughts:

(1) This does not sound good;
(2) MVC is putting the owners on notice, which, I believe is the responsible and prudent thing for MVC to do.

I have no basis for this, but it sounds to me like the relationship between MVC and the HOA Board is in trouble. I am reminded of very similar circumstances at The Ritz-Carlton Club, Bachelor Gulch, when the HOA replaced The Ritz-Carlton with The Timbers, as the management company, and reflagged the resort as a "Timbers" resort.


In the case of The Grande Residence Club, Lake Tahoe, I don't like the sound of the "environmental challenges" that that resort/fractional product is facing, and may continue to face for the forseeable future.

The letter from MVC may, in fact, prompt a sell-off (and significant devaluation) of fractional interests at The Grande Residence Club, Lake Tahoe.

Not good. This sounds all too much like our country club, that lost half of its members, when our expenses and Special Assessments increased the costs of membership, dramatically.
 

VacationForever

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It reminds me of the Villas at Cave Creek when the HOA elected to separate from Vistana due to its unwillingness to increase fees to bring it up to the management company standards.
 

geist1223

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Wonder how often Marriott has over spent without Board approval at other Resorts?
 

WBP

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It was really interseting to read Mr. Deatherage's letter to the HOA members. He presents a case, that, in my opinion, one must pay attention to.

I thought Mr. Deatherage's letter was very well written.

I'm in no position to make any judgements about the basis for the case by the HOA vs the Management Company. However, Mr. Deatherage's represenations of actions by the Management Company cause me to wonder if the problems that the members/owners of Grande Residence Cluib, Lake Tahoe, have experienced, are more widespread, within MVC. I wonder how much dialogue exists between one Marriott HOA Leadership and another?
 

SueDonJ

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I find it interesting that the relationship and legal ramifications between this Fractional resort's elected BOD and Marriott (MVCI? MVW? ??) as the Management Company are apparently very similar to the relationship predominantly in place between the Weeks-based resorts and Marriott as the Management Company, i.e. Marriott as the developer placed itself as Manager and severing that agreement is a relatively easy process for Marriott, requiring written notice in a relatively short time if the brand standard isn't upheld by the budget adopted by the board. I'd also be keeping in the back of my mind that Marriott likely also has the rights to sever a Management Agreement for any reason at all, the only difference between the not-upholding-brand-standard qualification and any other is the notice time required. Ownership also has a right to sever it but it's a steep hurdle to get over - likely requiring a supermajority of all votes.

Apparently the BOD and Marriott as the Manager have already been involved in lengthy legal entanglements and it doesn't sound like the Board is very happy with any of Marriott's actions related to local energy providers, for one? Again, as an owner I'd want to know more about how all this started and played out - and if this is something that's only now coming to light for owners, I'd be ticked off that neither the Board nor Marriott let owners know sooner that it was happening. Another related question is whether the assessments currently required to offset underpayments, mentioned by Marriott in their letter explaining their position, are a result of accumulated expenses that weren't paid while the legal issue was pending, and if so was the ownership at large ever advised that suspended payments would eventually become due, and if so why didn't the Board notify/plan for that?

Based on past history of other resorts in the Marriott portfolio I'd guess that there's an opportunity here for owners to keep Marriott as the Manager if the BOD acts to collect from the ownership whatever assessment it will take to put the resort back to solvency, with possibly some slight concession by Marriott to assume a portion that's not legally required of them - a sort of "we're willing to work with you to a limited extent" good faith effort that doesn't involve them accepting any responsibility for the current situation.

But it's more likely, IMO, that a severance will be happening, thus the need (a requirement in the governing docs, actually) for Marriott to send out notice. I will never understand why people think that if Marriott chooses to sever a Management Agreement for whatever reason and they follow the contractual requirements and legal constraints to effect the severance, that the sending of the required notice automatically equates to Marriott being arrogant. I also don't understand why in any similar situation the owners think they will have some leg to stand on to demand that any affiliated programs won't cease. Bonvoy, Abound, the Marriott preference in II or whatever other exchange company is affiliated via the Management Agreement, whatever - the governing docs make it crystal clear that those are attendant with a Marriott-as-Manager agreement and will end as soon as any such agreements end, regardless of whether the severance is furthered by Marriott or the ownership (unless Marriott chooses out of the goodness of its heart to extend them, and that's a pipe dream if any animosity is shown towards Marriott.)

I think the BOD's response is highly antagonistic in ways that aren't necessary, especially with the way they casually throw in the 10% Management Fee as if Marriott can't be doing anything but overcharging legitimate fees for their own benefit, and I think they may have worded it in a deliberate effort to inflame the ownership against Marriott so that when the severance they obviously want to happen finally does happen, they look like the good guys. I really don't see either side being 100% responsible for this situation, and I hope that cooler heads prevail so that the owners of this resort end up continuing to enjoy their ownership if that's what they want.

I too remember the last fractional severance from Marriott resulted in a Timbers management. It might be worthwhile to look into that, because it sounds like your BOD is aiming for it.
 
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timsi

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The explanation provided my Marriott for overspending, citing insurance and utilities, seems dubious. It's hard to believe that the BOD is questioning such apparent and verifiable cost increases. This raises concerns about missing details and overlooked recommendations, suggesting a potential lack of seriousness in addressing issues by Marriott.

The fact that Marriott spends money without real time accountability is troubling. I am left questioning the actual costs of items such as Westin beds and other procurements. Is there a way for us to verify the chain, or is the actual cost buried in a complex web of affiliated companies with no means for us to confirm and we just have to pay what the management company tells us to pay?

Marriott tends to shift responsibility for budget increases onto the BODs, claiming they approve our budgets. However, it appears that Marriott proceeds with spending regardless of the Board's decisions. This raises concerns about how many other resorts might be facing similar situations, potentially kept hidden due to cozy relationships between other boards and Marriott.

If the 2022 audit report for this resort is available, it would be important to examine whether it addresses any financial shortfalls and what recommendations it provides for addressing these issues. If the audit does not mention the shortfall, it puts into question how serious and detailed the auditing process is, and what else we should know but we don’t.
 

SueDonJ

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The explanation provided my Marriott for overspending, citing insurance and utilities, seems dubious. It's hard to believe that the BOD is questioning such apparent and verifiable cost increases. This raises concerns about missing details and overlooked recommendations, suggesting a potential lack of seriousness in addressing issues by Marriott.

The fact that Marriott spends money without real time accountability is troubling. I am left questioning the actual costs of items such as Westin beds and other procurements. Is there a way for us to verify the chain, or is the actual cost buried in a complex web of affiliated companies with no means for us to confirm and we just have to pay what the management company tells us to pay?

Marriott tends to shift responsibility for budget increases onto the BODs, claiming they approve our budgets. However, it appears that Marriott proceeds with spending regardless of the Board's decisions. This raises concerns about how many other resorts might be facing similar situations, potentially kept hidden due to cozy relationships between other boards and Marriott.

If the 2022 audit report for this resort is available, it would be important to examine whether it addresses any financial shortfalls and what recommendations it provides for addressing these issues. If the audit does not mention the shortfall, it puts into question how serious and detailed the auditing process is, and what else we should know but we don’t.
Moderator Note:

@timsi, you have a history of airing the same management-related grievances with Marriott throughout multiple forums on TUG, and you particularly have already been notified that you're not going to be allowed to hijack random threads to repeatedly post duplicates of the same unproven allegations. This particular thread is likely to become long and info-intense, and should be focused on the issues directly related to the GR Tahoe and Marriott contentiousness.

Please edit your post to remove any extraneous issues (the Westin bed tangent being just one) or I'll be forced to do it for you.
 

dioxide45

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CPI is a poor metric to use to determine budget increases for a resort like this. The amount consumers pay for groceries and other consumer goods has little bearing on the biggest expenses of a resort budget.

Any lawsuit taken up by HOA board is paid by owners.
And MVC earns 10% management fee of any funds that are used to pay for legal costs... Ironic.
 

vikingsholm

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As an owner at Grand Res, and after reading the statements from both Marriott and the BOD, I have the following thoughts.

I have a lot of loyalty to Marriott overall, and have really enjoyed the products and the benefits of both Hotels' Bonvoy and the MVC Destination Club points, the well thought out way it seemed to be structured, and the front line employees we encounter at the resorts.

But lately the MVC executives and their priorities have really turned me off. I think their purchase of Westin/Vidanta or whatever was a huge mistake. It's always expensive and often difficult to integrate two different systems. But my main question is: WHY did they do this? It sure doesn't seem to be helping their precious stock price, which these folks seem to obsess over.

I really see no use or advantage to adding these properties to the Marriott system. There is such location overlap, and then there are their other locations that hold no interest whatever for me. I rarely even look at them when planning future trips with points - I know some of the properties are nice, but Marriott's have been and are fine with me. At what cost to our owners (and unhappy Vistana owners now too) did this happen? What a bonehead move, seemed like an ego excercise to build an empire rather than paying attention to what needed work and attention at the existing, and to me, satisfying former Marriott-only timeshare product.

Then the Hyatt purchase, which at first had me interested because I like their properties and locations, but of course, they decide not to more widely integrate that one. Strike two.

Now I have to wonder how much these flubs are impacting both MVC's bottom line, and the attitude they're taking towards us (all owners, not just Grand Res) going forward?

I am happy to see some clarification from the BOD's memo, at least from their point of view, but where the hell was all this info for us previously? This Management memo crap came out of the blue for me, and I had no idea what was going on between the board and management. It sure sounds like Marriott management tries to bulldoze their way through things, and if their illicit overpayments without notifying the Board are true, that's pure arrogance, as well as violation of policy, it sounds like. But who knows which side is in the right here? It certainly hasn't been communicated to us regularly over the years.

I also don't know that a hard stance by the board on using the SF inflation rate is warranted in all cases. Insurance and energy costs may have issues in the Tahoe area that don't exist in SF, so being totally inflexible on that sounds a bit obstinate, even while I commend the Board on trying to maintain reasonable HOA increases, and for doing all the other unpaid hard work that they do.

With no proof, I also suspect that MVC corporation's mistakes in over expanding and assuming certain growth levels, as their expectations for an unnecessarily ballooning system may not be panning out, are leading them to try to hit the various owners with untoward fee increases. How this differs between deeded properties and the trust points owners, etc. is a peculiar question that I have about what's going on behind scenes there, as well as a comparison with what other systems are doing and what their owners are encountering in terms of similar HOA issues lately.

Finally, MVC may need to back off a bit on their holy standards policy, which in times of inflation, are going to hurt us at HOA fee time if they insist that nothing should change in that regard. Why do all properties have to have so many events, activities, blah blah blah - they think that this is what attracts people. Yeah, maybe some, but we rarely even use the pool, and almost never attend the "activities" or events. If this is one of the things leading to outsized fee increases, it's not just going to affect us, but other Marriott owners too eventually.

They can still have these events and activities, but why not pare them back to save on costs? It will not diminish Marriott in my eyes at all. Several activities that I've passed by at Grand Res seem to have very few people attending or participating, yet we pay for this with our fees, don't we? Why not take a hard look at what's popular and what's not, and reduce these while keeping those that are always well attended or popular? Not all of us go there for extraneous entertainment - we just want a nice place to stay, with decent furnishings, in working condition, in a good location, and an ability to easily use other properties in the system. Other types of companies take a close look at expenses when times get tougher, and pare back - they don't just look at always increasing fees and revenues.
 

davidvel

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IF, IF, what Mr. Deatherage says is true (other than the CPI BS) is true, then management is going to have issues in the lawsuit. Interestingly, the issue of the foreclosed weeks brings back memories of numerous threads where people ask how the HOA is compensated (as opposed to Marriott taking the units and then reselling them or putting them in the trust.)

That being said, the weakest (and scariest if this prevails across all MVC resorts) is this CPI crap. An HOA budget is not DRIVEN by the CPI, and should never be SET based upon CPI or other irrelevant metric. If insurance and utilities go up by 30%, you can't say were not going to pay that because the CPI only went up by 5%.

Now, if he is saying that the HOA (and Marriott) have agreed that they will track the CPI for MF increases, and they will keep MF increases at that level and will cut non essential services to track that theoretical 5% CPI metric that is a different story, so long as it can be done without losing core services, and with full disclosure to ownership.

To conclude, the allegations by Mr. Deatherage are serious and should be taken seriously by ownership, and are things that many have speculated have occurred across the MVC portfolio.

It appears the horses have approached the gates. . . and away they go.
 

ocdb8r

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Yes, grab the popcorn bucket.

I wish that either of these emails provided enough information for me to feel compelled to take one side or the other. They are both inflammatory and both lacking critical details. I am disturbed that the Board letter refers to "unauthorized" overspending in 2023 along with "the intent to engage in this same overspending...for 2024" yet cites none of the specifics as to where this overspend is occurring. The only thing mentioned is "increased utility and insurance costs, which the Board recognizes may be significant, the Board concluded that such a drastic increase was excessive and unnecessary to meet the anticipated basic expenses for 2024". MVC has little control over utility and insurance costs, so what "anticipated basic expenses" has MVC inflated to such a degree that there is massive overspend?!? Like many on this Board, based on past conflicts with other HOAs, I assumed there was a dispute about "brand standard" items, but if that's the case, why did the HOA not just point this out in their letter? Why not give at least a couple of examples of where MVC is request excessive budget for items that are not necessary or for which pricing is inflated? I agree with other posts that throwing out SF CPI numbers is totally unhelpful as the basket of goods and services used by a normal household is in no way a good gauge of costs facing a luxury resort.

On the flip side, the Board letter does raise a lot of examples of egregious mismanagement (and in some cases, impropriety) by the MVC management team. I can imagine this is part of what has led to a rather poor rapport between the two groups.

What a mess. Regardless, this does not paint a pretty picture for MVC.
 
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DRH90277

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Please give me some comfort on this if you can.

This makes me question my participation in timeshare. Do we have a situation of overwhelming dominance by MVC in telling us what we want, then billing us for it whether we like it or not, and then demanding acquiescence by an elected Board of Directors? Oh, and MVC has control over all financial resources. Who protects the interests of the lowly timeshare owner?

Who would want to serve on a timeshare BOD under these circumstances?
 

AlmostRetired

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I do not know which side is correct. I think disagreements between management and BOD is healthy but the apparent lack of communications to get to this point is troubling as is the lack of transparency that has made this a surprise to owners. Being on a board requires time and I thank the people willing to do it because I and most of us will not. Having the time doesn't make you qualified so I am positive there are people not qualified making decisions that impact me as an owner. I think I would be qualified but do not have the interest nor willing to put in the time. I am willing to live with the consequences. Having worked for IBM for 30 years in various management and non management roles before retiring, and based on my current job at an executive level, I firmly believe in the Peter Principle. In fact I may actually be subscribing to it (only kidding, kind of). Management and the GM at MVCI is no exception to that principle.

Maybe I am looking at this though rose color glasses but I have to believe the situation at the the Grand Residence is an anomaly and not wide spread throughout the resorts. I am a firm believer that the relationship between resorts and MVCI is a symbiotic relationship. One does not survive without the other. This is why I do not subscribe and respond to the conspiracy and evil empire posts. I can only best guess the behind the scene process on how deeded week reservations, trading within II and allocating/reserving weeks within the the point system really works. I know that playing within the rules we have, it has worked for me and I expect it to continue. When it doesn't, I will rethink my ownership.

I rented a fair number of 2024 points from someone who owns a fractional share at the Grand Residence. I am not sure the reasons why someone purchases a fractional share but a byproduct of it is a significant number of points to rent. I am guessing at a very favorable cost per point. I am already talking with the person about 2025 points at less than 70 cents per point that is being offered to past renters. Wondering if the early selling is a fear from losing the benefits, covering costs or how this person normally works in advance.

In any case, this is an interesting situation and one I feel bad for owners no matter who is at fault.
 
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dioxide45

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This kinds sounds like those emails you get from the cable company and then ads you see on TV from the local channels fear mongering about how the cable company doesn't want to pay to carry the channel.
 

larryallen

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KOBC x6, Westin Kierland x2, and we went to the darkside and bought points!
Who would want to serve on a timeshare BOD under these circumstances?

I never want to serve on any board and always suggest people really take a hard look at that. Have been on many boards and avoided complete disasters but it's a thankless job. Just say no!
 
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