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

[ocdb8r]

Just received the below notice. This sounds very concerning....given the Board clearly approved a budget opposed (or lacking the funding required) by MVCI, I wonder how this will play out.



December 4, 2023


Dear Grand Residence Club Lake Tahoe Members,

As your Management Company, one of our key goals is to work with your Board of Directors to balance your maintenance fee obligations with the need to provide the level of services and resort amenities that Grand Residence Club Lake Tahoe (GRCLT) Members expect. The balancing of these priorities has been even more challenging over the past few years with the impacts of hyperinflation, as well as wages, benefits and insurance costs escalating well beyond consumer price index averages. These challenges are being faced by most businesses and associations across the country. We are writing to you today to provide you an update outlining the following concerns:

1) Forecasted 2023 Association budget & cash flow shortfall; and
2) 2024 Board-approved Association budget shortfall.

Over the last two years, the budgets established by the Board, on an annual basis, for the Association have not adequately covered the expenses to operate the resort, with the shortfall largely driven by utility costs (gas and electricity) and property insurance premiums. The reality of property insurance costs in South Lake Tahoe after the 2021 Caldor Wildfire and the rate increases that have been enacted by the electricity company are creating cost pressures that are necessitating an increase in annual maintenance fees that exceed the increases typically experienced at your resort.

Throughout 2023, we have been working diligently with your Board regarding the needed funding to operate your resort to the standards you have grown to expect from Marriott Grand Residence Club. While the Board has several options to address the cash and budget shortfall for 2023, the Board has chosen not to act on these concerns. As of the date of this mailing, we find ourselves at an impasse. Unfortunately, the 2023 financial shortfall is forecasted to be approximately $550,000, with the key drivers being related to utilities and insurance costs, as noted above. Without Board action to fund this shortfall, we have run out of funds to operate the resort as of December 1, 2023. As a result, the Management Company will be unable to pay any Association bills related to the operation of your resort.

At the October Board meeting your Board of Directors approved an annual budget increase of 4.8% for the overall 2024 maintenance fees and only a 5.2% increase in the operating fund. Unfortunately, given the anticipated increases in utilities and insurance, we expect that the Board-approved 2024 budget will not provide sufficient funding to cover all of the basic expenses for your resort. We currently estimate the approved budget to be understated by approximately $780,000 (an 11% shortfall in operating funds) for 2024, and the Board-approved 2024 budget also does not address the forecasted shortfall of $550,000 in operating funds from 2023.

Finally, the Management Company is also aware that the Association is working to resolve an outstanding matter with us related to foreclosed fractional interests at the resort, and the Association may be anticipating covering its budget shortfall with funds received as part of that resolution. However, we are not able to anticipate the timeframe for resolution of that issue, and funds received by the Association (if any) will not resolve the long-term budgeting and cashflow issues outlined above.

We remain hopeful in our effort to find a positive solution with the Board. However, we are reaching out to you, the Members, regarding the potential impact to your ownership resulting from the issues described above. Failure to resolve these issues in a manner which provides adequate funding for continued operation of resort services and amenities at appropriate levels creates a substantial risk that many of the current benefits provided by Marriott Vacation Club and Marriott International to the GRCLT Members will be terminated along with the resort’s current management contract. While not intended be an all-inclusive list, the programs and benefits which may be eliminated include:

• The fractional interest rental program facilitated by Marriott Vacation Club
• Marriott brand recognition and use of Marriott.com
• Exchange of fractional interests for Marriott Bonvoy® points
• Exchange of fractional interests for MVC Points
• Status in the Marriott Bonvoy program or the Abound by Marriott Vacations™ program directly related to your GRCLT ownership

Given the magnitude of this situation, we needed to share these issues and concerns directly with you to ensure that you were aware of the potential implications to your GRCLT ownership. We encourage you to reach out and follow up with your Board of Directors. Please find the following email address for your Board: GRCBOD@vacationclub.com

Sincerely,

Tom McCormack
Market Vice President
Resort Operations Americas, West

 

[BigDawgTUG]

Just received as well. Tone used by the management company is very threatening. Question whether all of these benefits can, in fact, be terminated. Don't the members have contractual rights to some/all of these benefits? Maybe someone on the board can provide the board's side of things?

 

[geist1223]

Most Benefits are provided by the Developer/Management Company. Remember most Management Companies can change/do away with Benefits at their sole discretion.

 

[larryallen]

Yikes. Doesn't sound great. Good luck!

 

[BigDawgTUG]

I sent an email to the MGRC board via the email provided to ask the Board if it has a response to this correspondence from the management company.

 

[dougp26364]

Sounds like it’s a toe the line or else situation. I recall a similar standoff at Beachplace Towers in which the BOD lost. Keeping the Marriott name was more important than saving a few bucks on the budget

 

[CULox99]

I just sent an email as well. While a 4.8% MF increase for 2024 sounded great, I had thought it seemed really low when my other properties were getting double digit increases. I'll post any responses or other additional details.

 

[DRH90277]

MVC wants to manage to "standards we've come to expect" and then they list a few things that might not be amongst our expectations in terms of the guest experience - Bonvoy points, Marriott Brand recognition, etc.

Sounds like a good BOD who is pushing back some of the excesses in MVC demands. Wouldn't it be nice if the local BOD could pick and choose some of the MVC services they say could be eliminated. Notice the items MVC says would go - sounds like the city who always says the "fire department" will be eliminated during budget deliberations.

As a former financial officer, I can tell you there are always expenses that can be eliminated or delayed with little to no impact. You would be surprised at some of the easy eliminations. An easy start might be to lengthen the time before scheduled room renovation and furniture replacement in the reserves. Also, look hard at staffing levels and expenses that might be more to MVC's benefit than to unit owners.

Ask the BOD for their view - the biased view of MVC may not be in the best interests of the owners. Remember it is always easier to spend someone else's money.

 

[timsi]

Why did the owners only discover the financial strain after the resort had already depleted its funds?

 

[Dean]

Sounds like it’s a toe the line or else situation. I recall a similar standoff at Beachplace Towers in which the BOD lost. Keeping the Marriott name was more important than saving a few bucks on the budget

It was my understanding that a compromise was reached that allowed BPT to charge for parking and that an in between budget was agreed upon for the refurbishment. Granted, I'm just going by what I read her on TUG so take it for what it's worth. Another somewhat similar issue was related to the BOD at Aruba OC and MVC centered around the roofing issue. Again, I'm sure there are those with more intimate knowledge on the subject. A third data point would be the resorts that were excluded including Spicebush, Swallowtail and Vail related, in part, to refurbishment disagreements and BOD decisions. I don't think the Saturday Villas or Longboat were the same issues.

 

[vol_90]

The letter is only one side of the story. I would like to hear why the BOD is challenging the known increases. Maybe trying to push back on the management fee

 

[pedro47]

MVC wants to manage to "standards we've come to expect" and then they list a few things that might not be amongst our expectations in terms of the guest experience - Bonvoy points, Marriott Brand recognition, etc.

Sounds like a good BOD who is pushing back some of the excesses in MVC demands. Wouldn't it be nice if the local BOD could pick and choose some of the MVC services they say could be eliminated. Notice the items MVC says would go - sounds like the city who always says the "fire department" will be eliminated during budget deliberations.

As a former financial officer, I can tell you there are always expenses that can be eliminated or delayed with little to no impact. You would be surprised at some of the easy eliminations. An easy start might be to lengthen the time before scheduled room renovation and furniture replacement in the reserves. Also, look hard at staffing levels and expenses that might be more to MVC's benefit than to unit owners.

Ask the BOD for their view - the biased view of MVC may not be in the best interests of the owners. Remember it is always easier to spend someone else's money.

Can you name some of the expenses that can be eliminated or delayed with little impact to the resort operations ???

Maybe your financial experience can help both sides to resolve this budget problem.

 

[1Kflyerguy]

Ouch this does not sound good. Not a direct comparison, but i know the HOA for our primary residence has also been dealing with increased costs for insurance and utilities. So far they have been increasing our dues, but are still dipping into the reserves instead of increasing them enough to fully cover the increased expenses.,

 

[davidvel]

WOW, what a glaring example of the immense conflict of interest between the HOA/BOD and it's management company. The manager works for the HOA, not the other way around. Yes, I understand the complex agreement that relates to the place being called "Marriott" and the accompanying "benefits" (that are sold for a high price by the manger's related entity but can be removed at their discretion, with al the money spent down the tubes apparently.)

I also understand that the HOA/BOD needs to fund any expenses that they approved, but it seems this shortfall was not anticipated in 2022 when the 2023 budget was approved. It seems for 2024, there will be 750K more in expense than anticipated due to further increases in insurance/utilities throughout the year. (How did the BOD not know this when they passed the 2024 budget, if the problem cropped up in 2023, or did they truely ignore it and not cut somewhere else?) The BOD/HOA will have to find a way to reduce expenses in the budget which now appears to be a 1.25M hole (for 2023 shortfall +2024 anticipated shortfall), but as others note, insurance and utilities are the most basic of necessities.

The property manager (agent) is now trying to turn the owners against the HOA (its master), and likely is opposed to areas the BOD is looking to cut to fund the shortfall. Interesting indeed, and expect this to happen across the various Marriott vacation clubs as time goes on.

"Oh, what a tangled web we weave, when first we . . . "

 

[igopogo]

This email explains why we haven’t seen a statement yet.

I think Grand Residence and MVCI are important to each other, and standards at GRC are very high. I’m betting a compromise will be found. I was honestly surprised at the -5% estimate and also a bit concerned by the balance sheet.

 

[vikingsholm]

As an owner who hasn't studied the details of this too much yet, I feel like I need more info. and background from the board.

But if it becomes necessary, I'd like to see them strip out some of the fancy extras like all the events, weight rooms, extras in the lounge, staff that runs these, etc., and focus on the basics. Then see if they could cut a deal to access Timber Lodge's family events and other extras, perhaps for a fee if necessary for those who want to do so. We never use those extras, and paying for them is a nuisance. But keeping the Marriott benefits like Bonvoy points, DC club points, and other things related to using other properties is the most important thing.

 

[DRH90277]

Can you name some of the expenses that can be eliminated or delayed with little impact to the resort operations ???

Maybe your financial experience can help both sides to resolve this impact.

I can't do this, but the General Manager and the BOD could. And MVC's representative on the BOD should help them. Going around the BOD with an inflammatory memo is not the way.

 

[dougp26364]

As an owner who hasn't studied the details of this too much yet, I feel like I need more info. and background from the board.

But if it becomes necessary, I'd like to see them strip out some of the fancy extras like all the events, weight rooms, extras in the lounge, staff that runs these, etc., and focus on the basics. Then see if they could cut a deal to access Timber Lodge's family events and other extras, perhaps for a fee if necessary for those who want to do so. We never use those extras, and paying for them is a nuisance. But keeping the Marriott benefits like Bonvoy points, DC club points, and other things related to using other properties is the most important thing.

Years ago I raised concerns about the cost and upkeep of the extras at Ocean Pointe. It fell on deaf ears. All these years later it’s more apparent to me that the extras are required by Marriott as one of those standards of their resorts. Keeping up those standards is pretty easy when it’s other people’s money.

What it comes down to IMO, is the Marriott name worth all the extras and their expense. For the majority it appears the answer is yes, although there have been instances where the answer was no.

I wonder if the popularity of the resort among all MVC owners could play a roll in this process? If Marriott starts eliminating resorts over some sort of pissing match with owners and the HOA I know I won’t be happy. What about units that have been placed in the Marriott trust (probably not a lot of those). How ticked off will quarter share owners who have 13 weeks available to use in the trust be if they lose that benefit?

 

[vikingsholm]

Years ago I raised concerns about the cost and upkeep of the extras at Ocean Pointe. It fell on deaf ears. All these years later it’s more apparent to me that the extras are required by Marriott as one of those standards of their resorts. Keeping up those standards is pretty easy when it’s other people’s money.

What it comes down to IMO, is the Marriott name worth all the extras and their expense. For the majority it appears the answer is yes, although there have been instances where the answer was no.

I wonder if the popularity of the resort among all MVC owners could play a roll in this process? If Marriott starts eliminating resorts over some sort of pissing match with owners and the HOA I know I won’t be happy. What about units that have been placed in the Marriott trust (probably not a lot of those). How ticked off will quarter share owners who have 13 weeks available to use in the trust be if they lose that benefit?

Would be nice to know the full story behind all this.

 

[davidvel]

Years ago I raised concerns about the cost and upkeep of the extras at Ocean Pointe. It fell on deaf ears. All these years later it’s more apparent to me that the extras are required by Marriott as one of those standards of their resorts. Keeping up those standards is pretty easy when it’s other people’s money.

What it comes down to IMO, is the Marriott name worth all the extras and their expense. For the majority it appears the answer is yes, although there have been instances where the answer was no.

I wonder if the popularity of the resort among all MVC owners could play a roll in this process? If Marriott starts eliminating resorts over some sort of pissing match with owners and the HOA I know I won’t be happy. What about units that have been placed in the Marriott trust (probably not a lot of those). How ticked off will quarter share owners who have 13 weeks available to use in the trust be if they lose that benefit?

Exactly. "Marriott" rents out units to make a lot of money and wants consistency across the Vacation Club brand. This is critical to its business uniformity model, including sales of club points.

Great questions about resorts in the club's trust. If they are outside of their management, will they just pull them out of the trust? I presume that have authority under the club/trust they created to do so. As you note, how would that look to the people that bought points to go to GRC, or if it happens to other resorts? So far "Marriott" has wielded an iron fist over the HOAs of the various resorts, though there have been some separations. They already allow a 'third party' club to run a "commercial enterprise" using timeshare interests in violation of the CC&Rs, so the fine print doesn't seem to guide their ambitions. I don't think "Marriott" will ever back down or roll over. But this is a much bigger fish than the others that have separated.

 

[JaxnT]

Would be nice to know the full story behind all this.

We are Ocean Pointe owners for years. In the middle of a mess. I just stumbled across this group and it seems much better information here than the Facebook groups. Don’t quote me, my husband is the numbers guy. We were told that because of the Surfside community collapse we are in for 35% or 45% - I’ll have to see my notes - increases over the next 10 years to go into a reserve fund. $47 million total needs to be created. Ron DeSantis passed the legislation. So we asked the sales rep - we wrote down the numbers, so in 10 years, our MF will be $92,000 per week? That can’t be right? They said yes. They said MVC sent certified letters to all of us about a year and a half ago, with a timeline for when we could get out of our deeds and into the Trust. They said less than 100 people are still deeded. We thought we were going to be sick. Is this true? And they told us because of our level of ownership, Bonvoy credit card, points can be converted and then those convert to credit on our credit card and that can be used to pay MF. I’ve called Owners, Bonvoy and they are not able to give clear explanation. More numbers to call. We have a deal in place that gave up our weeks, 10,000 MVC points, and we have $100,000 to pay off in 10 years. 65% of those 10,000 points convert, then convert again to “credit” - math was about $12,500 in credit- and we use that to pay the $7800 in points MF. Does anyone know about this? Is it true? We can still rescind.

 

[davidvel]

We are Ocean Pointe owners for years. In the middle of a mess. I just stumbled across this group and it seems much better information here than the Facebook groups. Don’t quote me, my husband is the numbers guy. We were told that because of the Surfside community collapse we are in for 35% or 45% - I’ll have to see my notes - increases over the next 10 years to go into a reserve fund. $47 million total needs to be created. Ron DeSantis passed the legislation. So we asked the sales rep - we wrote down the numbers, so in 10 years, our MF will be $92,000 per week? That can’t be right? They said yes. They said MVC sent certified letters to all of us about a year and a half ago, with a timeline for when we could get out of our deeds and into the Trust. They said less than 100 people are still deeded. We thought we were going to be sick. Is this true? And they told us because of our level of ownership, Bonvoy credit card, points can be converted and then those convert to credit on our credit card and that can be used to pay MF. I’ve called Owners, Bonvoy and they are not able to give clear explanation. More numbers to call. We have a deal in place that gave up our weeks, 10,000 MVC points, and we have $100,000 to pay off in 10 years. 65% of those 10,000 points convert, then convert again to “credit” - math was about $12,500 in credit- and we use that to pay the $7800 in points MF. Does anyone know about this? Is it true? We can still rescind.

Can you share the 92K per week calculus, something seems off? Oh, did a salesperson tell you this to buy points? I think you are assuming only 100 units have to pay (this is a bs #.) All units would have to pay, even if in the trust. How many units are there? Use that number instead of 100.

Sales people that make stuff up are scum.

 

[igopogo]

We are Ocean Pointe owners for years. In the middle of a mess. I just stumbled across this group and it seems much better information here than the Facebook groups. Don’t quote me, my husband is the numbers guy. We were told that because of the Surfside community collapse we are in for 35% or 45% - I’ll have to see my notes - increases over the next 10 years to go into a reserve fund. $47 million total needs to be created. Ron DeSantis passed the legislation. So we asked the sales rep - we wrote down the numbers, so in 10 years, our MF will be $92,000 per week? That can’t be right? They said yes. They said MVC sent certified letters to all of us about a year and a half ago, with a timeline for when we could get out of our deeds and into the Trust. They said less than 100 people are still deeded. We thought we were going to be sick. Is this true? And they told us because of our level of ownership, Bonvoy credit card, points can be converted and then those convert to credit on our credit card and that can be used to pay MF. I’ve called Owners, Bonvoy and they are not able to give clear explanation. More numbers to call. We have a deal in place that gave up our weeks, 10,000 MVC points, and we have $100,000 to pay off in 10 years. 65% of those 10,000 points convert, then convert again to “credit” - math was about $12,500 in credit- and we use that to pay the $7800 in points MF. Does anyone know about this? Is it true? We can still rescind.

if their lips are moving they must be lying lying lying.

Rescind.

 

[bizaro86]

We are Ocean Pointe owners for years. In the middle of a mess. I just stumbled across this group and it seems much better information here than the Facebook groups. Don’t quote me, my husband is the numbers guy. We were told that because of the Surfside community collapse we are in for 35% or 45% - I’ll have to see my notes - increases over the next 10 years to go into a reserve fund. $47 million total needs to be created. Ron DeSantis passed the legislation. So we asked the sales rep - we wrote down the numbers, so in 10 years, our MF will be $92,000 per week? That can’t be right? They said yes. They said MVC sent certified letters to all of us about a year and a half ago, with a timeline for when we could get out of our deeds and into the Trust. They said less than 100 people are still deeded. We thought we were going to be sick. Is this true? And they told us because of our level of ownership, Bonvoy credit card, points can be converted and then those convert to credit on our credit card and that can be used to pay MF. I’ve called Owners, Bonvoy and they are not able to give clear explanation. More numbers to call. We have a deal in place that gave up our weeks, 10,000 MVC points, and we have $100,000 to pay off in 10 years. 65% of those 10,000 points convert, then convert again to “credit” - math was about $12,500 in credit- and we use that to pay the $7800 in points MF. Does anyone know about this? Is it true? We can still rescind.

They lied to you to get your $100k. You should rescind.

 

[Huskerpaul]

We are Ocean Pointe owners for years. In the middle of a mess. I just stumbled across this group and it seems much better information here than the Facebook groups. Don’t quote me, my husband is the numbers guy. We were told that because of the Surfside community collapse we are in for 35% or 45% - I’ll have to see my notes - increases over the next 10 years to go into a reserve fund. $47 million total needs to be created. Ron DeSantis passed the legislation. So we asked the sales rep - we wrote down the numbers, so in 10 years, our MF will be $92,000 per week? That can’t be right? They said yes. They said MVC sent certified letters to all of us about a year and a half ago, with a timeline for when we could get out of our deeds and into the Trust. They said less than 100 people are still deeded. We thought we were going to be sick. Is this true? And they told us because of our level of ownership, Bonvoy credit card, points can be converted and then those convert to credit on our credit card and that can be used to pay MF. I’ve called Owners, Bonvoy and they are not able to give clear explanation. More numbers to call. We have a deal in place that gave up our weeks, 10,000 MVC points, and we have $100,000 to pay off in 10 years. 65% of those 10,000 points convert, then convert again to “credit” - math was about $12,500 in credit- and we use that to pay the $7800 in points MF. Does anyone know about this? Is it true? We can still rescind.

You should rescind ASAP.