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

[tahoe]

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.

YES! BOD pushing back on costs!!!!! I wonder if the multi-week nature of ownership enables fewer owners to overcome MVCI board representation.

 

[igopogo]

Some random thoughts.

If $750,000 shortfall is 11% of the budget, then throwing off the chains of the management fee would just about exactly take care of that

I think the place has significant value as a going concern without the Marriott name. The local staff is awesome and I am sure they would stay.

We could probably set up a rental desk that is actually of value to owners. Imagine if the association took a 20% fee for rentals (instead of the 55% that Marriott takes), I think that’s win-win. Really we already have one with Tim Golobic, going in house would just offer exposure and more legitimacy.

There are cons, and honestly as an owner I’d probably be a little worse off without the MVC system. But not that much, and maybe I’m even undervaluing the idea.

One question comes to mind for those who have gone through this. If the developer pulls out, what happens to existing point reservations?

 

[dioxide45]

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.

The problem is that MVC/MVW control all the communications with the owners. I recall an issue with the Hyatt in Bonita Springs where they stopped sending their normal newsletter because MVW would change certain things to look more favorable to them. The HOA can send out their own communications, but I wonder how easily it is for them to get names and email addresses for all the owners since that information is usually retained by mother Marriott in its management function.

 

[DRH90277]

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

I question the propriety of this memo and the actions of MVC's representative in apparently sending this to owners in open contempt for a BOD elected by the owners of this property. Is MVC so arrogant as to think this is an appropriate action. There must be a better way........

And it's even worse, MVC may be acknowledging these BOD's are expected to be puppet boards beholden only to MVC.

 

[dioxide45]

Without Board action to fund this shortfall, we have run out of funds to operate the resort as of December 1, 2023.

Did the board take the necessary action? Is the resort still open and operating as normal? If so, where did the funds come from?

 

[igopogo]

Did the board take the necessary action? Is the resort still open and operating as normal? If so, where did the funds come from?

lol, I hope so…we heading there Friday! If there’s a lock on the door I’ll let you know.

 

[CULox99]

The odd thing is the email came on December 4th, but referenced funds running out on December 1, 2023.

While we could possibly save the 11% Management Fee (speculative) by going private without MVC Brand, It would be a massive hit to the value of the property for re-sale. 1) Because we would no longer have the Marriott Brand and 2) The draw in buying into to MGR is the Quartershare ownership that you can turn into MVC points for the weeks you cannot use. I visit once a year and twice a year max as I live on the East Coast. The points value I get for weeks not utilized is worth way more to me than getting some rental income back through Tim, MVC or a private in-house rental desk could offer. I know everyone's situation is different as many rent their units through Tim and are not enrolled for MVC Points, but in my opinion the rental prices would also take a hit in not having the Marriott Brand behind it.

I am hopeful this is just posturing to get to a mutual resolution, but don't like the optics and lack of response from our board. I am hopeful we hear something today in response.

Did the board take the necessary action? Is the resort still open and operating as normal? If so, where did the funds come from?

 

[dioxide45]

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?

All the benefits listed are through the affiliation with Marriott. If you aren't a Marriott property, you can't really take advantage of Bonvoy points. The only contractual rights you actually have are to your deeded ownership. If your share gets you five weeks a year, they are only entitled to five weeks a year in a unit at the resort. Of the five benefits bulleted out in the OP, only the first one can be facilitated by another management company.

 

[dioxide45]

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?

MVW has a similar situation with what was the Hyatt in Aspen. They have a number of units in the Hyatt Portfolio Program trust but the property is no longer managed by Hyatt Vacation Club or MVW. MVW still has the right to use those units since they own them and they can make reservations in them. There was some type of agreement made to still allow for nightly reservations vs the more traditional type of weekly reservation.

 

[grupp]

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.

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.

 

[igopogo]

It would be a massive hit to the value of the property for re-sale. 1) Because we would no longer have the Marriott Brand

I agree that the points system is a huge benefit, and we definitely benefit in the same way that you do, as well as buying back in to GRC and Timberlodge on the days we want to stay.

As far as the brand goes, I think we could be a Zalanta or Lake Tahoe Resort without too much of a hit. I actually think independent is fine. Yes you lose international exposure, but I think Tahoe is a very different market in that respect.

 

[igopogo]

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.

Honestly I think the facilities are practically identical, proportional to the size of each resort.

 

[igopogo]

Sorry, verbose this morning.

A perhaps not obvious benefit to MVC is that almost every time a quarter share changes hands…I’d say one a month through authorized brokers, MVC probably records 50k in -profit- on an enrollment sale.

 

[dioxide45]

If they did somehow drop MVC as the management company, it could possibly help increase rental rates for Abound point rentals/transfers. There are a large number of points for rent that are from GR fractionals and their MF cost per point is much lower than most. So they can undercut on pricing vs owners with higher cost of points. Take out all that cheap supply should mean higher prices for those looking to rent out their points.

 

[CULox99]

If they did somehow drop MVC as the management company, it could possibly help increase rental rates for Abound point rentals/transfers. There are a large number of points for rent that are from GR fractionals and their MF cost per point is much lower than most. So they can undercut on pricing vs owners with higher cost of points. Take out all that cheap supply should mean higher prices for those looking to rent out their points.

Rental points is Supply & Demand - I have excess points through my Quartershare at MGR and even thought my cost is lower per point for someone that owns Trust Points, I would never rent them below market value. I also own at MGO that has a great return on my MF per point if I elected to convert. Many of the legacy weeks have the same low MF per point conversion if you purchased platinum weeks and the right resorts. Market value is typically around MF, which is in the $.69 to $.70 range. Will be interesting to see if rental prices go up to $.78 to $.80 market with the 2024 MF increase. I can't see the demand given the state of economy. I think points rental market will be flat regardless of MGR issue outcome.

 

[bazzap]

The problem is that MVC/MVW control all the communications with the owners. I recall an issue with the Hyatt in Bonita Springs where they stopped sending their normal newsletter because MVW would change certain things to look more favorable to them. The HOA can send out their own communications, but I wonder how easily it is for them to get names and email addresses for all the owners since that information is usually retained by mother Marriott in its management function.

As I know you would expect, MVC will definitely not provide names and email addresses for all owners to the HOA / BOD.
However, at some resorts the BOD does successfully communicate directly with a good percentage of owners through a resort owner blog or dedicated resort owner facebook group.

 

[davidvel]

If they did somehow drop MVC as the management company, it could possibly help increase rental rates for Abound point rentals/transfers. There are a large number of points for rent that are from GR fractionals and their MF cost per point is much lower than most. So they can undercut on pricing vs owners with higher cost of points. Take out all that cheap supply should mean higher prices for those looking to rent out their points.

If they withdraw the memo says the points program would end for those owners. They wouldn't have any points to rent.

 

[davidvel]

Some random thoughts.

If $750,000 shortfall is 11% of the budget, then throwing off the chains of the management fee would just about exactly take care of that

I think the place has significant value as a going concern without the Marriott name. The local staff is awesome and I am sure they would stay.

We could probably set up a rental desk that is actually of value to owners. Imagine if the association took a 20% fee for rentals (instead of the 55% that Marriott takes), I think that’s win-win. Really we already have one with Tim Golobic, going in house would just offer exposure and more legitimacy.

There are cons, and honestly as an owner I’d probably be a little worse off without the MVC system. But not that much, and maybe I’m even undervaluing the idea.

One question comes to mind for those who have gone through this. If the developer pulls out, what happens to existing point reservations?

An HOA of this size in CA must have professional management. What would a new manager charge?

 

[dioxide45]

Rental points is Supply & Demand - I have excess points through my Quartershare at MGR and even thought my cost is lower per point for someone that owns Trust Points, I would never rent them below market value. I also own at MGO that has a great return on my MF per point if I elected to convert. Many of the legacy weeks have the same low MF per point conversion if you purchased platinum weeks and the right resorts. Market value is typically around MF, which is in the $.69 to $.70 range. Will be interesting to see if rental prices go up to $.78 to $.80 market with the 2024 MF increase. I can't see the demand given the state of economy. I think points rental market will be flat regardless of MGR issue outcome.

But if those GR owners lose affiliation, it will reduce the supply side. It could be said that Grande Residences owners are the ones keeping prices in the $0.70 range right now. The market price is really only what one person is willing to pay at the time of a transaction. If additional quarter share owners came in willing to take less of a profit, then it would push down average rental prices.

I suspect going into 2024 we may still see prices in the $0.70 cent range. Travel is down and more people may be willing to rent out points to try and cover some or all of their, now higher, fees. So supply may go up and if travel is down, then we may see fewer people looking to rent points from someone else.

 

[dougp26364]

If they withdraw the memo says the points program would end for those owners. They wouldn't have any points to rent.

They’d do like any other condo owner does and rent on a different platform like AirBNB or Vacation Candy and without Marriotts restrictions trying to stop owners from renting as a cottage industry.
Renting might actually become an easier and potentially more profitable proposition

 

[igopogo]

An HOA of this size in CA must have professional management. What would a new manager charge?

My understanding is that we pay all of the costs of running the resort, including our professional management on site and in Utah, and then another 10% on top of that. The management costs don’t come from the 10%.

 

[JaxnT]

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.

You should rescind ASAP.

We rescinded. Shew. Thank you so very much! Felt like we were losing our home. We got a call from someone. We understand the increase projections over the next few years. And that’s fine. But we were blatantly lied to and manipulated. 7 hours. We asked all the right questions. That’s the scary part. Thank you!!!!!

 

[dioxide45]

An HOA of this size in CA must have professional management. What would a new manager charge?

Generally independent resort management companies charge a flat fee instead of a fee tied to a percentage of the maintenance fees. A flat fee is a much better arrangement. For systems like Wyndham, Marriott, Hilton that charge a percentage, it doesn't cost that much more to run a resort that has a $1,500 per week maintenance fee than a resort that has a $2000 a week maintenance fee. With percentage based pricing, there is no incentive for the resort management company to try and keep costs in line. realize that Marriott provides a budget to the HOA/BOD for approval. Yes the BOD can make adjustments, but I suspect those adjustments are rare.

 

[davidvel]

Generally independent resort management companies charge a flat fee instead of a fee tied to a percentage of the maintenance fees. A flat fee is a much better arrangement. For systems like Wyndham, Marriott, Hilton that charge a percentage, it doesn't cost that much more to run a resort that has a $1,500 per week maintenance fee than a resort that has a $2000 a week maintenance fee. With percentage based pricing, there is no incentive for the resort management company to try and keep costs in line. realize that Marriott provides a budget to the HOA/BOD for approval. Yes the BOD can make adjustments, but I suspect those adjustments are rare.

I understand and agree that the % model of management companies is both a conflict of interest and generally not favorable for the HOA. But I doubt a "normal" management company that handles condos and other HOA encumbered property has the ability to handle the more complex requirements of TS management, including a reservation system, etc.

My point was simply that the new management company will charge something. If @igopogo is correct that the 10% fee is just fluff in addition to the underlying management of the resort, and I am not doubting them, then this significantly changes the math.

 

[dioxide45]

I understand and agree that the % model of management companies is both a conflict of interest and generally not favorable for the HOA. But I doubt a "normal" management company that handles condos and other HOA encumbered property has the ability to handle the more complex requirements of TS management, including a reservation system, etc.

My point was simply that the new management company will charge something. If @igopogo is correct that the 10% fee is just fluff in addition to the underlying management of the resort, and I am not doubting them, then this significantly changes the math.

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%.