What happens to Starwood's owners at mandatory resorts when others have sold out?

[zeke013]

I am just curious what you folks think Starwood's practice of having both mandatory and non-mandatory participation in the SVN network will do to those of you that have weeks at mandatory resorts. Think of it this way - you bought in, in part, because you knew you would have the ability to access other resorts in trade. And you bought at mandatory resorts, in part, to keep re-sale prices up knowing that the next buyer could participate.

But what happens 10 years from now (15? 20?) when the voluntary resorts have been churned (as have the mandatory - but it doesn't matter for this equation) and the rate of owners at non-mandatory resorts who could participate in SVN has gone from 100% at initial sales to 50%? 25%? 10%?

What happens when those of you at mandatory resorts (myself included) don't have inventory to trade into at other locations - as the new owners are FORCED to vacation there since they can't go anywhere else?

Is this a legitimate concern or am I over-simplifying?

 

[mesamirage]

I think you have a good point, but I wonder what percentage of owners never use their week?? 15%... 33%... higher. I know even among owners who are active in TUG or other groups (Yahoo for Hyatt) don't always get to using their weeks... I would only guess the % is even higher for those who are truely out to lunch with their TS ownership.

Example.. one of my SDO resale weeks I picked up was from a gentleman who originally purchased from the developer... bought it for $9,000... financed for 8 years thru developer so paid xxx interest... never used the resort EVEN once in the 8 years... 6 months after finally paying it off sold it to me for $925. Ouch... and I believe he could trade in SVN since he purchased from developer!! (grandfathered in, think he would have had to pay like $350 to join SVN) CRAZY!!

Steve

 

[BarryTX]

I am not yet an owner of any TS, but rather am researching Starwood as one possibility - so I may not be representative of who you are looking for response from, but for what it's worth....

If I buy anywhere, it will be where I intend to predominantly visit (which is Hawaii for me). The exchange feature in SVN or through outside exchange companies is a nice option, but I would expect to go to my home resort most years. I do see a value in the exchange possibilities, but I would not for example buy in a resort that I only intended to trade. The value of the resort to me is primarily where it is and what it is like because I intend to use it, so the real question for me is whether the cost of buying the resort worth what I'm getting in total as compared to similar alternatives.

....and if I buy and don't use it, someone should kick me in the head. And probably will.

Barry

 

[KOR5Star]

Since I intend to use all my weeks at my home resort, it doesn't really mean anything to me.

Being on Maui, I'd be able to rent for the cost of renting somewhere else. I might even make money, depending on where I would want to go. In any case, I wouldn't lose much.

 

[Transit]

Many advise to buy where you want to go but it would likley take along time before even 50% of ownership unts would go to resale. There also will be a large percentage of people who will trade through II.

 

[zinger1457]

I think you have a good point, but I wonder what percentage of owners never use their week?? 15%... 33%... higher. I know even among owners who are active in TUG or other groups (Yahoo for Hyatt) don't always get to using their weeks... I would only guess the % is even higher for those who are truely out to lunch with their TS ownership.

Steve

Agree with Steve on this. I own at Westin Kierland and my last two stays (Jan/Feb 07) the occupancy was at about 50%. And this is at a location where all the units are sold. As long as you have some flexibility in your schedule I doubt you'll have trouble getting into any of the resorts.

 

[Fredm]

Good question to ponder

At some point internal trade opportunities do decrease if all remains as they are. The ground rules can change, however, and that is not factored into the O/P's supposition.

Nothing prevents Starwood from accepting SVN membership applications from resale buyers of Voluntary resorts. It is a restriction they currently impose. But, a self-imposed restriction is not a prohibition from doing so. Right now Starwood chooses to be restrictive for reasons it believes beneficial to its new inventory marketing. Dwindling trade inventory affects everyone, even new owners who buy directly from Starwood. At some point Starwood will have to decide if they want a viable system or not. If it does not work well, it's value as a sales tool is diluted and compromised.
If that outcome does not make business sense to you, you can bet it does not make sense to Starwood either.
Then what does?
SVN membership is a revenue source for Starwood as well. The annual dues amount to healthy change.SVN enrollment fees of $600 or more will make the picture nicer yet if they relax membership restrictions. I suspect that they will not overlook the revenue potential when it is in their interest to do so. In fact, the current trend to classify all new construction as Voluntary does not necessarily mean that the O/P's assumptions follow. It does insure that Starwood gets a new enrollment fee every time one sells if my scenario has any basis. Currently, Starwood gets no SVN enrollment fee from the resale of a mandatory ownership interest, and never will.
That is a motive that makes sense to me.
In the meantime, mandatory resort owners have an increasingly desirable timeshare interest.

Fredm

 

[msweaver]

At some point internal trade opportunities do decrease if all remains as they are. The ground rules can change, however, and that is not factored into the O/P's supposition.

Nothing prevents Starwood from accepting SVN membership applications from resale buyers of Voluntary resorts. It is a restriction they currently impose. But, a self-imposed restriction is not a prohibition from doing so. Right now Starwood chooses to be restrictive for reasons it believes beneficial to its new inventory marketing. Dwindling trade inventory affects everyone, even new owners who buy directly from Starwood. At some point Starwood will have to decide if they want a viable system or not. If it does not work well, it's value as a sales tool is diluted and compromised.
If that outcome does not make business sense to you, you can bet it does not make sense to Starwood either.
Then what does?
SVN membership is a revenue source for Starwood as well. The annual dues amount to healthy change.SVN enrollment fees of $600 or more will make the picture nicer yet if they relax membership restrictions. I suspect that they will not overlook the revenue potential when it is in their interest to do so. In fact, the current trend to classify all new construction as Voluntary does not necessarily mean that the O/P's assumptions follow. It does insure that Starwood gets a new enrollment fee every time one sells if my scenario has any basis. Currently, Starwood gets no SVN enrollment fee from the resale of a mandatory ownership interest, and never will.
That is a motive that makes sense to me.
In the meantime, mandatory resort owners have an increasingly desirable timeshare interest.

Fredm

You make a really good point. Although Starwood and other developers seem to be doing quite profitably in extending the timeshare resorts, there will probably be a time in the future where timeshare development will level off, and the developers may see the potential of SVN memberships and annual fees as just as beneficial to them as the profits they [supposedly] make by "encouraging" developer-bought units.

I actually think that Starwood is exceedingly short-sighted in not allowing resale owners into SVN - I can't tell you how many hot-tub discussions I've had with other owners who are actually quite well informed about how the loss of SVN privileges would affect their resale value if they ever decide to sell. As more owners become properly informed of how Starwood is deflating their resale values to prop up Starwood's own marketing machine, it might benefit Starwood to follow Hilton's path of allowing SVN membership to resales. As Marriott considers how to implement an internal trading scheme for its resorts (with a possible points-based scheme similar to Starwood and Hilton) hopefully they will follow Hilton as well.

 

[Bill4728]

Starwood can take back units thru forclosure. Which allows them to sell more units even at resorts which are sold out.

ROFR could also add inventory, but does Starwood have ROFR?

 

[Lewis]

Voluntary vs. Mandatory Resales

There are some different ways to think about this.

I would tend to agree that an "all-mandatory" resort system would have its benefits ... resale values would be supported evenly across the system if all resale buyers could access the SVN.

However, with the current situation (some voluntary & some mandatory resorts with lots of resales), I would have a concern if Starwood suddenly allowed existing voluntary resale owners the opportunity to join SVN for a modest (e.g. $600 to $1000) fee.

There are lots of owners who have "cheap" resale weeks at voluntary resorts ... many voluntary resale owners would no doubt love to join SVN and try to get into Maui, Haborside, etc. I don't think that very many Hawaii, Harborside, or even Kierland owners are anxious to exchange their points for time at most of the existing "voluntary" resorts. Thus, a surge of voluntary re-quals into the SVN would make SVN trades into the most popular resorts more difficult for existing developer and mandatory resale owners.

 

[barndweller]

Thus, a surge of voluntary re-quals into the SVN would make SVN trades into the most popular resorts more difficult for existing developer and mandatory resale owners.

Not if Sheraton went to a home resort advantage and a points value system for internal trades. The more desirable resorts would have higher points assigned & lesser resorts would have lesser chance of trades. DVC does it well. Everyone gets a chance for any resort at any time beyond home resort advantage. But at a high points cost. There's enough non-demand time that everyone gets a chance at any resort eventually.

 

[vacationtime1]

I would have a concern if Starwood suddenly allowed existing voluntary resale owners the opportunity to join SVN for a modest (e.g. $600 to $1000) fee.

I would also be very concerned if Starwood did this, but I don't think it will.

Starwood makes Big Bucks selling developer units. One of the major incentives it provides for buying developer is the ability to exchange within Starwood via StarOptions. That incentive explains most of the discrepancy between resale prices at mandatory resorts and resale prices at voluntary resorts. Compare Kierland and Mission Hills, both upscale desert properties which had comparable developer prices. Kierland resales sell for far more than Mission Hill resales. Starwood apparently wants to make money off of that differential.

Starwood's current tack is to make its new resorts voluntary and to include a right of first refusal when the buyer eventually becomes a seller. My belief is that Starwood is doing this for the express purpose of destroying the resale market for these units. When the seller has to sell for 40% of original purchase price (such as Mission Hills sellers), Starwood will exercise its ROFR and resell it itself at full retail with StarOptions. It cannot do this if it allows too many requalifications or buy-ins.

OP's concern is lack of future inventory for SVN exchanges using StarOptions. Starwood will solve this problem by increasing the SVN inventory through selective exercise of its ROFR on resales of the existing properties most desired by SVN exchangers. Starwood's new properties will obviously be highly desirable in the exchange pool as well. The result will be a SVN exchange pool which is more upscale than Starwood's properties taken as a whole. This would help Starwood price its new properties even higher.

 

[jerseygirl]

I agree with Fred and have posted the same theory in the past. I don't think Starwood will be able to turn its back on the revenue when the next large economic downturn comes. Just think of what Hilton makes on its HGVC members -- $89 a year, $49 per reservation (something like that -- I'm a member, but don't pay close attention to the "little" costs ).

I think they'll eventually offer some sort of affiliate membership with a relatively large upfront cost to join and transactional fees for everything except reserving your own week. Developer buyers will be "charter" members (e.g., no fees). Affiliate membership will not transfer.

My company employs an entire department to run revenue/profitability projections on stuff like this. You can bet there will come a time when Starwood's bean counters "prove" that today's practices are not maximizing revenue.

Yes -- it will hurt sales a little. But, the other majors (Marriott, Hilton, Disney, Hyatt) aren't exactly hurting despite their lack of Starwood's punitive practices. As Marriott's growth rate indicates, there are still plenty of potential buyers out there who don't their research, or whose research leads them to believe that the ability to convert to Hotel points is worth the premium.

Starwood -- are you out there? I'm expensive, but will gladly come implement the program for the right price (oh, and I need 13 weeks of vacation per year so I can use all my timeshares.)

 

[Fredm]

Which is it?

I would also be very concerned if Starwood did this, but I don't think it will.

Starwood makes Big Bucks selling developer units. One of the major incentives it provides for buying developer is the ability to exchange within Starwood via StarOptions. That incentive explains most of the discrepancy between resale prices at mandatory resorts and resale prices at voluntary resorts. Compare Kierland and Mission Hills, both upscale desert properties which had comparable developer prices. Kierland resales sell for far more than Mission Hill resales. Starwood apparently wants to make money off of that differential.

Starwood's current tack is to make its new resorts voluntary and to include a right of first refusal when the buyer eventually becomes a seller. My belief is that Starwood is doing this for the express purpose of destroying the resale market for these units. When the seller has to sell for 40% of original


Sorry, changed my mind about replying.

 

[oneohana]

I would also be very concerned if Starwood did this, but I don't think it will.

Starwood makes Big Bucks selling developer units. One of the major incentives it provides for buying developer is the ability to exchange within Starwood via StarOptions. That incentive explains most of the discrepancy between resale prices at mandatory resorts and resale prices at voluntary resorts. Compare Kierland and Mission Hills, both upscale desert properties which had comparable developer prices. Kierland resales sell for far more than Mission Hill resales. Starwood apparently wants to make money off of that differential.

Starwood's current tack is to make its new resorts voluntary and to include a right of first refusal when the buyer eventually becomes a seller. My belief is that Starwood is doing this for the express purpose of destroying the resale market for these units. When the seller has to sell for 40% of original purchase price (such as Mission Hills sellers), Starwood will exercise its ROFR and resell it itself at full retail with StarOptions. It cannot do this if it allows too many requalifications or buy-ins.

OP's concern is lack of future inventory for SVN exchanges using StarOptions. Starwood will solve this problem by increasing the SVN inventory through selective exercise of its ROFR on resales of the existing properties most desired by SVN exchangers. Starwood's new properties will obviously be highly desirable in the exchange pool as well. The result will be a SVN exchange pool which is more upscale than Starwood's properties taken as a whole. This would help Starwood price its new properties even higher.

Has anyone encountered a rofr with *wood? I have have purchased a few resales that were under the 40% mark.

 

[timeos2]

I am not yet an owner of any TS, but rather am researching Starwood as one possibility - so I may not be representative of who you are looking for response from, but for what it's worth....

If I buy anywhere, it will be where I intend to predominantly visit (which is Hawaii for me). The exchange feature in SVN or through outside exchange companies is a nice option, but I would expect to go to my home resort most years. I do see a value in the exchange possibilities, but I would not for example buy in a resort that I only intended to trade. The value of the resort to me is primarily where it is and what it is like because I intend to use it, so the real question for me is whether the cost of buying the resort worth what I'm getting in total as compared to similar alternatives.

....and if I buy and don't use it, someone should kick me in the head. And probably will.

Barry

Barry - You have the system figured out far better than some long term owners. Buy what you want where you want and only use a trade if you want to or on the few occasions when you can't use your resort for some reason. It is a "nice to have" option not the reason for owning. If you do buy you are likely to be very very happy with your purchase.

 

[chemteach]

Do I misunderstand SVN??

I was under the impression that at 8 months out, anyone who officially has staroptions can make a reservation at any starwood (SVN) resort that has an opening. If many units at voluntary resorts are sold by their original owners, and these owners do not make their reservations before 8 months out, the units will be available to anyone who has staroptions.

If all people who purchase non-mandatory resorts are very savvy and make reservations before 8 months out, then yes, there will be less inventory available overall. I don't see this being a huge issue because whether the owner is the original owner or a resale purchaser, the person has that first 4 month window to reserve their unit and then at 8 months the units are open to all staroption owners.

What am I missing here??

 

[skim118]

What am I missing here??

The 8-month reservation window is a SVN rule and as such that only applies to the units in a Voluntary resort that is available for SVN usage.

Assume ten years from now Westin Lagunamar Cancun has a 50% turnover and is still a "Voluntary" resort; These new owners are not in SVN and therefore half these units are not available in the SVN pool. At the 8-month window, SVN members from other resorts will have to fight over whatever was left out of the 50% remaining units.

I dislike Starwood for destroying the resale values of voluntary resorts; I know that they lost a sale from us because they made Princeville a voluntary resort; of course they do not care at this point in time because their sales are still booming

 

[chemteach]

The 8-month reservation window is a SVN rule and as such that only applies to the units in a Voluntary resort that is available for SVN usage.

Assume ten years from now Westin Lagunamar Cancun has a 50% turnover and is still a "Voluntary" resort; These new owners are not in SVN and therefore half these units are not available in the SVN pool. At the 8-month window, SVN members from other resorts will have to fight over whatever was left out of the 50% remaining units.

I dislike Starwood for destroying the resale values of voluntary resorts; I know that they lost a sale from us because they made Princeville a voluntary resort; of course they do not care at this point in time because their sales are still booming

But does Starwood keep track of the units that were reserved by non-SVN members vs. SVN members? In other words, if only 50% of the owners at a non-mandatory resort are members of SVN, and at 8 months out, there are 2 units available for a specific week, I would think an SVN member could still reserve that week after 8 months, even if all the other units for that particular week had been reserved by SVN members who owned at the resort. Trying to track which weeks/units had been reserved by SVN owner members vs. owner non-SVN members seems almost impossible, particularly because the weeks are for the most part floating weeks at all the resorts being built. Holiday weeks are the main fixed weeks, and there aren't many of these.

Do people think that Starwood would track a season (platinum, gold, silver) within each resort and the percent of units owned in each season by SVN members, and then "shut-down" SVN reservations once the percentage of reservations within a season of SVN owner members hit the percent of owner members?

I don't think that would happen. I think Starwood would allow SVN members to reserve after 8 months out if units were available and then if they filled up and a non-SVN owner tried to reserve a unit, they would just be told that the weeks were all reserved, and the owner should have phoned earlier in the year to make the reservation. Also, within a season, there are often so many weeks that are not as desirable, so at 8 months out, SVN members will all phone up to make reservations, and if an owner calls to make a reservation for a high demand week, they will be told they have to reserve a different week within their season. It just seems to me this will be a non-issue and resales of non-mandatory resorts actually could benefit SVN members because there will be fewer members to compete with.

To explain: in a place like Kauai, if 50% of the owners are resale purchasers at some point, it is true that only 50% of the units there would be available within SVN if they do track numbers of SVN owners and SVN owner reservations from all SVN resorts at Kauai. But there would likely be a lot of January, September, October, November, and December weeks that were not booked up because these are the lowest demand week. The whole year is platinum, so SVN members from other resorts could still probably book March or June or July weeks at 8 months out (particularly since these weeks are toward the front end of the year).

I hope that all made sense...

Edited to add this:

On second thought, if Starwood tried to limit SVN reservations to the number of people who are owners/SVN members at the resort, there is a potential for a big problem for the SVN owners at the resort! Say at a resort where 50% of the ownership is SVN members, and for some reason 1/2 of those owners (25 % of the total membership) did not make reservations early. Along comes October, and through reservations from SVN owners at the resort and 8 month out reservations from SVN members at other resorts, 50% of all inventory for the next year has been reserved at the resort. An SVN owner calls on October 31 for a reservation for the next year (at 12 months out) and is told that the resort has maxed out its SVN use for that year and the person cannot use their week at their home resort - they must try to make a reservation at an alternate SVN resort. The HOAs are going to have a headache no matter what they do if this type of thing starts happening. I think it is far more likely that the Starwood would not create these limits and that if non-SVN owners try to make their reservations beyond 8 months out, they will be told that they waited too long to make a reservation and nothing is available. That, too will cause problems...

One can never predict what will happen in the timesharing world in the future...

 

[skim118]

Do people think that Starwood would track a season (platinum, gold, silver) within each resort and the percent of units owned in each season by SVN members, and then "shut-down" SVN reservations once the percentage of reservations within a season of SVN owner members hit the percent of owner members?

Yes.

I would say Starwood is legally bound "shut-down" SVN reservations. The issue has been moot until now since the voluntary resorts currently are not in great demand. Once Princeville & Cancun resales start occuring Starwood has no other choice.

Assume I am a resale Princeville owner; I do not have to follow any 8 month rule since I have deeded access only to my unit; ALL units have to be made available to me or other Princeville owners only each year. The fact SVN allowed outsiders at the 8-month window is of no consequence to me; I expect some week to be made available for my use each calendar year.

 

[DavidnRobin]

This is an interesting topic. I believe that the SVO reservation window is the same at a V resort whether it is SVO or resale purchased. In reading the Owners Manual for WPORV - they do not differentiate. If a resale V buyer waits until the last minute to reserve at less than 8 months - they could be SOL.

 

[skim118]

This is an interesting topic. I believe that the SVO reservation window is the same at a V resort whether it is SVO or resale purchased. In reading the Owners Manual for WPORV - they do not differentiate. If a resale V buyer waits until the last minute to reserve at less than 8 months - they could be SOL.

The owner's manual you received applies to SVN owners at Princeville; to these owners, after 8 months all Starwood has to provide is a week in any SVN network resort in return for your Princeville week and they have fulfilled their end of the deal.

Let's assume there are 100 units in Princeville; 50 weeks gives a total of 5000 week owners. If in the future there are 50% resale owners, clearly the SVN has access only to a total of 2500 Princeville weeks. At 8 months it's SVN prerogative to allow any non-Princeville owner to have access to Princeville weeks and that's not the concern of resale owners.

As a resale owner if SVN does not allocate 2500 weeks to the resale owners then they will be subject to lawsuits. It's true at the last-minute I may not find any weeks and could be SOL, but it better be that the resale pool of 2500 weeks was exhausted for that year(used by resale Princeville owners + units that stayed empty).

 

[DavidnRobin]

As a Scientist by profession - I enjoy theory and hypothicals, but... 50% resale at WPORV, owners who all don't call in... etc?

****
We are looking forward to WPORV in '09, but first we have WSJ, WKORVx2, WKV, WSJ, WKORVx2, WKV, WSJ, and then, maybe, hopefully if the bees are still around, then...WPORVx2

****
Personally, I am way more concerned about the bees....
{enter silly emoticon}

 

[chemteach]

Yes.

I would say Starwood is legally bound "shut-down" SVN reservations. The issue has been moot until now since the voluntary resorts currently are not in great demand. Once Princeville & Cancun resales start occuring Starwood has no other choice.

Assume I am a resale Princeville owner; I do not have to follow any 8 month rule since I have deeded access only to my unit; ALL units have to be made available to me or other Princeville owners only each year. The fact SVN allowed outsiders at the 8-month window is of no consequence to me; I expect some week to be made available for my use each calendar year.

Then what would happen to the SVN owner who calls at more than 8 months out, but SVN reservations have hit their limit and no additional units can be reserved for any weeks through the end of the calendar year?

Davidnrobin - I agree that the 50% this or that idea is not too worrysome - but in order to look at how Starwood might deal with the system, they have to consider different possibilities, including extremes.

If Starwood tracks the SVN vs. non-SVN owner reservations and closes reservations to SVN owners or members when the cap is hit, I think it would not be too unlikely that SVN owners at highly desireable resorts with all year floating platinum weeks would not be able to get end of year reservations because SVN owners from other resorts would cause the "shut-down" of SVN reservations at the resort with 8 month out reservations before the end of the calendar year prior to the use year. Okay - long run-on sentence...

 

[DavidnRobin]

I would advise everyone who signs a contract with SVO (esp for a V resort) to read the CCRs/Owners Manual that they agree to. While no resale owner signs such a contract - the terms are passed onto the buyer.

Has anyone seen a bee?
{google: "what is happening to the bees")