Whats up next for Starwood owners [MUST READ!]

[gmarine]

As some Tuggers know, I have been spending a lot of time calling Starwood to see what I can find out about any motives of the system change or future plans Starwood may have.

I have made dozens of calls to Owner Services, Specialists, managers etc. I have called Starwood sales multiple times. I have spoken to muliple people at Interval as well. I have called as an owner, giving my info as well as an owner just asking general questions without giving my info. I have pretended to be a prospective retail buyer and a prospective resale buyer. I have inherited a mandatory unit as well as a voluntary resort. I was a seller having trouble selling who had questions about why. I was an exchanger looking to trade into Starwood resorts. I had to make up a lot of stories to gather this info.

So here is what I have gotten from all this. Please keep in mind none of this is official. Much of it has been gathered in small parts from many different employees.

So here you go.

I was told very simply that Starwood knows this new system isnt owner friendly. This is why there has been no announcment. Starwood chose a "soft rollout", because they anticipated large numbers of unhappy owners contacting Starwood if they sent notices to all owners. They also anticipated plummeting resale prices as a result of an announcment. They preferred keeping it quiet and telling owners only when they called to exchange.

The new system was not put in place to make SVN owner and non SVN owners equal. It was put in place for purely financial reasons. Under the new system Starwood will be able to rent more prime season units than before. Previously owners would deposit high season units leaving only low season units as available for rentals. I assumed the new system would mean more availability for owners and SVN owners. I was told that I was wrong, that it it will not necessarily mean more availability for owners. I was also told that it will be just about impossible to trade one high season unit to another via Interval.

Starwood's profits are down in sales and other revenue sources were needed. Keeping a certain amount of high season rentals is Starwoods way of gaining revenue from each resort versus having only low season units avaible for rentals. I did a quick check and there are plenty of peak March SDO units available for rental direct from Starwood.

The lack of real Request First has a specific purpose. To again keep high season units as rentals. Since any reservation has to be canceled before an exchange request can be made, the high season unit reverts back as available for a rental and a low season unit is given to II instead. If the exchage request is not confirmed, the owner retains usage but may only have low season units to choose from since available high season units have already been rented.

Starwood also plans to try to implement a similar system with RCI as well as imposing similar restrictions on independant exchange company deposits. I was also told of the possibility that there will be a fee to put the name of a non owner on a home resort reservation or SVN exchange reservation.

I was told there are coming changes to SVN procedures but this is one area where I was not able to find out any more information.

Special assessments were also mentioned due to foreclosures and costs incurred due to the economy/energy costs.

HOA's at Starwood resorts are ultimately controlled by Starwood.

I dont wish to debate whether any this is true because nothing is in writing. However, this is what I was told. Yes, I lied a lot about who I was and what my situation was but it was necessary to seem like I was just another overly friendly uninformed person.

I dont know whether any of this becomes reality but its clear to me that Starwood is looking for every and any way to make money at the expense of owners, both SVN and non SVN. Those of you who I have on the owner list will hear from me again soon regarding some ideas or shoot me an email with suggestions.

Oh yeah, one more interesting tidbit. Current Starwood Vacation Ownership CEO Sergio Rivera was previously Chief Operating Officer of................Westgate Resorts. Now why am I not surprised Starwood is screwing owners

 

[DeniseM]

Outstanding work George!

But I am totally disgusted with the results of your research....it's worse than we even suspected.

George - please let us know what we can do!

And a BIG thank you!

*If you'd like to be on the list of owners who are working together on this issue, please send an email to gmarine.

 

[DeniseM]

It appears that Starwood may have already implemented the new rules with RCI - see this email that a Tugger just received today regarding an RCI deposit.

 

[DanCali]

What is the endgame?

Let'snot forget that we are are observing is probably only a small portion of the long term plan. Think of what you would do if you were Starwood, in desperate need of revenue, with no plans for further expansion into new resorts, and you pretty much control the HOAs...

If there are no plans for further expansion then reputation with new owners (ones buying from developer) is meaningless. I am truly starting to believe that the long term plan is to buy back these resorts at pennies on the dollar. With the control of the HOA, starwood can raise MFs over time to ridiculous levels, thus forcing more people to sell and lowering resale prices at the same time. It can then use ROFR to buy these back at 5%-10% of what original buyers paid. Forget renting what people trade into II - they will be able to rent all weeks, all views, whatever, whenever, while the few remaining owners subsidize the housekeeping costs...

I mean think about it - the MFs at all resorts went up again by 8%-15%. There is always an excuse - one year it's inflation, one year it's energy costs, one year it's delinquencies but they never provide enough detail to support any of these excuses! Owners just get used to it and believe MFs have to rise every year at 10%...

I want to emphasize that this is of course just PURE SPECULATION on my part; I have absolutely no evidence to back it up (besides the ridiculous trajectory of MFs at most resorts) but with the guy heading up the organization - would anyone be surprised if this was an actual deliberate strategy?

 

[jerseygirl]

Gmarine -- thanks for doing this. Are you keeping records (names, dates, times) of your conversations? Your information could prove very handy in a future action.

Danny -- I don't think Starwood wants to own the vast majority of these resorts. Why would they? Ownership brings great risks, e.g. economical (low occupancy/rental rates in a bad economy), weather (owners carry the insurance), competition (bigger, better, newer resorts can and will be built in most of these locations). With the double revenue bonanza of inflated sales prices and a lucrative management fees, they enjoy all the upside with none of the downside. They knew what they were doing when they got into the timeshare business and for a good many years it was a huge profit generator for them. Now, times are different, and they're determined to offset the losses caused by the ongoing costs associated with unsold property by squeezing every possible penny out of current owners. The management side of SVO can make a profit simply by managing the properties in a conservative manner -- but, no, that's not good enough for them. It's all about corporate greed.

But, I do believe you're right about their interest in the rental income. How those contracts were written so that rental revenue goes to Starwood and not the HOA is beyond me. Every other timeshare I own has rental income coming into the HOA finances. Perhaps that's the issue we should really be fighting (and yes, I realize it would require an expensive lawsuit to attempt to challenge the contracts). But, it defies logic (did owners really understand the implications when they signed their contracts and would the courts uphold them under a fairness challenge?). If Starwood had no motivation (i.e., no revenue) to rent prime weeks, they would stop messing with the reservation rules.

I think their current actions are very short-sighted. Someday, the economy will be booming again. But, will owners come flocking back? I don't think so. People have long memories when it comes to special assessments, out-of-control maintenance fees, benefits taken away under the guise of ehancements. Yes, there are always "new suckers" to draw in, but those who take even just a few minutes to research their purchases before the rescission period is up will easily find information such as this. On the other hand, look at the Hyatt and Hilton boards ... do you see complaints similar to ours?

 

[LisaRex]

But, I do believe you're right about their interest in the rental income. How those contracts were written so that rental revenue goes to Starwood and not the HOA is beyond me. Every other timeshare I own has rental income coming into the HOA finances.

I believe that the greed is what is going to ultimately hang them. I believe that we could fight the clause re Starwood keeping all the rental income on its face alone. I think it falls under "usury." But when they also bill current Starwood owners for delinquencies without handing over the rental income associated with those units ...well, let's just say that I believe they've hanged themselves.

They can't reasonably expect to have it both ways. I think the question is not whether the current owners are going to have to sue them but when.

And it gives me absolutely no pleasure to say that.

 

[Stefa]

The new system was not put in place to make SVN owner and non SVN owners equal. It was put in place for purely financial reasons. Under the new system Starwood will be able to rent more prime season units than before.

This is what I had suspected all along. I'm surprised someone at *wood would actually tell you this.

We made the decision to sell our SDO before these changes came about. The original plan was to buy again in a few years, but now I think we will stick with Marriott.

I still think SDO will be a good trader (by our standards) under the new system. I just don't want to be associated with Starwood.

 

[erm]

I don't pretend to know much about the Starwood system, but did spend yesterday morning studying the info available on TUG -thanks Denise and others. I attended the sales presentation yesterday afternoon and was told by the sales manager that she hadn't met anyone who knew as much about the system as I did (after she said I was "brazen" to bring recent ebay sales and WKV active listings to the meeting). When I asked about mandatory and non mandatory resorts she told me they aren't doing that anymore and Starwood is making it to stop people from buying resale. Just one bit of info I learned. I hope Marriott is not following this model for their new internal trade system.

 

[Transit]

I don't pretend to know much about the Starwood system, but did spend yesterday morning studying the info available on TUG -thanks Denise and others. I attended the sales presentation yesterday afternoon and was told by the sales manager that she hadn't met anyone who knew as much about the system as I did (after she said I was "brazen" to bring recent ebay sales and WKV active listings to the meeting). When I asked about mandatory and non mandatory resorts she told me they aren't doing that anymore and Starwood is making it to stop people from buying resale. Just one bit of info I learned. I hope Marriott is not following this model for their new internal trade system.

I'm not sure what you mean by Starwood is not doing mandatory and non- mandatory anymore.What is Starwood doing to stop people from buying resales?

 

[Politico]

I'm not sure what you mean by Starwood is not doing mandatory and non- mandatory anymore.What is Starwood doing to stop people from buying resales?

I think she means all future resorts (not that there are really any new ones coming) will be voluntary resorts.

 

[Politico]

Gmarine, Keep in mind that we know Starwood reads TUG. And a Starwood exec looked up another Tuggers account information and posted their personal information here. Unfortunately, I think the starwood execs are going to want to know who you are.

 

[pianodinosaur]

Gmarine:

You are amazing!!! Thanks for all the great work.

 

[Stefa]

When I asked about mandatory and non mandatory resorts she told me they aren't doing that anymore and Starwood is making it to stop people from buying resale.

The sad thing is this change isn't going to make very many people more likely to buy from Starwood. All it does is kill resale values, making buying from Starwood an even worse idea. Why would I want to buy developer at a place like Princeville knowing that Starwood was doing everything in their power to kill resale value?

 

[jerseygirl]

Gmarine, Keep in mind that we know Starwood reads TUG. And a Starwood exec looked up another Tuggers account information and posted their personal information here. Unfortunately, I think the starwood execs are going to want to know who you are.

Politico, I think many of us (gmarine, denisem, myself) are fully aware that Starwood knows who we are on TUG. I can't speak for gmarine or denise, but I couldn't care less. I'm not afraid of them -- I grew up in a large family and learned how to deal with bullies at a very young age! They can't stop me from using the units I bought to use, and I truly don't care one bit about the traders, except to the extent that I'll keep two (based in two separate states) so I can continue to "fight the fight" (with two different state regulators if necessary). I did consider dumping them all (I own so many timeshares -- believe me, I don't need the Starwood traders to enjoy wonderful vacations), but that would be giving in, which simply serves to reinforce a bully's behavior. Starwood is not going to be so lucky on that front.

I actually sent them a concilitory letter recently. I told them I'm willing to drop my formal complaints and apologize to all involved if they'll simply provide the legal documentation that proves they have the ability to control non-SVN deposits. (Heck, I'll even send them a crate of oranges if I'm wrong!). We'll see ... but let's just say I'm not holding my breath.

 

[DanCali]

The sad thing is this change isn't going to make very many people more likely to buy from Starwood. All it does is kill resale values, making buying from Starwood an even worse idea. Why would I want to buy developer at a place like Princeville knowing that Starwood was doing everything in their power to kill resale value?

You are right. We rescinded Princeville after I did a couple of hours of research on TUG. It doesn't take long to realize that buying voluntary from developer is not a great proposition. The mandatory/voluntary argument also dictates that there is no reason to buy Princeville on resale when you can buy Maui or even a property in the desert on resale and get much more in benefits, at least not until Princeville resale prices become more similar to WMH.

But now that I gravitated towards mandatory resorts (on resale), I realize that those are not maintaining their value either when MFs are skyrocketing every year.

Starwood has been living by the mantra of "There's a sucker born every minute" but I am sure that the ability of buyers to find TUG has increased the rate of developer purchase cancellations. The economy is only one reaon why there are no new developments, but not the only one in my opinion.

 

[DanCali]

I don't think Starwood wants to own the vast majority of these resorts. Why would they? Ownership brings great risks, e.g. economical (low occupancy/rental rates in a bad economy), weather (owners carry the insurance), competition (bigger, better, newer resorts can and will be built in most of these locations). With the double revenue bonanza of inflated sales prices and a lucrative management fees, they enjoy all the upside with none of the downside.

I don't know what their long term agenda is, so I am just speculating. They already got the inflated sales prices so how do they maximize revenues now? They can try to milk owners as much as possible with their cut from MFs, SVN fees, rentals, etc but I am not sure if that is sustainable in the long run.

Think about what are the options when MFs at WKORV reach $4000 or $5000? At this rate this can happen in about 5-6 years... At that level of MFs thousands of owners wll seek to dump their properties and resale values will literally be zero because nobody will want to buy them. So either Starwood buys the hotel back or owners vote to close down the property, if the latter is even an option. If they buy a week at $1000 (probably very generous, because at that level of MFs owners will be willing to give their weeks away, or even pay someone to take them) that's $50,000 per 2BR villa in a super prime location. Much cheaper than building from scratch... (in fact, buying just the furniture and appliances inside the villa would probably exceed that value). Even with the risks of economy/competition this has got to be a very attractive proposition for Starwood.

As an illustration think of their return on investment in an ultra conservative scenario - they rent a 2BR villa for $300 a night ($100 for the studio and $200 for a 1BR suite), have only 70% occupancy rates at those ridiculously low rates, and their costs to operate the villa are 90% of revenues... So their operating income per villa per year would be $300 * 365 days * 0.7 occupancy * 0.1 operating margin = $7665 per year. On a $50,000 investment that's a pretax return on equity of over 15% a year. And I think we can all agree this is a very conservative scenario...

Now in more realistic, but still quite conservative scenario, they rent a villa at $500/night (say $200 for a studio and $300 for a 1BR suite), have 80% occupancy and let's just assume their costs are still 90% of sales. Now their operating income per villa per year would be $500 * 365 days * 0.8 occupancy * 0.1 operating margin = $14,600 per year. On a $50,000 investment that's a pretax return on equity of over 29% a year! This doubles to a 60% pretax annual return if the costs are 80% of revenues and they have a 20% operating margin.

When you think of it that way you see that despite the risks, buying the hotel back fr a symbolic price would be a great way to create value for Starwood shareholders (not the SVN owners). This is not so outlandish as it may seem at a first glance at the idea...

 

[gmarine]

Gmarine, Keep in mind that we know Starwood reads TUG. And a Starwood exec looked up another Tuggers account information and posted their personal information here. Unfortunately, I think the starwood execs are going to want to know who you are.

A Starwood Exec looked up a Tuggers account and posted that information in a public forum without permission ? If that is true, and Starwood management found out, I guarantee that employee would be fired immediately. Starwood Corp has specific privacy policies in place to protect members information. An employee cannot post private information in a public forum.

I tell Starwood management every chance I get that I post on TUG. I want them to know who I am and that I'm going to be a most annoying pain in the ***.

I cant imagine why anyone would not want Starwood to know that they are unhappy and that they are willing to post in a publice forum to let others know.

 

[James1975NY]

It appears that Starwood may have already implemented the new rules with RCI - see this email that a Tugger just received today regarding an RCI deposit.

I believe that this is a different issue. More likely, the owner has used some time for 2010 and they are not eligible to deposit a week right now. Was there any follow up from the Tugger? They said they did not have time to call SVO to discuss the e-mail.

 

[DeniseM]

A Starwood Exec looked up a Tuggers account and posted that information in a public forum without permission ? If that is true, and Starwood management found out, I guarantee that employee would be fired immediately. Starwood Corp has specific privacy policies in place to protect members information. An employee cannot post private information in a public forum.

I tell Starwood management every chance I get that I post on TUG. I want them to know who I am and that I'm going to be a most annoying pain in the ***.

I cant imagine why anyone would not want Starwood to know that they are unhappy and that they are willing to post in a publice forum to let others know.

George - the TUG member in question reported it to the Starwood lead attorney and they did NOTHING - in fact the employee who posted the TUG member's info. still lurks on TUG, and still uses their work ISP.

 

[DeniseM]

I believe that this is a different issue. More likely, the owner has used some time for 2010 and they are not eligible to deposit a week right now. Was there any follow up from the Tugger? They said they did not have time to call SVO to discuss the e-mail.

Jim - the OP wants to deposit their reserved 2010 week with RCI and Starwood/RCI will not allow them to do so. They have not use the week - they have tried to deposit it, and they are not being allowed to do so.

 

[gmarine]

George - the TUG member in question reported it to the Starwood lead attorney and they did NOTHING - in fact the employee who posted the TUG member's info. still lurks on TUG, and still uses their work ISP.

Really? Wow. Most companies have a very strict policies regarding the release of personal information and have a zero tolerance policy for violations. Immediate dismissal is common for violations. That TUG member should call Sergio Rivera's office and file a formal complaint against both the employee who posted the information and against the attorney who did nothing. Something like that could result in a lawsuit against Starwood.

 

[sjuhawk_jd]

Really? Wow. Most companies have a very strict policies regarding the release of personal information and have a zero tolerance policy for violations. Immediate dismissal is common for violations. That TUG member should call Sergio Rivera's office and file a formal complaint against both the employee who posted the information and against the attorney who did nothing. Something like that could result in a lawsuit against Starwood.

Gmarine, remember your own post, Servio Rivera used to be CEO of ....... Westgate resorts. So things such as contracts, violations of policies, fairness, threat of lawsuits do not mean much going forward. I do see starwood taking actions against some SVO owners who will show up at one of their resorts wearing a t-shirt "starwood lied to me and screwed me"

http://www.wftv.com/news/20121236/detail.html

 

[James1975NY]

As some Tuggers know, I have been spending a lot of time calling Starwood to see what I can find out about any motives of the system change or future plans Starwood may have.

I have made dozens of calls to Owner Services, Specialists, managers etc. I have called Starwood sales multiple times. I have spoken to muliple people at Interval as well. I have called as an owner, giving my info as well as an owner just asking general questions without giving my info. I have pretended to be a prospective retail buyer and a prospective resale buyer. I have inherited a mandatory unit as well as a voluntary resort. I was a seller having trouble selling who had questions about why. I was an exchanger looking to trade into Starwood resorts. I had to make up a lot of stories to gather this info.

So here is what I have gotten from all this. Please keep in mind none of this is official. Much of it has been gathered in small parts from many different employees.

So here you go.

I was told very simply that Starwood knows this new system isnt owner friendly. This is why there has been no announcment. Starwood chose a "soft rollout", because they anticipated large numbers of unhappy owners contacting Starwood if they sent notices to all owners. They also anticipated plummeting resale prices as a result of an announcment. They preferred keeping it quiet and telling owners only when they called to exchange.

The new system was not put in place to make SVN owner and non SVN owners equal. It was put in place for purely financial reasons. Under the new system Starwood will be able to rent more prime season units than before. Previously owners would deposit high season units leaving only low season units as available for rentals. I assumed the new system would mean more availability for owners and SVN owners. I was told that I was wrong, that it it will not necessarily mean more availability for owners. I was also told that it will be just about impossible to trade one high season unit to another via Interval.

Starwood's profits are down in sales and other revenue sources were needed. Keeping a certain amount of high season rentals is Starwoods way of gaining revenue from each resort versus having only low season units avaible for rentals. I did a quick check and there are plenty of peak March SDO units available for rental direct from Starwood.

The lack of real Request First has a specific purpose. To again keep high season units as rentals. Since any reservation has to be canceled before an exchange request can be made, the high season unit reverts back as available for a rental and a low season unit is given to II instead. If the exchage request is not confirmed, the owner retains usage but may only have low season units to choose from since available high season units have already been rented.

Starwood also plans to try to implement a similar system with RCI as well as imposing similar restrictions on independant exchange company deposits. I was also told of the possibility that there will be a fee to put the name of a non owner on a home resort reservation or SVN exchange reservation.

I was told there are coming changes to SVN procedures but this is one area where I was not able to find out any more information.

Special assessments were also mentioned due to foreclosures and costs incurred due to the economy/energy costs.

HOA's at Starwood resorts are ultimately controlled by Starwood.

I dont wish to debate whether any this is true because nothing is in writing. However, this is what I was told. Yes, I lied a lot about who I was and what my situation was but it was necessary to seem like I was just another overly friendly uninformed person.

I dont know whether any of this becomes reality but its clear to me that Starwood is looking for every and any way to make money at the expense of owners, both SVN and non SVN. Those of you who I have on the owner list will hear from me again soon regarding some ideas or shoot me an email with suggestions.

Oh yeah, one more interesting tidbit. Current Starwood Vacation Ownership CEO Sergio Rivera was previously Chief Operating Officer of................Westgate Resorts. Now why am I not surprised Starwood is screwing owners

Gmarine.

I am shocked to hear of this feedback having been previously employed with SVO.

Are you saying that a Starwood employee(s) specifically said that they we aware that the recent changes were not owner friendly?

Also, Starwood employee(s) specifically said that the changes were put into place purely for financial reasons and that they could rent out more prime weeks?

Whether the statements are true or not, I would not imagine SVO or any other developer coming to the line with such a response.

I understand that Starwood has verbiage in some (if not all) of their condominium documents that allows them to rent out unreserved inventory 60-days out. What I am not sure of is that there are so many owners that want to deposit specific weeks that they see an opportunity to improve their bottom line so much by changing the process so drastically.

Very interesting reading here.

 

[DavidnRobin]

on a related note - see my post from SVO Management regarding WSJ MFs and Owners deliquencies and defaults (typical corp-speak)

http://www.tugbbs.com/forums/showpost.php?p=810907&postcount=302

I will not go away until I get real answers and results...

I suggest that others start LOUDLY complaining to SVO Managment and HOAs/BODs...

 

[gmarine]

Gmarine.

I am shocked to hear of this feedback having been previously employed with SVO.

Are you saying that a Starwood employee(s) specifically said that they we aware that the recent changes were not owner friendly?

Also, Starwood employee(s) specifically said that the changes were put into place purely for financial reasons and that they could rent out more prime weeks?

Whether the statements are true or not, I would not imagine SVO or any other developer coming to the line with such a response.

I understand that Starwood has verbiage in some (if not all) of their condominium documents that allows them to rent out unreserved inventory 60-days out. What I am not sure of is that there are so many owners that want to deposit specific weeks that they see an opportunity to improve their bottom line so much by changing the process so drastically.

Very interesting reading here.

Yes,yes, and they did indeed.

Keep in mind that I pretended to be many different people and was in many different situations. Many times I spoke of things like my sympathy for the employees who are being yelled at by owners for something management did, they should treat employees better etc. You would be surprised how much you can get from employees that you can get talking, especially if they even have the smallest amount of contempt for their employer.

Starwood's third quarter financial results were a disaster. Revenue from timeshares was down 44%. It makes sense that they are looking for any way they can to increase revenue. They are unfortunately attempting to do it ar the expense of owners.

I wanted to add that its pretty obvious Starwood knew the changes arent owner friendly. If Starwood anticipated good reaction they would have made an announcement about the changes and advertised the great new trading "enhancment". Instead they hid the whole thing and the only way owners find out is by calling and asking. Starwood is also still refusing to provide owners with the official details of the system.