Marriott Going to Point Syst

Earlier this week Marriott International announced that they will spin-off their Timeshare business from the company. Existing Marriott shareholders will receive a proportional shareholders interest in the new, yet to be named timeshare company. This is an obvious sign of the trouble the timeshare business is in and indicates that Marriott management doesn't want the poor performance of its timeshare business to impact the remaining assets which may be in a more rapid recovery scenario. It also allows for the timeshare business to be sold much easier than before. Regarding the new destinations point system, it implies that it was not the savior they might have hoped for. While it has been interesting to discuss the pluses and minuses of the destinations program, the changes that could result from the spin-off could be more significant in the long run.

This is a game changer if Marriott no longer is in the timeshare business. The value of the properties will take a nose dive.

Yes, Marriott just announcede it is spinning off the timeshare operation.

While sales to existing customers were up (probably because of the cost to buy into the new program) sales to new owners were down -- which is not a good sign.

It it my judgment that this is NOT a good sign for Marriott Timeshare owners. The new company will just be leasing the Marriott name, so Marriott will no longer be involved. At first things will be similiar. However, over time it will be a very different operating company -- which of course, is one of the reaons for spinning it off so it can be different. It would not be surprising for the Boards of Directors of some Marriott properties to hiring Hyatt, Hilton or some other well known timeshare company to manage specific units. Bottom line: this is a very significant change with a very unknown outcome.

Here is the quote on Marriott timeshare financials:

"In the fourth quarter, Marriott’s timeshare business continued to focus its efforts on educating existing customers about the benefits of its new points product. The program allows customers to purchase timeshare in smaller increments than the traditional one-week product and allows greater flexibility of use. In the fourth quarter alone, over 30,000 existing owners joined the points program, continuing to exceed the company’s expectations. Contract sales to existing owners increased 47 percent in the fourth quarter compared to the year-ago quarter. With fewer sales to new customers year-over-year, fourth quarter adjusted Timeshare segment contract sales declined $2 million to $201 million (excluding a $4 million allowance for residential contract cancellations recorded in the quarter). In the prior year’s quarter, adjusted Timeshare segment contract sales totaled $203 million (excluding a $28 million allowance for fractional and residential contract cancellations).

In the fourth quarter, Timeshare sales and services revenue totaled $372 million and, net of expenses, totaled $43 million for the quarter. Adjusting for restructuring and other charges, as well as the impact of consolidating securitized notes had that occurred at the beginning of 2009 rather than 2010, fourth quarter 2009 adjusted Timeshare sales and services revenue would have totaled $373 million and, net of direct expenses, would have totaled $64 million. These adjustments and reported results for the 2009 quarter are shown on page A-11.

Fourth quarter 2010 Timeshare sales and services revenue, net of expenses, declined largely due to $8 million of costs related to the new points-based program, a $6 million impairment charge related to a few fractional projects, higher carry costs on unsold units, and lower interest income on mortgage notes. These unfavorable variances were partially offset by higher rental income and lower expenses associated with reacquired inventory.

Timeshare segment results include Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity in earnings (losses), gains and other income, interest expense and general, administrative and other expenses associated with the timeshare business. Adjusted Timeshare segment results for the 2010 fourth quarter totaled $42 million (as shown with reported results on page A-9) and included $15 million of interest expense related to the consolidation of securitized Timeshare notes, as well as a $20 million gain on the sale of real estate, both of which were included in the company’s fourth quarter 2010 guidance. In the prior year quarter, adjusted Timeshare segment results would have totaled $28 million, adjusting for the restructuring costs and other charges, as well as the impact of consolidating securitized notes had that occurred at the beginning of 2009 rather than 2010, as shown with reported results on page A-11. Adjusted Timeshare segment results for the year-ago quarter included $26 million of interest expense related to the consolidation of securitized Timeshare notes."

What if the new points owner could get 3 weeks from off season reservations in a one bedroom or 2 bedroom. Let's say they purchased 4500 points at .40 per point for main fee which would be $1800 a year. If they got 4 weeks out of the 4500 points that would be about $450 per week for main fee. I don't think that is to shabby do you? For example: 2 bedroom villa for 7 nights at Manor Club for 1400 points, 3 bedroom villa at Surf Watch for 7 nights for 1000 points, 1 bedroom at Mountain Valley for 7 nights for 625 points, 1 bedroom at Canyon Villas for 7 nights for 1450 points. Total points for that years usage 4475. Keep in mind most of these weeks are being reserved in the off season. But you get my point (No pun intended)

Yes, that is what makes the new points system very interesting. Howver, if you want to go during the platinum, or even the gold seasons in high demand locations, both the buy in and the mtce fee will be significantly higher then for deeded owners who own during those periods.

FYI. Here's one of the better articles on the spin off.

Sounds like Marriott International, their hotel business, was being pressured to return to their core business so it could achieve greater value and a stronger ability to borrow for expansion and growth. The spin off company will be a timeshare development focused company under the brand names Marriott and Ritz-Carlton only. Since Marriott International is THE world expert in hotel/resort management I suspect they will continue to provide this service (paid for by maintenace fees) for all their existing timeshare properties. The practical difference is now the timeshare development and sales activities will have to stand on it's own. This will mean growth and expansion opportunity will be directly linked to sales performance and as we all know as of 20 Jun 2010 that will depend on the new Destination Points system.

One note is Marriott International has done this type of thing before when they decided to focus on their hotel/resort management side there-by fanchising/transferring ownership of most of their existing hotel/resort properties to investor groups but retaining full operations and management.

Marriott International will still develop new hotel/resort properties, but now without the burden of the slower timeshare side. The new timeshare spin off will have to fund it's own development efforts based on it's own performance and credit worthiness.

BTW it should be noted as deeded owners we are the investor group(s) that own all the existing Marriott Timeshare properties and pay Marriott International to service and manage our properties. As owners we should become more active in how our board of directors (for each property) represents our interests. We should be advocating/demanding priority, transparency and ease of exchange for Marriott owners (internal exchange). Then promoting full occupancy of Marriott properties via outside exchange and rentals to control growth of maintenance fees.

One suggestion I would make is since Interval International and RCI are easily pressured by timeshare developers, we as owners need to band together and make our own demands on how we want them to manage our units/properties. If they don't or can't respond then, it might be time to use Redweek/DAE or another start-up that we control to keep it in the "Marriott Timeshare Deeded Owners" family first. Remember the days of internal exchange for $39 or $49?

Marriott timeshares are and will continue to be the best brand in resorts by far (all Marriotts are Premier/five-star). We as owners have been blended with all other brands (most not so good) as the exchange process has been moved to subcontractors II and RCI vs Marriott. Our exclusivity has been watered down to the point we spend too much time competing with non-Marriott owners for exchanges. With our own Marriott controlled exchange system (or subsystem) we could do Marriott internal exchanges for a longer period (perhaps 90 days) before depositing in II/RCI and allowing non-Marriott owners access to our inventory.

Just some early morning thoughts. I'd welcome other ideas, but for now it's time for a cup of coffee.

Erman

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Marriott Shares Climb After Timeshare Spinoff Planned February 15, 2011, 4:39 PM EST By Nadja Brandt

(Updates with closing share price in second paragraph.)

Feb. 15 (Bloomberg) -- Marriott International Inc., owner of the JW Marriott and Ritz-Carlton brands, rose in New York trading after saying it would spin off its timeshare operations.

The company’s shares climbed 1.1 percent to $41.46 at 4:15 p.m. in New York Stock Exchange composite trading. They earlier rose to $42.78, the highest intraday price since October 2007. The stock has gained 54 percent in the past year.

The spinoff will allow investors to choose between Marriott’s hotel management and property development businesses. It will likely give the hotel company a higher valuation after separating from the slower-growth timeshare business, according to Joseph Greff, an analyst at JPMorgan Chase & Co.

“Marriott’s lodging fee business needs little capital investment, while timeshare needs some level of investment, so this spin could be accretive to free cash flow,” Greff wrote in a research note yesterday. “Our initial take on the spinoff is that this is likely going to be well received by investors.”

The company has pursued an asset-light strategy, divesting most of its hotel real estate and concentrating on operating properties rather than building and owning them. The timeshare business, hurt by a slump in demand during the recession, is focused more on development, said Patrick Scholes, a New York- based analyst with FBR Capital Markets.

‘Investor Pressure’

“There has been investor pressure for many years to sell that business,” he said. “If you want to grow the timeshare business, you have to invest heavily in real estate and development and build things from the ground up. Marriott shareholders aren’t keen on that.”

Stock in the timeshare business, which had revenue of about $1.5 billion last year, will be distributed to Marriott shareholders as a tax-free dividend by the end of this year, the Bethesda, Maryland-based company said yesterday in a statement. The spinoff is likely to trade on the New York Stock Exchange, Marriott said.

The timeshare business, which Marriott started in 1984, has been slow to recover from a decline in consumer spending. In the fourth quarter, Marriott’s timeshare sales fell to $201 million from $203 million a year earlier.

“This had nothing to do with how the timeshare business has been impacted,” Arne Sorenson, Marriott’s president and chief operating officer, said of the planned spinoff in a telephone interview. “It obviously has been impacted by the downturn. Compared to the recession earlier this decade, it was hit harder this time. It’s more about that investors prefer one or the other.”

Separate Boards

Marriott and the new company will have separate boards. J.W. Marriott Jr. will remain chairman and CEO of Marriott International. Stephen Weisz, president of the timeshare business, will become CEO of the new company. William Shaw, who recently announced his retirement as Marriott’s vice chairman, will become chairman of the timeshare company.

After the special dividend, the Marriott family probably will hold about 21 percent of the common stock of each company. The new company is unlikely to pay a quarterly cash dividend or be investment grade “in the near term,” Marriott said.

The timeshare unit accounts for about 13 percent of Marriott’s total revenue. Marriott will continue to receive franchise fees from the timeshare company’s use of the Marriott and Ritz-Carlton brands, the hotelier said.

“The timeshare business is a very capital intensive real estate business,” Scholes said. “The rest is a global management and franchise business with minimal capital expenditures and minimal ownership.”

Marriott yesterday also reported fourth-quarter earnings that beat analysts’ estimates. Net income climbed to $173 million, or 46 cents a share, from $106 million, or 28 cents, a year earlier, the company said. Adjusted earnings, which exclude an $84 million impairment for revenue-management software and other costs, totaled 39 cents a share, more than the 37-cent average estimate in a Bloomberg survey of five analysts.

Revenue climbed to $3.64 billion in the fourth quarter from $3.38 billion a year earlier.

--Editors: Daniel Taub, Christine Maurus

Great information ermanc! Thank you for finding and sharing this with us. I know that the knowledge helps with my uncertainty.

I am still concerned but not nearly the unsettled that I was.

I have further information on my experience with the new point system that I will be typing up and posting later. I hope that it helps clarify somethings for others. I think I have a better understanding after spending time with my representative (a different one from the past) on the phone again.

Nice piece of information ermanc.

The split from the main company is not a bad thing. It will provide more focus to the timeshare business and put the customers/owners again at the center of the equation.

The way it is done seems well thought, as Marriott family members will still be in the board and the brand is licensed. I frankly think that it provides the flexibility that this business needs to operate (heavy capital need) and that the hotel owners will not like.

Marriott brand/timeshare is simply fantastic. I am spending 4 days (president's week-end) at Crystal Shores in Marco Island and it is great resort/service/value for money/etc... No doubt that this business will only go up from here and we (as owners) will benefit from it.

I agree with ermanc that we have to be more proactive as owners. Going forward, I will be more looking into board minutes and resolutions, as well as nominations. We should be careful about the hidden cost of DC points and that it is not us (owners) that pay for MVCI.

Happy President's Day to all,

Glad to share info as I come across it as well as my own thoughts (when they seem worthy). I do have a another thought to share as we get more involved with the operations and management of our respective Marriott timeshare resorts.

- Maintenance fees (MFs) are the primary cost item for deeded owners, but other than complaining about them when they increase what have we done to keep them reasonable? In a perfect world MFs are the taxes and operating costs (maintenance, repair, capitol improvements, etc) divided by the number of owners. Unfortunately, we live in the not too perfect world where many fail to pay their MFs each year (reasons vary), but in the end the responsible owners end up paying a larger share. Note: This pool of paying owners includes individuals and MVCI (for unsold units).

So let break this down a bit more:

Taxes: Property taxes always seem to go up on real estate. Actually, not always! In the past few years real estate values have dropped dramatically as the economy has dropped. Property taxes on my own home have dropped two years in a row so has a similar drop been applied to our resorts. Demand your board of directors' (BDs) treasurer or MVCI check it and if they have not gone down push them to have it reassessed. Trust me when this recession is over and property goes up again the tax rates will go up quickly.

Management costs: This is done by MVCI and for the most part it is done very well so I don't see a need to change, but it would be nice to have BDs compare per/unit costs to say Hilton Vacation Club or Sheraton to see how MVCI compares. If they are higher, perhaps we should negotiate a better rate.

Maintenance, repairs, capitol improvements: This is the majority of our MFs and dependent on age and condition of the units. When you stay at your unit "inspect" the unit, grounds, building exteriors, and facilities using the same eye you would use if you were considering purchasing a unit. I actually try to take an "owner's" tour of all the timeshares I stay at or can visit. If the resort is top-notch we can thank MVCI for enforcing high standards. If you see issues bring them up to mgmt, and write to your BDs with issues and recommendations. So how do we lower MFs? First we need to know how MVCI is sourcing work and capitol improvements. Are they competing housekeeping, maintenance, repairs, and capitol improvements? If not ask them why not? The difference between retail and wholesale or sole-source or competitive bids is tremendous especially in today's economy.

Unpaid MF's: All of the above should be things MVCI already handles well since they are considered the industry leader in property management. This topic seems to be one they don't have much control over. They send out our MF bills which owners pay on-time. If they pay late, they pay a late fee. If some or many don't pay at all, they get reported to a collection agency and paying owners have the unpaid MFs added to our total next year as reserve funds drop/become underfunded. If the delinquent owner has an unpaid mortage too, it eventually is foreclosed on and sold at auction. We see many of these on eBay sold by large timeshare firms liquidating dozens of units. So how many owners get a report on the MF's that were not paid in the past year? Is it in the annual financial report? If not, it should be there and even noted in newsletters or resort websites. So what happens to these units when MFs go unpaid. Do they go unused? Does MVCI try to rent them out via Marriott for the 66% return (33% fee to Marriott)? Perhaps all these units could also be listed on RedWeek for $25/wk and reduced as start date approach so units get rented. In the end, we should all know the procedure used for unpaid MFs since this directly impacts paying owner's annual MFs.

Foreclosed units and/or owner resales: In trying to achieve 100% owner payment of MF's I believe it is required that all units need to be owned by responsible parties. Sadly, in the current economy that is not the case even for Marriott timeshares. To improve this situation, I propose our BD's or owners offer to list these units on RedWeek or TUG, etc to find new responsible owners at reasonable values. How many of us would consider an additional unit at our favorite Marriott timeshare at perhaps a fraction of what MVCI is struggling to sell at high retail DPs values? Bottom-line is I'd like to see a single site with listings of all Marriott timeshare resales that banks/lenders could also list foreclosed units for auction. I strongly believe current Marriott owners are the best market for resales/auctions and the best source for new potential buyers (family, friends, etc).

Just more food for thought and owner action in the coming months/year. If you do one thing this year, make a list of questions (copy mine above or use others on this site as a starting point if you wish) and send it to to your BDs. Encourage them to be responsive if they don't elect those that will or consider running yourself with a platform based on those things we know to be best for deeded owners. Finally encourage them to create a sharing forum/website for all Marriott Deeded Owners so we can organize and demand responsiveness from MVCI.

We should all take our ownerships seriously and perhaps we can even help each other achieve the ownership level of satisfaction we expect from Marriott. Until then happy vacationing. Remember book early and don't forget the sunscreen. For now, I'm off to fix lunch and enjoy the rest of President's Day.

Erman

PS: Sorry if this was mostly off the topic of the new Destination Point's system. I'll restate my view that I support it as far as it offers me another option in using my deeded units. I believe the points owners will be getting less as they are members of a collection of units. I belive most points will be sold at locations like Hawaii, Marco Island, Orlando, or West Palm but be backed by the Collections less desireable unsold inventory that MVCI still owns. I for one would like to only trade my deeded units for DPs when the dates/locations I desire are available "Request/Book First". Otherwise, I recommend we deeded owners keep pressing MVCI and II to respond to our needs as the owners or find another form of internal trading (perhaps RedWeek DAE?) that more closely matches our original vision and experiences. Cheers!

ermac thanks for the great information regarding the spin off.

Ermanc, great information...... now an update from a previous discussion.... Over the years I have traded my bronze winter week on HHI for other destinations all considered Red or Platinum. (even if I have accepted a lockoff). I have a request that is pending now trading Winter Grande Ocean for Sept at St Kitts. This is St Kitts lowest season, but that is when my last daughter is getting married, hence the exchange.

For the first time in 14 years doing around 10 exchanges, I was called by Interval and told that I probably would not get this exchange, since I was trading a green week for Red. I was also told that inventory never comes available from St Kitts. Then the rep proceeded to try and sell me a getaway to St. Kitts, which supposedly are lock off units. If you look at all the info for St Kitts, there are no lock offs, only 2 or 3 bedrooms. I assumed that the lock off units are really part of the Marriott Hotel Resort that also is on the property but this might not be the case. Could it be that the resort does have lock offs, but they have plugged this hole in the trading system?

Back to my original point, I realize that I have always been lower on the request totem pole as far as getting exchanges with a bronze week, and that is fine. But now it does appear that I am being locked out of getting an exchange through Interval for an internal Marriott property... Perhaps some of the other posters have been correct in their assumptions that II exchanges will dry up, This is the last week I had deposited under that old system and old interval account. That must be how they are keeping track of who is in the new system or not. I have two interval accounts now, one for all activity before joining points and one as part of joining points.....

Anyone have and concrete information about St Kitts to help me make a decision on buying this getaway or not? It wasnt a bad price, $425 and after I cancel the exchange fee of $139 the guest certificate of $60 its only another $200 or so. It seems that the winds of change with II are in the air........

I was able to exchange for 2011, through II, an Orlando GV week (July 4th) for a late July week at St Kitts--it was a 2BR for a 2 BR and it was confirmed with about a 4 week wait. I suspect that the problem in St Kitts currently is that the unsold inventory is not available to II and is part of the inventory for Destinations. I imagine that the majority of properties with unsold inventory will have this type of condition from time-to-time. Unfortunately, while the economy has slowed Marriott's future timeshare development, deeded week owners who don't join Destinations will find it difficult to exchange through II into any new properties as they will be exclusively in the Destinations/Trust program.

Thanks for the key information and checklist for our BDs. One additional question that I have is the following:

With the DC program, MVCI is selling days instead of full weeks. How does that influenced cleaning/check-in/out workload?

In fact, in our maintenance fees, we pay for the services at the reception, one full cleaning a week, etc. If you start splitting a full week in various piece of stays, who is paying for the additional workload and cost involved?

This is for me one of the key question with the DC program and the resort management costs. If the response is that it is not incremental (because employees are already on site, etc), this is maybe valid short term but not necessary over the long term. We all know that today most check-in/out happened on week-ends.

Anyway. Let's keep an eye on it.

Good morning,

In case you wanted to see Bill Marriott's press statement/announcement on the spin-off of MVCI here's a link to the clip on youtube. Press articles align well with his actual words that MVCI spin-off was done to help both the hotel and MVCI groups grow and prosper.

EC

http://www.youtube.com/watch?v=MfjbiODMgsY

Anyone have and concrete information about St Kitts to help me make a decision on buying this getaway or not? It wasnt a bad price, $425 and after I cancel the exchange fee of $139 the guest certificate of $60 its only another $200 or so. It seems that the winds of change with II are in the air........ _____________________________________________________ In response to the above, we stayed at St. Kitts a year ago in a hotel room by using our Marriott Rewards points (used WAY too many when we found out later that we could have had the same through a getaway for about $200 at that time). We found out while staying there that the "lockouts" were indeed the hotel rooms. We only found this out after asking a Marriott sales person there to give us a reason for buying when we could get a lockout for about $200 as a getway. He then went on to explain that the lockouts were unreserved hotel rooms, not actual timeshare "lockouts" as we know them.

Concerning trading in there, we were offered a trade for this month back in January and we weren't even trading a Marriott. We probably should have taken the trade, but we had just been there a year ago so took a trade to the Marriott Aruba Resort instead. I'm guessing the reason we were able to get into either of these without using one of our Marriott properties is because it was within the 60 days prior to the trade.

Hope this helps!

We just came back from the Marriott Maui Ocean Club where we met with the timeshare staff about the points program. No thank you! I don't like the idea of not owning a week every year at your home resort and instead having points. And the way the system works, it's likely you won't have enough points to go all the places they say this new "flexibility" will allow.

They said we could change our ownership week into points for $1500. We bought on the resale market (through Redweek). If we'd bought through Marriott, it's something like $500 to convert. He said that only 5% of Marriott owners were choosing NOT to go with points. Yeah, right! What a bunch of bunk.

He also said that if owners convert to points, they no longer have the option of selling their "unit" on the open market - that it can only be sold back to Marriott. So that means whatever Marriott will pay is what you'd get in resale.

The points system is awful! Don't do it!

He also said that if owners convert to points, they no longer have the option of selling their "unit" on the open market - that it can only be sold back to Marriott. So that means whatever Marriott will pay is what you'd get in resale.

The points system is awful! Don't do it!

In response to the above statement, I think your salesperson was giving you more than a bunch of "bunk," as you say. This information is not accurate, as far as I know. If you join the Destinations program, you still maintain your deed and can still sell your villa on Redweek or wherever you want. Marriott has always had the first right of refusal, but they will not be taking away the option of selling our units. If we buy points, that is the case because we don't actually own our specific villa, but it is not the case for weeks we own when we join the Destinations program.

Hello all, Here are some very specific written information on new Marriott's new DP program as reported in my MVCI newsletter for Monarch Sea Pines, HH. The same details were in my other two Marriott newsletters received in the last couple of weeks.

Erman

*********************************************** Three of the top areas of concern for Monarch owners have been villa availability, COA governance impacts, and COA fees/budget issues. Our MVCI management team provides these clarifications:

1. RESORT VILLA AVAILABILITY

The reservation rules and priorities that have been in place over past years have been maintained, so owners’ access to occupancy of their own resort villa will not change. To implement the Destinations™ program, MVCI has conveyed the weeks that MVCI itself owns to a newly-formed “Trust Owners Association,” which can be thought of as a multi-week owner. The Trust cannot reserve any accommodations beyond the number and type season, bedroom type, etc.) actually owned by the Trust. In addition, MVCI’s inventory management team allows the Trust to reserve inventory only within a particular season proportionate to the total percentage of weeks owned by the Trust during that season, so that Trust reservations are spread across the entire season, not just in highly-desired weeks.

2. GOVERNANCE

The structure of the existing Owners Association at Monarch (and at other MVCI managed resorts) will not change. The enrollment of weeks in the Trust will not have any adverse effect on Monarch’s operations. All owners maintain their voting rights. The Trust will have the same ownership rights as any other multi-week owner, including the obligation to pay maintenance fees.

3. FEES AND BUDGET

The cost of the MVCI Destination™ program will not affect Monarch’s maintenance fees. The annual maintenance fees for any Monarch units conveyed into the Trust will be paid for by the Trust. These fees will be paid on or before the due date, in cash, which may even decrease our overall credit card commission charges and bad debt expenses. Additionally, MVCI has put processes in place to ensure that any incremental costs associated with the new program (e.g. incremental housekeeping charges due to shorter stays by Points Owners) will be identified and reimbursed by the Trust or the Exchange Company.

Thanks Erman, I love it when owners share FACTS. (I just wish Marriott would put this kind of info on their site and train ALL their sales people to also provide factual info.)

Wondering if anyone has thoughts as to whether or not "the gift of time" will be offered to owners now that they have another way to make money from the additional days that aren't deeded.

Last year I think it was offered in June and this is another year where there is a week 53 but I suspect that we may never get the offer due to the new point system.