I am a generally satisfied member of Festiva Adventure Club, but I'm not happy with their July 29th letter, asking me to pay $230 in a special assessment to cover losses related to the COVID pandemic. My question is, are other companies billing owners for extra fees? I haven't been able to secure a Festiva reservation this year, or last, so this assessment really rankles me.
All Festiva owners received the same apologetic special assessment letter, but they won't be the last. Many other developers and legacy HOAs — especially those with no active sales programs — are either dipping into reserves to cover pandemic costs or drafting special assessment notices that they'll send to owners between now and the end of year. We've also discovered several companies that are just tucking COVID-related costs into their reserve budgets for 2021.
Festiva COVID Special Assessment Due Sept. 10
Festiva is a privately owned, points-based club launched in South Carolina in 2000. It is representative of regional medium-sized timeshare companies that claim 100,000 families and a smattering of resorts (and in Festiva's case, catamarans for sailing vacations). Here are excerpts from the club's special assessment letter to owners:
"We are still faced with travel restrictions, the fear of travel amongst our membership base, and bad debt recovery from delinquent members. In years past, we have relied heavily on our rental component to help offset the shortage of funds, but with these challenges, we are projected to only hit 25% of what we anticipated collecting from rentals to keep our club thriving."
A portion of the special assessment will be allocated to replenishing reserve funds that, this year, have been spent on resort renovations. That means, according to Festiva, that owner maintenance fees for 2021 will see "minimal to no increase."
The rest of Festiva's letter describes capital improvements at several resorts that were shuttered by the pandemic. It also reminds owners to take advantage of special, last-minute travel deals for 2020.
We contacted Festiva's member services and media team for an interview about the assessment, but they declined to respond. There is no information about it on their website, either. Festiva, in fact, has not published a press release, of any kind, since May 2019.
Vistana Maintenance Fees Rise as Cleaning Costs Soar, Rentals Decline
The Vistana timeshare network owns the Westin and Sheraton brands with luxury properties all over the US mainland, Hawaii, Mexico. and the Virgin Islands. In its Aug. 11 maintenance fees billings to owners, the Flex Collection HOA disclosed COVID expenses in ways — costs per point — that would be incomprehensible to many owners... and most CPAs. Overall, Vistana says the pandemic is responsible for a 2% assessment, which masks many of the real costs (such as depressed sales, personnel layoffs, and loss of incidental on-site revenues from owners and renters).
The easy to identify culprits for the 2% assessment are:
- Increased cleaning expenses mandated by compliance with all federal, state. and local COVID safety protocols.
- Increases in annual reserve account "to maintain cash flow and achieve long term funding objectives."
- Wage adjustments mandated by states to sustain jobs and/or unemployment for COVID-impacted workers.
- Decrease in villa rentals, which owners subsidize by paying higher maintenance fees.
Kaanapali Beach Club Fees Rise 4.5% to 5.2%
The COVID pandemic costs for owners of the Kaanapali Beach Club, Maui, which is part of the timeshare network owned and managed by Diamond Resorts International, are buried in the fine print of a $33.7 million budget summary included with the maintenance fee bill for 2021.
A cover letter clarifies the bottom line: maintenance fees for 2021 will rise 4.5% to 5.2%, depending on what an owner owns (weeks or points). The primary drivers of the increase are higher property insurance, taxes, and an increase in capital reserves (to pay for renovations enacted in 2020 during the resort's shutdown).
"The Board is sensitive to the challenges that the pandemic has caused to many owners and voted to apply $413,000 of the prior year operating surplus against 2021 operating expenses to reduce the maintenance fee to an amount less than the 2021 projected costs," the letter said.
According to several industry sources, most if not all timeshare companies are sensitive to criticisms of their operating budgets — and fearful of owner backlash against special assessments or whopping increases in maintenance fees. Thus, they don't go out of their way to publicize financial issues that might rile owners.
There is a major upside, however, in the pandemic shutdowns that have closed resorts and restricted travel for owners: a few well-managed companies have used the closures to reduce operating costs (including personnel) while plowing reserves into renovation projects that were pending, but not funded in current budgets. That may not be much of a consolation prize for owners unable to travel this year, but it may be a future benefit.
Owners Still Have Time to Maximize Ownership in 2020
With few exceptions, individual owners have no control over the management of their timeshare resort and, as a result, no role in deciding maintenance fees. But they do have opportunities, even during a pandemic, to control the destiny of their timeshare.
While the pandemic continues to restrict travel in the US and elsewhere, many timeshare owners are turning to exchange companies to deposit their weeks or points for use in 2021 and 2022. In recent weeks, exchange companies say they are flooded with deposits from owners who are giving up on the 2020 travel year due to COVID.
Turns out, the pandemic is a bust for travelers, but a boomtime for exchange companies. That's good news, too, for owners, who deposit their weeks in time to use them in another year.
There is still time in 2020 for owners to bank weeks, either with their developer company, or with an external exchange company. Exchange companies urge owners to deposit weeks "at least" 60 days in advance of their check in. They won't accept any deposits within 14 days of checkin.
For company-specific rules, contact your member services departments. Some companies, such as Diamond Resorts, are offering owners internal resort exchange services as a result of the COVID crisis. AS WITH ALL THINGS TIMESHARE, RESTRICTIONS APPLY!
Keep in mind, however, that if you typically rent out your time rather than use it, that isn't an option once you bank it with an exchange company. Most exchange companies prohibit the rental of weeks obtained through exchange. Which means you should plan on using, gifting, or losing any banked weeks.
Whatever you do, do your research now, so you don't lose the value of your timeshare. You can always travel, later, when the timeshare universe is post-pandemic.
Have you received communication from your resort regarding any special COVID fees or cost reductions? Leave a comment below.
