Resale prices for Marriott??

All,

I've been monitoring with interest the separate post on a possible Marriott points systems. I also note the incredibly difficult economy/market conditions that may be with us for awhile.

So my question is: What would cause Marriott resale prices to ever go up? Will demand for resale ever exceed supply? Why would it?

Even with ROFR (and this is not a ROFR debate), why would Marriott use their cold hard cash to increase their inventory? They are gambling they can resell the product (and then pay the commissions, MFs during the holding period, for what margin?)

I'm beginning to gravitate towards the belief that the last 5 years have truly driven an artificially high price for high-end timeshares, and that even today's resale prices are unsustainable. I believe a $50K Lahaina/Napili floating OF today will be $30K in 2 years -- and $15K in 5 years.

All other asset classes are moving down to 2002-2003 pricing, what were MOC Oceanfront category units selling for then?

Thoughts (and thanks!)?

I believe certain areas won't slip as much as you suggest, one being Maui, and I'm sure numerous others. I don't see my plat+ MOW losing much. I do think many will lose like you suggest, but other areas will subilize and probably even go up. When the economy turns around, more buyers will be vying for prime locations, and the pricing will go up for numerous prime Marriott resorts, IMHO.

I am not familiar with resale prices but it makes sense that since prices are based on supply and demand, prices will fall (and so will inventory purchased by Marriott) during difficult times. The good news is difficult times have always been cyclical and prices will once again rise, as unlikely as it seems now, when people feel confident to spend again.

I don't see the outlook as dismal as you do. Marriott's direct timeshare sales are good. There are people with lots of money to spare and they are taking advantage of the temporary price reductions. I just closed escrow on a house that was only for sale for 5 days because there were 7 offers!

When times become good again, Marriott will increase their direct prices and resale prices will rise again as a result. My personal opinion is that when direct prices are high, people gravitate towards resale

Given the economy the current pricing decline is to be expected. I think that whether full retail pricing such as it has been over the past few years will be sustainable in the future will depend upon the economic recovery as a whole. Even without the global economic crisis, I do wonder if the timeshare pricing bubble would have burst at some point anyway, because prices at some locations had, imho, exceeded their value.

I do think it will be a long time before Marriott (or any high end seller) will be able to move inventory without offering either a price concession or other large incentive and that, for the foreseeable future, the prior model of timeshare sales (relying on vacationers in a good mood to make large, impetuous purchases without considering whether they were over priced or over valued) will be difficult to sustain. Furthermore, I am not sure if the model will need to be changed permanently, because the economic crisis has heightened awareness and, I think, will leave people a little wary for years to come about large expenditures. I also think that the Internet, and the ready availability of information, would likely have had more and more of an impact over time anyway, even without this crisis. So, personally, I think Marriott is going to need to sweeten the pot, so to speak, for future sales; I would expect larger upfront offers, such as European vacation packages or Hawaii trips, etc., to entice people to buy, which may be more attractive than a $5000 price reduction.

Although I do feel that developer pricing or sales tactics will have to undergo a possibly permanent change, I do agree with Joe, though, in that prime properties will bounce back wrt their resale value, since there are destinations that once travel rebounds people will flock to. There are a few Marriott properties that, even in this climate, have not seen their resale values plummet, but only decrease by a relatively modest 10-20%; I believe that these properties will likely be the first to recover. While timeshare sales prices from the developer, even those with deeds, far exceed the underlying real estate value, there has been at least some loose correlation and I think the resale market has, at least to some extent, reflected that value. Assuming that real estate prices will recover and again increase over time (as they have historically cyclically done) then timeshare prices will likely rise as well.

My opinion is that at current or lower resale prices, the Marriott timeshares are generally a good buy right now. If you are going to stay in the timeshare each year, it is especially a good deal for very high demand locations. My guess is that savy buyers will pick up some bargains when others are panicking and selling.

Location, location, location........ places that are now and will be popular resort desinations will hold their value higher than less desireable vacation locations.

When inflation does come back those vacation hot spots will again be hard to get into and prices wil lcome back. If you own in a place where it is hard or impossible to build new than your timeshare investment should be solid.

We looks at out timeshare investments as banked money where we go on the vacation with the "interest" (and resort fees and taxes).

GregT said:

I'm beginning to gravitate towards the belief that the last 5 years have truly driven an artificially high price for high-end timeshares, and that even today's resale prices are unsustainable. I believe a $50K Lahaina/Napili floating OF today will be $30K in 2 years -- and $15K in 5 years.

All other asset classes are moving down to 2002-2003 pricing, what were MOC Oceanfront category units selling for then?

Click to expand...

I can't speak for '02-03 pricing because I wasn't looking then, but I can report that both Marriott and Westin were pricing OF 2 bdrms in Maui from $80-90k+ in '07. That price point, IMO, will be unsustainable even when the economy recovers because, like Phoenix real estate, it was glaringly overpriced. My WAG for a reasonable price from the developer is $55k for OF, but that is based on nothing but my limited research on resale prices, which seem to have settled at about $30k for OF, $20k for OV, and $10k for IV, give or take $5k.

A more critical question IMO is not the purchase price, but the MFs! For the past 3 years, MFs in Maui have been increasing at an alarming rate. We were just shy of $2k (or $300/night) in '08 for MFs at WKORV-N. Ouch! If that trend continues, it will be very difficult to sell these units at any price.

Even if the MFs remain reasonable, as far as long term price, once the economy picks up and developers begin building new properties, the price of the "older" properties (including MOC and WKORV) will invariably take a hit. Generally speaking, owners like new properties. Not only are the new units prettier because they are newly painted and decorated, but smart developers have their eye on trends, from frivolous trends such as flat screen tvs and infinity pools, to practical trends such as in-unit kitchens and w/d's -- that will give the newer properties an edge over the older ones. C'est la vie.

IMHO, the price of Marriott resale will rebound when Marriott starts using their ROFR again. People will quickly learn that you can't buy a NCV TS for $7000 anymore when Marriott uses their ROFR at anything less than $10,000

I totally agree. There is currently no life net for free falling prices since Marriott stopped inforcing ROFR.

What's happened to all of the folks who wrote on this board that ROFR didn't support resale prices and that ROFR was only a scheme for Marriott to pick up units at cheap prices? Could they have been wrong?

Oh you guys are just itching for a "fight" aren't you.

I too am surprised that know one has chimed in yet.

Greg, If the prices got low enough and they had a resort that was sold out, it would be a good business decision to start exercising ROFR again.

Powerguy said:

Location, location, location........ places that are now and will be popular resort desinations will hold their value higher than less desireable vacation locations.

Click to expand...

MOXJO7282 said:

. . . When the economy turns around, more buyers will be vying for prime locations, and the pricing will go up for numerous prime Marriott resorts . . .

Click to expand...

I agree with Joe and Powerguy as they identify the fundamental lever which moves prices up and down in any economic sector.

In terms of where MVC prices might eventually end up, it's going to be a function of location and destination along with improved consumer confidence. That's what MVC was always about except that in the former bubble economy, not all folks took note of this. Then again, there are so many valid ways to evaluate TS ( aesthetics/destination travel/economics) so it really comes down to owners (hopefully) creating portfolios which represent their personality and their specific goals/needs despite the economy of the moment.

It requires a lot confidence in the MVC product and one's own decision to jump on board for one to weather out the current economic storm. But the sun will come out again. What we do not know is when or how brightly that sun will shine for specific resorts. I'm not saying that some resorts are "better" than others ( aesthetics again ), but certain resorts, such as those in high demand areas located directly on the beach ought to gradually turn the corner more quickly than other resorts. People will indeed be gun shy about any discretionary purchase in the future. But Americans are born with "spending genes" and we'll have to wait and see where this sort of spending returns first. I myself think that leisure travel is an escape from what the knuckleheads in DC are trying to jam down our throats. MVC has lowered sales targets, but it does appear that some shoppers are at least poking their head around the TS corner.

One can not obsess about current prices particularly on E-Bay which itself has never exhibited a paricularly "rational" logic purchasing any sort of good/service ( do you ever say "I won a car" when you purchase at a car dealer? Yet how many times do you see a post saying "I won" on E-Bay? It's like bingo or lottery mania ). All we can do as MVC owners is occupy our weeks or trade them and enjoy them until we check in a few years to see where prices are.

Barry

I have never bought a timeshare. I consider it often but then always end up renting. I like the flexibility of renting. Having said that I certainly keep an eye out for private party sales of a few select Marriott properties but have not yet bought. Some people are able to buy for substantially less than others and it doesn't appear Marriott is likely to exercise their ROFR. Could prices go down even further? Sure, of course. However, I think it's a good time to buy private party. I am not in a rush to buy but if the deal is right I would love to own a week or two with Marriott. Marriott may eventually make the incentives good enough to encourage me to buy directly from them. However, not yet. They are still asking substantially more than private party and I don't think the differences in what you get justifies the price difference.

It's not just Marriott. A 1 bdrm FOUR SEASONS AVIARA went for $4125 on Ebay

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=STRK:MEWAX:IT&item=290330431443

And another one ... this one 2 bedrooms -- is up there now and may go cheap...only $4500 when I posted.

http://cgi.ebay.com/FOUR-SEASONS-CL...itu=US-BWR%2BUCI%2BUCC%2BIT%2BUA&otn=12&ps=33

Brianhttp://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=STRK:MEWAX:IT&item=290330431443

According to this July 8, 2009 WSJ article linked by travelexpert on Flyertalk http://online.wsj.com/article/SB124701522076409321.html?ru=MKTW:

"Carrie Stinchcomb, a sales associate at A Time-share Broker in Orlando, said her office's listings have increased 30% from last year. However, sales have fallen roughly by half because there are fewer buyers, she said."

kjd said:

What's happened to all of the folks who wrote on this board that ROFR didn't support resale prices and that ROFR was only a scheme for Marriott to pick up units at cheap prices? Could they have been wrong?

Click to expand...

I think those people now feel vindicated. Witness the free fall in Marriott resale prices - proof positive that ROFR has not shielded owners from market realities and falling prices. The point has always been that Marriott will utilize ROFR only when it benefits Marriott. It does not offer price protection for owners.

Pork isn't just in Washington...

Timeshare developers have created their own market where every Friday had a scheduled price increase - its totally phony.

Probably ALL developers are offering cash-back deals right now - don't lower the asking price to reflect 25% - 50% loss of condos 100 yards away. This is a sign of a market that is rigged - it does NOT follow the laws of supply and demand.

Timeshares have done this for 40 years and I believe this is the time in the real estate cycle where timeshares will finally succumb to reality.

The 40 year old rule of Sales = 4 * Cost has way too much pork in it. The developers need to get out their carving knives and reduce this to 3 to 1. This would instantly reduce developers' asking prices.

However that means resale prices will take a huge hit - an overreaction to what the developers will finally have to do. Today's $1 eBay timeshare is still way way overpriced.


I see nothing "rosy" in the above chart - just a market that seems to have slowed and looking to Washington to see what awaits it next.

Pigs of a feather....

P.S.
If I had to guess, and that's all it is, 2009 is not the year to buy any timeshares either from the developer or resale. Washington is not done screwing around - that's how all this came about and will still impact real estate.

Pit said:

I think those people now feel vindicated. Witness the free fall in Marriott resale prices - proof positive that ROFR has not shielded owners from market realities and falling prices. The point has always been that Marriott will utilize ROFR only when it benefits Marriott. It does not offer price protection for owners.

Click to expand...

ROFR, if it works, can only work if it is being exercised. The current climate isn't proof of anything, since Marriott has stopped exercising ROFR.

Let's not hijack this thread as so many others have been hijacked, and for the sake of this thread let's agree to disagree.

Brian- Wow! It just shows that no one is immune in this economy. Hey- a lot of wealthy people have lost their jobs and many their life savings with the various Ponzi schemes. Even owners of Four Seasons are feeling the pinch, and the prospect of paying those annual MF's if the income isn't there has to be daunting. I guess desperate times call for desperate measures.

I think that location, quality and controlled MF's are key to everything. Great resorts like Grande Ocean are just fine. Resorts like Maui Ocean Club will be as well, although cost of travel must be factored in.

When in Maui last week I looked at a few properties listed for sale at a local real estate storefront display. The ultra premium properties are still ultra premium in price. Example: you can buy nice "view" lots for $.5-$1mil, but the true ocean front lots are WAY more expensive. There were two ocean front lots in Ka'anapali, listed separately, that had asking prices of $7.5mil and $10mil.

Brian, those Aviara units are indeed cheap, but even high quality resorts have limitations. 2BR units are almost always a better "value" than 1BR units, and most here believe that "platinum/red" season is as well. Two strikes against those mentioned eBay sales.

pwrshift said:

It's not just Marriott. A 1 bdrm FOUR SEASONS AVIARA went for $4125 on Ebay

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=STRK:MEWAX:IT&item=290330431443

And another one ... this one 2 bedrooms -- is up there now and may go cheap...only $4500 when I posted.

http://cgi.ebay.com/FOUR-SEASONS-CL...itu=US-BWR%2BUCI%2BUCC%2BIT%2BUA&otn=12&ps=33

Brianhttp://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=STRK:MEWAX:IT&item=290330431443

Click to expand...

Why Four Seasons Aviara is so famous and so desirable?

ldanna said:

Why Four Seasons Aviara is so famous and so desirable?

Click to expand...

Because the resort accommodations are great and the service is supposed to be unparalleled. The only issue they allow pets, which some love, but I am unsure if that will be a problem for people with pet allergies.

thinze3 said:

...Brian, those Aviara units are indeed cheap, but even high quality resorts have limitations. 2BR units are almost always a better "value" than 1BR units, and most here believe that "platinum/red" season is as well. Two strikes against those mentioned eBay sales.

Click to expand...

The second one was a 2 bdrm unit but when I clicked on it the auction has ended and $1 was the opening bid ... something must have happened and closed it down. Strange.

Brian

pwrshift said:

The second one was a 2 bdrm unit but when I clicked on it the auction has ended and $1 was the opening bid ... something must have happened and closed it down. Strange.

Brian

Click to expand...

I missed the 2BR part of your post. It appears the 2BR unit has been relisted.

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=140335376382

Almost Just Exactly Right.

m61376 said:

ROFR, if it works, can only work if it is being exercised.

Click to expand...

ROFR is only good if it is exorcised.

The rest of the time, ROFR = ROFL.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

What will happen is the market will seek its own level. It always does eventually. Severe market downturns always accelerate that process. This one is no exception. This is a very healthy long term scenario for the industry.

The current downturn in the timeshare industry is exactly what was needed to weed out the excesses of the past 5 years. Just as in the general residential real estate market, timeshare resort developers had very unrealistic assumptions about the elasticity of pricing in the market. As long as the general economy was growing, credit was readily available for new developments and they proved they could persuade buyers on site to pay 2-3 times what a timeshare was worth while not doing any due diligence on the resale alternatives, they thought the model would continue. These assumptions made sense. After all, they worked pretty well for over 40 years.
Now, these false economics are coming home to roost.

What is likely to happen is lots of companies will go out of business in all parts of the value chain for timeshares. Some resorts will go belly up. Some exchange companies will as well. We have already seen a few PCCs go down. Even the model where you pay to get rid of your timeshare is breaking down. Believe it or not, this is all good and healthy for the industry long term. That being 1-2 years out.

If the level that the timeshare industry seeks is insolvency, then this could very well be the end of a great product for all of us. That is definitely a possibility if resort developers don't take action to create a new sales and marketing model that doesn't require so much financing and/or luring folks in to close them while they are there. This is the root cause of the false economics. In addition, maintenance fees must be kept under control. With potentially a high percentage of owners defaulting, resort developers need to take swift action to replace those owners with other maintenance fee paying owners so that the cost death spiral doesn't occur.

Many resort developers will successfully make it to the future state of timesharing. Others won't. But, I believe strongly that it will emerge a stronger and more viable market after a couple of years. Why? Because there is still way too much value in timesharing a vacation property rather than owning one outright. Sure, it can go back to a rent only model with resort developers holding all of the risk of capital ownership. But, I don't think they will want to do that. I think they will continue to want to have mixed use properties to diversify the risk away from the peaks and valleys of economic conditions. In Hawaii, the occupancy rate for timeshares over the past 6-9 months far surpasses that of the local hotels. 80-90% vs. 60-70%. That occupancy rate variance makes it a worthwhile endeavor to keep travellers travelling in good times and bad. So, I believe there will be an incentive for resort developers to continue the timeshare model.

Back to the OP. What are the circumstances when Marriott would once again exercise ROFR? That's easy. If and when the demand returns to the resorts where they have the ability to either finance or sell the timeshare outright to new or existing owners, Marriott will once again start exercising ROFR when their demand is easy to forecast. They will do that rather than simply brokering it because the return on capital can be higher when the purchase out right. It's easier for inventory management as well.

The primary reason Marriott isn't exercising ROFR right now is that they have lots of inventory, they have access to resale inventory through their customers where they need it today, consumer demand at the resorts isn't great enough to soak up existing inventory and credit markets are unfavorable right now. The right circumstances for that to happen will occur again in the future. The only way it won't is if Marriott purposefully decides to kill off the product by making it to costly to own by favoring a new product like a new points system. Or, if they decide they can't make it work any longer and decide to exit the market.

I think the market returns. The conditions for exercising ROFR return. And, the prices for select Marriott properties firm up significantly over time.