Starwood Sells $125 Million in Timeshare loans to a private party

nodge said:

OK, OK I’m not trying to make this personal, I’m just trying to figure out if Starwood (a cash strapped corporation desperate for money, not unlike a heroin addict) would take more money than is needed from us SVO owners (captive cash cows not unlike an unguarded mother’s purse left on the kitchen counter) to make its numbers look better and keep their jobs.

Let’s try looking at this situation from a purely math perspective.

From the available data it appears that Starwood hotels needs to bring in about $100 million/quarter more than it currently takes in to pay everyone, including Fritz, and keep the lights on. This translates into about $400 million a year.

It also appears that Starwood is pretty good at finding things to sell ($125 million timeshare loans, A W hotel here and there, left over timeshare inventory) to make up about $200 million of that difference. This leaves a shortfall of about $200 million/year.

So how much would our maintenance fees have to go up to make up that shortfall?

Well, last time I checked, there were about 250,000 SVO timeshare owners (give or take). So . . . . .

$200,000,000 divided by 250,000 owners = $800/year per villa

Now the powers that be at SVO would have a hard time implementing a blanket across the board $800/year maintenance fee increase. But if it cut costs to maintain our properties and pocketed the difference, and it cut the cost of operating its hotels too, then the maintenance fee increase needed to balance the hotel books may just appear “reasonable” enough to timeshare owners.

Now, Fritz has reported that SVO has cut its operating costs by 30%, and it has cut its hotel operating costs by 30%. Applying those “savings” to the calculation you get.

$140,000,000 (needed by the hotels to balance the books with a 30% cost savings) divided by 250,000 owners = $560/year per villa needed.

Assuming the average maintenance fee for an SVO property is $1000/year. The 30% savings in reduced overhead costs at SVO translates into $300 in SVO’s pocket.

So, applying that savings to the money needed for the hotels means . . . . $560/year less $300 savings in reducing SVO overhead by cutting services we’re paying for = $260/year increase in maintenance fees. (This amount could be easily spread around the various line items – “management, “ “operating costs,” etc., to hide it even more).

In other words, using my rough estimates, if SVO increases, on average, our maintenance fees by $260/year per villa and cut its hotel and SVO operating costs by 30% (as it claims to have done), it could balance its hotel operating books (and even keep giving away all those hotel rooms and paying Frtiz top dollar like its currently doing).

The only problem is that our “maintenance fees” would no longer be (if they ever actually were) rationally related to the actual costs associated with maintaining our properties. We would be paying, on average, $1260/year per villa, but SVO would be spending only about $700/year per villa (including its already over-inflated “management fee” and other mark-ups and profits) to actually maintain our properties.

Sooooo, these rough calculations suggest that Starwood is configuring itself to take about $140,000,000 out of our collective “maintenance fee” purse on the counter, in exchange for a big ol’ pile of nothin’, except the privilege of us continuing to use the Starwood brand names (Sheraton, Westin, Vistana) on our timeshares because the corresponding hotel chains stay in business with the help of our forced “donations.”

Does anyone have any better data or analysis of this situation? If not, I anticipate that our 2010 maintenance fees will increase, on average, about $260/villa, but the maintenance and service quality of our villas will decrease, on average, about 30% under SVO’s continued "care."

As for “why” I’m reporting this information here on TUG, I figure owners and potential owners of SVO properties would be interested to know where their money goes, or would go if they bought an SVO property. That way they can make informed decisions as to whether to buy or sell an SVO property separate from the smoke and mirrors information provided by SVO and even some resales agents.

-nodge
my website

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nodge said:

OK, OK I’m not trying to make this personal, I’m just trying to figure out if Starwood (a cash strapped corporation desperate for money, not unlike a heroin addict) would take more money than is needed from us SVO owners (captive cash cows not unlike an unguarded mother’s purse left on the kitchen counter) to make its numbers look better and keep their jobs.

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Troopers said:

Nodge, good luck on your quest. I don't think the answers lie in financial articles/press releases.

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Troopers said:

Nodge, since you enjoy news articles, here's one for you.

Have fun with it.

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nodge said:

Funny thing is if Starwood were stealing from our collective purse on the counter, it probably wouldn’t go out of its way to tell anyone about it. In fact, it would probably just maintain a code of stoic silence about EVERYTHING it did, thereby preventing an employee from inadvertently spilling the beans. Hmmmm.

Fortunately, I’ve learned two things from my lifetime of watching cop shows on TV. First, the “jump the shark” moments for these shows usually involve the main character showing his bare butt in a highly-hyped episode to drum up ratings (eg. Dennis Franz/NYPD Blue – sheesh); and 2) criminals and other folks who do wrong always leave ever so small clues, that at first appear irrelevant, but over the course of the next hour, less commercials, grow and build into an iron-clad case.

Let’s review the evidence collected against Starwood so far . . . .

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