Diamond Doing Well on Sales

AmexBlack · Jul 30, 2015

http://finance.yahoo.com/news/diamond-resorts-international-inc-reports-202800508.html

They need more deedbacks to sell the timeshare unit to the next upcoming buyer for pure profit!

TUGBrian · Jul 30, 2015

its very odd, many investor firms are doing crazy research on diamond lately...I must get a call a week from them asking for info.

i guess this explains it!

T_R_Oglodyte · Jul 30, 2015

AmexBlack said:
http://finance.yahoo.com/news/diamond-resorts-international-inc-reports-202800508.html

They need more deedbacks to sell the timeshare unit to the next upcoming buyer for pure profit!

It has long been a mystery to me why developers don't do deedbacks as DRI is doing. An oft-quoted figure is that in a developer sale one-third to one-half (maybe even more) of the sales price is the development cost of the project and 50% of the price is the sales program. If that's true, then if they can acquire inventory for essentially close to zero cost, they can double or triple their margins.

This is such a no-lose situation. The developer gets inventory to sell at a higher margin than they would get by developing or purchasing new inventory. Owners for whom ownership no longer works get a way out that doesn't require that they start defaulting on debts. Because there are fewer defaults and inventory is cycled, bad debt reserves in the trusts and at the resorts is lessened. The crew on the sales floor still gets their full commission from sales - in fact if DRI were so inclined they could increase compensation because the cost of the inventory is less.

davidvel · Jul 30, 2015

T_R_Oglodyte said:
It has long been a mystery to me why developers don't do deedbacks as DRI is doing. An oft-quoted figure is that in a developer sale one-third to one-half (maybe even more) of the sales price is the development cost of the project and 50% of the price is the sales program. If that's true, then if they can acquire inventory for essentially close to zero cost, they can double or triple their margins.

This is such a no-lose situation. The developer gets inventory to sell at a higher margin than they would get by developing or purchasing new inventory. Owners for whom ownership no longer works get a way out that doesn't require that they start defaulting on debts. Because there are fewer defaults and inventory is cycled, bad debt reserves in the trusts and at the resorts is lessened. The crew on the sales floor still gets their full commission from sales - in fact if DRI were so inclined they could increase compensation because the cost of the inventory is less.

Steve,
Your argument makes sense, up to a point. If they opened it wide up, many of these outfits could have return rates of 75-80%, and they'd have to pay the annual assessments on unsold inventory. They have to balance it out so only some know about the deed backs.

bnoble · Jul 31, 2015

T_R_Oglodyte said:
It has long been a mystery to me why developers don't do deedbacks as DRI is doing. An oft-quoted figure is that in a developer sale one-third to one-half (maybe even more) of the sales price is the development cost of the project and 50% of the price is the sales program. If that's true, then if they can acquire inventory for essentially close to zero cost, they can double or triple their margins.

Wyndham's investor relation presentations often quote a number closer to 20% acquisition/development costs, but the piont still stands.

I suspect the willingness to deedback or not depends on underlying economic factors---when things are booming, there are relatively few defaults and plenty of sales prospects, so deedbacks are easy to include. When the economy is slow, the opposite is true. But, we are in boom times---even Wyndham is taking back intervals these days.

T_R_Oglodyte · Jul 31, 2015

davidvel said:
Steve,
Your argument makes sense, up to a point. If they opened it wide up, many of these outfits could have return rates of 75-80%, and they'd have to pay the annual assessments on unsold inventory. They have to balance it out so only some know about the deed backs.

Yep -so you do it the way Diamond is doing it. Low key and for people who seem to need a way out.

RuralEngineer · Aug 3, 2015

efficiency

i wonder how much new business ideas and IT contribute to their current success. DRI has capitalized on IT and capital light model. High stress workers like to have good vacations. 2nd homes no longer make sense. AirBnB also has brought a great IT platform to capitalize on empty rooms and houses thus bringing hugh efficiency to underutilized assets.

i just don't understand why a new owner thinks that the current DRI sale price makes any sense.

stephen

Diamond Doing Well on Sales

AmexBlack

TUGBrian

T_R_Oglodyte

davidvel

bnoble

T_R_Oglodyte

RuralEngineer