[OFFICIAL Vistana *2019* Maintenance Fees Thread]

[controller1]

According to Exhibit C of the Westin Flex Governing Document (Budget and Assessments) the developer guaranteed each owner that the total annual assessments would not exceed $0.01893 per point up until Dec. 31, 2019.

Is it possible that this guarantee kept the MF's below where they actually should have been in order to sell more Flex and as a result we're seeing a higher than normal increase now that the guarantee is gone? It will be interesting to see how it plays out with the underlying resorts MF's over the next few weeks as assessments start rolling in.

That could certainly be it!

 

[jabberwocky]

If I am not mistaken, the management fee is calculated before the reserves, just based on the operating expenses.

I believe you are correct.

 

[dioxide45]

I believe you are correct.

You could be right. Though only for Vistana and the calculation includes taxes and operating fee. When I run the numbers, it does look like the management fee at Vistana is about 10% of the operating assessment and taxes minus the management fee. However, when I run the same calculation for Marriott, the calculation comes out to about 10% of the total MF amount minus the management fee

SVV 2BR 2019
Operating Fee $793.86
Taxes $134.07
Replacement Reserves $253.19
Management Fee $85.66
Calculation (85.66/(793.86+134.07-85.66))=10.17%

Marriott Grande Vista 2BR 2019
Operating Fee $807.83
Taxes $144.17
Replacement Reserves $329.77
Management Fee $122.06
Calculation (122.06/(807.83+329.77+144.17-122.06))=10.53%

If this is correct, Marriott properties have a disadvantage in their contract with Marriott. Perhaps expect this to be something that Marriott will attempt to renegotiate with the HOAs when the contracts come up for renewal. Would you be willing to pay about an extra $40 to keep the Westin and Sheraton brands on the resorts?

Also something else to consider. The main difference in MF between the two properties is with how they calculate the management fee and Grande Vista having about an $80 higher replacement reserve fee. If you just up the replacement reserve by the $80, that is about a 6.7% increase in overall fees. I suspect very likely that the increases being seen in the trusts is directly attributed to increased reserve fees.

 

[DannyTS]

Would you be willing to pay about an extra $40 to keep the Westin and Sheraton brands on the resorts?

Would Marriott be willing to lose $85 to gain $40?

The management fee is indeed calculated on the operating cost, this is from the Lagunamar bill:
"Management Fee is paid to Turística Cancún, S. de R.L. de C.V., Blvd. Kukulcan KM 12.5 Lte.18 Zona Hotelera Cancún, Q.Roo 77500 for providing
management services to the Association pursuant to the management agreement. The management fee is calculated at 10% of total annual Association
operating costs, less the management fees and VAT."

This is the way it should be anyway! Why would the developer make a cut on money that is sitting in the bank???? Once they spend the reserve, the developer takes a cut. By taking a cut both when the reserve is billed then when it is spent, Marriott would make a cut TWICE on the same money. So the Marriott resorts should wake up and contest this, it is not that the Vistana resorts have to change it!

 

[dioxide45]

Would Marriott be willing to lose $85 to gain $40?

The management fee is indeed calculated on the operating cost, this is from the Lagunamar bill:
"Management Fee is paid to Turística Cancún, S. de R.L. de C.V., Blvd. Kukulcan KM 12.5 Lte.18 Zona Hotelera Cancún, Q.Roo 77500 for providing
management services to the Association pursuant to the management agreement. The management fee is calculated at 10% of total annual Association
operating costs, less the management fees and VAT."

This is the way it should be anyway! Why would the developer make a cut on money that is sitting in the bank???? Once they spend the reserve, the developer takes a cut. By taking a cut both when the reserve is billed then when it is spent, Marriott would make a cut TWICE on the same money. So the Marriott resorts should wake up and contest this, it is not that the Vistana resorts have to change it!

Do you really think that is how it would go down? Seriously? If MVW strong arms the boards would you rather have them walk than just pay the extra cash? I suspect your answer may be different if you own voluntary vs in network. Also consider that Vistana currently controls most of the boards.

The $80 is not profit to Marriott, it is reserve spending. The $40 is pure profit in this scenario.

I don't disagree that this is how it should be, but it wouldn't be charge twice. When they spend reserves, it doesn't become part of the operating costs. It is still reserve spending which is not a line item on the financial statement. If it were, you would still be paying the Management Fee on it today, just on the back end instead of the front.

 

[DannyTS]

Considering 94% of the Westin Flex MF increase is due to the MF increases at the underlying properties, I expect to see 6.5% - 7% increases in MFs at all the Westin properties. IMO we are beginning to see the impact of Marriott Vacations Worldwide since the increases at the legacy MVC properties over the past five years have been significantly higher, on average, than the Vistana MF increases.

It is not just the MF increases of the

Do you really think that is how it would go down? Seriously? If MVW strong arms the boards would you rather have them walk than just pay the extra cash? I suspect your answer may be different if you own voluntary vs in network. Also consider that Vistana currently controls most of the boards.

The $80 is not profit to Marriott, it is reserve spending. The $40 is pure profit in this scenario.

I don't disagree that this is how it should be, but it wouldn't be charge twice. When they spend reserves, it doesn't become part of the operating costs. It is still reserve spending which is not a line item on the financial statement. If it were, you would still be paying the Management Fee on it today, just on the back end instead of the front.

We own both mandatory and voluntary. Is this how it is going to play out? I do not know but Ido know that Marriott needs us as much as we need Marriott. All I am saying is that Vistana owners or the boards should not start from a position of weakness, they have no reason for that. I am getting close to 5k in MF for all my Vistana weeks so I am not that indifferent if there was a 7% increase accross the bord. If the money were well spent it would not bother me much but as you say half would go straight to profit.

 

[DavidnRobin]

Considering 94% of the Westin Flex MF increase is due to the MF increases at the underlying properties, I expect to see 6.5% - 7% increases in MFs at all the Westin properties.

Really? That is some serious speculation.
I’d wager that a 6.5-7% increase in 2020 will not happen for most deeded VSE VOIs.
(Based on the last 5 years of increases)


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[dioxide45]

Really? That is some serious speculation.
I’d wager that a 6.5-7% increase in 2020 will not happen for most deeded VSE VOIs.
(Based on the last 5 years of increases)


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It isn't really speculation. The Westin Flex is made up of individual weeks at all of the Westin resorts. It is possible that the main increase is because they dumped all that Nanea inventory in the trust. But the fact remains that the MFs on the underlying ownership of the trust is up 6-7%. It isn't speculation. When Sheraton Flex MFs come out, it will be interesting to see if they see similar increases.

 

[PamMo]

I hope David is right. My units are deeded, and I sure don't want to see 6-7% added to the 2020 MF's for all my Ka'anapali and Harborside VOI's.

 

[DavidnRobin]

It isn't really speculation. The Westin Flex is made up of individual weeks at all of the Westin resorts. It is possible that the main increase is because they dumped all that Nanea inventory in the trust. But the fact remains that the MFs on the underlying ownership of the trust is up 6-7%. It isn't speculation. When Sheraton Flex MFs come out, it will be interesting to see if they see similar increases.

So... you are willing to wager? LOL

OR... perhaps reason could be that they protected (supplemented) the Flex MFs as was observed with deeded units for SVO/VSE Resorts early in the Sales period, and now catching up.

Regardless- I would be shocked to see this % increase (6.5-7%) for WKORV/N, WPORV, or WKV (my Resorts that have Westin Flex association).
Perhaps for WSJ since MFs have been relatively flat since 2012, and now dealing with H.Irma aftermath costs.



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[dioxide45]

OR... perhaps reason could be that they protected (supplemented) the Flex MFs as was observed with deeded units for SVO/VSE Resorts early in the Sales period, and now catching up.

Do we have any evidence that they supplemented MFs of the flex trusts?

 

[DavidnRobin]

Do we have any evidence that they supplemented MFs of the flex trusts?

Nope. Pure Speculation- see how that works?

But the speculation of a 6.5-7% increase is double the increases over the last 5 years (2-3%), and need to be legally justified in their accounting that goes to creating MFs.

Have the costs (or lack of revenue) really increased this much in one year for typical VOIs?
Or, is this increase due to Flex normalizing itself as it becomes more mature?

Sorry - I don’t see it.
Will shall see in a couple of months...
(and I am still willing to bet on it).

Mark this conversation.


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[dioxide45]

So... you are willing to wager? LOL

OR... perhaps reason could be that they protected (supplemented) the Flex MFs as was observed with deeded units for SVO/VSE Resorts early in the Sales period, and now catching up.

Regardless- I would be shocked to see this % increase (6.5-7%) for WKORV/N, WPORV, or WKV (my Resorts that have Westin Flex association).
Perhaps for WSJ since MFs have been relatively flat since 2012, and now dealing with H.Irma aftermath costs.

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If we compare similar resorts between Marriott and Vistana, we will notice in many cases that Marriott has a heavier Replacement Reserve;

Arizona
Canyon Villas at Desert Ridge (2BR LO)
2019 Property Tax Fee $35.20
2019 Replacement Reserve $386.98
2019 Operating Fee $1,035.65

Westin Kierland Villas 2BR LO
2019 Operating Assessment $1,203.22
2019 Replacement Reserves $300.00
2019 Estimated Real Estate Tax $62.09

Orlando
Marriott's Grande Vista 2BR - Platinum Season
2019 Operating Fee $850.18
2019 Replacement Reserve $342.93
2019 Property Tax Fee $163.59

Sheraton Vistana Villages - Bella 2BR - Prime Season
2019 Operating Assessment $739.86
2019 Replacement Reserves $253.19
2019 Estimated Real Estate Tax $134.07

Desert Springs CA
Marriott's Desert Springs Villas II
2019 Master Operating $68.41
2019 Master Reserve $46.98
2019 Operating Fee $854.22
2019 Replacement Reserve $466.68

Sheraton Desert Oasis 2BR LO
2019 Operating Assessment $1133.39
2019 Replacement Reserves $339.29

These numbers are from the MF threads for each system. As you can see, Marriott properties set aside significantly more reserves that Vistana. Do Vistana properties cost less to renovate every 5 and 10 years than Marriott? Is Marriott wasting owner's money or buying better quality goods? We don't really know without digging in to all the details. However it would seem that if Vistana increased the reserves to match those at similar Marriott properties, you would have increases in the overall MFs as follows;

5.97% - Westin Kierland Villas 2BR LO
6.61% - Sheraton Vistana Villages - Bella 2BR - Prime Season
8.86% - Sheraton Desert Oasis 2BR LO

I am sure we could compare them at all locations where they both have properties and see consistent results.

Of course the actual specific cause of the increase in the fees won't be known until after the board meetings and for most after we get our MF bills. Will it be attributed to the Replacement Reserve fee? Perhaps or perhaps not. But given the increases reported for Westin Aventuras and Westin Flex, we know it is attributed to the MFs of the underlying deeds. For Westin Flex, perhaps that could be attributed to Nanea being added. For Westin Aventuras, there are two new properties added. We will just have to wait and see.

However, I would expect that MVW will push the boards to bring their reserves up to par because there is a big disparity between the reserve fee at properties in the same area.

 

[Ken555]

If we compare similar resorts between Marriott and Vistana, we will notice in many cases that Marriott has a heavier Replacement Reserve;

Arizona
Canyon Villas at Desert Ridge (2BR LO)
2019 Property Tax Fee $35.20
2019 Replacement Reserve $386.98
2019 Operating Fee $1,035.65

Westin Kierland Villas 2BR LO
2019 Operating Assessment $1,203.22
2019 Replacement Reserves $300.00
2019 Estimated Real Estate Tax $62.09

Orlando
Marriott's Grande Vista 2BR - Platinum Season
2019 Operating Fee $850.18
2019 Replacement Reserve $342.93
2019 Property Tax Fee $163.59

Sheraton Vistana Villages - Bella 2BR - Prime Season
2019 Operating Assessment $739.86
2019 Replacement Reserves $253.19
2019 Estimated Real Estate Tax $134.07

Desert Springs CA
Marriott's Desert Springs Villas II
2019 Master Operating $68.41
2019 Master Reserve $46.98
2019 Operating Fee $854.22
2019 Replacement Reserve $466.68

Sheraton Desert Oasis 2BR LO
2019 Operating Assessment $1133.39
2019 Replacement Reserves $339.29

These numbers are from the MF threads for each system. As you can see, Marriott properties set aside significantly more reserves that Vistana. Do Vistana properties cost less to renovate every 5 and 10 years than Marriott? Is Marriott wasting owner's money or buying better quality goods? We don't really know without digging in to all the details. However it would seem that if Vistana increased the reserves to match those at similar Marriott properties, you would have increases in the overall MFs as follows;

5.97% - Westin Kierland Villas 2BR LO
6.61% - Sheraton Vistana Villages - Bella 2BR - Prime Season
8.86% - Sheraton Desert Oasis 2BR LO

I am sure we could compare them at all locations where they both have properties and see consistent results.

Of course the actual specific cause of the increase in the fees won't be known until after the board meetings and for most after we get our MF bills. Will it be attributed to the Replacement Reserve fee? Perhaps or perhaps not. But given the increases reported for Westin Aventuras and Westin Flex, we know it is attributed to the MFs of the underlying deeds. For Westin Flex, perhaps that could be attributed to Nanea being added. For Westin Aventuras, there are two new properties added. We will just have to wait and see.

However, I would expect that MVW will push the boards to bring their reserves up to par because there is a big disparity between the reserve fee at properties in the same area.

It’s difficult to compare reserve contributions without also considering the amount currently in the reserve, and view the reserve study for the property (assuming they have a reliable one). At the moment you’re just comparing reserve contributions for resorts in similar regions with the implied rationale that their reserve should be similar, when in reality that may not be accurate. Or am I missing something?


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[Ken555]

The $80 is not profit to Marriott, it is reserve spending.

This is a truly hilarious statement. If Marriott really does do this then they’ve done a great job of getting paid twice for the same money, as already posted. I find it absurd that any management firm would even consider floating such an idea.


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[dioxide45]

This is a truly hilarious statement. If Marriott really does do this then they’ve done a great job of getting paid twice for the same money, as already posted. I find it absurd that any management firm would even consider floating such an idea.


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Please explain how they would be getting paid twice. They don't earn a management fee on reserve spending only on money collected for operations and taxes.

 

[cubigbird]

Really? That is some serious speculation.
I’d wager that a 6.5-7% increase in 2020 will not happen for most deeded VSE VOIs.
(Based on the last 5 years of increases)


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If we see increases like this across the board I bet we see an increase in the delinquency rate as well.

 

[cubigbird]

This is a truly hilarious statement. If Marriott really does do this then they’ve done a great job of getting paid twice for the same money, as already posted. I find it absurd that any management firm would even consider floating such an idea.


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Is the whole concept of Flex to be paid twice?? TS companies looking for ways to get paid twice isn’t a new idea.....

 

[Ken555]

Please explain how they would be getting paid twice. They don't earn a management fee on reserve spending only on money collected for operations and taxes.

It seems I, and perhaps others, misinterpreted your earlier post. I certainly thought you wrote that they would get paid on the amount contributed to the reserves. Then, they would get paid again when they spend the money.


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[controller1]

Really? That is some serious speculation.
I’d wager that a 6.5-7% increase in 2020 will not happen for most deeded VSE VOIs.
(Based on the last 5 years of increases)


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I'm not sure it is speculation. The 94% is a calculated number based on the explanation given by Vistana to me in my invoice for Westin Flex. It stated the increase was due to increases in MFs in the underlying timeshare properties.

I hope I'm wrong, but if I am then the wording provided by Vistana for the increase is extremely poorly communicated. Exactly what is your interpretation of the data?

 

[dioxide45]

According to Exhibit C of the Westin Flex Governing Document (Budget and Assessments) the developer guaranteed each owner that the total annual assessments would not exceed $0.01893 per point up until Dec. 31, 2019.

Is it possible that this guarantee kept the MF's below where they actually should have been in order to sell more Flex and as a result we're seeing a higher than normal increase now that the guarantee is gone? It will be interesting to see how it plays out with the underlying resorts MF's over the next few weeks as assessments start rolling in.

I did miss this post somehow. It does seem that there was a guaranty in place that could have been artificially keeping Flex MFs low. We will have to wait and see what happens here once the weeks based MF bills start coming in.

Even still, over time I do expect Vistana reserve funding to increase to be more in line with where Marriott properties are. Vistana isn't doing something magical to keep their need for reserve funding low, unless Marriott is wasting owners money. Which is very possible and even likely. We see lots of pet projects at Marriott resorts. Towel folding machine, entertainment big screen for movies poolside, tiling all the exterior hallways at Grande Vista. The money comes from reserves. Perhaps we will see these things come to a Vistana resort near you?

 

[controller1]

I did miss this post somehow. It does seem that there was a guaranty in place that could have been artificially keeping Flex MFs low. We will have to wait and see what happens here once the weeks based MF bills start coming in.

Even still, over time I do expect Vistana reserve funding to increase to be more in line with where Marriott properties are. Vistana isn't doing something magical to keep their need for reserve funding low, unless Marriott is wasting owners money. Which is very possible and even likely. We see lots of pet projects at Marriott resorts. Towel folding machine, entertainment big screen for movies poolside, tiling all the exterior hallways at Grande Vista. The money comes from reserves. Perhaps we will see these things come to a Vistana resort near you?

And that would be the reason and if it is, that should have been in the explanation that the increase was due to the prior years' increases in MFs of the underlying properties which would have been better understood than what was stated.

But even with that, Westin Flex has just been around since 2018 so it's not like there is a lot of history with the product.

 

[cubigbird]

Seems like Westin Flex MF are quickly coming inline with the cost to rent. I bet the delinquency % will increase fairly quickly when owners figure this out and just walk.

 

[dioxide45]

They did specifically mention increases in reserve spending to achieve long-term funding objectives. So it isn't so far fetched to expect reserve amounts to increase on the underlying weeks.

 

[DannyTS]

They did specifically mention increases in reserve spending to achieve long-term funding objectives. So it isn't so far fetched to expect reserve amounts to increase on the underlying weeks.

View attachment 13755

This is the kind of vague corporate verbiage that makes me very suspicious.