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Apollo Group looking to buy HGVC [Merged]

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terces

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Maybe this long involved discussion of Marriott's should move tomthe Marriott thread.
I am an HGVC owner and would like to add one more 7000 point unit and I am finding this recent discussion to be very helpful. I understand that the MVC Trust might be totally different than anything that happens with HGVC, but the exercise is helping me understand how they work, and also assessing the risk on whether to buy more now or hold off. So far I am leaning towards holding off.
 

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I just made an offer to purchase 2 bedroom HGVC Kings Land 8400 pts last week. Just received the contract to sign this morning and saw the news. Now I am totally not interested to purchase HGVC at all. I told the agent this afternoon and she is not happy now.
 

escanoe

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I just made an offer to purchase 2 bedroom HGVC Kings Land 8400 pts last week. Just received the contract to sign this morning and saw the news. Now I am totally not interested to purchase HGVC at all. I told the agent this afternoon and she is not happy now.

I completely respect your decision, but IMHO it is likely an overreaction (my view is it is about the same risk now as it always is owning a timeshare). If enough potential resale buyers feel the same way you do, I will probably roll the dice and try to pick up some bargain platinum points. (Said in some jest .... if I act quick enough I may be grandfathered with lower MFs than what later purchasers will have as part of the trust.)
 

pchung6

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I completely respect your decision, but IMHO it is likely an overreaction (my view is it is about the same risk now as it always is owning a timeshare). If enough potential resale buyers feel the same way you do, I will probably roll the dice and try to pick up some bargain platinum points. (Said in some jest .... if I act quick enough I may be grandfathered with lower MFs than what later purchasers will have as part of the trust.)
If it is Marriott or Vistana or Disney acquisition, i will be ok. But it is Diamond, I'm definitely out. I think i got lucky this time.
 

jabberwocky

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If it is Marriott or Vistana or Disney acquisition, i will be ok. But it is Diamond, I'm definitely out. I think i got lucky this time.

I've been closely looking at adding a HGVC to our portfolio to round it out as it covers most areas where we would also want to go. If Apollo is involved I don't want to be close to this as their methods are essentially financial engineering to make a quick buck. Blackstone I would be okay with, since they do seem to know how to manage things well and position investments for long term performance.

I'll see how this shakes out - but I know have an excellent excuse for our HGVC presentation next month.
 

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I did the comparison to point out how a MVC type trust (point only) system could devalue the home week advantage.

As it currently is with HGVC, you can book your home week for 3 months initially, with no other competition other that those other owners of your particular home week place and type. Furthermore, those people who own at your home week will not book it if they plan to utilize points. That is a double advantage for advanced planner who own exactly where they want to go, year after year. HGVC conceptually caters to those.

With a MVC type of trust, that advantage would totally disappear. The trust would be booking all their weeks at the start of the home booking window, and then letting their point owners select later in time what (and when) they want to get.

From minimum competition for the week owner to maximum competition in one fell swoop.
 

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I did the comparison to point out how a MVC type trust (point only) system could devalue the home week advantage.

As it currently is with HGVC, you can book your home week for 3 months initially, with no other competition other that those other owners of your particular home week place and type. Furthermore, those people who own at your home week will not book it if they plan to utilize points. That is a double advantage for advanced planner who own exactly where they want to go, year after year. HGVC conceptually caters to those.

With a MVC type of trust, that advantage would totally disappear. The trust would be booking all their weeks at the start of the home booking window, and then letting their point owners select later in time what (and when) they want to get.

From minimum competition for the week owner to maximum competition in one fell swoop.

But most likely the trust will have more low season weeks than high season weeks. I feel like that's the whole point of a trust -- screw uninformed people into paying MFs on low season weeks by dangling a carrot of a few high value weeks. I think Hyatt points trust and Vistana trust operate this way. MVC reportedly has high season weeks so not all trusts are bad.
 

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With a MVC type of trust, that advantage would totally disappear. The trust would be booking all their weeks at the start of the home booking window, and then letting their point owners select later in time what (and when) they want to get.

From minimum competition for the week owner to maximum competition in one fell swoop.

But it doesn't have to be this way. If a hypothetical HGVC trust were structured similar to MVC, and if HGVC approached it in the fashion that MVC supposedly does where the trust only reserves any given week proportionately to the trust's ownership of that given view/unit type/season, then it would not have to be negative for the legacy owners. As I noted above, for every complaint that "MVC is booking up all the good weeks for the trust" there are other anecdotes that weeks owners can still book their weeks. I would like to think that HGVC would approach it in a similar fashion. I would have less faith that a Diamond-dominated entity would act responsibly, but if the HGVC management/model prevails, I think they would understand they should not screw over legacy owners. That has certainly not been their model to date as they are even more fair to resale owners than about anyone in the business.
 

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But most likely the trust will have more low season weeks than high season weeks. I feel like that's the whole point of a trust -- screw uninformed people into paying MFs on low season weeks by dangling a carrot of a few high value weeks. I think Hyatt points trust and Vistana trust operate this way. MVC reportedly has high season weeks so not all trusts are bad.

Based on what I've read that has indeed been a problem with the Vistana Flex Trusts - too much low season inventory, and since many Vistana resorts do not have ROFR, they don't have any easy way to build-up that better inventory. MVC on the other hand, has been fortunate to have ROFR rights at most of their resorts, so they have been able to boost the quality of the trust inventory, but since they also allow legacy weeks to play in the MVC Exchange where all trust and legacy points inventory gets commingled, points availability tends to be excellent for both trust owners and enrolled weeks owners, because both trust and legacy owners can access both pools of inventory through the Exchange. I would totally expect (hope?) any HGVC trust to be more like the MVC system than the Vistana systems. The current HGVC club booking window is essentially an internal Exchange just like the MVC Exchange. The HGVC trust would then play in that club season exchange just like everyone else at nine months. If any HGVC trust only had so-so weeks, then that would hurt trust owners during the 12-9 month home resort window (because the good stuff wouldn't be in the "trust home resort"), they would have to wait for club season to book the better weeks, just as the owners of new resorts have to do today to go elsewhere.

Another thing, aren't most HGVC resorts except for the newest ones basically sold out? But HGVC still has high quality/high season inventory to sell at these sold out resorts because of people exchanging their existing week for a new week (upgrades). If HGVC converted all new sales to trusts, then these upgrade reacquisitions would immediately go into the trust to fund points sales from the trust, as would ROFR weeks, etc. I think in fairly short order, any hypothetical HGVC trust would get some attractive inventory.
 

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Another thing, aren't most HGVC resorts except for the newest ones basically sold out? But HGVC still has high quality/high season inventory to sell at these sold out resorts because of people exchanging their existing week for a new week (upgrades). If HGVC converted all new sales to trusts, then these upgrade reacquisitions would immediately go into the trust to fund points sales from the trust, as would ROFR weeks, etc. I think in fairly short order, any hypothetical HGVC trust would get some attractive inventory.

Yes all non new resorts are sold out, but HGVC could still be owning some contracts at those locations as they could acquired those through rofr, foreclosures etc. Only some locations now qualify for trade in if you upgrade, ie Elara does not anymore, but west 57 do.
 

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But it doesn't have to be this way. If a hypothetical HGVC trust were structured similar to MVC, and if HGVC approached it in the fashion that MVC supposedly does where the trust only reserves any given week proportionately to the trust's ownership of that given view/unit type/season, then it would not have to be negative for the legacy owners. As I noted above, for every complaint that "MVC is booking up all the good weeks for the trust" there are other anecdotes that weeks owners can still book their weeks. I would like to think that HGVC would approach it in a similar fashion. I would have less faith that a Diamond-dominated entity would act responsibly, but if the HGVC management/model prevails, I think they would understand they should not screw over legacy owners. That has certainly not been their model to date as they are even more fair to resale owners than about anyone in the business.

JIMinNC, ski_sierra, let me deep dive into the details of what I am saying. I will use Bay Club/HGVC as an example, but I could use any HGVC resort.

I own A Penthouse weeks. There are 750 weeks available at Bay Club. (15 units @50 weeks a year. Weeks 51 and 52 are their own separate class.) For convenience, all sold out.

Of those 750 weeks, how many will book via home week preference? All of them?, some of them?, none of them? If everybody booked home week advantage, there would be a 1 to 1 booking when the window opens. So far, so good.

But say 50% decide to not to use the home week advantage, because they want to "point out" to another HGVC location.

Now you have 50% of 750 weeks competing for the same "prime weeks" for the type I own. Much better odds of getting the week(s) I want, for the place I own. Is anyone being hurt? No. I'm paying $400+ a week more, by owning at Bay Club, compared to, say, Elanra, for this preference. Any one could have this preference, if they are 1.) Willing to pay the extra fees, and 2.) Willing to plan more than 9 months in advance.

Now if one had a hypothetical HGVC trust structured like MVC, here is what would happen. (For this discussion, let's assume that Bay Club has a ROFR. In practice, it does not.)

Assume that the trust has 50% of the weeks, either by ROFR, or by deposit by those "pointing out" people. (The MVC weeks owners converting to Trust points equivalent. . .)

Whereas in the current system, those weeks are not assigned until the home week window closes. They are inventory for the current HGVC points people. Under the "MVC like" trust, those weeks get booked at the opening of the home week, as inventory for the trust!

So I go from 50% of the people competing over the weeks I own in the initial window, to 100%. Then I would not have any advantage by owning at Bay Club. It would be given to the trust. At which point, why own at Bay Club, paying the Hawaii premium? Sell and Buy in Vegas, if you can find a person to sell to.

In essence, this is what happened at MVC with the DC Trust. All the frictional inventory, (not sold, or ROFR'ed, or repo'ed), that had been part of the week owners inventory, became DC Trust inventory, leaving all the week owners with a 1 to 1 booking, at every location in the system. With cancellations along the way, the results could end up with owners not getting a week, even if they paid for it. (This is downplayed, but it is very real. personal experience.)
 
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mrharris03

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JIMinNC, ski_sierra, let me deep dive into the details of what I am saying. I will use Bay Club/HGVC as an example, but I could use any HGVC resort.

I own A Penthouse weeks. The are 750 weeks available at Bay Club. (15 units @50 weeks a year. Weeks 51 and 52 are their own separate class.) For convenience, all sold out.

Of those 750 weeks, how many will book via home week preference? All of them?, some of them?, none of them? If everybody booked home week advantage, there would be a 1 to 1 booking when the window opens. So far, so good.

But say 50% decide to not to use the home week advantage, because they want to "point out" to another HGVC location.

Now you have 50% of 750 weeks competing for the same "prime weeks" for the type I own. Much better odds of getting the week(s) I want, for the place I own. Is anyone being hurt? No. I'm paying $400+ a week more, by owning at Bay Club, compared to, say, Elanra, for this preference. Any one could have this preference, if they are 1.) Willing to pay the extra fees, and 2.) Willing to plan more than 9 months in advance.

Now if one had a hypothetical HGVC trust structured like MVC, here is what would happen. (For this discussion, let's assume that Bay Club has a ROFR. In practice, it does not.)

Assume that the trust has 50% of the weeks, either by ROFR, or by deposit by those "pointing out" people. (The MVC weeks owners converting to Trust points equivalent. . .)

Whereas in the current system, those weeks are not assigned until the home week window closes. They are inventory for the current HGVC points people. Under the "MVC like" trust, those weeks get booked at the opening of the home week, as inventory for the trust!

So I go from 50% of the people competing over the weeks I own in the initial window, to 100%. Then I would not have any advantage by owning at Bay Club. It would be given to the trust. At which point, why own at Bay Club, paying the Hawaii premium? Sell and Buy in Vegas, if you can find a person to sell to.

In essence, this is what happened at MVC with the DC Trust. All the frictional inventory, (not sold, or ROFR'ed, or repo'ed), that had been part of the week owners inventory, became DC Trust inventory, leaving all the week owners with a 1 to 1 booking, at every location in the system. With cancellations along the way, the results could end up with owners not getting a week, even if they paid for it. (This is downplayed, but it is very real. personal experience.)

I see what you are saying. If that's what happened with the trust, it would indeed be sad.
 

Tamaradarann

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Blackstone owned HGVC as part of the Hilton buyout. This is considered one of the most successful and largest buyouts by private equity. Blackstone sold their share in 2018, but were/are the backers of building developments such as Elara and W57. HGVC operated well under Blackstone ownership and Blackstone understands the relationship with Hilton so I consider them a preferred option over Apollo Diamond.

https://www.bloomberg.com/news/arti...aid-to-plan-sale-of-remaining-stake-in-hilton

IMHO...Diamond is the place where old timeshares go to retire. Apollo knows this and wants to spread the HGVC goodwill over Diamond to revive the brand and tie new business with a hotel system so they can package and sell. However, Hilton owns the brand license and could pull so they will have a huge say as to whether value will be realized in this deal.

I agree with your thoughts here and certainly favor Blackstone to buy HGVC rather than Apollo. Since Blackstone is an investment company not an operator of companies and they will probably not change anything in the HGVC just like when they owned it before. While Apollo is also an investment company, it owns DRI which is a timeshare company that most of us don't like the way they operate. Therefore, since Apollo already owns a timeshare company if they bought HGVC the tendency would be for them to make a change in the way one or both operate by giving control to one of the companies to run and/or overpower the other one in the operation of their timeshare company ownerships.
 

CalGalTraveler

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More reporting on Apollo’s offer for a SunTrust analyst after talking to HGV stakeholders, indicating (1) Apollo’s offer may not be enough (suggesting low to life $40s is the target) and (2) Hilton effectively has a veto because of the licensing agreement and is reportedly loathe to have HGVC combined with DRI.

https://seekingalpha.com/news/3505772-apollos-reported-bid-hilton-grand-may-enough-suntrust-says

Thanks for sharing. I hope the deal become unprofitable and falls through, or Hilton Worldwide (HLT) vetoes because the Diamond brand would poison both the Hilton Hotel and HGV Brand (they are correct in this assessment).

Losing the Hilton HLT brand and deal flow would render the deal useless because they would be paying a hefty premium to add more properties to Diamond's portfolio. This would not get Apollo closer to exit. And may make it more risky for Apollo to achieve an ROI given the size of the combined entity under the Diamond brand to sell.

Without the Hilton brand, it would only perpetuate the notion that Diamond is the retirement home for old timeshares which would not make it more attractive to Wall St. than it is now i.e. inflating maintenance fees to higher cost than renting (aka inefficient operations management), pissing off long-time owners causing deedbacks and defaults resulting in negative brand perception which does not attract new buyers.

Bottom line: Diamond doesn't have a sustainable business model without a hotel deal. In the tech world we call this "living off of your installed base revenue"; it will devolve into a long slow death. I would not buy Diamond IPO stock if it were offered today because Apollo/Diamond squeezed all the juice out of the orange and turned it into a lemon. :) Without a Hilton deal flow and brand there is limited opportunity for growth because Diamond damaged their brand by focusing too much on MF profits to package for sale at the expense of market competitiveness/value proposition to new buyers, and losing upgrade revenue from existing owners who lost trust and shut off their wallets.

The good news is that the Chairman of the Board of Hilton Hotels is a high ranking executive at Blackstone so Blackstone will have influence on this decision. I hope they get this scuttled soon because this must be a huge distraction for HGV management and is causing buyers to hold off on purchases.

With that said, I could envision Blackstone/Hilton proposing to cherry pick certain resorts as an acquisition to help improve Apollo's ROI on this albatross. Embarc portfolio, Maui, Tahoe, Waikiki Modern and possibly Cabo Azul come to mind. Time will tell what these deal meisters brew up. If Blackstone and other hotel developers are involved they may be interested in converting some timeshares buildings into multi-use TS and hotel properties.
 
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nuwermj

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... since Apollo already owns a timeshare company if they bought HGVC the tendency would be for them to make a change in the way one or both operate by giving control to one of the companies to run and/or overpower the other one in the operation of their timeshare company ownerships.

We should not assume that Apollo will give that control to Diamond. Although they own Diamond, they have absolutely no allegiance to that company or it's managers. From the dollars and cents perspective of an investment bank, it make much more sense to put HGV in charge of the new entity. Moreover I see no reason for a new management to merge the two clubs.
 
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Jason245

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I think you will drive yourself nuts trying to guess what will happen. Sit back and eat some popcorn while watching the show. Until we know more any actions would be foolish.

Sent from my SM-N950U using Tapatalk
 

Talent312

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Apollo Offers About $40 Per Share for Hilton Grand
Gillian Tan and Scott Deveau
October 14, 2019, 5:17 PM UTC

(Bloomberg) -- Apollo Global Management Inc. made a first-round offer for Hilton Grand Vacations Inc. valuing the timeshare resort operator at about $40 per share, according to people familiar with the matter.

The Blackstone Group Inc. also bid for the Orlando, Florida-based company, said the people who asked to not be identified because the matter isn’t public.

Hilton Grand Vacations’ shares rose to their highest level since June 2018, jumping as high as 10.3%. The shares were up 6.1% to $34.65 at 1:07 p.m. in New York trading, giving the company a market value of about $3 billion.

Representatives for Apollo and Blackstone declined to comment. Hilton Grand Vacations didn’t respond to requests for comment.

Elliott Management Corp. has built a position in Hilton Grand Vacations and was advocating for a sale prior to the company putting itself on the block, people familiar with the matter said last month.

The company, with 55 resorts and more than 315,000 members, fell the most ever on Aug. 1 after lowering its forecast for earnings and sales, citing a lack of inventory in locations like Cabo San Lucas, Mexico and the Big Island of Hawaii.

Apollo bought timeshare operator Diamond Resorts International Inc. for $2.2 billion in 2016.
 
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jabberwocky

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Blackstone seems to be in an acquisitive mood. It looks like they've just picked up the Bellagio in Las Vegas (MGM will still manage but Blackstone will be the landlord). Given the HGVC footprint in the Vegas I can't see Blackstone wanting to cede ground to Apollo.

https://www.wsj.com/articles/mgm-re...shareToken=steaeb2019731545608b0262ce9c5cb2e5

As a side note: Circus Circus has been sold to Phil Ruffin, the owner of Treasure Island, in a separate deal.
 

Tamaradarann

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We should no assume that Apollo will give that control to Diamond. Although they own Diamond, they have absolutely no allegiance to that company or it's managers. From the dollars and cents perspective of an investment bank, it make much more sense to put HGV in charge of the new entity. Moreover I see no reason for a new management to merge the two clubs.

After reading the information from Bloomberg about both Apollo and Blackstone I do agree with your thoughts here. These are big investment companies that buy and sell companies and assets more frequently than ordinary people buy or lease cars. There is no way that we can figure out what will happen with these offerings. Being HGVC owners we are put in a position of being manipulated by the owners and operators of the system we bought into without any control of the destiny. We can only hope for a smooth landing of the timeshare asset we own.
 

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I’m a little confused on what you guys are talking about when you see a trust. Why would I change the point value? Wouldn’t that either just keep the same point value or change it? What does a trust have to do with it.
 

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I’m a little confused on what you guys are talking about when you see a trust. Why would I change the point value? Wouldn’t that either just keep the same point value or change it? What does a trust have to do with it.
There are pretty thorough explanations in this thread. It's an interesting read to follow it through and you can find the answers to your question. It's a good idea to spend the 15 bucks and join TUG so you can see all the discussion.
 

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I’m a little confused on what you guys are talking about when you see a trust. Why would I change the point value? Wouldn’t that either just keep the same point value or change it? What does a trust have to do with it.

A trust will change what you pat in MF’s and what is potentially available in your home season. They usually figure your MF’s as an average of all the deeds in the trust, negating any advantage you have with a cheaper MF deed. The inexpensive Vegas deeds would lose the MF per point advantage. It also could affect those that use their home week advantage. The trust could use an earlier booking window to give the same or better reservation window than those with the home week advantage. Those that bought those weeks probably spent a good chunk of change and the trust could severely damage their ability to book their desired week and decrease the value of their deed.
 

Tamaradarann

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A trust will change what you pat in MF’s and what is potentially available in your home season. They usually figure your MF’s as an average of all the deeds in the trust, negating any advantage you have with a cheaper MF deed. The inexpensive Vegas deeds would lose the MF per point advantage. It also could affect those that use their home week advantage. The trust could use an earlier booking window to give the same or better reservation window than those with the home week advantage. Those that bought those weeks probably spent a good chunk of change and the trust could severely damage their ability to book their desired week and decrease the value of their deed.

While all the the things that are mentioned in this post are possible, I believe that the most critical issue with Apollo,(who owns the DRI timeshare system which has a trust system that they vigorously market) purchasing HGVC is what is available during CLUB SEASON. If they merge the 2 systems so that DRI members could exchange with HGVC during club season there will be more members competing to reserve nights during the HGVC Club Season. It is difficult to reserve at certain resorts during HGVC club season now. Adding DRI members to that chase could make it more difficult or impossible to reserve during that period.
 

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Resorts Owned
HGVC, MVC Vistana
While all the the things that are mentioned in this post are possible, I believe that the most critical issue with Apollo,(who owns the DRI timeshare system which has a trust system that they vigorously market) purchasing HGVC is what is available during CLUB SEASON. If they merge the 2 systems so that DRI members could exchange with HGVC during club season there will be more members competing to reserve nights during the HGVC Club Season. It is difficult to reserve at certain resorts during HGVC club season now. Adding DRI members to that chase could make it more difficult or impossible to reserve during that period.

This is a key reason the EMBARC system (formerly Interwest) resisted integration into the Diamond Collections. HGVC owners may need to protest and do the same or else everyone will compete for the good stuff (primarily HGVC with some Diamond e.g. Maui, The Modern Honolulu) and no one will want the rest. Although Diamond has some nice properties, they also have many properties past their prime which would be a significant downgrade in quality.

If Diamond/Apollo execute a purchase, IMO I am a bit relieved we own bHC because our reservation priority will be protected in NYC at least. If HGVC adds more bHC locations, we may shift from HGV club aka "HGVC Vegas Collection" to bHC reservations in order to obtain the bookings we want with less competition. We also will redirect future resale portfolio additions to the "Marriott/Westin Collection."
 
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