Resale Market Suffering

[WalnutBaron]

A number of developments in the timeshare industry have me quite concerned about the future resale values of higher end timeshare properties under the Marriott, Vistana, Hilton, and Hyatt brands. The things affecting these properties vary, but the net effect is, in my opinion, potentially detrimental and perhaps even devastating. Here's my logic, discussed by brand:

Marriott

Marriott is now the big dog in the timeshare industry, owning not only the vast Marriott network of properties, but having added Vistana and Hyatt to its portfolio through its acquisition of ILG last year. We all know what Marriott did to denude the value of resale properties way back in 2010, when weeks purchased through the resale market no longer could be traded internally to other Marriott properties except through II. There is now a healthy fear that they will extend this policy to Vistana and Hyatt over time. More on that in the separate discussion of those brands below. With the exception of Hilton, Marriott is at the center of much of the degradation of resale values in the high end timeshare industry.

Vistana

Vistana (formerly Starwood) includes the Westin and Sheraton timeshare brands. When Starwood owned these properties, they already had initiated a "split personality" approach to restriction of internal trading. So-called "voluntary" properties, which was most of them, could not be traded internally if purchased on the resale market. "Mandatory" properties, however, could be traded, even if purchased resale. Will Marriott attempt to breach this capability, even on the Mandatory properties? I'm not familiar enough with the language in the purchase contracts for those properties, but I am quite certain Marriott's attorneys have looked for any loopholes they can find to attempt to weaken the internal trading capability of resale units.

In addition to internal trading capability, I also wonder what Vistana owners are seeing in terms of future increases in their maintenance fees now that Marriott owns their properties. I ask only because the early indications on mailings to Hyatt owners shows proposed budgets that reflect MF increases that range from high to downright alarming. Please see specifics in the discussion on Hyatt below. As we all know, once an aggressive MF increase gets implemented, it becomes the new base for future increases (since they almost never go down) and--once those MF's reach a critical level, they definitely tend to suppress resale valuations.

Hyatt

Hyatt, like Vistana, was acquired by Marriott last year as part of the ILG deal. The beauty of the Hyatt system--unlike Marriott and Vistana's voluntary resorts--is that resale owners have just as much ability to trade internally within the Hyatt network of resorts as owners who purchased from the developer. And while there have been no indications this will imminently change, I am very concerned about how Marriott may work to change things in the future.

One other note about internal trading: Hyatt does not allow Hyatt owners to trade back into Hyatt through II.

But there is one change that we are sure is coming: MF increases for 2020 are going to hurt--anywhere from 8% to 40% increases, depending on the property in question. These increases are shocking and, while they have not yet been finalized, they need only approval at the annual owners meetings scheduled to take place over the next 40 days or so before they're official. As I mentioned above, these increases will form the new base for future increases and will certainly serve to suppress resale demand and damage resale values.

Hilton

Hilton has historically had a very generous policy toward resale owners, similar to Hyatt. Resale owners can easily trade internally and, because Hilton has a much larger collection of properties than Hyatt does, this is a tremendous benefit for resale owners. In addition, Hilton has allowed Hilton owners to trade back into Hilton properties through RCI. It has been the most generous trading policy for resale buyers among all of the major high end brands.

But there is real concern that things may be changing, as Hilton is actively trying to sell its network.

Because the sale has not yet been consummated, things will likely not become clear for Hilton owners for many months, perhaps as long as a year from now. But given the changes foisted on the timeshare industry by Marriott, it's a genuine concern that the new owners of the Hilton system, whoever that may turn out to be, will be sorely tempted to treat resale owners the same way Marriott does.

Bottom line: the whole higher end of the timeshare branded industry is in flux right now--and to the detriment of resale owners. It's a troublesome development, to say the least.

 

[Fredflintstone]

Sadly, the gradual erosion of owner benefits coupled with the arrogance that they can fee without repute is going to kill the industry.

The writings are in the wall. Here are a few examples:

1. Increases of delinquency which has forced many resorts to accept deedbacks. I have seen in TUG many times where posts giving people hope to return deeds peak and become highly engaged. It’s like a rush to the Exit door the minute it opens.

2. Timeshare industries are starting to lose cases in court. It used to be they were confident they would win any owner legal challenge. Their argument was a contract is a contract (and still is in many cases).

3. As the rental market expanded through Airbnb and others, pricing for rentals have become more competitive. This has made ownership less attractive.

4. I have read many posts from millennials saying they are not getting tied down with ownership unlike baby boomers.

It’s sad to see the gradual erosion. I do think the concept was good until benefits eroded and fees when up.

I know many Tuggers argue timeshares are still good value and I do respect their opinions. I just read their posts to explain changes in their chosen resort system that are detrimental to them. I particularly enjoy the posts at the end of the year showing another pop up in fees. It just reaffirms I will remain free by shopping the rental market and paying cash on the best deal I can find.

The good thing though is the timeshare industry has brought many great people together through TUG. There is always good things that come out of flawed systems.




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[VacationForever]

@WalnutBaron, Great post. I have seen my Vistana proposed MF for 2020 and it looks fairly flat. What justification was given for huge increases with Hyatt timeshare?

 

[WalnutBaron]

@WalnutBaron, Great post. I have seen my Vistana proposed MF for 2020 and it looks fairly flat. What justification was given for huge increases with Hyatt timeshare?

@VacationForever, not sure yet. Believe me, we are gearing up to ask that very question at the upcoming annual meetings, but I think the real answer--regardless of whatever they actually say at the meetings--is that Marriott has determined that MF's for their Hyatt properties was too low, that those fees can easily be increased due to the relatively high quality of the Hyatt properties, that relative to the rest of the higher end market Hyatt fees have been lower than average (which is true), and that Marriott intends to extend profit margins on their shiny new acquisition to the benefit of their shareholders.

 

[chapjim]

Anti-trust analysis typically centers around two questions -- does a firm have market power and are there significant barriers to entry into the market.

Barriers to entry would seem to be fairly easy. It would be very difficult, perhaps prohibitively so, for a new firm to enter the timeshare market. It is difficult to say a firm has market power if other firms could enter the market easily if one or more firms start misbehaving.

Whether Marriott has market power is a more difficult matter. With Hilton, Wyndham, Westgate, and smaller firms like DRI, VRI, etc., it would be hard to argue that it does. I don't know where Disney would fit in, if at all.

If there are barriers to entry into the market and a firm has some degree of market power, the concern is that the firm would start behaving monopolistically. What would that look like? Two that come to mind from the OP are increasing maintenance fees substantially in excess of some measure of the cost of living and heavy-handed treatment of owners that restricts the benefits of all ownership classes.

Maybe Marriott doesn't have monopoly power but you could argue they are acting as if they did.

(The above is off the top of my head -- forgive me if the analysis is too simplistic. I took Antitrust Law back in 1992 with Judge Douglas Ginsburg as the instructor. Blame it on me, not him!)

 

[SteelerGal]

As I understand, MVC MFs have averaged 5% or greater for sometime. Knowing this I expected as such for our Vistana and Hyatt, I just didn’t expect up to 48%. Hopefully the Boards can give detailed info regarding the huge hike. Is it due to Mgmt fees? Bad Debt?

If you have a chance review the last earnings call as well as deck on the Marriott Board. Hyatt is still being operated separately. The focus is Vistana. Currently it looks like StarOptions will remain however there will be an overlay of some sort. Of course w/ a skim but it could be another year or so. To retro resale, the buy in has significantly decreased however not as advantageous as what was offered to pre 2020 MVC owners. MVC is using ROFR aggressively even for non ROFR locations. So it’s been a ride.

 

[TheHolleys87]

A number of developments in the timeshare industry have me quite concerned about the future resale values of higher end timeshare properties under the Marriott, Vistana, Hilton, and Hyatt brands. The things affecting these properties vary, but the net effect is, in my opinion, potentially detrimental and perhaps even devastating. Here's my logic, discussed by brand:

Marriott

Marriott is now the big dog in the timeshare industry, owning not only the vast Marriott network of properties, but having added Vistana and Hyatt to its portfolio through its acquisition of ILG last year. We all know what Marriott did to denude the value of resale properties way back in 2010, when weeks purchased through the resale market no longer could be traded internally to other Marriott properties except through II. There is now a healthy fear that they will extend this policy to Vistana and Hyatt over time. More on that in the separate discussion of those brands below. With the exception of Hilton, Marriott is at the center of much of the degradation of resale values in the high end timeshare industry.

Vistana

Vistana (formerly Starwood) includes the Westin and Sheraton timeshare brands. When Starwood owned these properties, they already had initiated a "split personality" approach to restriction of internal trading. So-called "voluntary" properties, which was most of them, could not be traded internally if purchased on the resale market. "Mandatory" properties, however, could be traded, even if purchased resale. Will Marriott attempt to breach this capability, even on the Mandatory properties? I'm not familiar enough with the language in the purchase contracts for those properties, but I am quite certain Marriott's attorneys have looked for any loopholes they can find to attempt to weaken the internal trading capability of resale units.

In addition to internal trading capability, I also wonder what Vistana owners are seeing in terms of future increases in their maintenance fees now that Marriott owns their properties. I ask only because the early indications on mailings to Hyatt owners shows proposed budgets that reflect MF increases that range from high to downright alarming. Please see specifics in the discussion on Hyatt below. As we all know, once an aggressive MF increase gets implemented, it becomes the new base for future increases (since they almost never go down) and--once those MF's reach a critical level, they definitely tend to suppress resale valuations.

Hyatt

Hyatt, like Vistana, was acquired by Marriott last year as part of the ILG deal. The beauty of the Hyatt system--unlike Marriott and Vistana's voluntary resorts--is that resale owners have just as much ability to trade internally within the Hyatt network of resorts as owners who purchased from the developer. And while there have been no indications this will imminently change, I am very concerned about how Marriott may work to change things in the future.

One other note about internal trading: Hyatt does not allow Hyatt owners to trade back into Hyatt through II.

But there is one change that we are sure is coming: MF increases for 2020 are going to hurt--anywhere from 8% to 40% increases, depending on the property in question. These increases are shocking and, while they have not yet been finalized, they need only approval at the annual owners meetings scheduled to take place over the next 40 days or so before they're official. As I mentioned above, these increases will form the new base for future increases and will certainly serve to suppress resale demand and damage resale values.

Hilton

Hilton has historically had a very generous policy toward resale owners, similar to Hyatt. Resale owners can easily trade internally and, because Hilton has a much larger collection of properties than Hyatt does, this is a tremendous benefit for resale owners. In addition, Hilton has allowed Hilton owners to trade back into Hilton properties through RCI. It has been the most generous trading policy for resale buyers among all of the major high end brands.

But there is real concern that things may be changing, as Hilton is actively trying to sell its network.

Because the sale has not yet been consummated, things will likely not become clear for Hilton owners for many months, perhaps as long as a year from now. But given the changes foisted on the timeshare industry by Marriott, it's a genuine concern that the new owners of the Hilton system, whoever that may turn out to be, will be sorely tempted to treat resale owners the same way Marriott does.

Bottom line: the whole higher end of the timeshare branded industry is in flux right now--and to the detriment of resale owners. It's a troublesome development, to say the least.

@WalnutBaron, thank you for this detailed information. In the last year DVC has implemented restrictions on resale buyers too, limiting their ability to trade into other DVC resorts, and on the DVC-related Internet forums the question of what other TS systems are doing comes up frequently. I’m glad to have some basic knowledge in that area. DVC is somewhat different from the other TS systems in that Disney’s parks are the draw for ownership, but I agree with many that the new restrictions will drag down resale values there. The question is by how much.

 

[CalGalTraveler]

Sadly, the gradual erosion of owner benefits coupled with the arrogance that they can fee without repute is going to kill the industry.

The writings are in the wall. Here are a few examples:

1. Increases of delinquency which has forced many resorts to accept deedbacks. I have seen in TUG many times where posts giving people hope to return deeds peak and become highly engaged. It’s like a rush to the Exit door the minute it opens.

2. Timeshare industries are starting to lose cases in court. It used to be they were confident they would win any owner legal challenge. Their argument was a contract is a contract (and still is in many cases).

3. As the rental market expanded through Airbnb and others, pricing for rentals have become more competitive. This has made ownership less attractive.

4. I have read many posts from millennials saying they are not getting tied down with ownership unlike baby boomers.

It’s sad to see the gradual erosion. I do think the concept was good until benefits eroded and fees when up.

I know many Tuggers argue timeshares are still good value and I do respect their opinions. I just read their posts to explain changes in their chosen resort system that are detrimental to them. I particularly enjoy the posts at the end of the year showing another pop up in fees. It just reaffirms I will remain free by shopping the rental market and paying cash on the best deal I can find.

The good thing though is the timeshare industry has brought many great people together through TUG. There is always good things that come out of flawed systems.




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I am getting tired of all the games and frequent rule changes in the name of greed. Despite this there are still good deals out there. Our MF are still considerably below rentals so we are ahead of the curve. But if MF's increase to flip that equation we will get off this horse.

What bothers me is that MF are supposed to represent the costs to maintain the building. Full Stop. However, the greed has crept in and they seem to be approached as a competitive revenue source of management fees by the developers to a captive audience.

 

[alwysonvac]

...We all know what Marriott did to denude the value of resale properties way back in 2010, when weeks purchased through the resale market no longer could be traded internally to other Marriott properties except through II...

Just a FYI...
Marriott never built an internal exchange system for their original weeks system. Weeks owners have always used Interval International for trading to other Marriott properties. This is BAU.

Marriott only built an internal exchange system for their DC program (points based system).

 

[VacationForever]

Our timeshare ownership has worked very well for us. We will never rent someone else's homes so VRBO and AirBnB type rentals don't work for us. Whenever we have to settle for a hotel, it almost always feels like a step down from staying at a Marriott/Hyatt/Westin timeshare. As long as one is mentally prepared for annual MF increases and plans for $0 resale by the time they are done with timesharing, timeshare is still the best way to have a land-based relaxing vacation.

When we amortize what we have paid for our timeshare over 15 years and including MF, it comes up to $1,500 per week for 10 weeks a year in a timeshare. The math works for us.

 

[CalGalTraveler]

I am smiling that we bought resale. Not much to lose if you didn't pay much in the first place.

 

[WalnutBaron]

Aggressive increases by ILG (Marriott) on Hyatt Mf's for 2020 definitely seem to be affecting resale values. Even if you bought resale in the past 3-5 years, you're underwater--but not by nearly as much as if you'd bought from the developer.

 

[bogey21]

The devaluing of Marriott started about 2-3 years after I bought my Sabal Palms, Harbour Club and Heritage Weeks way back when. Note that all were bought pre-construction. It has been a steady devaluation ever since. Fortunately when the devaluation process became apparent I sold my Sabal Palms, Harbour Club and Heritage Weeks without losing any money. The changes between the product I bought and what it is today are earth shattering...

George

 

[Synergy]

When I first got interested in timeshares, I really believed there was significant value in the branded resort systems. Perhaps fortunately for me, I was not in a position to spend much up front on ownerships. Even the change in resale value since then is stunning, I would likely be beside myself if I'd bought in at developer hybrid prices.

 

[mjm1]

If I remember correctly the management fee that MVC receives is 10% of MF’s before their management fee. What is HRC’s management fee based upon?

Best regards.

Mike

 

[TravelAmore]

Just a FYI...
Marriott never built an internal exchange system for their original weeks system. Weeks owners have always used Interval International for trading to other Marriott properties. This is BAU.

Marriott only built an internal exchange system for their DC program (points based system).

I’m not sure what BAU means; however, when we purchased our first deeded week timeshare from Marriott in the 1980’s, we called a Marriott Customer Service number to reach our assigned agent (assigned at purchase of our week) and submitted requests to stay at other Marriott properties, or trade in for a certain number of airline miles, or traded for other timeshare properties through Interval World. (Actually, at that time the weeks were referred to as “vacationshare”.)
That process worked annually for us for several years, and then, one year a “Marriott Desk” was announced at Interval International and the rest as they say is history....


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[bogey21]

Marriott never built an internal exchange system for their original weeks system. Weeks owners have always used Interval International for trading to other Marriott properties.

Not the way I remember it. Back when I bought my Sabal Palms, Harbour Club and Heritage Weeks, all pre-construction, Marriott used RCI as their Exchange Company Partner...

George

 

[alwysonvac]

Not the way I remember it. Back when I bought my Sabal Palms, Harbour Club and Heritage Weeks, all pre-construction, Marriott used RCI as their Exchange Company Partner...

George

Ok, thanks for the correction.

 

[alwysonvac]

I’m not sure what BAU means; however, when we purchased our first deeded week timeshare from Marriott in the 1980’s, we called a Marriott Customer Service number to reach our assigned agent (assigned at purchase of our week) and submitted requests to stay at other Marriott properties, or trade in for a certain number of airline miles, or traded for other timeshare properties through Interval World. (Actually, at that time the weeks were referred to as “vacationshare”.)
That process worked annually for us for several years, and then, one year a “Marriott Desk” was announced at Interval International and the rest as they say is history....


Sent from my iPad using Tapatalk

Interesting, thanks for sharing that history. I don’t recall hearing about “vacationshare”.

The point of my post was to point out that the introduction of Marriott’s Point Systems didn’t change how resale weeks internally traded to other Marriott properties. They were using Interval International for internal trading in 2010 and still do today.

 

[hurnik]

I’m not sure what BAU means; however, when we purchased our first deeded week timeshare from Marriott in the 1980’s, we called a Marriott Customer Service number to reach our assigned agent (assigned at purchase of our week) and submitted requests to stay at other Marriott properties, or trade in for a certain number of airline miles, or traded for other timeshare properties through Interval World. (Actually, at that time the weeks were referred to as “vacationshare”.)
That process worked annually for us for several years, and then, one year a “Marriott Desk” was announced at Interval International and the rest as they say is history....


Sent from my iPad using Tapatalk

BAU = Business As Usual

 

[SandyPGravel]

BAU = Business As Usual

TY, I had no idea either!

 

[MOXJO7282]

A number of developments in the timeshare industry have me quite concerned about the future resale values of higher end timeshare properties under the Marriott, Vistana, Hilton, and Hyatt brands. The things affecting these properties vary, but the net effect is, in my opinion, potentially detrimental and perhaps even devastating. Here's my logic, discussed by brand:

Marriott

Marriott is now the big dog in the timeshare industry, owning not only the vast Marriott network of properties, but having added Vistana and Hyatt to its portfolio through its acquisition of ILG last year. We all know what Marriott did to denude the value of resale properties way back in 2010, when weeks purchased through the resale market no longer could be traded internally to other Marriott properties except through II. There is now a healthy fear that they will extend this policy to Vistana and Hyatt over time. More on that in the separate discussion of those brands below. With the exception of Hilton, Marriott is at the center of much of the degradation of resale values in the high end timeshare industry.

Vistana

Vistana (formerly Starwood) includes the Westin and Sheraton timeshare brands. When Starwood owned these properties, they already had initiated a "split personality" approach to restriction of internal trading. So-called "voluntary" properties, which was most of them, could not be traded internally if purchased on the resale market. "Mandatory" properties, however, could be traded, even if purchased resale. Will Marriott attempt to breach this capability, even on the Mandatory properties? I'm not familiar enough with the language in the purchase contracts for those properties, but I am quite certain Marriott's attorneys have looked for any loopholes they can find to attempt to weaken the internal trading capability of resale units.

In addition to internal trading capability, I also wonder what Vistana owners are seeing in terms of future increases in their maintenance fees now that Marriott owns their properties. I ask only because the early indications on mailings to Hyatt owners shows proposed budgets that reflect MF increases that range from high to downright alarming. Please see specifics in the discussion on Hyatt below. As we all know, once an aggressive MF increase gets implemented, it becomes the new base for future increases (since they almost never go down) and--once those MF's reach a critical level, they definitely tend to suppress resale valuations.

Hyatt

Hyatt, like Vistana, was acquired by Marriott last year as part of the ILG deal. The beauty of the Hyatt system--unlike Marriott and Vistana's voluntary resorts--is that resale owners have just as much ability to trade internally within the Hyatt network of resorts as owners who purchased from the developer. And while there have been no indications this will imminently change, I am very concerned about how Marriott may work to change things in the future.

One other note about internal trading: Hyatt does not allow Hyatt owners to trade back into Hyatt through II.

But there is one change that we are sure is coming: MF increases for 2020 are going to hurt--anywhere from 8% to 40% increases, depending on the property in question. These increases are shocking and, while they have not yet been finalized, they need only approval at the annual owners meetings scheduled to take place over the next 40 days or so before they're official. As I mentioned above, these increases will form the new base for future increases and will certainly serve to suppress resale demand and damage resale values.

Hilton

Hilton has historically had a very generous policy toward resale owners, similar to Hyatt. Resale owners can easily trade internally and, because Hilton has a much larger collection of properties than Hyatt does, this is a tremendous benefit for resale owners. In addition, Hilton has allowed Hilton owners to trade back into Hilton properties through RCI. It has been the most generous trading policy for resale buyers among all of the major high end brands.

But there is real concern that things may be changing, as Hilton is actively trying to sell its network.

Because the sale has not yet been consummated, things will likely not become clear for Hilton owners for many months, perhaps as long as a year from now. But given the changes foisted on the timeshare industry by Marriott, it's a genuine concern that the new owners of the Hilton system, whoever that may turn out to be, will be sorely tempted to treat resale owners the same way Marriott does.

Bottom line: the whole higher end of the timeshare branded industry is in flux right now--and to the detriment of resale owners. It's a troublesome development, to say the least.

Perhaps your referring to markets I don't follow but from my standpoint as someone who owns 28 Marriott weeks, most in Maui, HHI with a few plat Newport Beach, (2) 3BDRM golds at Frenchmans Cove and 1 EOY Boston I'm not seeing a decline in resale prices recently in the real prime markets like Maui and HHI. With Maui I know over the last 3 years prices have gone up where I was able to purchase a 2BDRM OF float in the new towers for $19.1K and now I doubt you could by the same for $27k min. I haven't watch HHI as closely because I'm not in perpetual buying mode like Maui but I believe the prime OF resorts on HHI also have maintained their value.

Which resorts and what specific events are you referring to? Or are you referring to the period since 2010 where prices have fallen but I think recently the prime units being sold are being sold at a premium or at least at a consistent price.

 

[WalnutBaron]

I've seen degradation in offered prices for resorts such as Marriott Newport Beach, Hyatt Highlands Inn in Carmel, CA, Hyatt properties in Florida, Hilton properties in Hawaii including some at Hilton Hawaiian Village, and some of the branded mountain properties by Hyatt and Hilton in Colorado and California. As mentioned, the aggressive increases by the developer companies in jacking up MF's at many of these properties is one of the main reasons that supply is higher than demand. I also suspect another reason for this is that timeshares are not desirable to most Gen X'ers while Baby Boomers demand is at or past its peak due to the continued aging of our generation. Are my reasons for the decline in demand speculative? Yes.

And while there are certainly exceptions as you have pointed out, I think that neither the consolidation of the industry--mainly by Marriott in its acquisitions of Vistana and ILG--nor the disadvantageous demographics of those who buy timeshares bodes well for the future resale value of many of the branded properties.