Open questions to Myers, Brettholtz & Company

[DannyTS]

Myers, Brettholtz & Company is the auditor for Lagunamar SVV, SVR probably other Vistana resorts as well.
I read the Lagunamar and Bella audits and there are a few items in the Lagunamar budget that need further clarification. Maybe owners with accounting expertise or resort management can help


1) The Lagunamar housekeeping expenses are $2,897,789 for 296 condos.
The SVV Bella housekeeping expenses are $3,054,697 for 340 condos. Does it make sense that the housekeeping in Mexico is more expensive per room than in Orlando? Does Vistana pay higher salaries in Mexico than in the US? If not, how can the Lagunamar housekeeping expenses be so high?

2) Vistana rents a high percentage of the inventory, about 30%. The rentals come with higher housekeeping (daily), credit card and front desk costs. Are the additional expenses itemized in the budget so that the owners do not pay for them?

3) The Lagunamar credit card fees are about $500,000 a year, almost double the fees paid by SVV Bella. Is that normal?

4) Vistana owns 14% of the VOI but it rents about 30% of the inventory. Has anyone looked at the numbers to see where the difference comes from and if the numbers add up?

5) the Lagunamar internet expenses are very high, about 6 times more than in Orlando. Does that make sense?

6) Lagunamar has a large amount invested in mutual funds, 26 millions in addition to about 1 million in short term securities. SVV Bella invests about 18 millions in mutual funds. I assume that the amount the Vistana resorts invest in mutual funds is over 500 million dollars. Probably over 2 billion dollars for all the Marriott resorts.
Is there evidence that the fees the resorts pay to the the financial institutions are the best they can be given the size of the accounts? And what are the fees paid by the way?

 

[SteelerGal]

Significant. Curious if anyone know why?

 

[controller1]

Those questions are not appropriate for nor will they be answered by the public accountant. Those questions are appropriate and should be answered by the HOA Board and/or management.

 

[needvaca]

where did you find the audits? can you post them? I don't see them in my Vistana.com account for my ownerships.

 

[DannyTS]

where did you find the audits? can you post them? I don't see them in my Vistana.com account for my ownerships.

you can ask the board relations for copies. I am reluctant to post them since they are not public information.

 

[dioxide45]

4) Vistana owns 14% of the VOI but it rents about 30% of the inventory. Has anyone looked at the numbers to see where the difference comes from and if the numbers add up?

THe difference here would likely be weeks people convert to Bonvoy Points and possibly now SOs converted to Cruise bookings.

 

[ocdb8r]

A few thoughts...

Myers, Brettholtz & Company is the auditor for Lagunamar SVV, SVR probably other Vistana resorts as well.
I read the Lagunamar and Bella audits and there are a few items in the Lagunamar budget that need further clarification. Maybe owners with accounting expertise can help


1) The Lagunamar housekeeping expenses are $2,897,789 for 296 condos.
The SVV Bella housekeeping expenses are $3,054,697 for 340 condos. Does it make sense that the housekeeping in Mexico is more expensive per room than in Orlando? Does Vistana pay higher salaries in Mexico than in the US? If not, how can the Lagunamar housekeeping expenses be so high?

Are unit sizes comparable? Bella has a more diverse set of Villa offerings and sizes which could impact housekeeping. I agree it seems odd on it's face.

2) Vistana rents a high percentage of the inventory, about 30%. The rentals come with higher housekeeping (daily), credit card and front desk costs. Are the additional expenses itemized in the budget so that the owners do not pay for them?

I don't think these are strictly itemized differently, but typically the HOA recoup's an additional fixed cost for rentals to account for this. It may not directly correspond to the true additional costs, but there is supposed to be an attempt to offset the higher costs from rentals.

3) The Lagunamar credit card fees are about $500,000 a year, almost double the fees paid by SVV Bella. Is that normal?

This one does not surprise me. Processing fees in Mexico are not nearly as competitive as in the US and from anecdotal evidence on these boards, I suspect there is a much higher spend charged to room accounts at Lagunamar than Bella.

5) the Lagunamar internet expenses are very high, about 6 times more than in Orlando. Does that make sense?

Another one not that surprising, I suspect rates are not as competitive and that usage is higher at Lagunamar (more people relying on the Resort internet because they are abroad).

 

[DannyTS]

A few thoughts...



Are unit sizes comparable? Bella has a more diverse set of Villa offerings and sizes which could impact housekeeping. I agree it seems odd on it's face.



I don't think these are strictly itemized differently, but typically the HOA recoup's an additional fixed cost for rentals to account for this. It may not directly correspond to the true additional costs, but there is supposed to be an attempt to offset the higher costs from rentals.



This one does not surprise me. Processing fees in Mexico are not nearly as competitive as in the US and from anecdotal evidence on these boards, I suspect there is a much higher spend charged to room accounts at Lagunamar than Bella.




Another one not that surprising, I suspect rates are not as competitive and that usage is higher at Lagunamar (more people relying on the Resort internet because they are abroad).

1) From what I could find, the maid salaries in Cancun are about 400 USD per month. Even if Lagunamar paid them a bit better (and I hope it did), I do not see how they would get to comparable numbers. The unit configuration could be a factor but not that big.
https://everythingplayadelcarmen.com/the-secret-life-of-the-mexican-worker/

If I think about this, the housekeeping costs are so low in Mexico that other high end resorts (like Vidanta, Grand Solmar etc) can offer daily housekeeping with comparable maintenance fees.

2) The only revenue in the budget related to rent is
Club Rental Revenue (4)
(4) Associations which are part of Vistana Signature Network (VSN) will receive a share of the rental for weeks not reserved by Members
under the Club Priority Period.

The number is very small and it would be the equivalent of 6.8 dollars per week per rented unit. The fact that there is nothing else there tells me that the housekeeping expenses are not itemized and that the owners actually subsidize the developer rentals. This item is a particular concern to me, especially for the future. Marriott wants to increase the rental revenue and I do not want the resorts to stretch their housekeeping staff just because more and more units will be cleaned daily. If the developer wants to rent more, fine with me, but it should pay its share.


3) I am not sure if the merchants pay a higher fee in Mexico than in the States I could not find any information on the net. It is very possible. At the same time Lagunamar charges high exchange fees that should be seen somewhere in the budget as a revenue (or partially offset the credit card fees), I am pretty sure they have a high margin on that.

I also find it odd from another prospective. I assume the credit card fees refer to rentals and incidentals. Are the fees not baked in the prices already? If someone books a snorkeling trip (owner or guest) why would I pay for that transaction? If someone books online and pays for the room at the reception, why would I pay for that fee? The more others spend the more I pay? How does that make sense? This item is significant ($500,000 per year in the budget) and it should be looked at.

5) I did not find any evidence that the internet costs are higher in Mexico; to the contrary, numbeo.com states that the internet is 56% cheaper in Cancun. I just do not see how the Lagunamar guests browse the internet 12 times more than the Bella guests. And even if they did, most contracts now do not have a linear charge, the more you consume the cheaper per Gb (or just unlimited!)
https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&city1=Orlando,+FL&country2=Mexico&city2=Cancun

Of course we are guessing, someone with authority and that can look at the numbers objectively should be the one giving the answers (the HOA board as @controller1 said?) .

With that being said, I love Lagunamar and I want to give the management the benefit of the doubt because IMO they do an outstanding job.
Trust but verify.

 

[blondietink]

One thing I have noticed on our trips to Lagunamar is that if you book an excursion through the Concierge desk, it has always been told to us that the charge does not go through on the Lagunamar account, therefore we do not get the extra points (6xs) using our AmEx card that we would normally get when charging through the resort. So, that says to me that any credit card fees that come from the Concierge should not show up as an expense in our yearly maintenance fees.

Regarding internet costs vs. Bella. When we are in Orlando at SVV, we only use the internet once a day to check our emails, etc. We are out of the resort most days at the theme parks. When at Lagunamar, we are either out at the pool or beach and use the internet to stream videos, music, etc. We don't leave the resort very often. I have met people at Lagunamar that work online while vacationing, so that could also account for the increase in costs. They have told me that the internet connection at Lagunamar is very good for their work purposes.

 

[YYJMSP]

paying MFs by credit card is likely the largest part of those fees...

 

[DannyTS]

paying MFs by credit card is likely the largest part of those fees...

if that was the case, why would the credit card fees be double at Lagunamar than at SVV Bella for comparable budgets? I pay both fees to Vistana through the website.

 

[DannyTS]

One thing I have noticed on our trips to Lagunamar is that if you book an excursion through the Concierge desk, it has always been told to us that the charge does not go through on the Lagunamar account, therefore we do not get the extra points (6xs) using our AmEx card that we would normally get when charging through the resort. So, that says to me that any credit card fees that come from the Concierge should not show up as an expense in our yearly maintenance fees.

Regarding internet costs vs. Bella. When we are in Orlando at SVV, we only use the internet once a day to check our emails, etc. We are out of the resort most days at the theme parks. When at Lagunamar, we are either out at the pool or beach and use the internet to stream videos, music, etc. We don't leave the resort very often. I have met people at Lagunamar that work online while vacationing, so that could also account for the increase in costs. They have told me that the internet connection at Lagunamar is very good for their work purposes.

But all other incidentals are paid at the end with a CC and so are the rentals that are not prepaid. Why should the owners pay for something they may or may not spend? If somebody books on Expedia and pays at the hotel, why would I have to pay for the CC fees when the revenue goes to the developer? We are talking about 500,000 per year, it is not a small amount.

You are right, the internet is pretty good at Lagunamar. Is it worth 6 times more money than at Bella? The cost to the owners is $270,000 per year, or 68 dollars per occupied 2 bdr unit per month. It does not make sense, I pay about 60% of that for unlimited fiber internet for my house in Canada. Of course, they do not or should not pay retail prices.

 

[DannyTS]

THe difference here would likely be weeks people convert to Bonvoy Points and possibly now SOs converted to Cruise bookings.

possible but it would be nice to know for sure. Given that not all the owners are retail (to be able to convert to Bonvoy) and given that Vistana already owns 14% of the inventory, this would mean that 1 in 4 retail owners converts to Bonvoy which I think it is very high and hard to believe. Probably people convert occasionally to Bonvoy when they do not have other options but the value is not there so I do not think it is a popular choice.

 

[DannyTS]

An additional question that is probably relevant for other resorts as well:

7) from the audit: "Turistica (the developer) utilizes portions of the common area within the Resort Association for the purpose of establishing
outdoor terrace areas, pool bar and corporate office space. Turistica paid annual rent and taxes of $28,924 and
$29,500 for the years ending December 31, 2018 and 2017, respectively, included in other revenue."

Is there evidence that none of the developer's sales related costs are supported by the HOA? I am referring to the phone lines, internet, common area expenses, concierge services (that are used in part to attract people to sales meetings). To me, the amount of $28,924 a year (or $2,410 a month) seems very little for rent paid by the developer for all the sales space plus bar and restaurants.

 

[Mulege]

Sorry about the repetition

 

[Mulege]

The annual meeting is in January in Cancun