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2020 Maintenance Fee Discussion (inc. "Management Fee" line item)

Superchief

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The discussion in the Ocean Pointe MF thread raises the issue for me about the 10% MVC management fee, and what that money is used for. I was told when I bought my Marriott timeshares over the years that it was used to cover the corporate expenses that were not specific to the individual resort. This would include:
  • Corporate management
  • licensing/goodwill expenses (Marriott Name)
  • Overall operating costs of the MVC ownership services (customer service, website, etc)
As the company grew and the DC program was implemented, these costs increased dramatically, but I had assumed they were adequately covered by the annual MF fee increases and the addition of the trust points.

I thought the resort MF's only included the expenses associated with the individual resort. This includes the 'owner services' expense item, which I had believed was only for the onsite related expenses.

Recent discussions regarding MF's and Management fees indicate my assumptions were incorrect and I had previously been misinformed. As MVC continues to grow and ownership costs are getting out of control, I would like to understand where all our money goes.
 

StevenTing

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Figured this is needed. Just looked at my MF's across my portfolio. All combined, my MF's went up 6.4% which represents an increase of $734.19 over last year.

Grand Chateau grew at a slower rate than the past 12 year average. 2.66% compared to the average of 3.49%. That was nice to see.

Destination points also grew at a slower rate compared to the last 9 years. 3.42% compared to the average of 4.02%. Also a nice surprise.

For some reason, the Hawaii resorts had big increases.

Ko Olina was 6.89% while the 9 year average is closer to 5.12%.

Maui 3BR OF were 7.61% compared 8 year average of 4.37%

Because of these changes, I've added a "Percent Increase" tab to my tracking sheet. Percent increase is based off:

(Current year - Prior Year)
Prior Year
 

Steve Fatula

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Recent discussions regarding MF's and Management fees indicate my assumptions were incorrect and I had previously been misinformed. As MVC continues to grow and ownership costs are getting out of control, I would like to understand where all our money goes.

Just a point of clarification, when you say "I would like to understand where all our money goes", this means the 10% management fee only, right? The other places it goes are documented in the budget, so, not clear what exactly you are asking. Maybe it's me. :)
 

Steve Fatula

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Had the same points increase as you of course, and, my DSV went up (all in including taxes) 3.63%, a little less than last year.

Note that you'll have a discrepancy with what I shows vs what your spreadsheet shows since for California, taxes are billed separately. To compare apple to apples, you really need to add property taxes to the MF shown in your spreadsheet since all other resorts include it. The property tax I paid actually went down this year, so, this made the overall increase lower than shown in your spreadsheet.
 

Superchief

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Just a point of clarification, when you say "I would like to understand where all our money goes", this means the 10% management fee only, right? The other places it goes are documented in the budget, so, not clear what exactly you are asking. Maybe it's me. :)
I am interested only in how management fees are used. If it isn't used for corporate expenses, how are those expenses paid?
 

Superchief

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I started a separate thread about the Management fees, but suggest that it be included in your thread because the use of management fees impacts all maintenance fees. It appears that Florida resorts are experiencing similar high increase as HI.

[Threads merged as suggested. <-- SueDonJ]
 
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echino

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Management fee is not used for the resort, it's management company's income and their main source of profit.
 

dioxide45

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The discussion in the Ocean Pointe MF thread raises the issue for me about the 10% MVC management fee, and what that money is used for. I was told when I bought my Marriott timeshares over the years that it was used to cover the corporate expenses that were not specific to the individual resort. This would include:
  • Corporate management
  • licensing/goodwill expenses (Marriott Name)
  • Overall operating costs of the MVC ownership services (customer service, website, etc)
As the company grew and the DC program was implemented, these costs increased dramatically, but I had assumed they were adequately covered by the annual MF fee increases and the addition of the trust points.

I thought the resort MF's only included the expenses associated with the individual resort. This includes the 'owner services' expense item, which I had believed was only for the onsite related expenses.

Recent discussions regarding MF's and Management fees indicate my assumptions were incorrect and I had previously been misinformed. As MVC continues to grow and ownership costs are getting out of control, I would like to understand where all our money goes.
There are other line items, like accounting and human resources which I am sure cover MVCI corporate back office expenses. However, I suspect owners aren't paying all back office expenses at the corporate level, only those that relate to the resorts. Keep in mind that Marriott makes a big profit off of developer sales that cover their overhead on the sales operation. I am sure that they try to squeeze every penny out of the owners in the budgets where they can.

Keep in mind that at Vistana, the 10% management fee isn't collected against property taxes and reserves. I wonder if MVCI is going to try to push to change that. They are leaving a lot of money on the table there.
 

dioxide45

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Since MVC isn't collecting taxes or remitting them for properties in CA or the USVI, then it would make sense that the management fee wouldn't calculate based on that. How would they even know how much in taxes each owners pays. In CA, the tax amount can vary widely based on when the week was purchases and if it was resale or developer.
 

dioxide45

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My biggest problem with the budgets is the pet projects. I have sat in on a couple of MGV budget meetings and the pet projects that the GMs have are big. Towel folding machine, big screen TV by the pool. All new tile for the exterior hallways. While I don't like layoffs, I asked if the towel folding machine would results in fewer staff and the answer was no. If they are automating a process that was once done by three or four people, why would we still need to carry them as well as pay tens of thousands of dollars for this machine?

I challenged the near 30+ year payback of the tiled floors which would cost millions and only save a couple hundred thousand a year (if it was that high). The resort will be nearing sunset by that time. They went ahead with it anyway. All out of reserves, which Marriott gets a 10% chunk.

I am also not sure that there are really that many people benefiting from a big screen pool side. At any given time there could be 4,000 people staying at MGV, how many come to the movie night? a few dozen? Stop wasting our money on pet projects! They operate like the government, the only difference is that they usually end up with a balanced budget at year end because we all paid for it.
 

JIMinNC

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My understanding has always been that the management fee covered all the corporate overhead not accounted for in the other line items, plus the profit for the Resort Management line of business. Owner Services would cover the direct costs of the functions related to owner services like call centers, web, etc; Accounting the direct costs of accounting and financial; etc etc.
 

ecwinch

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Do we have anyone that has served on the BoD of one of the HOA's? My understanding is consistent to some of the above opinions... that the mgt fee is direct revenue to MVC and does not cover any expense at the resort level.
 

bazzap

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For the MVC Trust, accepting there are differences with managing MVC resort Week budgets, they say
“6) In accordance with the MVC Trust Management Agreement, this Management Fee is equal to 10% of all money that Trust Manager is required to collect pursuant to the Association's annual budget (exclusive of the Management Fee itself and Component Expenses), but inclusive of any ad valorem taxes assessed directly to the Association or Beneficiaries, and for special assessments not part of the Association's annual budget”

https://owners.marriottvacationclub.com/medias/2019-MVC-Trust-Budget-Information.pdf?context=bWFzdGVyfGltYWdlc3wyNTk2OTJ8YXBwbGljYXRpb24vcGRmfGltYWdlcy9oNTkvaDYzLzg5ODM3NzkwODIyNzAucGRmfGQ0ZjFhNWNlZmQ0ZWYwZTI3YmViNzA3ZmQzYmJmYTBmMmM5MjhmNjcyMjIwNTUzOTgzZDJmMGNkMDQxODMxNzQ

A
t Phuket Beach Club, the Management Fee is 15%.
It is applied before Property Tax is added and it is as it suggests a pure fee.
 
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pedro47

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IMO, the problem with reading a budget report/sheet is that the average owner does not understand what each lines item represent and that is the problem with Management Fees listed on the budget report/sheet.
 

littlestar

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My biggest problem with the budgets is the pet projects. I have sat in on a couple of MGV budget meetings and the pet projects that the GMs have are big. Towel folding machine, big screen TV by the pool. All new tile for the exterior hallways. While I don't like layoffs, I asked if the towel folding machine would results in fewer staff and the answer was no. If they are automating a process that was once done by three or four people, why would we still need to carry them as well as pay tens of thousands of dollars for this machine?

I challenged the near 30+ year payback of the tiled floors which would cost millions and only save a couple hundred thousand a year (if it was that high). The resort will be nearing sunset by that time. They went ahead with it anyway. All out of reserves, which Marriott gets a 10% chunk.

I am also not sure that there are really that many people benefiting from a big screen pool side. At any given time there could be 4,000 people staying at MGV, how many come to the movie night? a few dozen? Stop wasting our money on pet projects! They operate like the government, the only difference is that they usually end up with a balanced budget at year end because we all paid for it.

How much are Grande Vista proposed fees for 2020?
 

SueDonJ

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Management fee is not used for the resort, it's management company's income and their main source of profit.

That's my understanding as well.

Taking into consideration that every resort has its own governing docs, and, that we know of discrepancies among them, I still think it's helpful to look at any of them for a general understanding of how Marriott's timeshare business is structured. Using SurfWatch's docs as an example, its Public Offering Statement consists of the Master Deed, Timesharing Declaration/Plan, and Management Agreement. I don't see anything in any of them that says Marriot ("Marriott Resorts Hospitality Corp") as Manager must use the Management Fee funds they collect to pay for any of the costs associated with managing the resorts. The SW Management Agreement is 23 pages, too much to put here, but these few are relevant to this discussion:

"ARTICLE III: RESPONSIBILITIES OF MANAGER
Section 3.01 Scope of Services
The services to be provided by Manager pursuant to this Agreement shall consist of the performance of all activities deemed appropriate by Manager for the proper and efficient management and operation of the Time Sharing Plan and the Condominium Property including, but not limited to, those described in this Agreement (the "Services"), all consistent with the MVCI Brand Standards."

"ARTICLE IV: COMPENSATION

Section 4.01 Management Fee
In consideration of its performance of the Services during the Term, Manager shall be paid a management fee (the "Management Fee") for each Fiscal Year equal to ten percent (10%) of the Estimated Operating Budget (exclusive of the Management Fee itself, but inclusive of Reserves and real property taxes whether or not such real property taxes are separately invoiced from the Annual Maintenance Fee) with respect to such Fiscal Year."

(For the full context of the entire COMPENSATION section:
4.02 Payment of Management Fee authorizes Manager to make payment of the MgmtFee on behalf of the association;
4.03 Rental Commission entitles Manager to a commission in accordance with a rental listing agreement between Manager and the Board;
4.04 "RESERVED FOR FUTURE USE";
4.05 Taxes says Association is responsible for all local, state and federal taxes (other than income taxes) on sales, value added or goods and services, payable to Manager on production of invoices or receipts.
Then below is the last item in Section IV.)

"Section 4.06 Operating Expenses
Debts and liabilities incurred by Manager as a result of its management and operation of the Resort in accordance with the terms of this Agreement, whether asserted before or after Termination, shall be paid by Association. Further, all expenses incurred as a result of the management and operation of the Time Sharing Plan and Condominium Property, including reasonable corporate allocations by Manager, shall be the Association's responsibility and Manager shall be reimbursed therefor."

I know that it's a lot of legalese (and that for some people the fact that Marriott relies on legalese as heavily as it does is somehow nefarious in itself) but as with so many other Marriott threads, for me it always comes down to whether or not Marriott is in compliance with the docs that they wrote when they established their timeshares. Reading all this, I just can't see how they can be faulted for collecting a 10% Management Fee that may actually be pure profit, not used to pay for any expenses they incur in managing the resorts.
 
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hangloose

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How much are Grande Vista proposed fees for 2020?

My Grande Vista iss up 5.74% in MFees in 2020 vs 2019. Nearly $1,500 for a 2BR Plat now. I recall when I first bought..it was in the $600/yr in MFees. :/

I tend to agree with dioxide. While I enjoy MVC resorts keeping up with quality amenities, the decisions need to be financially sound as to not significantly increase fees for owners.
 
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