Sometimes it’s easy to think of timeshare in an insular manner, it’s not until you take a look at the bigger picture do you get a feel for the monstrous power that is the timeshare industry.
On perusing a recent article published in relation to the Marriott group, it strikes you that the numbers just go on and on. Despite 2020 having a dramatic effect on the holiday industry, Marriott still managed substantial sales of new timeshare contracts.
Timeshare contract sales totalled “$140 million” in the third quarter of this year and were up by a $30 million in comparison to sales completed in the second quarter.
Marriott state that the entry level for timeshare ownership is around $30,000, which means that despite the world suffering from an unprecedented worldwide pandemic, on average nearly 5,000 new purchasers or upgrades took place in the third quarter.
Among timeshare companies, Marriott Vacations Worldwide see their success in part to its $4.6 billion acquisition in 2018 of ILG, which of course includes Interval International. The deal brought into the fold timeshare brands such as Hyatt, Westin, and Sheraton along with a marketplace that allows timeshare owners to swap holiday destinations globally. That exchange industry doesn’t require a lot of capital investment and so aids much-needed cash flow.
Even though Marriott’s consolidated timeshare sales dropped by 55% in the first half of this year compared with the same period a year earlier, roughly 40% to 45% of its pre tax income comes from recurring sources such as maintenance fees giving it a tremendous cash flow source.
Now perhaps you can understand why maintenance fees are so important and why refunds are not in order.
How much is Marriott worth?
The measure of a company’s value is to look at what is known as their market capitalisation. Basically, this is the market value of a publicly traded company’s outstanding shares. Market capitalisation is equal to the share price multiplied by the number of shares outstanding.
In the case of Marriott the current figure is $4.61bn approximately, let’s look at that number with all the noughts on the end; $4,610,000,000 that is some number.
Another big advantage for Marriott Vacations isthat it can acquire business from Marriott Bonvoy, Marriott International’s loyalty programme, which has more than 140 million members and considerably more than those of rival companies Hilton Worldwide Holdings and Wyndham Hotels & Resorts.
Our opinion
We at the TCA understand that the income generated by timeshare resorts from sales to new owners is minimal. Once marketing expenses and the salespersons commissions have been taken out there is not a lot left. Therefore despite the $140m in sales in the third quarter this won’t put a lot on the company’s balance sheet.
The interesting figure is 40 to 45% pre tax income generated from the payment of maintenance fees. A spokesman for Marriott was quoted on BBC Radio 4’s You and Yours program that Marriott have around 660,000 timeshare owners. If we assume that each pays a maintenance fee of $1,000, this yields a pre tax profit of $660,000,000 ($660m). Not really surprising that Marriott glean so much profit from these fees and are vehement in their defence of collecting them.
In reality there will be fee defaulters but also $1,000pa fee is probably quite conservative so the figure above will possibly be higher. Now perhaps the penny drops as to why there have been no financial offers for refund of 2020 maintenance fees and of course within a couple of weeks the 2021 maintenance fee invoices will be dropping through the front door at a charge that will likely be a darn sight more than the previous year.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk