Reading Between the Lines on the Marriott Timeshare Cutbacks
Saturday, September 26, 2009
It would be ignoring the elephant in the room not to talk about the announcement made by Marriott Timeshare earlier this week. The company stated that it plans to take a third-quarter pretax charge of $760 million in its timeshare business.
Bloomberg.com says that Marriott timeshare will stop development at some luxury fractional resorts and will sell undeveloped land. Additionally, Marriott timeshare will sell its inventory of rooms in a new program with Ritz-Carlton Destination Club.
So, what does this really mean?
Hard to say exactly how all the ramifications will work out, but this news indicates that as a percentage of Marriott’s overall business, timeshares will occupy a smaller percentage than it has in the past. If one is to read between the lines, it appears that Marriott timeshare will still be part of the inventory of products offered by Marriott International, but that the company is cutting back primarily in its development of luxury timeshares and ultra high-end fractionals. According to The Wall Street Journal, “Marriott said it doesn’t expect ‘to pursue new Marriott-funded‘ residential timeshares, but does expect to continuing licensing and managing projects developed by others.” What makes this statement even more interesting is the fact that many Marriott branded and Marriott managed hotels are not owned by the Marriott company at all, leaving one to believe that Marriott is just as committed to their timeshare business as always, but plans to focus more on property management and branding and less on development.
Jake Fuller, an analyst with Soleil Securities Group Inc says, “Marriott has shifted from development mode to cash-harvest mode in its timeshare business.” Fuller rates Marriott shares as a ‘buy’ stock, and explains, “This timeshare business will now produce cash instead of use cash.”
Marriott will take a charge of approximately $300 million at nine fractional- ownership projects in North America; $295 million at five luxury residential projects; $95 million at one North American timeshare resort project; $55 million at four European timeshare resort projects; and $15 million associated with two Asia-Pacific timeshare resorts. At this time, Marriott Timeshare has not disclosed the names of the timeshare resorts on this list.
Here’s What Marriott Timeshare Owners Can Expect
If you are looking to buy Marriott timeshare resales, now could be a good time to do so because it is possible that a slowdown in the construction of Marriott timeshare resorts will increase demand in the future for Marriott timeshares on the resale market. And if you already own Marriott timeshare and are considering selling, interest in Marriott timeshare resales may increase as prospective buyers try to second guess what the market will do. But here’s one thing I don’t need a crystal ball to predict: if you own Marriott timeshare, you should continue to expect the same standards and service you have come to associate with the Marriott brand.