2009 Annual Meeting
Question & Answer Session
With Commentary
Gene: Well, since the line seems to have formed on the right, let’s begin.
Owner: Good evening, my name is Bob Wendt, and I’d like some explanation. I understand there are a number of different reasons why the management fee would increase from 6.85 to 10.8%, that’s a 57% rate of increase, and I’m not complaining per se because I know there are some things that could cause that, but I’d like to know what they are.
Herrick: One of the things that Dorothy mentioned in her presentation was that if you look at the history of the Club, I think the management fee ranged from 4.9% to let’s say 11.2% and everything in between. On average, over the 20 years it’s about 7.5 %. As she mentioned, it would be great if we had a perfect crystal ball when we did our budgeting process and knew exactly what all the different costs would be so we just nailed it year after year but what we know is true is that the Club has a lot of moving parts. 71 resorts, we have a fairly large corporate office, a lot of unexpected things can happen, sometimes to the favorable impact of a budget, sometimes to the negative side of a budget. Last year I think the management fee came in at 5.4%, this year it came in at 10.8%. We try to target the management fee to be somewhere in the 8% - 10% range. This year it came in on the high side because of some of the favorable things she mentioned; most significant was the favorable impact of the Canadian exchange rate which we just didn’t predict and we had a nice windfall this year.
Bob Wendt: How does that increase the management fee?
Herrick: Let me explain how the management fee works. We have all our revenues, which are 85% 80% of that is dues, then we have a few ancillary revenue items such as bonus time income and that sort of thing and then we have all of our expenses, all of the corporate related expenses like the vacation planning center, and all of the resort related expenses. Resort related expenses represent about 80 – 85% of the total expense. Whatever is left over after you take revenue less expense is the management fee, at a cap of 15% of total expenses. So industry averages are management fee is usually in the 10% range; this year we actually came in right at that, but historically the management fee has been well below the average.
Owner: I heard our membership is about a quarter of a million; it made me feel old since my number is 01000187. So I’ve been around a long time and I appreciate very much WorldMark it has been a great thing for us. Just a couple of little things that I’m a little concerned about. We have 20,000 points which we find fits our needs very well. Occasionally we like to use Bonus Time, particularly we like to go to the Oregon Coast in January when the ______ are flying back toward ______ county, but the bonus time is being impinged on a little bit by these special memberships where you can book now if you have a certain number of points you can book further ahead, and that does impinge a little bit on those that have just two weeks ahead for bonus time. I would encourage you not to let that go too far. The other thing we also own a timeshare on Kauai which is primitive compared to WorldMark, I admit. Nevertheless there I can sit in my unit and with my wireless computer and their wireless router, I can access the internet from my unit. I’m wondering why we can’t do something like that in WorldMark. Thank you.
Gene (to Peggy): Do you want to address the first part?
Peggy: I will address the infringing on the Bonus time. The extra programs I think you’re talking about are the FAX rental programs. FAX rental programs are truly available to every WorldMark owner, not just special groups. The difference is there are different price points that are allowed for different groups due to they have a different dues base based on what their group is. So there isn’t … everything that is booked outside of Bonus Time is utilizing a FAX credit and all owners have the ability to use these FAX credits, so when you say it infringes on bonus time, I say to use the example the Oregon Coast. If something cancels and it becomes available on the Oregon Coast if it’s going to be, if it is real popular, it is going to be picked up, right? Regardless it’s never going to make it to Bonus Time. Somebody will pick it up with their credits. The only difference is that when they’re using a FAX credit to do it or if they’re using somebody else’s credits, and once again every owner’s got the right to do that, but even if FAX credits didn’t exist, if something came open in a popular place, you and I both know it will get picked up on credits before it goes into bonus time.
I think Peggy is either missing the point or avoiding the point of the question. The owner is clearly referring to TravelShare and its Fun Time program.
Gene: Would you explain FAX credits? Does everybody understand what FAX credits are?
Peggy: OK, let’s start over. This is FAX credits 101. A FAX credit is created when we offer an out-of-network product. Say for example that I offer that you wanted to buy one of our cruises, and the cruise cost 30,000 credits. What you do, we take your credits out of your account, and we hand you cruise documents, and off you go to cruise using you no longer have use of those credits because you gave those to the developer to pay for your cruise. Now the developer has got the right to use your time in WM because you are not going to be using it this year because you’re going off on a cruise. Does the developer have the right to USE the time? Or just to offer the time to other owners to use under the OWNER’s rights? So every time that we offer out-of-network products, what you’re doing is you are assigning those credits to the developer. Now the developer has bought, WorldMark by Wyndham Travel has bought your cruise, or they have bought your trip to Europe, or whatever you used your credits for, they paid for that with cold hard cash. So now what they need to do is get their money back on those credits, and one of the ways they do it is to re-rent it out to you in FAX rentals, in Fun Time, um and so that’s one of those ways to monetize those credits to get the money back in, which allows us to allow you to use your credits for other things.
Gene: It’s the same as if you had done like an RCI exchange or an Interval International exchange. It’s a like-for-like exchange is basically what it is. And that’s how they convert those credits back to cash. And they have the same rights as an owner. NO THEY DON’T. The governing documents specifically state that the developer has the right to use the units within 45 days of occupancy, as long as member access is assured. Re-renting the credits via the FAX program is allowable under the governing docs, but that is different than having the same rights as an owner! I mean, they’re your credits, so based on the expiration determines the window. Sorry (to Akins?)
Dave Akins: The second part of your question was the internet access. Two or three years ago now, we were trying to come up with a solution for all resorts to have a consistent high-speed internet access. Unfortunately the solution we were able to come up with for all the variety and type of buildings that we have to deal with in the system is a wired system, and you’re probably familiar with it, it’s called ResortNet. Now the next logical thing would be to upgrade that to be more wireless in nature and that would probably be our next task to try and achieve so you can have your wireless connectivity out on the balcony of any resort. But we’re not quite sure how we’re going to do that and when that will happen. The equipment that is currently used plugs into an electrical outlet and sends the internet access through an Ethernet cable. I know owners who bring their own wireless routers and plug them into the equipment provided by the resort. Even if the system is limited to a separate box for each unit, why couldn’t that box be a wireless setup?
Gene: But it’s the objective of the Club to have wireless throughout the network, I mean that’s what we’re working towards.
Akins: As (best? fast?) as we can.
Owner: Good evening, my name is Bob Jenkins. Gene, you triggered this question. We have a document called the Daily Vacation Credits Values, and in that each resort and each room has the number of weeks that are in red, blue, or white time, and the number of credits associated with that. In the past, you’ve always said that is set and it will not change, in that the same number of weeks will be red time, the same blue and white, and the point value will not change. However, today you did make a comment that the developer has the opportunity to change the credits. Were you talking about this document?
Gene: No, no.
(aside:) I’m wired, it’s ok. I
don’t mean coffee wired, I’ve got a wire on me. She was handing me a
microphone, I just … No, I’m talking about future resorts. Once the resort …
the developer transfers the inventory into WorldMark the Club. They have to transfer it without any debt,
any encumbrances, the title has to be clear.
Now it’s owned by WorldMark.
Prior to that the credit values, the number of seasons, that’s all
pre-determined because they have to base it on their product cost and a number
of other things. Note: The
governing documents make NO allowance for credit values to be based on product
cost! The Declaration of Vacation Owner
Program says “such allocation shall be based on the relative use-value of the
new Resort compared to existing Resorts”
So once those credit values are set, transferred to the resort, they can
never change. But let’s say that well
let’s say that they decide to open in Manhattan. Go into
Owner: Good evening, my name is Charlie Yang, and I appreciated being in the WorldMark membership. I have enjoyed all of your resorts but one of the things I’ve noticed for a lot of potential new members is on the sales approach that have been used by some of your people where they either get some like a Costco benefit or you get a trip to Las Vegas or something like that in their sales pitch. But the thing about the trip to Las Vegas, it’s not a trip to a WorldMark resort to experience the glamour of the WorldMark membership, and I said that disillusioned me when I got that offer. I joined WorldMark because my friend recommended it to me and he enjoyed it and he had nice experience, but when I got that offer and found out the limitations of it and it wasn’t a WorldMark, it was a fly-by-night cheap deal, that really disheartened me. I asked the people here
Gene (cutting in): I understand.
Charlie: It’s a very poor approach to sell WorldMark.
Actually the sales staff does sometimes house sales prospects in our units. It is within their rights to book time in the resorts for sales purposes using their own unsold credits and within 45 days of occupancy, as long as owner use is not affected. I would prefer that no sales prospects be housed at the resorts!
Gene: I couldn’t agree with you more. When I had the opportunity to directly oversee sales, I was Trendwest, I have not worked for Wyndham, but as Trendwest’s uh chief operating officer I didn’t even have on-site sales. I mean I believed in separating the experience from the owner and the uh sales process all together. We just I the uh board of directors does not have the ability to change the sales. What we can do, I can make a call to Franz Hanning and he’s the Chief Executive Officer, and you can bet that I’ve called him on more than one occasion. We can represent your concern when you feel that you’ve been told information that was improper or inaccurate and the Board will jump all over it in a heartbeat. They have a sales and marketing contract that they’ve signed, and like I said earlier, part of the agreement is when they develop and transfer a resort, then they have the exclusive right to sell the credits that are associated with that resort and we don’t always agree on how that’s being done, we don’t. The board does everything it can, whenever you notify us especially when somebody’s trying to tell you that the WorldMark rights are going to change or something like that, that just can’t happen and I would love to see them using the resorts but at the same time what they’re saying is that they want to keep the resorts exclusive to owners and friends so those people who are coming in to view them as a potential purchase they keep them off-site then bring them on-site to look at it, and it’s just the way they do business, and like I said I don’t necessarily agree with it. You don’t agree with it? Isn’t that exactly the way you just described handling it yourself when you were in charge?
Gene has departed from the original question here, but he addresses something that many owners have complained about – the tactics and mis-representations of the sales staff. He claims that the Board of Directors has no say in how sales are handled. But the Wyndham sales staff are the face of our club – they are the first and many times only exposure that people have with WorldMark. When someone leaves that sales presentation, his or her impression of WorldMark at that point is often the only impression of WorldMark he or she will ever have. The sales staff is representing US, the Club. They must be held to the highest standards of conduct and ethics! One of the responsibilities of a Board of Directors is to protect the reputation and image of the organization.
Charlie: I say get rid of that Las Vegas deal because you’ll kill potential members, and I was frustrated at that and that perturbed me but however actually going to a WorldMark resort changed my mind and the way you operate the resorts is first-class but the way you sell it needs to be improved.
(applause)
Gene: Don’t hesitate to bring those experiences to Owners services, truly.
Charlie: I would have taken the Costco membership over that Las Vegas trip, that’s what I’m complaining about.
Herrick: Oh, I see, it’s all about Costco. I just wanted to say that from the management side of things we work closely with the sales organization, we don’t work directly for the sales organization, but we work closely with the sales organization, and when we do get comments from owners regarding an experience on the sales side that’s less than favorable, we do have the contacts within the sales organization to work with them to make improvements and we get very good cooperation with them. I know that they just are rolling out a brand new sales training program for the in-house sales people that I think is going to have a real positive impact on that experience. So we work with them closely, if you do have concerns please let Owner Services know, Peggy and I will get that information and we will work with our counterparts on the sales side to direct any corrections that need to be made. Thank you.
Owner (Teresa): I’d like to talk a little bit about the ballot measure that’s on the ballot. Gene made reference earlier in his opening statements about owners in the past asking for the member list.
Gene: For twenty years, I’ve been asked for that list. Would that be because the Bylaws guarantee the Owners the right to inspect and copy the list? (Bylaw 7.1(a))
Teresa: And you said only one or possibly two exceptions, everybody else was for commercial. Gene, I was one of those. I was never, ever going to use it for commercial.
Gene: Well, Teresa what makes you think I included you in those one or two?Teresa: Well you said one, then you went “oh, well maybe possibly two”. So there was only one other person besides me that just wanted … I wanted to contact and communicate with my fellow club members.
Gene: I understand that.
Teresa: And that’s the sole reason why I asked to be able to share a club experience with my fellow club members.
Gene: God bless you, Teresa, because you are probably one of the most dedicated owners I’ve ever met. And Teresa has a WorldMark site, it’s called WMowners.com –
Teresa: It’s not mine, it’s owners’.
Gene: Well I know that you helped get it launched and get it started. I was just trying to give you a little credit for doing that. But you know, the thing that people are missing on this ballot measure is it’s not so much about the –
Teresa: Let me finish. Hold on. Just in the past couple of months, 4 months or so, I have been called 4 times from timeshare rentals, they know I own a timeshare, somehow they got my name and phone number which is an unlisted private cell phone number.
Gene: I get those calls too.
Teresa: And on the
caller id it’s out of Orlando,
Gene: See, that’s an excellent question, and what we’re trying to do is prevent that very thing from happening.
Teresa: What I’m saying is it’s already happened. It’s already happened.
Gene: No, no. Yes, yes! You just said you get the calls too!
Teresa: For us as owners to be able to ask to have contact with our fellow club members without having to pay over $200,000 which we have taken the steps to try and do as owners to try and contact our fellow Club members just so we can have open communication .
Gene: And Teresa, I applaud it. The only thing I’m going to suggest to you, and this is the only thing I want you to consider, is that is a Club asset. The Club owns those names, that is a Club asset and it is worth 10’s of millions of dollars. So not only are we trying to clarify a bylaw, but we are trying to protect an asset that you all own. Period.
It’s
a Club asset that we all own … but none of us are allowed to access? Owners want access to each other, not
necessarily to “the list” (more on that later).
The reason we want to communicate with each other is to protect the BIG
asset that the Club owns – the resorts!
Teresa: And every owner, when they got their documents, saw that in there, that we have the right to ask for the membership list.
Gene: You are interpreting and we have a disagreement here. How can that be an interpretation? Every owner at purchase was given a copy of the Governing Documents, including the Bylaws, and was required to acknowledge receipt of those documents in writing. Section 7 of the Bylaws, “Records and Reports”, reads “7.1 Inspections. 7.1(a) Members. The Articles, Bylaws, Declaration, Rules, Membership register (including mailing addresses and telephone numbers) or duplicate Membership register, the books of account and minutes of proceedings of the Members, the Board and any committees, and all other records of the Program maintained by the Club or its Manager, shall be made available for inspection and copying, upon written demand and reasonable notice, by any Member or his duly appointed representative, at any reasonable time and for a purpose reasonably related to his interests as a Member.” It looks pretty cut and dried to me! It’s on the ballot, the owners are going to decide, whatever you want to do. We’re trying to protect personal information and overwhelmingly, that’s the response I get from the owners – don’t let my personal information out. It’s your call, folks. It really is. Yes, it is on the ballot. And the Board has done a great job of playing up the “privacy” aspect. But there has been no discussion of other alternatives and no “against” argument presented to owners. Shortly before the election, the Club did put a statement by Gene on the website and called it an “against” argument. But it was NOT an against argument! It was “some people don’t want you to vote for this, but they don’t know what they’re talking about.” How can owners be asked to make a choice when given such one-sided information?
Herrick: You know, Teresa, there is specific language in the bylaw that says that owners can and owners do today there are owners that use the alternative approach … Actually, the “alternative approach” is NOT part of the Bylaws. It is in a policy enacted unilaterally by the Board without a vote of owners, in direct violation of our Bylaws. That is the source of the legal action that brought about this bylaw proposal – a legal action that the Board LOST and is appealing. During the stay for appeal, they are trying to push through the bylaw amendment retro-actively so they can say that owners have accepted the alternative. And again, they are not presenting the entire issue to owners before asking for a vote.
Teresa: they have to pay for it, that’s what I said …
Herrick: No, all they’re paying for is the mailing.
Teresa: Absolutely, it’s over $200,000.
Herrick: If you got the list and you wanted to communicate to people you would have to mail as well. How is it different? All we are doing is protecting the private information so that you are still going to pay for the mailing costs, you’re just not going to get the private information. We’re just trying to be able to facilitate the communication without sharing the private information. No, they are trying to BLOCK the communication by blocking access to the owner list. If they wanted to facilitate communication and still protect owners’ personal information, there are many ways they could have done that. I personally requested several times over the last two election years to have information communicated to the owners. I asked for information to be included in emails and publications that were already going out to owners, and was denied. I asked to be included in the Club’s proxy solicitations to owners, and was denied. Another owner asked the Board to put certain proposals before the owners for a vote, and was denied. He was told that he had to show support of 5% of the ownership for the proposals. So he asked the Board to put the option of the proposals before the ownership, and they refused. He asked to contact the owners directly, and the Board refused. That is why he eventually brought the legal action against the Board in order to gain access. They claim that it is about protecting privacy. It is actually about protecting Wyndham’s control of communication! Gene said that the list is an asset worth 10’s of millions of dollars. Perhaps that is because if owners were allowed to communicate with other owners and make them aware of the problems and self-dealing within the Club, it would cost Wyndham control of the Board of Directors, which would result in true oversight of our manager and developer, which could cost Wyndham 10’s of millions of dollars! (See the comments about elections toward the end of the Q&A session.)
Gene: And this isn’t
about debating the addendum, but … yes, heaven forbid that there be any actual discussion or debate on the addendum before people vote on it ...
Teresa: I know, I was just trying to share, it was me and one other person that asked for it without commercial intent …
Gene: And I maybe there was more than two, I apologize for making such a broad generalization…
Teresa: I know there are other people that want to ask questions, but since they asked about the internet, we’re staying at the Camlin and I’m actually staying with my girlfriend Nena. We have our own separate Telkonet accounts, we’ve paid for the annual fee. I have, she has. At the Camlin we cannot use it independent of each other. There’s the one box that’s anchored on the wall and when I go to check into a resort I always check out the modem box at the desk and I take it to the unit and can use it. They have no extra modem boxes at the Camlin desk, so if she’s on, I can’t be on; if I’m on, she can’t be on, so
Gene: I understand.
Teresa: I’d like to
Herrick?: It’s a good suggestion, sure.
Gene: The right person is writing it down.
Teresa: Thank you very much Dave, Thank you. And Saturday evening we are having a pot luck at the Camlin at 6:00 for anybody that’s watching on the web cast or here, come on …
Gene: OK, we need to get other peoples’ questions. Thank you.
Gene: Well, gosh darn it, I’m trying to be fair and equal. Go ahead.
Owner: Mr. Hensley commented probably reflecting on days of yore that we had a true point-based club. I recall when the congenial sales agents from TW would explain that if you paid more money, you got more points, that gave you more days of resort time. That was it.
Gene: That is it.
Owner: Now with Wyndham sales agents, it’s pretty much of a hard sale, and in order to ramp up the amount of money needed for development, they sweeten the pot for selling extra shares by adding bits of advantage like Fun Time and they can ramp you up to the platinum level so that we have about four tiers of ownership that affect in subtle ways the value of the shares of minor owners. (Applause) What happens is that bonus time is cherry picked by the people who can get there first during the 14 through 21 day window by having bought more credits so when it gets to the 14 day you take a look at that calendar and it’s a desert where it used to be a fruitful hunting ground. So I’m thinking that if these changes that have taken place which are prejudicial against minor owners, is this sort of the camel’s nose in the tent? Who is protecting us? (applause) I will get to his other points within the responses below, but I love his final question. WHO IS PROTECTING US??? That is the job of the Board of Directors!
Gene: Well first, of all, (aside) do you want to address TravelShare?
Herrick: Yeah, TravelShare was launched by the developer in 2006, it’s a completely ancillary product over and above the WorldMark product. Peggy talked about FAX credits. One of the things that drive the fun time activity is those FAX credits that are purchased by the developer from members who use their credits to go on a cruise. There are no more credits in the system than there can be owners who purchase credits. It’s just a different way of cycling the credits through the owner base. This is all true – but it highlights the base problem: communication. The only communication owners ever receive about TravelShare is at the hands of the Wyndham sales staff, who use TravelShare to bash owners into thinking that if they do not upgrade, their current credits will be useless. TravelShare is indeed a separate product, and Fun Time is as he says just a different use of FAX credits. In fact, ALL owners have access to FAX credits at 13 months out, not just at the 14 – 35 days that Fun Time offers. But the problem is in the presentation. The Board has allowed the sales staff to bully the owners. Why hasn’t the Board instructed the manager to put together a factual description of all that TravelShare is and is not, and distribute that to all owners?
Owner: That doesn’t address the issue of what happens to bonus time opportunity for minor owners.
Herrick: Fun time, the fun time rules, are within the same guidelines as your WorldMark booking rules. So in other words, if an owner didn’t use their credits to go on a cruise, they could have booked using their credits within the same guidelines as the fun time guidelines. They are all within the same rule base.
Gene: A credit is a credit is a credit. They all function and operate the same way.
Owner: Thank you. I think you’re missing the point. I agree. The point is that owners need complete information!
Gene: Let’s go over here.
Owner: Hi guys, how are you.
Gene: Good
Owner: I just have an in a nutshell question. This is maybe a little bit more sales based. I am wanting to know what the future is for owner education. I know that I am fortunate enough to live close to the Camlin, where I can drive and listen to Miss Amy Godwin teach us all the things, but my heart goes out to those who don’t live close to Indio or close to Anaheim and want to know what the future looks like there.
Peggy: Right now the future is going to be at the existing sales offices, which in this area they are Camlin and Birch Bay. Of course what we’re looking for is to as I said next year launch a great big robust program online that can replace I know it can’t replace Amy Godwin, and I wouldn’t even try to do that, but to try to get that information available for all owners. It was a program that was promoted and offered by sales, and when sales was no longer open in those areas, no longer is owner education available in those areas. So it’s going to be up to the club and one of the ways to do it is to work with the developer to get it online.
Owner: Great, I look forward to it online. Thanks so much.
Gene: We actually had it online several years ago, and it became outdated. And with all of the transfer into the new system, it lost some of its priority. New system? What new system? But ideally there will be a tutorial online where you will be able to go through any one of the chapters, to go from bonus time to exchanges to you name it and have a compete tutorial online, and then it will be complemented with folks like Amy.
Owner: That is exactly what we are looking for.
Yes, that IS what we are looking for! Owner education that is independent of the sales efforts!
Gene: Thanks for the question.
Chris Wheeler: Hi, I’m Chris Wheeler, and I’m somebody who owns 12,000 credits and am working on paying it off and my concern was about the new resorts coming online where they are assigned greater number of credits per day and I’ve been a member since 1992. Financially don’t see myself ever getting more than 12,000 credits. But my concern is going forward that my ability to book into WorldMark is going to get more difficult because a) people may go for the resorts that have a smaller number of credits for each day in whatever season to maximize like I’m trying to do and my ability to afford to go into either current resorts that have more credits or future resorts that are going to be even more costly credit-wise, plus the fact that the housekeeping and the maintenance will on a regular basis go up will make the program almost like unaffordable for me.
Gene: You know, I
really appreciate what you’re saying, I do.
We even asked owners because this was a really strong point several
years back, and uh it actually started with the first the Las Vegas resort on
the strip, not Spencer Street, but the Las Vegas resort on the strip. They worked
so hard to get those numbers to work, and the only way they could do it was by
increasing the credit value in red week from 10,000 to 11,000. And I mean we butted heads over that it just
about cost us that resort . We butted
heads over it so bad. So we asked the
owners, when we go into a high-demand area, or if we go into an expensive area
like I was mentioning about Manhattan, product cost is going to drive it up so
there’s three things we can do: 1) we
can address the credit values to the cost, 2) we can adjust the business model,
somehow increase if we can density, or 3) we can simply walk away from it. And overwhelmingly the owners said take us to
San Francisco, take us to San Diego, take us everywhere you can
possibly get us. As Gene said, when they conducted that survey,
owners were looking at
Chris: Part of the credits I got then, and part of them are more recent and I’m paying them off, but it’s basically I worry that my ownership will get so diluted that eventually it will be unaffordable for me.
Gene: In order for
that to happen, what would have to happen is these higher credit value resorts
would have to be at a lower occupancy because then it means that they’re not
being correctly utilized and that’s not the case at all. They are being completely utilized and so
it’s not like it’s driving people to other resorts. That’s not the case at all. How do you know that it’s not driving people to the other
resorts? I would love to see a study of
the booking patterns in Las Vegas.
Chris: So in other words it will always be there for me out into the future.
Gene: It will always be there, absolutely.
Chris: I mean in the sense … I just want to voice that as a worry that you know, so …
Gene: Yeah, agreed. Absolutely agreed. We do everything as far as a board can do to influence the developer to keep the credit values consistent. But the bottom line is that they pay for the development and they adjust the credits accordingly if we want to be in those areas. No, WE pay for the development through the purchase of those credits. And if the Board had done everything the Board could do to influence the developer to keep the credit values consistent, there would not be a derivative lawsuit against the Board of Directors for failing fiduciary duty on this very issue. I’m sorry, Bob, did you want to say something?
Bob Morrison: I was going to say, when I first came on the board, that was exactly a concern that I had, and we’ve gone through the numbers and looked at how the development process comes about, but the most important thing for me is making sure that the utilization of these higher credit value newer resorts is as high or higher than the utilization or the occupancy rate if you will at the older resorts. Because if it were lower, that would indicate to me that people were choosing the lower credit resorts over the higher credit resorts. We don’t see that in the statistics that we look at. We see that the new resorts with the higher credit values are being utilized and people are paying those credits. So we think that we’re watching that and we do not think your concern is right at this point. But what statistics do you look at? Do those statistics separate out developer and sales use of the resorts? Public rentals? In order to truly measure OWNER use of the resorts, we must have a DETAILED accounting of how the units are being used and the patterns under which they are being booked. Are the more expensive resorts being booked only as a last option, after the lower-credit-cost resorts are full? If so, then owners ARE being pushed into the more expensive resorts.
Gene: Know that we watch it. We look at those utilization reports on a quarterly basis, every three months to see who is doing what, how owners are using the properties and projects, so …
(question unintelligible … microphone turned off?)
Gene: Well we’d have to, in someway, if there was an adjustment to be made. But right now there is absolutely none and at this point we don’t have any new resorts coming in so it’s not going to be an issue for a while. I hope it’s … never mind. Anyway. Sorry, I don’t know who was next. I wonder what the question was?
Owner: I have a quick question if I may. It was mentioned earlier, and I quote “reservations start any time of the week and you can stay as long as you want.” Why was I told that I have to book for a minimum of seven days at Depoe Bay?
Gene: Well chances are that you were booking ninety days, you were booking less than three months in advance. No, the opposite …
Owner: No, I was booking seven months in advance.
Gene: That’s why, sorry. It’s less than 90 days where in Red week … it used to be 60 days, that’s what I was talking about. And the principle behind that was we wanted to be sure that people who were booking their family vacations a year in advance or six months in advance, they had a full week available to them and all the weekends weren’t gobbled up. So in red season, red season only, it only applies to red season, if you were going to book uh beyond 90 days in red season, you have to book a solid week, at least 7 days. You can book 8, 9, 10, whatever, but it has to be a minimum of 7 days if you book 90 days or less in advance, you can break that red week over night or a weekend or however you want it. But that’s part of your guidelines, that’s in your reservation guidelines, and that’s part of the that’s the rule that we just expanded from 60 days to 90 days and if I could get my way it wouldn’t exist at all. We don’t have a problem in blue season, we don’t have a problem in white season, you can book that 13 months in advance for a weekend if you want.
Owner: But I can’t book 90 days in advance because I only have 10,000 credits.
Gene: Well, you can book as far or as little in advance as you want.Owner: Well, that’s what I was told at Las Vegas three weeks ago by the salesman there. If you spend another $20,000, NOW you can book 90 days in advance instead of only 60. This started out as an Owner Education problem, but turned out to be another sales abuse issue.
Gene: NO, it’s in your guidelines. You can book less than 90 days in red season if you’re booking less than a week.
Peggy: You know what, why don’t you give me a call tomorrow or I’m going to be in Indy next week, but let’s just spend some time and go over it. I’ll give you my card.
Owner: Oh, please. Where can I pick that up?
Peggy: After the meeting, I’ll …
Gene: I’ll bet owner services in back would gladly give you Peggy’s direct line.
Owner: Thank you very much, Peggy.
Peggy: No problem. No problem.
Gene: It’s a misinterpretation of a guideline, that’s what it is. Sorry. Let’s go back here now.
Lynn: OK, I’m Lynn Connors I’m from Orange
Gene: Welcome
Lynn: Well thank you. This is my third year coming to this meeting, and I’d rather not be up here asking a question or making a statement, but my question has to do with the same thing that Teresa said, and that is with that ridiculous proposal. Gene, you said that for twenty years you’ve been denying owners the owner list in violation of the governing documents. Are you proud of that?
Gene: What I … you know, the guideline reads “or a suitable alternative”. I’ve never denied anybody …
Lynn: No, the guideline does not read “or a
suitable alternative”. You attempted to
institute a policy and the
Gene: Oh, let’s not get rude. Please don’t get rude.
Lynn: how can you look in the mirror every day when you do that, all of you, because you know that you …
Peggy: Because we are trying to protect owners’ information
Lynn: No, you are not, if you were trying to protect my information, I wouldn’t be getting the calls that Teresa was talking about. We didn’t buy from the developer, and certainly there is no deed that goes with WorldMark Credits, so …
Gene: Shh, take it down a notch, nobody here is at war or anything …
Lynn: Well I don’t … I disagree with that because you are at war with the owners. You will not allow us (Gene: No … ) You will not allow us to communicate with each other.
Gene: I will not hand out a list of 276,000 personal information on owners. (applause)
Lynn: In violation of
Gene: That hasn’t
been proven yet. That hasn’t been proven
yet. For those of you that don’t know,
there is a litigation around this. And I
feel that part of our fiduciary responsibility when you join, a right of
membership is not access to 276,000 personal information, that’s not what the
membership is about, and 90% of you seem to think everything is going pretty
darn swell. Actually, access to the member list IS a right of
membership … see the above-quoted bylaw.
It is also a requirement under
Owner: Alright, I’d just like to phrase my comments by saying that I think WorldMark is a phenomenal concept, has done extremely well, and that’s why I’m a member I guess. Found that I’ve used it extensively and very much enjoyed. Um, I guess there’s always a however, and I don’t want to add fuel to the fire. (Gene: That’s ok) But I guess there seems to be with the developer of date as Trendwest used to have it, I thought it was an excellent organization, that’s when I bought it. And now with the new developer, there has to be a conflict of interest, given that they are such a large conglomerate all in the business of recreation tourism etc travel and the interest of the owners I think are being compromised to a certain degree because of the ownership. It’s certainly a perceive conflict of interest. Perhaps you can elaborate, and I know you have in the past many times, as to where the legal aspect of it comes.
Gene: Ok, (to Herrick) did you want to address?
Herrick: I just wanted to get clarity on uh your perception on the conflict of interest from the new developer’s perspective as compared to Trendwest. Just enlighten me.
Gene: As you know, I was COO of Trendwest as well at the same time being president of the WorldMark board and the advantage we had was I brought every bit of operational information to those board rooms, and we had I mean we were right in the executive group we knew absolutely everything that was going on and had the ability to work with that in our board meetings. So that was the case, Bill Peare was on the Board of Directors, Mike Moyer, Jeff Sites was on the Board of Directors, those are the founders of Trendwest, I was brought on to the Board of Directors in 1995, and I’ve never worked for Wyndham. I retired before that change happened, and I chose to stay on the Board because I’ve told you, as long as you vote me in I’ll do it, I love WorldMark and I loved building it. It was one o the most exciting times of my life. Now, to your point. Where is that perceived conflict? The fact that the original Board of Directors was all made up of Developer executives is supposed to make us feel BETTER about conflict of interest? That’s the whole point! If everyone on the Board – or even a majority of those on the Board – come from a Developer background, they are going to address every question with a Developer bias. Look at two issues that came up frequently in this Q&A: credit value allocation and access to the member list. The Board has declared that the Developer has absolute control over the allocation of credits values for new resorts, and there is nothing they can do about it. But the Declaration actually states that the credit values are to be based on relative use value, in the Declarant (developer)’s reasonable discretion. That means that they CANNOT base it on costs, and that they have a LITTLE bit of wiggle room – not absolute control. A non-developer Board might have more aggressively protected the existing members and the existing Club against the Developer’s abuses of the credit value allocations. On the issue of the member list, the Board is absolutely correct about the need to protect owner privacy. But what about the need to protect owners’ GUARANTEED access to each other? What about the need for owners to communicate with one another regarding their Club? A Board that was less concerned with protecting the Developer’s financial interest in that list and stifling owner-to-owner communication may have come up with a TRULY reasonable alternative, one that does not require an individual owner to spend upwards of $150,000 to contact each owner ONE time.
Owner: OK, the perceived conflict is I mean there are many things, but one of the simple ones is the process of RCI, for example, that the developer is involved with RCI, involved with our club, and so that the accumulation of points as has been indicated by many this evening and the utilization of those points can certainly have a conflict. And so if there is a perceived conflict, indeed there is potential for that conflict to exist, and so therefore Wyndham really should not be the legitimate owners and operators of our club. RCI is an interesting example. When I bought into the Club in 2001, RCI was the official exchange affiliate. The Club later changed affiliations to Interval International. The Board Meeting Minutes indicate that the Board was concerned about changes in the RCI business model, with the specific example of renting units to the public rather than keeping them exclusive for the use of exchanging members. Then right after Cendant (now Wyndham) purchased Trendwest, the Club switched back to RCI, which was also owned by Cendant. There is no discussion in the minutes of why the affiliation was given back to RCI. Was it truly for the owners’ best interest? Or was it because of the Cendant relationship?
Gene: Well they are your management company, and part of the management agreement has always been tied to the sales and marketing agreement. No, that’s not correct. The management agreement is separate; there is no “sales and marketing agreement”. The management agreement can be cancelled by vote of the owners, but the Developer position is exclusive to the Declarant (Trendwest and its successors, now Wyndham) per the Declaration. Any time owners want to change that, they can vote to change it. See the discussion of “open elections” below. But overwhelmingly, overwhelmingly our owners are just absolutely thrilled with our management company, the management company that services us. And our …
Herrick: … the model hasn’t changed.
Owner: I think they’re overwhelmed with the Club and the concept and enjoy using it, and I guess. (Gene? Herrick? That’s what it’s for) And I guess my question is the fear that we will lose that. I think we gradually have an erosion that we have presently.
Gene: You know, I am up for election again this year, and every two years I say the same thing, you know you make the call. And you do make the call. Again, I will address this below when Gene and Herrick talk about “free and open elections”. So you have to … so far, you’ve been pretty happy with the way everything has been run. And our job is to protect the Club according to the bylaws, the guidelines, and the declarants, and they are spelled out very very clearly. Yes, they are … so why are you violating them? (Relative Use Value/Credit Allocation, owner access to the member list, developer use of resorts, etc.)
Owner: Well all things considered, I think you are doing a fabulous job, but I still perceive there to be a conflict of interest.
Gene: And I respect your opinion, I believe the beauty of an opinion is everybody gets to have one. But within WorldMark, only Wyndham and the Board get to express their opinions. I have repeatedly asked for the opportunity to express my opinions and concerns to other owners, and I have been refused. I get 150 words in Destinations and 350 words on the Election section of the Club website. And I really do respect the opinions of others and I appreciate your bringing it up.
Owner: Thank you.
Gene: Yes sir.
Cliff: Thank you. My name is Cliff Connors and I am also from Orange
Gene: Nobody on the board is paid. You understand that none of the board members is paid.
Cliff: Not paid as board members. Are …
Gene: Well I’m not paid for anything.
Cliff: … none of you paid by Wyndham?
Herrick: Obviously Peggy and I are employees.
Cliff: Obviously. And those who were may have uh other benefits that come from there or insurance or something. It’s the possible conflict that we are concerned about. I agree with you that we should have some kind of representation on the board by the developer so that what you said was being brought by you to the board would be part of it. I don’t think that the developer should have an overwhelming interest. When we received a package of materials from Wyndham relating to our membership, the first page in it was from the California Department of Real Estate and in that document it said something to the effect that it is crucial that while at first it is natural and logical that the developer must control the board because they are the primary members, after a period of time in an orderly and cooperative manner that board should become the owners’ board. My question is, when is Wyndham going to cooperate?
Herrick: All I can say is that every year there is an election of board members, and every year you all participate in the election process and the outcome of that election is based on the votes that you all make or the proxies that you have signed so any given year any person on this board could be ousted and replaced by somebody else. The election process is open and free and any owner can participate and it is up to you to decide who you want on the board.
“Open and free elections”? The incumbent, developer-connected Board gets access to the owners whenever and however they wish. Challengers get 150 words and three minutes at the annual meeting. During the 2008 election, I pointed out several instances in which Dave Herrick, against whom I was running, had addressed the owners on issues that were key to my campaign. I asked for equal time through an article in Destinations, an insert in the election materials, or space on the Club website. I was denied. Before the elections started this year, I asked to be included in any proxy solicitations that went out to the owners. I was again denied. I was offered the “reasonable alternative” of paying for my own mailer, at a cost of $150,000 - $200,000. I did choose this option and with the assistance of WM Owners Inc. (www.wmowners.com) was able to reach approximately 10,000 of the 263,000 owners.
I
have already talked about the biased presentation of the bylaw amendment
proposal on this year’s ballot. If there
was no alternative presented and no argument against, how can it be seen as a
true CHOICE owners made? I have a more
thorough analysis of this issue on my website: http://marci4worldmark.yolasite.com/proposed-bylaw-amendment.php.
This is not the first year that Gene has said that if we don’t like the management company, we can vote to cancel the contract. But how would we do that? In order to vote on the issue, it would have to appear on the ballot. As mentioned above, last year an owner requested that several proposals having to do with conflict of interest and curtailing the Developer/Manager’s power be put before the owners; the developer-controlled Board refused. Sure, we can vote in changes to reign in the Developer and Manager. But those changes have to be put on the ballot, and what goes on the ballot is decided by the Board, which is controlled by the Developer and Manager.
The fourth and most obvious argument against the claim of “free and open elections” and “just vote us off” is the voting power held by the developer and the Board. In 2008, there were a total of 155,133 votes cast. Of those votes, the Developer controlled 28,020, or 18%. The Board controlled 65,071, or 42%. That is a total of 60% of all votes cast. HOW are owners supposed to vote anyone on or off the board? If you exclude the Board proxy, I received more votes than David Herrick even including the Developer vote. If you exclude both the Board proxy and the Developer vote, I received more vote than the two “winners” combined. And this year will only be worse. We do not yet know the total vote count or the Board proxy count. But we do know that Developer holds over 79,000 votes this year. Last year’s election drew a record-setting total of 155,00 votes; 2007 drew 133,000, and 2006 only 76,000 votes. This year the developer alone, without any help from the Developer-controlled Board proxies, holds 79,000 votes.
Gene: We’re now well into over time.Cliff: I really have to address that. A number of times, we have had elections where the incumbents by the proxies that the board itself decides how they get voted, you have re-elected your members who quickly resign and new people are appointed. We have very few people really who are ever given the opportunity to be elected to this board.
Herrick: If the board didn’t get proxies from you all, the board wouldn’t have proxies to participate in. We look at that as a support to the board for doing what we are doing and we appreciate the proxies that you are providing us.
If the owners were given any choice besides the Board to hold their proxies, then this claim would hold up. But they are not. 2007 is the first year that there was even any mention of a possibility of other than the Board holding the proxy, and a way to assign to someone other than the Board. In 2008 it was finally possible to assign a proxy through an online vote. But as mentioned above, the Board refused my request to be included in proxy solicitations for 2009. The language on this year’s ballot made it clear that anyone not attending the meeting would be required to assign a proxy, but gave no choices for that proxy other than the Board. Until the owners have a choice other than the Board, the Board cannot claim that those proxy assignments mean “support to the board for doing what (they) are doing.”
John Henley: Of course one of the options would be for the owners to give us the 25% we need necessary to enlarge the board to have more owner representation.
And we would have done so, had the proposal put forth allowed for the OWNERS to select the additional board members. The Proposal the Board put on the ballot the last two years would have removed the existing language stating that a vacancy on the Board could be filled by the owners or by the Board, and limited it strictly to the Board. It would also have given the Board complete control over whether, when, and how to expand the Board. Given the history of the Manager/Developer’s control of the Board and its elections, how could we possibly believe that giving the Board that additional power could possibly result in less Developer control?
Gene: We have put that on the ballot twice, and it’s never gone through. And just to diversify the board, I mean it would be lovely to see some diversity that is more representative of our owner base. But it has to be voted though. It takes 25% of you to agree to it. It’s a bylaw that we don’t have the ability to enforce or change.
OK, we’re going to try to do two more questions, but we have gone well over. So why don’t we start over here.
Nena: Hi, I’m Nena.
Gene: Hi Nena.
Nena: From Eugene Oregon. Actually you made a perfect segue for me. Last year we ended with me asking a question about how you would fill empty board seats if there were seven members, and remember a year ago you didn’t have an answer, I doubt that you do now. But …
Gene: I have to experience the circumstance first to respond to it. Why? The language of the proposal said exactly how you would have filled the “empty” (newly created) Board seats; the existing Board would have appointed the new members. You either had not read your own proposal, did not understand, or refused to admit it. Yeah, I’d like to see us get there.
Nena: Well you guys could decide.
Herrick: The documents have the language on how vacant positions are filled. Yes, they do. And that language currently says “Vacancies in the Board may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, or by the Members; provided, however, that a vacancy on the Board created by the removal of a director can only be filled by the Members. If the Board accepts the resignation of a director tendered to take effect at a future time, the Board or the Members shall have power to elect a successor …“ (emphasis added).
Nena: By appointment, right? And we were suggesting that maybe you could go down the list of candidates that actually got a top number of votes, and I understand you have changed your voting tactics this year, so I recognize that, that you are going to allot them to the three incumbents. But that again that’s a segue into my question about how seats are appointed and your position, Gene. Last year you told a number of people here that you were going to retire.
Gene: I’ve been retired for four years. Just did a lovely trip to the Amazon, backpacked into the rain forest, climbed Machu Pichu, climbed Olititambo (?), I am retired.
Nena: Well this was from the Board, you said you were going to retire from the board.
Gene: Well I also said if you vote me back in I’ll stay. Don’t vote for me, Nena. I don’t know what to tell you.
Nena: actually, that isn’t what you said, but anyway
Gene: There’s days when it seems like a real good idea.
Nena: You aren’t going to retire in the near future, are you?
Gene: You know, if your crystal ball works better than mine, you’ll have to tell me. Because I don’t know except for now, and if I’m running it’s because I choose to serve. That’s why, and that’s the only reason.
Nena: So you’re saying you’re going to run again next year, is what you’re saying.
Gene: I don’t have to if I’m elected this year. It’s a two-year term. Boy you and my wife ought to talk, you’re on the same page, let me tell you.
Nena: I have two quick questions: when is the next year’s meeting, what is the date of the next year’s meeting?
Gene: I believe …
Herrick: We haven’t set the date yet.
Nena: You haven’t set the date?
Gene: But it’s usually around this time, I mean this is uh I think it’s like –
Herrick (to Stephanie Aardal): Do we have the date set?
Stephanie: Third Thursday of October.
Gene: Third Thursday of October.
Herrick: Third Thursday of October. Sorry.
Nena: The other question I guess I missed this, what’s the average owners’ account size?
Gene: It’s gone up to 10,800.
Herrick: Ten thousand something.
Nena: OK, thanks.
Gene: one more, that’s what we’re going to do.
Mike: Hi, I’d like to address the owner communication issue. I’m Mike Tribe, my wife is running for the Board and I wasn’t going to ask a question but um I believe that you have misrepresented in many different ways the desire of people who have been trying to communicate with other owners. Nobody wants names, addresses, phone numbers, we have asked the board on many occasions to have WorldMark send an email to people. That would be free, it would cost nothing to communicate deep concerning issues with other owners within the Club. Nobody wants to know your names or your um addresses, we don’t want your personal information. There needs to be communication and that is free.
Gene (over the top): Email is personal information.
Mike: It’s free.
Herrick: Email is personal information.
Mike: But we don’t want your email. We want WorldMark to send the email. We would never get it. If you didn’t want to communicate with anyone, you would never get any communication. (Gene: oh gosh). So people cannot
Gene: OK, we’re not we’re not going to debate it here. So when and where CAN we debate it? When can the two sides of the issue be presented to owners? Not on the election materials, not in the owner meeting …
Mike: I just want you to know that you are misrepresenting what the people who are opposed to it are talking about.
Gene: I know the conversations that I’ve had, and those people that have talked to me, they know exactly what they’ve said to me, and that’s as far as I’ll go with it. My mind is made up; don’t confuse me with facts or alternatives.
OK, go ahead, we’ll do one more. Oh no, that’s it. Ladies and gentlemen thank you so much. (Herrick: thank you everyone) We’re going to officially close our meeting and we’re going to call it an evening.
Owner: I want to say something. My name is George VanCleeve and I’ve been a member since 1990. And I have not found anything that I’ve found really wrong with WorldMark except with a couple of incidents that I’ve heard tonight here, And that is exactly our point. Owners don’t know about the conflicts on our Board or the election manipulation or the breach of fiduciary duty because we are not allowed to communicate with each other. If the owners were ever able to communicate, the Developer and the Board would quickly find themselves being held to a much higher standard. and the one of them is I don’t appreciate people taking giving out my name address phone number anything else unless I initiate it myself.
Gene: Your choice.
George: If you want to get my name and telephone address and you happen to be at the resort where I’m staying at, you talk to me at the resort and I’ll be glad to give it to you on a personal basis, but I’m not going to give it to anybody through any organization.
Gene: Your point is well taken, thank you very much. Good night ladies and gentlemen, thank you so much for being here.
Back to 2009 Annual Meeting
Back to Home Page
