Marci For WorldMark

EXAMPLE OF CREDIT DILUTION
written by ladycody in 2006

Increased Credit Values Makes San Diego resort a MISTAKE!

Trendwest recently announced the addition of a new resort in San Diego with the highest credit value assignment in the history of the club. 15,000 credits for a 1-bedroom every single week of the year, an 87% increase over the Oceanside resort, 39 miles away. That's higher than a 3-bedroom in Hawaii! The July 2006 Destinations magazine contains an article entitled "Increased Credit Values Make Prime Locations a Reality" (click here and scroll to page 8). In it, Trendwest tries to justify this outrageous inflation in credit values. Since Cendant purchased Trendwest, the number of credits needed to use the new resorts keeps rising. They are destroying the club as it previously existed. Let's examine some of the rationale Trendwest uses to justify these increases.

INCREASED CONSTRUCTION COSTS

It's true that the value of resort property has risen drastically. But that includes the value of our existing resorts. The original founders of WorldMark built a very important protection into our governing documents, one that Trendwest and our Board of Directors is choosing to ignore. Article 3.4(a) of the Declaration of Vacation Ownership Programs states that the credit assignment will be based on the relative use-value of the resort to the owners. NO MENTION IS MADE OF COST. What that means is if San Francisco and Seattle (other inner city hotel conversions) cost 12,000 credits for a 1 bedroom, then San Diego MUST cost 12,000 credits for a 1 bedroom.

Trendwest says they are faced with the choice of charging more credits or walking away from the project. But they fail to mention a third choice; simply raising the price charged for credits to match the increasing costs of resort property. That's the exact reason that protection was created by WorldMark's founders. In the last 5 years, the value of our existing resorts has risen by up to 500%, depending on location. In that time, the price of credits has gone up about 25%. That means new owners are paying less in relative terms than you did.

It's really simple; if Trendwest raises credit prices to match inflation, all new resorts can come in at traditional WorldMark values and the money you spent on your credits is protected. You'll continue to be able to use all resorts without having to add more credits. The resale value of your credits will rise. It should be no more or less difficult for Trendwest to sell credits than it was in the past, since the increases match inflation of resort properties. So the new owners would pay exactly the same (in 2006 dollars) as you did in 1992 or 2002.

However, if Trendwest continues the current trend of raising credit values for new resorts, all of us 230,000 current owners will either have to continually buy more credits or we'll be relegated to all competing (along with new owners) for the same existing resorts. The value of our credits will go down. At the current rate of increase, it would take 45,000 credits to stay in a new 1-bedroom within 10 years. Is that the system you thought you bought into? The system I heard described was one in which you "locked in" the price of future vacations. I knew that Maintenance Fees would increase, but the initial investment was supposed to be a one time expense, unless I wanted to add a second “week” of ownership.

WORLDMARK BOARD OF DIRECTORS

So where is our Board of Directors on this? Since we elect them to represent our interests, they are our only line of defense against this outrage. Instead of fighting these fundamental changes to our club, they've spent their energy spreading the following myths about their responsibilities and duties.

1) They say the WorldMark Board of Directors has no say in credit assignments, seasonal calendars or resort locations. That's absolutely untrue. San Diego (or any other resort) can NOT be brought into WorldMark without the signature of the Board of Directors of WorldMark. They say the Declaration of Vacation Owner Program gives Trendwest the right to annex property, but they forget to mention that it doesn't become effective until WorldMark signs it. Each Declaration is specific to one property; signing one Declaration for San Diego does NOT give Trendwest the right to add a property elsewhere.

2) They say existing owners were never guaranteed access to future resorts in WorldMark. Is that the way you understand WorldMark to work? Do you think it would be legal for Trendwest to sell new owners part ownership of our existing resorts, if we don't get partial ownership of the new resorts as well? Of course not!

So why would our elected representatives spread such blatant misinformation? As in much of business and politics, one need only FOLLOW THE MONEY! 4 of the 5 members of the board are long time executives of Trendwest or Cendant (the parent company). They are required to look out for the interests of their shareholders, so they can't also look out for WorldMark’s interests.

WHAT CAN YOU DO ABOUT IT

We can't depend on Trendwest or Cendant to protect us. They've already shown their game plan; take every penny they can out of WorldMark, regardless the long term effect. We can't depend on their employees on the WorldMark Board to protect us; they'd lose their jobs if they tried. While 2 of the board members have retired from Trendwest and/or Cendant, we can only assume they are still greatly influenced (through severance contract or "golden handcuffs" or otherwise) by Cendant, since they were career top level executives with those companies. All we have left is ourselves, and we can do the following:

1 - Educate yourself to the changes going on. Go to www.wmowners.com and participate in the discussion forum. Even if you only read, you'll became a knowledgeable owner, something Trendwest fears most.

2 - Help spread the word. There are efforts on-going to send a mailing to every single WorldMark owner. Help is needed in funding it. Even if you can only contribute a dollar or ten dollars, you'll be involved in the solution.

3 - Elect an independent board of directors. The only solution possible involves electing a board free of influence from Trendwest or Cendant. That's not an easy task; most owners don't vote. Of those that do, about half give their proxies to the board because they don't know any better. We must educate owners to stop doing that.

4 - Don't split your votes. There are always several independent candidates running for each open seat on the board. While we can't prevent that (nor should we want to), it's important that we not split our vote, allowing the incumbent to get re-elected. The only way I know to do that is to all vote for the same candidates, or to all give our proxies to someone that will do so. Check the discussion forum on wmowners.com.