Bluegreen Vacation Club Annual Meeting - 9/21/10

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

I attended this year's Bluegreen Vacation Club Annual meeting yesterday and got a lot of really good information that I will share with you today.

In attendance were about 20-30 people including owners, all the Bluegreen Vacation Club Directors and a bunch of Bluegreen Executives. Here is a list of who did most of the talking:

Dave Pontius, President of Bluegreen Resorts
Wendy Poe, SVP Club Services and Customer Care
Kathy Foster, President of the Bluegreen Vacation Club Board.
Terry Dodd, SVP of Club Operations and Product Development

The first thing that most people care about and the last thing discussed are 2011 maintenance fees. Here are the new Trust Fund formula for 2011. The good news is No Special Assessment.

Trust Fund A: pass through (average increase 4%)
Trust Fund B: $170 + $.063/point (no change)
Trust Fund C: pass through (average increase 4%)
Trust Fund D: $.074/point (increase of 13.85%)
Trust Fund E: $320 + $.045/point (vs $310 + $.0405/point for 2010)

As you can see, it appears that the older underlying resorts were only experiencing about 4% increases. The newer ones (as reflected in Trust Fund D) experienced much higher increases of almost 14%. However, there were significant increases for Trust Fund D and E. We had a dialog about it and determined the following:

The primary increase for maintenance fees in these Trusts were due to:

1) increase in reserve funding for delinquencies from around a historic norm of 6% to around 11% now. This is pretty high and due mostly to the bad credit policies for sales made immediately prior the bursting of the credit bubble. Bluegreen has been taking corrective actions around these delinquencies for the last year and half and tightened significantly their credit standards. They have gone from receiving 10% cash deposits to averaging around 45% within 30-days of purchase according to Dave Pontius, President of Bluegreen Resorts.

2) Renovations made at several resorts that hit mostly Trust Fund D and E funds. 8 resorts are ungoing renovations including:
a) Solara Surfside, new windows
b) Casa Del Mar, sea wall
c) The Soundings (Cape Cod)
d) Shore Crest
e) La Cabana
f) The Fountains Bldg 3 & 4
g) MountainLoft
h) Christmas Mountain Village

I asked questions about theses increases and when they would moderate. I didn't get any great answers. But, I do believe the following after the discussion:

1) Delinquencies are the biggest issue. The new credit and collections policies should help and when the economy improves, the increases should abate since we would be reserving for a higher rate (11%) when the historic norm is only 6%.

2) Trust Fund E had artificially lower fees for larger sized owners when it first came out. As owners increased the size of their purchases and base fees ($310/$320) were eliminated, that cost the Club money. Now, the formulas have had time to catch up to the average size of owner.

3) Bluegreen is really going after it with renovations. For example, the Fountains renovations for Building 3 and 4 are stunning. I was told that a new philosophy of Bluegreen is to spend a bit more money upfront to make much more durable and longer lasting units. It would save money over time, but cost more money now.

When will the larger than average increases stop? I think the delinquency rate will be the biggest driver. If BG can bring it back down to 6%, then we automatically get 5% back. And, given the current level of budgeting, there is a significant capital budget for renovations going forward. Most developers have had a hard time keeping costs down for similar reasons. Bluegreen has been historically a very good resort manager. Time will tell if they can put a lid on cost increases.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Wendy Poe spent a lot of time going over new initiatives for the year. Here is a summary of some of them:

1) External communications venues have increased significantly. Bluegreen has the following communications venues:
- Bluegreenonline.com
- Youtube videos
- Facebook
- Twitter
- Colorfulplaces.com

Bluegreen will be overhauling the entire Bluegreenonline website to integrate many of the above sites. They will be getting owner feedback via a focus group of some type. I'll try to see what they are looking for in terms of participants.

2) Bluegreen is building a smartphone interface. The first to come out will be for the iPhone. iPhone owners will be able to check availability via an app and link to the call center to book a reservation. Some time in the second phase, we will be able to book reservations from the iPhone. The Droid interface, then the Blackberry will follow.

3) Online reservations for Select Connections should be available in the first quarter of next year. For those of you who use it, you know it takes forever to book a reservation. This is going to be a big help to owners who use Select Connections.

4) Bluegreen is changing the renewal policies for Traveler Plus. The formal policy is that if you let it lapse, you need to make another developer purchase to get it back. However, what that did was cause problems for Traveler Plus forecasting for various offerings. So, Bluegreen pretty much has been letting anyone renew at anytime if they have had it in the past. Now, what Bluegreen will be doing is allowing owners a one year grace period to renew Traveler Plus. After that year, owners will have to make another developer purchase.

5) There is a new type of bonus time like program for new fee for service properties. It is called a "preview rate." It is basically just cheap rentals of developer units for fee for service properties. The reason it is not called bonus time is because the rates vary by resort and season. And, you can book some of those resorts up to 11 months in advance of check in. This is a venue for accessing developer owned inventory at these new fee for service resorts.

6) A couple of months ago, Bluegreen announced that it has fee for service agreements with some hotels. For now, these are just management agreements. However, several new features may come out of it for Club owners.
a) preview rates for the hotels will likely be offered to us. Although this has not been finalized. In fact, it looks like we will be getting access to any of Bluegreen's managed properties which is a superset of Club resorts. That helps to explain why you can see availability at resorts such as the Yachtsman in Myrtle Beach even though they aren't Club Resorts.
b) In some circumstances, we "may" have blocks of rooms committed to the Club for usage in points. Not a done deal, but a possibility.

7) Online reservations will be improved. Recently, we got a new +/- 3-days feature that really helps out with searches. Bluegreen has been monitoring searches and have plans to add features that decrease "no match" searches.

I saw a prototype of a screen that had an availability calendar. It's some time off before it becomes real. But, the good news is that they are finally working on it.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Bluegreen will be changing the way in which owners transact with RCI. Currently, Bluegreen allows owners to pick their own week for deposit into RCI. This works extremely well for experienced exchangers and it works horribly for inexperienced exchangers.

So, Bluegreen is moving to a straight points based request first model. No more deposits are required by owners. This will be viewed extremely positively by most owners.

Those who won't like it are those who pick their weeks wisely.

If you plan on making Bluegreen deposits for next year into RCI, I would do it right away. I think this may go into effect around Dec 1.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

New Resorts:

In the foreseeable future, it looks like we will probably have 2 new resorts coming online. We were asked not to share the names or locations of the resorts until they are announced. The deals aren't completed, so they don't want them to be unhooked by premature release of information. Suffice it to say that many of us will be very happy with the new resorts.

In addition, Bluegreen plans to expand the resort groups that are part of Select Connections. Once the online capability is built, they will be actively seeking other Resort Group participation. I really look forward to these new resort groups coming online.

This feature alone makes Traveler Plus worth having. Given availability and cost of Select Connections resorts, this could end up replacing RCI as the primary exchange vehicle for Bluegreen owners.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Resort utilization.

Here are the resort utilization stats for 2010:

Owner usage: 57.1%
Bonus time: 6.5%
Exchange: 8.3%
Sampler: 5.4%
Marketing: 4.6% (tours)
Rentals: 2.6%
Vacant: 9.5%
Offline: 6% (maintenance)

This year, we delved into these numbers a bit more than normal. What came ot of that discussion is a much better understanding of how Bluegreen manages inventory.

At this time, there is about an 80/20 split between owner inventory and developer inventory. And, the inventory is managed in total, not discretely. In other words, a given unit and week is not fixed as either owner inventory or developer inventory. It is managed virtually instead.

So, what Bluegreen does is creates an initial forecast of usage in each of the above categories at each resort in the system. As actual usage occurs over time, adjustments are made to the mix. Bluegreen priorities owner usage first above all else. And, they do their best to make sure that all units are occupied.

So, if there is an 80/20 split of total inventory, then 100% utilitization for owners is actually when owners use 80% of inventory in their categories. In the above example, that would be:

Owner usage: 57.1%
Bonus time: 6.5%
Exchange: 8.3%

Total: 71.9% of 80% = owner occupancy of 90%.

Bluegreen does have some resorts with bonus time only that cannot be used with points. This is what stimulated the discussion in the first place. I asked them why it was the case.

It is because the dynamic model for inventory management assigns inventory based on ownership type dynamically. Inventory is set aside for each of the above buckets and changed over time. When Bluegreen has a lot of unsold inventory, then sampler, marketing and rentals cannot take up everything they own. So, they need to put it into bonus time only to recoup some of their MF expenses since they must pay it when they own it.

Lastly, there is a time when all channels get access to all inventory. That is usually 7-days prior to check in. So, if something was set aside for bonus time only, at the 7-day mark it is made available to anyone including points.

There are some circumstances when Bluegreen knows there is going to be a lot of excess inventory that they offer it to more channels early.... like Club 36, where there is a glut of units available in Las Vegas.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

We spent a lot of time on the owner survey. Interestingly, we only received 4000 proxies, so we could not convene a formal meeting of the Vacation Club. However, there were over 32000 submissions on the owner survey. There was a ton of detail, so I didn't take detailed notes. I will just give you what I recall.

36% of people voted for pet friendly option. For reasons we have already discussed, I doubt this will ever happen. Our MF are already too high. Can't see an expense going to this item without it being funded by the pet owners directly like in a fee for service kennel.

The biggest write in suggestion by far was for free internet access. So, when I compiled the requests, it didn't surprise them. I offered up the groups suggestions including points for internet usage. Wendy did write that one down.

For Traveler Plus, RCI Points and Hot weeks were the 2 most popular features. That surprised me and Bluegreen. I expected it to be Select Connections. After the discussion, I determined that Select Connections wasn't chosen because it has been pretty hard to use and people don't know how much availability is there. When Bluegreen enables online reservations to Select Connections, I think that will change since it is so much cheaper than RCI Points.

Customer satisfaction with the product was around 70% and increased about 5 points across every category year over year.

The most requested new resort area was the Caribbean. Bluegreen is making strategic choices in this area. Given how they were talking, we should have a decent flow of new resorts coming online over the next few years.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

I asked Terry Dodd if the corporate strategy was going to be mostly Fee for Service going forward. He told me that it wasn't. He told me the 5 year plan including a mix of about 50% Bluegreen developed resorts and 50% Fee for Service.

And, that they would be back on track with that plan in about 2014. That tells me that is when they will have worked down the excess inventory build into the pipeline from 2005-2009 in the boom years.

[vintner Super Moderator Find all posts View Profile Close vintner]

First, thank you for providing such detailed information. That is very helpful for us owners who want real information and find that we don't get that too many places other than here and a couple other websites.

Second, I think you offered some great ideas to BG, points for internet sounds good.

I don't remember seeing a proxy this year. Don't know if I missed it, or didn't get it. I did buy a little bit of BXG stock, so figured I can have some additional reports or news as a stock owner. Maybe I will have more of a voice in future years.

On the maintenance fees-that is a $200 increase for me. Kind of painful and I will need to review my using points vs. renting out times for the next year or two. However, if they are getting new resorts, maybe I will have to put in for some new location and put my points to use.

Thanks again for posting this information.

[Hobbitess Senior Member Find all posts View Profile Close Hobbitess]

Bluegreen will be changing the way in which owners transact with RCI. Currently, Bluegreen allows owners to pick their own week for deposit into RCI. This works extremely well for experienced exchangers and it works horribly for inexperienced exchangers.

So, Bluegreen is moving to a straight points based request first model. No more deposits are required by owners. This will be viewed extremely positively by most owners.

Not by this one.

Thanks for the extensive write up, Jim.

[VA_Traveller Senior Member Find all posts View Profile Close VA_Traveller]

Thanks Jim..appreciate the info!

[akparsa Senior Member Find all posts View Profile Close akparsa]

Boca, thanks!

This is fantastic information. I'm looking forward to learning about the new locations.

A few questions:

How did BG respond regarding the high level of desire for internet access (Other than writing down the pts for usage idea)?

Was there anything you heard at the meeting that worried you?

Overall were you feeling good about the state of the club and the strength of the business plan for the next few years?

Anita

[SteveChapin Senior Member Find all posts View Profile Close SteveChapin]

Not by this one.

Thanks for the extensive write up, Jim.

Agreed. and seconded on the thanks.

I want to make sure I understand this. Is it going to be like the Wyndham model, where an owner says they want to deposit a week worth 9,000 (10,000, 12,000, ...) points to RCI, and BG picks the week? I have some concerns about this:

1) What about other exchanges? RCI isn't the only game in town.

2) What policy will be used to select the week to be deposited? From what I read on Wyndham owner forums, people are generally unhappy with Wyndham's method of selecting weeks, because often the selected week is what Wyndham wants to get rid of, not what the customer wanted, i.e., it's a weak trader.

3) Will there be any chance to select a specific week for deposit? I can understand that the vast majority of people don't understand triangulation and don't study the RCI/II demand tables to pick particular weeks, but why penalize those of us who do?

I'm all for making things easier for the typical user, but power users shouldn't be penalized.

[shockwave7_7 Member Find all posts View Profile Close shockwave7_7]

Thanks for all the info Jim. The MF increase is steep. Hopefully the increase doesn't drive up default rates. There were some really great features you mentioned though. The online SC reservations and availability forecast online would be great. As far as the new resorts I would really like to see something out west or in the Caribbean. I am optimistic about the new RCI system. I have never traded, because I was kind of intimidated by the process. As someone mentioned earlier, I could see BG allocating the trade based on what resorts have the most open inventory.

I was a little lost on the fee for service and bonus time only resorts. Do these currently exist as options for us making reservations? If so, do you know which ones they are.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Agreed. and seconded on the thanks.

I want to make sure I understand this. Is it going to be like the Wyndham model, where an owner says they want to deposit a week worth 9,000 (10,000, 12,000, ...) points to RCI, and BG picks the week? I have some concerns about this:

1) What about other exchanges? RCI isn't the only game in town.

2) What policy will be used to select the week to be deposited? From what I read on Wyndham owner forums, people are generally unhappy with Wyndham's method of selecting weeks, because often the selected week is what Wyndham wants to get rid of, not what the customer wanted, i.e., it's a weak trader.

3) Will there be any chance to select a specific week for deposit? I can understand that the vast majority of people don't understand triangulation and don't study the RCI/II demand tables to pick particular weeks, but why penalize those of us who do?

I'm all for making things easier for the typical user, but power users shouldn't be penalized.

Steve,

You were one of the people who I thought would have a problem with the new RCI model. It only applies to RCI and not II.

Basically, Bluegreen will have a points table for all RCI resorts. Not sure how generic it will be. My guess is it will be very similar to the current Bluegreen/RCI Points table.

No more depositing will be required. All you need to do is search for availability and pay the Bluegreen Points total required for the exchange.

The goodness or badness of this program will depend on the values in the point table that Bluegreen negotiates.

Basically, the exchange department at Bluegreen will work with RCI to exchange inventory behind the scenes.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Thanks for all the info Jim. The MF increase is steep. Hopefully the increase doesn't drive up default rates. There were some really great features you mentioned though. The online SC reservations and availability forecast online would be great. As far as the new resorts I would really like to see something out west or in the Caribbean. I am optimistic about the new RCI system. I have never traded, because I was kind of intimidated by the process. As someone mentioned earlier, I could see BG allocating the trade based on what resorts have the most open inventory.

I was a little lost on the fee for service and bonus time only resorts. Do these currently exist as options for us making reservations? If so, do you know which ones they are.

The new RCI exchange method was built for people like you. It will make it much easier to use for most Bluegreen owners. You will probably like it.

I am not sure how the "preview rates" show up online. I imagine it will just be part of the bonus time interface. We will have to wait for people to report seeing it. Trust me, as soon as it starts showing up, someone will post it.