Published August 19, 2016
Even if you have never used EE or held the membership, DRI’s new EE program will affect us all.
On August 18th, 2016, you should have received an email from our manager, Diamond Resorts International (DRI), with the email address “EmbarcToYou@connect.diamondresorts.com”
If you didn’t, check your junk folder (no pun intended… well…). DRI sent the email to tell members about upcoming changes in the ExtraOrdinary Escapes program.
Who owns EE? DRI
Before we look at those changes, let’s look at the terminology used by DRI to identify the program:
“ExtraOrdinary Escapes is Embarc’s private exchange program, with a carefully selected portfolio of additional domestic and international vacation opportunities.”
This might have you thinking that the program is actually owned and managed by Embarc (i.e. us), but no…. that is not the case at all.
EE is a separate company, a third party, and a subsidiary of DRI.
DRI bought EE from Intrawest ULC, when they bought Intrawest’s points, loans, and other interests in Embarc (Club Intrawest). As we all likely know by now, Embarc was never for sale, but the companies that Intrawest set up around Embarc definitely were. And DRI bought a lot of them, EE being one.
So Embarc doesn’t own EE? No.
Embarc does not currently own EE and never did (as Embarc or Club Intrawest). The program was implemented by Intrawest as a way to broaden the network of available resorts to members, but in a way that generated revenue for Intrawest as the manager/declarant. It also allowed Intrawest a way to cross book the other properties that they owned / managed (beyond CI).
Any money that is generated by EE (membership fees, bookings etc…) flows right through our club and into the pockets of DRI.
What is exactly is EE? Accommodation swapping.
EE is an entity that allows members to swap their Embarc points for room accomodations at other resorts. DRI (and previously Intrawest) contact other exchange firms (like Interval International) and market the properties they manage. Then together with the other firm, they set up an agreement on how to swap points / weeks, the value of the points / weeks, and how to cover the costs of administering the program. But since the program is based on swaps, the costs for both firms are likely minimal. They don’t make money off each other, they make money off of people like us, the members.
Once partnerships are established, DRI then turns around to us (Embarc members) and charges an annual fee. This fee is entirely at DRI’s discretion; remember that they already negotiated a swapping arrangement with the partners. So DRI is at liberty to charge a lot or a little. What they likely do is figure out how much members are willing to pay (maybe through surveys etc… but not sure if they would do that electronically…) – and they set a price, which could change at any time. And what does this all cost DRI? Some time up front, maybe, some modifications to the reservation system (oh no), and that’s about it. And given that DRI already does this across all of its collections, well, there is not a lot they really need to do, is there?
DRI also has another nifty advantage. Since DRI managers about 200 resorts, it’s very easy (and very cheap) to put their own resorts into the EE program. Then they can charge all of their members to exchange within the DRI resort network, and make lots of profit for doing, well, nothing much. And so the paid membership price pretty much goes straight to their bottom line.
And finally, because DRI is our manager, they have our contact information, which means they can market the program to us directly, at any given time. They can also attach EE benefits to our club membership, such as allowing EE premiere and signature members to acquire room upgrades. Now, DRI will argue that those upgrades will be provided through the DRI inventory, but … we will never know. Because the Board of Directors refuses to provide members with any detail on any of the club operations. So what happens behind the scenes? Members have no idea.
The swap process
Members of EE, through the reservation system, essentially (virtually) give back their points to DRI when they book a reservation through the EE system. DRI will actually deposit weeks ahead of time into partner exchange companies, to make our clubs available to non-members.
In other words, if an Embarc members books outside of the club for a week at another resort that sits in II (for example), then that leaves a free week at Embarc for a non-member to book.
Overall, our 4.4 million annual points that represent our annual inventory cannot change, but who uses the rooms can; one Embarc member books somewhere else for a week, one non-member takes their week at an Embarc resort.
What does DRI get out of all of this? Money.
Well, they get the annual EE membership fees, which they can change at any time, For example, DRI will now start charging not only a base annual fee for EE membership, but also a price per point. Why? Because they can. The cost of the program to them hasn’t changed, they are simply looking to make more money. And at 30 cents per point, assuming 50% enrollment, well, that’s an extra $660K per year that goes straight to their bottom line (DRI’s, not ours…).
DRI also receives high margin revenue for all other EE transactions (booking costs, etc…). Remember that its a swap, so the exchange companies get their money from members, not each other (for the most part). Members fund it all. And this is really the foundation of the modern timeshare – Exchanges. Which is one reason why firms like DRI love to manage a lot of resorts that have separate trusts.
DRI can also increase marketing opportunities. By getting Embarc members out of the clubs and replacing them with non-members, they can pitch the visitors to buy points.
Finally, DRI can leverage the EE program to … SELL MORE POINTS.
And this is exactly what they are up to now.
EE tiering and the introduction of an Embarc class system
Our club now has four levels of members:
Level 1 – Embarc: The base membership. Some new DRI money makers have been added, such as cancellation insurance, the ability to buy one time points for booking, etc… All of these “services” are intended to generate revenue for DRI, not members.
Level 2 – EE: This is the base EE membership, which offers a few additional “services,” many of which are actually cheaper if you just booked them yourself (e.g. car rental discounts etc…). Just need to know how to use the internet…
Level 3 – EE Premiere: Accessible only for those who own 400 or more points. Entry into this level requires an addition purchase of 60 Embarc points, now selling for over $300 US (I use the term “selling” lightly). Even if you already own 400 points, and have for decades, DRI doesn’t care. They require you to spend $18K (or more) to get into this program. For what? Some additional services (of questionable value) and the opportunity to upgrade your room IF an upgrade is available. Check the reservation system, well try to, and you will see that our clubs get full pretty fast, except for maybe Wednesdays in the middle of spring, while kids are writing exams.
Level 4 – EE Signature: The top level, for owners of 720 points. But again, you need to spend $18K to get into this level, even for the 40 or so members who already own 1000+ points.
Additional perks also include, for the top two levels, fancy room keys. Why? Well, to build a class system in our clubs, and to encourage members to upgrade, so they can join the fancy class.
The DRI tiering strategy
So is DRI tiering just to build a class-based club? No, not really. The trick of tiering is not creating higher levels of value, but eroding the lower levels so that people upgrade.
Think about airlines. Economy class seats get smaller and smaller, but the price doesn’t drop. Then the airlines create a premium economy class, with larger seats that are really the original size of the “old” economy seats, and charges more.
DRI makes it clear in their descriptions that the resort options at the base EE level are “limited.” You get more choice the higher you go. It’s like that funny hand game that you may have played when you were a kid. One person puts their hand down, then the other puts their hand on top, then the other follows with the other hand, etc… and soon you are both slapping each others hands in a race to be the hand on top. The game never ends until someone walks away…
The DRI “notes”… and the impact to members
Like all legal documents, it’s important to read the little notes at the bottom of every page. DRI has published four “conditions” that some sales staff might gloss over. But these notes are key. Because they define the terms.
DRI NOTE 1 ExtraOrdinary Escapes Premiere and ExtraOrdinary Escapes Signature Tiers are only available to those ExtraOrdinary Escapes members who have purchased Embarc™ resorts points after May 1, 2016.
IMPACT TO MEMBERS: I stated above, even if you already have enough points to get into these levels, you need to spend tens of thousands of dollars to get in. Eric Assam, VP of Marketing at DRI, told me (face to face, at the SGM) that this was to cover the cost of setting up the program. But a quick look at the program and you will see that there is no cost. They have partnerships with other firms, for discounts. The cost of setting these up is negligible, and was already done for their other collections. No, Eric, this is a money grab (he didn’t like that comment at all; I think he wanted to kick me, but I may have misread the look on his face).
DRI NOTE 2 Embarc Flexibility (purchase of one time points) bookings made for any marketing product Luxury Hotels, and Luxury Cruises are ineligible. There is no cash refund for Embarc™ Flexibility points. In the event of cancellation, standard cancellation policy or Reservation Protection (if purchased) applies and any points eligible for refund will be returned to your account. If using Embarc™ Value points to complete a reservation, then in the event of cancellation the standard cancellation policy applies or Reservation Protection (if purchased) applies and any points eligible for refund will be refunded in cash. No points will be returned to your account. Embarc™ Value cannot be used in combination with discounted reservations.
IMPACT TO MEMBERS: This note is understandable, in regards to cancellation. But note the condition on “Luxury.” How do you define luxury? How does DRI define it? Who wins on that definition? DRI…
DRI NOTE 3 Advance Accommodation Upgrade. Available only at Embarc™ resorts. Affiliates and Norwegian Cruise Line® bookings are ineligible. Upgrades are not available on discounted reservations. One upgraded accommodation level per reservation is permitted. The upgrade fee is non-refundable and non-transferable.
IMPACT TO MEMBERS: Well, if you are purchasing EE, you want to exchange. But this benefit is only for club bookings. Hmmm? Also, it is based on availability. Have you even booked at a busy time, and missed the 11 month window by a minute? Anything left? Oh an look, there is an upgrade fee. Why? So DRI can make money.
DRI NOTE 4 Advance Reservation Protection Plan is non-refundable and non-transferable. Additional discount provided for the Reservation Protection Plan when it is added to an online reservation at time of booking. Only applicable for Embarc™ reservations. All Luxury Programs or exchanges are ineligible for the Reservation Protection Plan.
IMPACT TO MEMBERS: Well, it’s only good at the club. And at the club, we can cancel up to 30 days in advance. So you can pay $375 per year for protection on all of your reservations, at the 720 level, but it only applies to your club bookings. Why do you have EE?
The most dangerous DRI note of all: EVERYTHING IS SUBJECT TO CHANGE
Remember at the beginning I said that DRI owns EE? This is their program.
The last line of the program description, written in very small print, says: All benefits are subject to availability. All benefits and prices are subject to change, substitution, or termination at any time without notice.
The September 5, 2016, deadline and future memberships
To encourage a mad rush of enrollment, DRI is forcing all non-EE members to enroll before September 5, 2016, if the member wants to avoid having to buy more Embarc points to get in.
After September 5, 2016, any member who is not enrolled (e.g. they let their membership expire or never had one) but wants to enroll, will have to buy additional Embarc points just to get access. Yes, POINTS – at $300US plus per point… (Like a bad golf club membership, where you pay a ton up front but still have to pay an annual fee and also pay for each golf game….)
So should members renew or enroll?
This is very much a personal choice. Some things to consider:
- As DRI has clearly stated (even if it is in small print), the entire program is subject to change. Be ready for change and be ready to have no influence in those changes.
- There are many exchange programs that deal with individuals, and often at a lower cost than what DRI charges. Consider joining those programs or using services like AirBnB to exchange your weeks.
- Buyer beware… Once bitten, twice shy.