MacDonald Resorts Directors’ Report: Not Good News for Members

MacDonald Resorts Limited, part of MacDonald Hotels & Resorts is just one company out of many which make up the whole group, with many of the Directors holding positions in other companies of the group. This is nothing unusual except for the number of companies which make up the group as a whole, it looks very much like the setup of the Limora Group, which we highlighted in our Silverpoint articles.

AIT has been supplied with a copy of the annual Directors’ Report and Financial Statements for the year ending 1 October 2020, issued late we might add, there is no sign of the 2021 report yet. We should also point out that a “Compulsory Strike-off Order” was issued on 22 February 2020 and a notice of “Discontinuation of Compulsory Strike-off” was issued only 3 days later on 25 February 2020. Probably because the late accounts for 2020 had finally been submitted, showing on Company House records on 7 March 2020.

As accounting is not our strong point, we will not be going through the finances, which we will say do not look good, with a gross profit of only 3% as opposed to 15% the previous year. For those of you who are more at home with figures, the PDF of the report is placed at the end of this article.

This is probably the reason for the huge increase in the timeshare member’s annual maintenance bills, which have increased by 30% at MacDonald Forest Hills and 40% at the Doña Lola Resort in Spain. These increases are going to hit every single MacDonald’s timeshare member and resort, most of whom are now seniors and retired.

These members also have no way of ending their “contracts” as they are all in perpetuity, even the Spanish resorts where it is illegal to have any contract over 50 years in duration. They also “own” nothing, where they once had fixed weeks with fixed apartments, which guaranteed use, they were basically forced to convert to a points membership system, also illegal in Spain, especially if the purchase was made in Spain.

Unfortunately, MacDonalds has hidden behind the clause in their contract that Scottish Law governs them. A point in the contracts (UK Jurisdiction) which Club La Costa & Diamond contested in the courts and lost with the Supreme Court of Spain endorsing the rulings that the contracts did come under Spanish law.

As for “exiting”, that is a complete lottery, upon payment of 4 years’ maintenance fees which must be up to date, members may apply for termination of the contract. There is no guarantee this will be accepted as the numbers allowed to terminate are very low indeed, plus this is only available every two years.

So, what has this to do with the report, quite a lot really, as the report itself and the Independent Auditors Report give us a glimpse into the company itself and not just the finances.

Page two begins with the Strategic Report from the Directors, it starts with “Principle activities”, which states “The principle activities of the company are the sale, management and rental of timeshare units and associated hotel and leisure activities.”

Notice they state “Rental of timeshare units”, if these are the timeshare units which are paid for by the members in their initial purchase and subsequent annual maintenance fees, how can they be rented out?

Could this be the reason we hear complaints of no availability since the points system was introduced, after all, you are not guaranteed anything with points as they are subject to availability.

We then move to “Business review”, this section explains the “principal risks and uncertainties” which are affecting the business. It is point three which we find interesting,

“Competitive risk: the company operates in competitive markets. Product development by competitors could adversely affect the company. The company’s focus on quality and standards, the diversity of operations, strong focus on cost control together with the continual investment in its hotels and product reduces the possible effect of action by any single competitor.”

We agree, timeshare is or rather was a very “competitive market”, product development was key in the sales process, not just to entice new members but also to get the existing members to spend more with all the new “upgrades”. It is how timeshare sales works.

This continued “product development” has changed the original concept of timeshare beyond all recognition, and it has not been for the best. So, we wonder what delightful “new product” MacDonalds will come up with next, after all, they are playing with the “big boys” but don’t have the money.

The next paragraph is

“Political risk: Brexit. With the UK no longer in the European Union the company continues to monitor in particular the points-based immigration system and the impact this may have on recruitment of core hospitality staff. Our policy remains to provide our employees with a safe working environment, excellent working conditions, career progression opportunities through our Stairways Programme combined with competitive rates of pay with our stated goal of implementing the National Living Wage across all our businesses within the next 3 years.”

Very strange this paragraph, it seems to imply a “culture of exploitation”.

It seems to blame “Brexit” for its staffing problem and recruiting “core hospitality staff”, this is probably true, because at the end of the paragraph they go on about “competitive rates of pay” and their goal of implementing the “national living wage” within the next 3 years.

So, what have they been paying the foreign workers if they can’t recruit from within the UK unemployed?

This lack of staff after the Covid restrictions were lifted and Brexit went ahead was noticed by members who stated they had to empty their bins and strip the beds prior to departure. Not what “guests” would be expected to do in any hotel.

Next in the report are the “key areas” namely Sales and Marketing.

“Sales and marketing: significant efforts are made to develop the company’s brand and ensure new business is being won continually; new markets have been developed in line with the company’s strategy; key customer relationships are monitored on a regular basis.”

This paragraph is actually a big joke, timeshare sales in Europe are at the lowest they have ever been, this was even before the Covid travel restrictions. We have seen the major timeshare companies operating in Spain being taken through the courts and losing for illegal contracts. Remember, Spain was probably the main hub for timeshare sales in Europe.

The big three, Diamond, Club la Costa and Anfi all laid off staff, with CLC and Anfi joining Silverpoint in liquidating their sales arms, admittedly with Silverpoint, there are other factors involved.

We believe the reasons for this downturn in sales have to be the general reputation of timeshare, along with the huge and rising maintenance fees and the lack of availability due to the points and floating week systems. Then there is the initial “investment” to purchase in the first place, why pay to join a club with prices starting on average £15,000 to £20,000 for the basic timeshare when you are able to book the same resort and accommodation online without being a member and without the annual costs whether you use it or not?

We now move to the most telling part of the report which appears on page 6 and is by the Independent Auditors.

This section “Going concern”, is what you might call quite revealing as to the state of the company.

The first paragraph reads:

“The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the company or to cease their operations, and as they have concluded that the company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Is this a “Smoke and Mirrors” statement from the directors to the auditor?

The company believes it is realistic and can continue for at least another year, could this be while they wait for the “New Maintenance Fees” to roll into their coffers?

The last paragraph of this section looks like a warning from the auditors as they state:

“However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the group or company will continue operation.”

Could it be that they see the chances of the company folding to be greater than the directors’ report would suggest?

We believe the chances of the company going into liquidation or ceasing operations are greater than MacDonalds would have us believe. Our reasoning is very simple indeed, there are no signs that timeshare sales in Europe will improve, so we can forget any additional income from this area. This leaves us with huge rises in their maintenance fees.

It is the timeshare members themselves who will keep the company afloat, the high maintenance and the inability of members to exit ensure the company still receives this income. For members to just stop paying is not an option, MacDonalds use their Law firm Shepherd & Wedderburn to great effect by threatening County Court action to recover arrears.

AIT also wonder if MacDonalds will do what many other developers are doing, especially in the US, attaching a “sinking fund” to the annual maintenance bill. This is an extra payment on top of the annual fees to cover “maintenance costs” and refusal to pay will end up with suspension of membership and legal action for the “debt”.

As the old saying goes, we will have to wait and see.

Directors Report PDF

Notice of Strike Off   PDF

Notice of Discontinued Strike Off  PDF

Company House Records MacDonald Resorts Ltd

https://find-and-update.company-information.service.gov.uk/company/SC019593

AIT would like to thank our friends at the TCA for supplying some information from their research it has been very valuable indeed.

To end this week AIT brings you the latest news from another Military Lending Act lawsuit with “The FTC, CFPB, and Military Organizations Support Plaintiffs Louis vs Bluegreen Vacations – A MLA Lawsuit”, by Irene Parker. As our regular readers are aware, AIT has been highlighting the plight of many Veterans harmed by predatory sales tactics by unscrupulous timeshare sales agents, with the blessing of their employers. We say “blessing” as the usual response from the developers is always

“WE ARE NOT RESPONSIBLE FOR WHAT OUR SALES AGENT SAYS”