Very interesting read about Marriott Vacations Worldwide in yesterday’s WSJ. The author made salient points on the diversification of the timeshare companies business models. However, let there not be any confusion, this is a sales and marketing business and as profitable sales and tour flow grow, so do the market capitalizations of these timeshare companies.
VAC’s market capitalization is down $3 billion dollars since their stock traded (not long ago) at $163 per share. They have been a stark reminder of a sector that has been sold off because the market doesn’t fully understand the business. If you look at industry wide comparisons on the timeshare sales and marketing businesses, they are all up nicely over 2019 pre COVID metrics. During COVID timeshare companies lead the entire travel sector back in occupancy rates. They bounced back much quicker than other travel businesses because of the prepaid nature of their owner’s membership. Simply put, the members had paid their annual fees and so they got in their car and drove to resorts and used their product during COVID.
While the general population slowed their travel immensely during COVID, timeshare companies capitalized on their owners traveling and saved millions in sales and marketing spend. They focused their marketing and sales efforts on existing members who were staying on property and using their ownership. Because of the very high industry owner satisfaction rates, these existing owners when toured close at a 2.5x to 3x the closing rate of new member tours. The cost of these prospects is also only 30% of the cost of a new-member tour. Because of this very dynamic, the timeshare sector saw historically and artificially high margins during COVID. Now that the new member tour flow is building back to more normalized rates, the sales mix has started shifting back towards more pre-COVID like traditional (new member vs existing member) mix numbers.
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Even though the public companies have been signaling this message to the street for well over a year, thus far the message has not been fully received and the market has not let them off the hook for the mix shift. So, while I do agree with the author that this is an attractive sector at the moment, let us never forget that this industry is and always will be a sales and marketing driven industry. Therefore, the companies that are the best at executing in the sales and marketing arena will ultimately be the ones that generate the most shareholder value.
Read Wall Street Journal here.
Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products, and services. The Company has over 120 vacation ownership resorts and approximately 700,000 owner families in a diverse portfolio that includes some of the most iconic vacation ownership brands. The Company also operates an exchange network and membership programs comprised of more than 3,200 affiliated resorts in over 90 countries and territories, and provides management services to other resorts and lodging properties. As a leader and innovator in the vacation industry, the Company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International, Inc. and an affiliate of Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. For more information, please visit www.marriottvacationsworldwide.com.
A full-service sports, music and entertainment company, tapping into the power of experiential marketing to put on unforgettable golf tournaments and live events. Founded by Mike Flaskey, one of golf’s most innovative business executives and founder of the Diamond Resorts Tournament of Champions. https://mfentertainment.com/
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