ORLANDO, Florida — Michael Brown said the data points in a very optimistic direction for the vacation ownership business and his company, Travel + Leisure Co. Owner nights are tracking up 6% year-over-year and there’s an expectation of double-digit growth in tours (sales presentations) for all of 2024, especially for new customers.
The Orlando-based company, which made a high-profile acquisition earlier this year with its $48.4
million purchase of Accor Vacation Club, had a modest earnings beat for the second quarter (according to C. Patrick Scholes of Truist Securities) with a net income of $129 million, net revenue of $985 million and adjusted EBITDA of
$244 million.
Brown told Hotel Investment Today that he was especially excited about higher-than-projected volume per guest (VPG) numbers. “We’re optimistic because our business is running very well and, in most cases, above our expectations,” he said. “We have different data points that show how the consumer is performing and those would say the second half of this year is going to be good.”
We’re optimistic because our business is running very well and, in most cases, above our expectations. We have different data points that show how the consumer is performing and those would say the second half of this year is going to be good.
Michael Brown
Scholes said Travel + Leisure’s earnings were a “respectable and fairly straightforward quarter” but with one big difference. “Unlike the prior quarter, the modest earnings beat resulted in the full-year guide being raised by the amount of the earnings beat, whereas the full-year guide was left unchanged last quarter following a small earnings beat,” he said. “We see the beat
and raise driven by somewhat higher than expected VPGs.”
Brown said the VPG numbers of $3,050 is well above where the number was pre-COVID and where it was expected to settle post-COVID. He also said the company’s financial portfolio (loans for timeshares) has come down a bit, which is weighing down its stock price.
The VPG numbers have grown higher for a few reasons. Brown said the company decided last year to elevate its marketing standard and raise the minimum FICO score to 40 points higher than in 2018-19. That has given Travel + Leisure a customer of a higher
financial quality, which creates other benefits. Brown said people are also staying longer at their resorts because of remote work.
“What you tend to get is a better-performing loan, and that, combined with an economy that still continues to do very well because people aren’t going to give up on vacations as we learned over the last five years,” he said. “What’s really driving that
is the fact that I think the consumer base has been elevated… We’re really seeing a positive move in our demographic as well as our economic status of our consumer.”
Brown said the 22% increase in new customer tours is especially important. “That new owner tour flow is super important to the longevity of the business, and this year, we’re way ahead of where we thought we’d be at the halfway mark of the year.”
Hotel Investment Today also asked Brown about the integration of Accor Vacation Club, the status of its Sports Illustrated Resort and Margaritaville verticals and overall trends in vacation ownership.
Hotel
Investment Today (HIT): Can you give an update on the integration of your Accor
Vacation Club properties?
Michael Brown: It is going exceptionally smoothly. From the partnership with Accor to the actual restarting of the business, opening sales galleries and speaking to the owners about the new opportunities, this creates the restarting of the top-line revenue
component of the business, which eventually creates profit.
We know the baseline is there. We’ve gone through a full quarter, and we’ve seen a good integration. They’re immaterial to our overall P&L but above where we expected them to be. And now we can start focusing on those growth initiatives of incremental
sales locations and incremental projects that will provide more optionality for owners…
We’ll be thinking about expanding our sales locations this quarter and starting to look at opportunities to add incremental units to Accor Vacation Club. (Brown noted that this would be through organic growth in the Asia Pacific and Middle East regions.)
HIT:
What’s the latest on Sports Illustrated Resorts?
Brown: We did Tuscaloosa first, and our investment there was very early in the process to secure the land… As a first resort, we’ve spent a lot of time getting the right programming.
Over two-thirds of consumers today are either Gen X, millennials or Gen Z… which greatly dispels the idea that this is a product for your grandfather or grandmother.
Michael Brown
The Michigan project (in Ann Arbor) that was originally scheduled ran into some zoning issues. I’m probably a bit more cautious about talking about development, but I am very confident in saying we have a very robust pipeline at a number of universities.
I would expect multiple announcements as we head into the second half of this year, and we’re really excited about growing the brand in college towns and, candidly, in non-college towns as well.
HIT:
What’s the latest on Margaritaville’s development?
Brown: When I joined the company, we had two resorts. We’re up to, I believe, six at the moment and continue to look at incremental locations that are right for Margaritaville. For me, when I say Margaritaville, I think “toes in the sand and a drink
in your hand” type of places, and when you think about where our development pipeline is going to be… It’s going to be in destinations like that. We’re not by any stretch done with that brand and where we think it can be very.
HIT: What
are the latest trends in vacation ownership?
Brown: Over two-thirds of consumers today are either Gen X, millennials or Gen Z… which greatly dispels the idea that this is a product for your grandfather or grandmother. You just need to look at the average age continuing to move down. The fact
is that the industry is really consolidated around brands, and over 80% of the sales are to branded consumers or by branded hospitality.
The balance sheet and reputation have completely made a 180-[degree turn] from the time [before the Great Recession] when it was individual developments selling an individual resort that was real estate based without a balance sheet, without a loyalty
program, and without a system to allow consumers to enjoy an entire brand as opposed to a single location.
One of our biggest missions as we look forward is to continue communicating that it’s a branded industry committed to consumer protection. It’s a fundamentally transformed space.
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