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HGVC Investors Call

1Kflyerguy

TUG Review Crew: Veteran
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Resorts Owned
HGVC Kings Land, Elara, and Marriott Destination Club Points
I finally got around to listening to the HGVC quarterly conference call recording. Obviously mostly focused on the financial of the business but a few points were interesting as an owner:

The stated their network definitely will grow, as they have a smaller footprint than their competitors. While nothing specific was listed they stated interesting in adding properties in urban markets like Chicago and San Diego. They said the West Coast is under represented, and both Japan and China look really attractive for expansion. Japan has over 60K members, or around 20% and is up to 8 sales centers so its strong contender for new resorts.

They are also looking at mid-market opportunities to expand the customer base.. I am not entirely sure where those locations will be..

When asked about Maui…. They said no start date yet.. guess that is still pending, but not close enough to share a date.

On a separate note they also said they were being much more aggressive recently in buying back inventory off the open market as highly profitable for them. I know I lost a Kings Land unit to ROFR earlier this month, so guess I was not just unlucky and might be a trend… .
 

GregT

TUG Member
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Resorts Owned
Marriott: Maui Ocean Club Lahaina Villas (3BRx5), Ko Olina, Shadow Ridge II, Willow Ridge, Aruba Ocean Club, DC Points HGVC: Flamingo, Sea World, I-Drive, Starwood Bella (x4), SDO, TradeWinds, Worldmark
Thank you for these comments, it will be interesting to continue to track HGVC's development as an independent company. Urban locations are certainly becoming popular with Marriott and not surprising to see HGVC pursuing the same strategy. I still hope to get a property in the Caribbean for HGVC, and perhaps their enthusiasm for expansion will cause them to rectify the hole in the locations. We will see.

Thanks again for the comments!

Best,

Greg
 

thare

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One interesting thing will be to see what happens in the next downturn. Timeshares are REALLY economy dependent. They got absolutely crushed last downturn, and without the Hilton group to prop them up, HGVC could get pummeled (between bankruptcy of purchasers, fewer purchasers, financing costs increasing, fewer people taking vacations, etc), resulting in some dramatic changes to their business (IE no repurchases for sure).
 

tk25

TUG Member
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Location
Wisconsin
Resorts Owned
Kings Land 12,600 points; Sea World 8400 points and Las Vegas Boulevard 7000 points
I finally got around to listening to the HGVC quarterly conference call recording. Obviously mostly focused on the financial of the business but a few points were interesting as an owner:

The stated their network definitely will grow, as they have a smaller footprint than their competitors. While nothing specific was listed they stated interesting in adding properties in urban markets like Chicago and San Diego. They said the West Coast is under represented, and both Japan and China look really attractive for expansion. Japan has over 60K members, or around 20% and is up to 8 sales centers so its strong contender for new resorts.

They are also looking at mid-market opportunities to expand the customer base.. I am not entirely sure where those locations will be..

When asked about Maui…. They said no start date yet.. guess that is still pending, but not close enough to share a date.

On a separate note they also said they were being much more aggressive recently in buying back inventory off the open market as highly profitable for them. I know I lost a Kings Land unit to ROFR earlier this month, so guess I was not just unlucky and might be a trend… .

Hello how many points were you trying to buy at King's Land and for what price did HGVC exercise their ROFR? thanks in advance
 

Tamaradarann

TUG Review Crew: Expert
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Resorts Owned
HGVC South Beach, HGVC Las Vegas, HGVC Las Vegas on the Strip, HGVC Sea World, Misner Place
On a separate note they also said they were being much more aggressive recently in buying back inventory off the open market as highly profitable for them. I know I lost a Kings Land unit to ROFR earlier this month, so guess I was not just unlucky and might be a trend… .[/QUOTE]

I guess buying back is very profitable for them. I have heard that it costs the developer about 1/2 of the price they charge for a timeshare unit in marketing the timeshares. If that is true then a unit that they sell for $40,000 cost them about $20,000 to build. If they buy a timeshare for $5,000 via ROFR they save the $20,000 cost to build so their profit is about 400% more.
 

buzglyd

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Resorts Owned
HGV Lagoon Tower
HGV Carlsbad Seapointe
Gaslamp Plaza Suites
SVV Bella
I wouldn't say $20,000 to build. Developer profit has to be in that $20,000 as well.

But yes it has been said many times that Sales and Marketing costs are about 50% give or take.

Years ago the goal in the industry was to make timeshare a "sought good" like a TV or car. They were doing pretty well especially pushing the high end of the market and then the crash happened. Then the sharing economy happened.
 

thare

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I think base cost is about 25% of sale price. As mentioned above, you then add on profit, sales, marketing, admin costs, etc to get to the current sale price. It probably varies by specific developer.
 

1Kflyerguy

TUG Review Crew: Veteran
TUG Member
Joined
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Messages
3,430
Reaction score
1,528
Points
399
Location
San Jose, Ca
Resorts Owned
HGVC Kings Land, Elara, and Marriott Destination Club Points
Thank you for these comments, it will be interesting to continue to track HGVC's development as an independent company. Urban locations are certainly becoming popular with Marriott and not surprising to see HGVC pursuing the same strategy. I still hope to get a property in the Caribbean for HGVC, and perhaps their enthusiasm for expansion will cause them to rectify the hole in the locations. We will see.

Best,

Greg

I agree the Caribbean would be great! That was not a location they mentioned or hinted at... Personally Japan and China don't excite me all that much, If i were to vacation there chances are i would look to hotels, as i would probably be moving around to see the sights be moving around. But i understand their desire to grow in Asia.
 

1Kflyerguy

TUG Review Crew: Veteran
TUG Member
Joined
Nov 20, 2012
Messages
3,430
Reaction score
1,528
Points
399
Location
San Jose, Ca
Resorts Owned
HGVC Kings Land, Elara, and Marriott Destination Club Points
One interesting thing will be to see what happens in the next downturn. Timeshares are REALLY economy dependent. They got absolutely crushed last downturn, and without the Hilton group to prop them up, HGVC could get pummeled (between bankruptcy of purchasers, fewer purchasers, financing costs increasing, fewer people taking vacations, etc), resulting in some dramatic changes to their business (IE no repurchases for sure).

Vacations and Time Shares in particular are indeed tied to the economy. But I suspect HGVC should fare OK. As an independent company they will need to react to changes in the market, they can easily slow down on development, and yes possibly slow their ROFR buy backs... or they could see that as a buying opportunity and buy more units back if they are selling for less. Plus as an independent company all their capital can be used an ways to maximize the returns for the T/S business. When they were a division of a larger company like Hilton, the corporate parent would be making all the capital allocation decisions and HGVC would just be one option.
 

GregT

TUG Member
TUG Member
Joined
Jul 19, 2007
Messages
7,128
Reaction score
1,886
Points
599
Location
Carlsbad, CA
Resorts Owned
Marriott: Maui Ocean Club Lahaina Villas (3BRx5), Ko Olina, Shadow Ridge II, Willow Ridge, Aruba Ocean Club, DC Points HGVC: Flamingo, Sea World, I-Drive, Starwood Bella (x4), SDO, TradeWinds, Worldmark
I agree the Caribbean would be great! That was not a location they mentioned or hinted at... Personally Japan and China don't excite me all that much, If i were to vacation there chances are i would look to hotels, as i would probably be moving around to see the sights be moving around. But i understand their desire to grow in Asia.
Agreed on all points - the one reason I can think of for a Caribbean property is many of their shareholders (and institutional investors) are East Coast, and will likely ask management if there are plans for Caribbean. It's all speculation of course, but I could see it - them adding a Caribbean property to be responsive to their shareholders. It is a hole in their portfolio and what serious leisure company can ignore the Caribbean?

Best,

Greg
 

thare

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Vacations and Time Shares in particular are indeed tied to the economy. But I suspect HGVC should fare OK. As an independent company they will need to react to changes in the market, they can easily slow down on development, and yes possibly slow their ROFR buy backs... or they could see that as a buying opportunity and buy more units back if they are selling for less. Plus as an independent company all their capital can be used an ways to maximize the returns for the T/S business. When they were a division of a larger company like Hilton, the corporate parent would be making all the capital allocation decisions and HGVC would just be one option.

My experience with timeshares is that there is significant sales volitility. Currently the stock is priced at a P/E of 16 - basically assuming good times stay good forever. The company easily could lose 20-30% of its sales in a recession, resulting in a major restructuring of the employee base, and could put the company into losses. I don't work there though, so it is just speculation, and their revenues are up 20% in the last 4 years, which is pretty damn good.
 
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