Marriott timeshare earnings still going up....

In July of last year I posted a summary of the timeshare portion of Marriott's June 2005 presentation to security analysts. I included the following statement:

Marriott's profits from vacation ownership activities ranged from $123 million in 1999 to $149 million in 2003 before jumping to $203 million in 2004.

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Last month Marriott again briefed security analysts on its operations and future expectations. Marriott:

• Expects to earn $275 million from timeshare operations this year.
• Projects that it will earn $377 million from timeshare operations in 2009.

Tidbits from Marriott's 2005 annual report:

• Marriott had $1.721 billion in timeshare-related revenue in 2005, up from $1.502 billion in 2004 and $1.279 billion in 2003. ("Timeshare" section on page 23)
• Marriott had $344 million in timeshare notes receivable at the end of 2005 (up from $315 million at the end of 2004) related to its financing of timeshare sales. (Note 10 to the financial statements)
• The high interest rates that Marriott is able to charge on timeshare loans allows it to periodically sell some of the notes at a significant profit. The total gains on such sales in 2005 were $69 million. (Note 11 to the financial statements)
• The number of Marriott timeshare owners has grown as follows ("Timeshare" section on page 23):
  • 195,000 at the end of 2001
  • 223,000 at the end of 2002
  • 256,000 at the end of 2003
  • 284,000 at the end of 2004
  • 323,000 (a 17% one-year increase!) at the end of 2005

This can translate into good news for all of us owners. As long as Marriott does well we can expect to see lots of new resorts being built. However, the next question that arises is how much of this profit increase is due to operating the resorts and how much is from sales? I dont think we can tell from the information that was presented. I assume the $275M projected profit includes profit on all aspects of timeshares including both operating and sales of units. This also more than justifies Marriott wanting to get into the handling of trading (rather than II).

Thanks for the info Dave.

Although I didn't notice a breakdown in this year's analysts' meeting info, I reported the following a year ago:

53% of Marriott's 2004 profit from timeshares came from sales. An astounding 33% came from financing! The remainder came from management fees and rental commissions.

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Thanks for the info...they's why I invested in Marriott after buying my first timeshare. They have had great performance!

33% of timeshare profit is from financing? That is simply astounding to me.

JimC said:

33% of timeshare profit is from financing? That is simply astounding to me.

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a recent promo was to finance 75% of purchase at 13.99% for 10 yr term...you get 25k pts every 6 months and for ten yrs you get 500,000mrps (wow 1/2 million pts sure sounds great!!!). Marriott is using this sort of technique to 'milk' more profits from owners

winger said:

a recent promo was to finance 75% of purchase at 13.99% for 10 yr term...you get 25k pts every 6 months and for ten yrs you get 500,000mrps (wow 1/2 million pts sure sounds great!!!). Marriott is using this sort of technique to 'milk' more profits from owners

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Okay lets say you finance $20,000 for 10 years at 13.99%
Monthly payments are $310.41
Total interest paid = $17,249.52
So you paid 3.4 cents per point. Guess it is better than paying the interest and getting nothing for it. But hardly a case for borrowing rather than paying cash.

I would guess that, with substantial increases in annual fees across the board, you will see a larger percentage of Marriott's 2006 and 2007 profits coming from annual fees/maintenance operations than in the prior years.

JimC said:

Okay lets say you finance $20,000 for 10 years at 13.99%
Monthly payments are $310.41
Total interest paid = $17,249.52
So you paid 3.4 cents per point. Guess it is better than paying the interest and getting nothing for it. But hardly a case for borrowing rather than paying cash.

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yep, this is the reason why I refused to take the finance for points deal from Marriott. I rather not pay anymore interest than I need to, even for pts.