Hilton Grand Vacations strikes deal to acquire Diamond Resorts

[T_R_Oglodyte]

From this comment (highlights added):

Welcome to HGVC!

Welcome back, Doug ! You and DRI were meant to be DRI always seems to be coming back around to me like a cosmic pimple

tugbbs.com

6. Can I transfer my HGV timeshare to Diamond?
No, your timeshare ownership cannot be transferred to Diamond. Over time, some of Diamond’s existing resorts may be rebranded into the HGV family, and you may be offered additional purchase opportunities at that time. Rebranding of Diamond’s resorts is expected to take place over a phased, multi-year period.
…
16. Will Diamond resorts meet HGV’s brand standards?
Over time, the majority of Diamond’s resorts will be rebranded under a new HGV brand. This new product will complement our existing Hilton Grand Vacations and By Hilton Club brands. Rebranding of Diamond resorts is expected to take place over a phased, multi-year period.

Item #6 suggests that some Diamond resorts will be rebranded as HGV resorts. I would expect those to be the upper end DRI properties - probably most of the properties that are in the DRI Hawaii Collection since that Collection was intended to be for the higher end resorts.

Item #16 suggests that a new brand will be created with the DRI properties that don't get converted to HGV. Presumably this would be a "downscale" brand from HGV. This will give the sales teams something to pitch to people who might be finding HGV too rich for their blood. Wouldn't surprise me to see them rebranded as something like Hampton Vacation Club.

If these guesses are correct, I suspect they already have a good idea of which resorts they want to bring into HGV and the changes they intend to make before the rebranding. Until those changes are made, they will keep them as Diamond resorts. There's also a significant amount of legal and logistic work that needs to get done. It's not going to be easy to sort out how a Diamond resort, with ownership interests held by individual owners and by the Diamond collections, can move over to HGV while preserving continuity in owner usage rights and privileges in both systems.

As for the remaining resorts - the "Hampton Vacation Club" brand level - I expect the first priority will be to identify resorts that HGV wants to carry the new brand, and which resorts they might want to get rid of. They probably have a pretty good idea of that already from the pre-acquisition due diligence, but it wouldn't suprise me if they spent a bit more observing the resort operations and the market positions before coming to final decisions. They also need to prepare upgrade plans for the resorts they want to keep, and then work up the capital spending plan for the upgrades The resorts they decide to keep will then go through a period of making whatever upgrades or changes are needed to meet whatever quality standards they want to have for the new brand. Once that is complete, the rebranding will occur. This process will likely extend over quite a few years. I would also expect maintenance fee increases, just as when Diamond acquired Sunterra and began making upgrades.

As for any resorts that they don't believe warrant upgrade to meet the standards of the new "Hampton Vacation Club" brand, HGV will then need to figure out how to dispose of those. They can't just drop the resort, because ownership is those resorts is held by one of the Diamond trusts, where it is mingled with all other resorts. Inventory control also requires that the number and type of units or occupancy interests owned by the trust balance with the total usage rights of the trust owners. HGV would not be able to simply jettison resorts because then there would be an imbalance between unit availability and trust ownership interests. (The governing documents for the trusts require this balance - except apparently for the European collection.). So if they get rid of a resort they simultaneously would have to add another resort to offset the loss of inventory.

 

[dioxide45]

Item #16 suggests that a new brand will be created with the DRI properties that don't get converted to HGV. Presumably this would be a "downscale" brand from HGV. This will give the sales teams something to pitch to people who might be finding HGV too rich for their blood. Wouldn't surprise me to see them rebranded as something like Hampton Vacation Club.

The thing is, Marriott already tried that years ago with their Horizons brand and it failed miserably. Perhaps the market demographics are different now, but the younger millennials that they would be targeting with such a product is far different than the Gen X market that Marriott was targeting years ago. The market they would be trying to target are all about booking on AirBnB with limited commitments that timeshares would bring.

 

[DazedandConfused]

Come on. There is a huge difference between motel 6 ($40 a night) and HGV level hotels/resorts ($200-500/night retail)within the industry; motel 6 is considered budget and most HGV are upper upscale. There are 6 tiers between the two. Keep in mind for every person like you there are probably two happy to stay at equiv of a Hampton inn for twice as many nights. And while that may not be good enough for you, keep in mind Hampton inn is the most popular hotel in North America - by far.

Perhaps I was a little too critical, but having 100 affiliates that are super challenging to book is not too helpful. Also, have a bunch of 2 star resorts are not interesting either. So I guess, I need to see what are the best 10 or so Diamond resorts out there

 

[T_R_Oglodyte]

The thing is, Marriott already tried that years ago with their Horizons brand and it failed miserably. Perhaps the market demographics are different now, but the younger millennials that they would be targeting with such a product is far different than the Gen X market that Marriott was targeting years ago. The market they would be trying to target are all about booking on AirBnB with limited commitments that timeshares would bring.

I don't see that as targeting the AirBnB/VRBO crowd. That community is not a viable market for timeshares of any type. My kids are in that crowd. They love our timeshares, but they have less than zero interest in ever owning one themselves because AirBnB/VRBO fit their lives much better. (Actually, had those platforms existed in 1999 I don't think we would have got involved with timeshares ourselves.)

Where I think this might position is to the people who are motivated on the sales floor to consider a timeshare, but won't bite on the main product due to price. This could fit into that downsell market.

But the main place this would work is in the sales room at the "Hampton Vacation Club" resorts themselves. That's going to be a different crowd than the people at the HGV resorts. It's also the same sales program that Diamond has been running at those resorts anyway, with decent success.

In fact Diamond itself has been using this two tier strategy for quite a few years. The Hawaii collection was created and is marketed to prospects as the upscale collection, and is offered at a higher price point.

 

[ocdb8r]

Perhaps I was a little too critical, but having 100 affiliates that are super challenging to book is not too helpful. Also, have a bunch of 2 star resorts are not interesting either. So I guess, I need to see what are the best 10 or so Diamond resorts out there

I mentioned up-thread that I was not super excited. However, there are some Diamond owned/managed resorts that look interesting to me and that I would consider exchanging into, including:

• Sedona Summit
• Scottsdale Links
• Cabo Azul
• The Point and Poipu (Kauai)
• Lake Tahoe Vacation Resort
• Royal Palm Beach Villas (St. Maarten)
• Palazzo Catalani (Italian Countryside)
• Royal Oasis Club at Pueblo Quinta (Malaga, Spain)
• Any of the Embarc/Intrawest locations (would particularly like access to Zihuatanejo)

I have not included any of the Balearic Island resorts, although some look nice, as it's not of particular interest to me and way overbuilt with timeshares (meaning there is plenty of choice regardless what system you are in). Ditto for the Orlando area resorts.

I also noted upthread that the Crescent Resort South Beach Miami is interesting given it's right next door to the McAlpin...and we like staying in this area.

Otherwise, nothing caught my eye as interesting or at the level I would want to visit.

 

[tpdgfmt]

I own at HGVC Grand Pacific Mar Brisa which can be dual affiliated. The resort started out as a Grand Pacific developed property and then HGVC took over. Because I own one of the original units it is part of the GP group and I also qualified it as an HGVC unit, I have already have access to all the HGVC properties and all the Grand Pacific Properties. I wonder if HGVC will now expand the relationship with the other Grand Pacific resorts since it seems DRI has an affiliation with them as well.

Hilton has a lot of experience integrating other timeshare systems and resorts into its Club. I believe it began with the acquisition of Mariner years ago when Hilton was just getting into the timeshare business. Hilton has also brought individual existing resorts into the Club such as the Bay Club in Hawaii, Grand Pacific's Marbrisa and Grand Pacific Palisades and Carlsbad Seapointe Resort at Carlsbad, California, and Elara in Las Vegas. More recently, it has worked with developers in South Carolina to bring new resorts built by others into the Club. In every case of which I am aware, Hilton has respected the ownership of owners of the resorts brought into HGVC and been able to offer HGVC members additional vacation alternatives. HGVC owners tend to complain about the lack of availability of SW Florida affiliate resorts, but that seems to be a function of Hilton's respect for the ownership rights of owners at those resorts, many of whom owned long before HGVC existed and did not want to join the Club. I suspect the same can be said for Seapointe, which existed long before it became part of HGVC. Bringing those resorts into the Club did not hurt Hilton's other owners and has provided some opportunity to exchange into them, even if it is a limited opportunity. Then there has been a sliding scale for the integrations of the Bay Club, Palisades, Marbrisa, Elara, and the South Carolina resorts. The newer they were, the more the owners at those resorts have become HGVC members (at the newer resorts, many if not most of the owners bought as HGVC members) and more inventory at those resorts became available to HGVC owners. Again, no one got hurt. In every case, Hilton's integration of a resort or a company into HGVC has been thoughtful of both its Club members and the owners of resorts being integrated into the Club.

Hilton's email to owners yesterday states in relevant part and in bold, "What's Not Changing: Putting You First." I like many of you am leery of anything said by a large corporation. On the other hand, this one (Hilton Grand Vacations) in my opinion has a track record of doing exactly this: putting us first. When I look back over my 20 years as a Club member, Hilton actually has put me first time after time. It says in bold print that it is not changing this, and I have seen no facts to the contrary. For months I like many of you HGVC members worried that Diamond would acquire HGV. Now HGV has acquired Diamond, so the biggest risk of all doesn't appear to be happening (I am aware in the corporate world that an acquired corporation can actually be the acquirer, but I don't think that is happening here). Other contributors have pointed out that Diamond charges high maintenance fees, provides mediocre maintenance of its resorts, and has some (but not all) substandard resorts. Hilton has a track record to the contrary. It will probably work on all of these issues, but it will take time. Much of what has or needs to be done likely has to be done at the board and owner level at each individual resort. As far as bringing any resort into the Club, Hilton has a lot of experience doing this, so I expect it will use its experience and knowledge to create a win-win for us owners as much as is possible.

HGV has just been through a year that can only be described as financial hell. Whereas in 2019 its net income was $216 million, in 2020 it lost $201 million. I don't know Diamond's results, but the hospitality industry generally had a terrible year. One way or another, there is no reason to think Diamond had a great year, either. I believe Hilton's press release when it said that this business consolidation "enables significant value creation from scale," "rebrand(s) Diamond's properties over time to drive revenue growth," "generates over $125 million in run-rate cost synergies," "Increases recurring EBITDA streams and drives overall cash flow ," and "facilitate(s) financial flexibility and deleveraging." If Hilton weren't doing this deal, I would expect it to try to make up the loss by raising membership and reservation fees at the Club level, management fees it charges resorts, etc. (I doubt that it can simply raise maintenance fees whenever it wants, given the statutory protections in most states for timeshare owners and the fact that except for its own management fees, it doesn't get the money that owners pay for maintenance at its resorts). Although it didn't commit to never raising fees, I think Hilton is looking outside the box in an attempt to make up lost ground other than by charging us. I look at myself in the mirror and wonder if I could or would do as well if I had just lost as much as I normally earn.

In conclusion I agree that the devil will be in the details, but I actually believe Hilton when it says it is trying to make the Club better for us.

 

[dougp26364]

The thing is, Marriott already tried that years ago with their Horizons brand and it failed miserably. Perhaps the market demographics are different now, but the younger millennials that they would be targeting with such a product is far different than the Gen X market that Marriott was targeting years ago. The market they would be trying to target are all about booking on AirBnB with limited commitments that timeshares would bring.

MVC tried building from the ground up, including trying to find new buyers.

HGVC has acquired a program already built and well entrenched with a large group of owners.

Having said that, the original Sunterra went bankrupt, but that was due more to poor management than to not having customers.

As to how HGVC will manage all of this, maybe look to Elara as an example. Part of that ownership remains Westgate owners. There are, of course, differences. But it maybe gives some idea of how separate ownership groups might be handled. Then there are the HGVC owners and the By Hilton owners. How HGVC handles those two groups might provide some insight.

No one should be jumping off a cliff right now. The better managed company (my informed opinion) will be in control. DRI had a habit of increasing pure management fees with no real return to owners. Out THE Club dues had gone from $135/year to well over $500/year in a few short years (4 or 5 years). HGVC has had increases, but NOTHING like what we saw with DRI. And that was just THE Club management fees. It didn’t include the ridiculous management fees built into owners MF’s. When we left DRI, our 2 bedroom Suites at Polo Towers MF’s were higher than our current MF for our standard 2 bedroom at HGVC LV Blv. Let that sink in for a minute. I was paying higher MF’s and club dues in 2015 that were higher than my current HGVC fees.

If we’re into predicting, and all predictions I’ve ever made have been wrong, I predict there will be a “joiner” fee to access across brand lines. This will be a pure fee that’s waved if you buy additional ownership interests in either program. It will be easier to keep the programs separate but equal with a joiner fee and set conversion of one groups points to the other. They won’t have to attempt to adjust program rules, such as HGVC’s club booking window of 9 months compared to DRI’s no -ho e resort booking window of 10 months. If you have any interest in “dual” access, I’d recommend jumping early. MVC offered affiliation of weeks owners being able to convert their deeded week to DC points for $599 (or something close to that figure) and increased it significantly not to long afterwards. BUT, MVC was trying to enroll inventory in a new program. HGVC is dealing with a well established program...... so maybe not. Like I said, my track record at predicting is abysmal.

 

[elaine]

Putting owners 1st, Another thing hgvc did for owners was to offer free enrollment last year for sw fl affiliates. Maybe that way to encourage those deposits, as there’s such limited availability?
my concerns are:
1. Will all dri owners have equal access to hgvc inventory as hgvc owners? That’s a lot more people chasing reservations.
2. Although there are fine dri resorts-we really like greensprings in Williamsburg (but not quite on par with HGVC), imho also many lower quality resorts. I’ve stayed in a some on Rci trades. I doubt hgvc would want to dilute the hgvc brand. So maybe they’ll stay dri or be renamed something else-Hampton inn estates, Hilton flex-space, etc.

 

[letsgobobby]

I mentioned up-thread that I was not super excited. However, there are some Diamond owned/managed resorts that look interesting to me and that I would consider exchanging into, including:

• Sedona Summit
• Scottsdale Links
• Cabo Azul
• The Point and Poipu (Kauai)
• Lake Tahoe Vacation Resort
• Royal Palm Beach Villas (St. Maarten)
• Palazzo Catalani (Italian Countryside)
• Royal Oasis Club at Pueblo Quinta (Malaga, Spain)
• Any of the Embarc/Intrawest locations (would particularly like access to Zihuatanejo)

I have not included any of the Balearic Island resorts, although some look nice, as it's not of particular interest to me and way overbuilt with timeshares (meaning there is plenty of choice regardless what system you are in). Ditto for the Orlando area resorts.

I also noted upthread that the Crescent Resort South Beach Miami is interesting given it's right next door to the McAlpin...and we like staying in this area.

Otherwise, nothing caught my eye as interesting or at the level I would want to visit.

Agree with you, just need ten or so resorts in new locations that would make this worthwhile to me. Particularly Intrawest Zihua, a glorious place.

Why don't you have any of the Maui property on your list? Especially in the Ka'anapali area, that would be a big add.

 

[ocdb8r]

Agree with you, just need ten or so resorts in new locations that would make this worthwhile to me. Particularly Intrawest Zihua, a glorious place.

Why don't you have any of the Maui property on your list? Especially in the Ka'anapali area, that would be a big add.

The only Maui property owned/managed by DRI (i.e. not an affiliate) is KBC and to be honest, it's very dated and the beach in front isn't ideal (disappears almost completely during high tide). There is some potential there with upgrades....the fact it is a high rise makes for a LOT of great views from the rooms and the pool is pretty decent given the age of the resort (although I wonder if it's undersized for the number of units on site). I'm also spoiled with access to the Westin properties for Ka'anapali.

Totally agree that if I took my list of 8 resorts (plus the Embarc/Intrawest Resorts) alone and HGVC added these, I would not be complaining. I think it's hard to focus on these gems given there's another 75 less than interesting resorts being added.

 

[Sandy VDH]

I own HGVC and Wyndham.

I have stayed at 2 DRI - Grand Beach and Santa Fe. I do know know for sure what level these resorts are in the DRI portfolio. While these resorts and units were fine, I thought they were not cleaned well, and that their décor and resort amenities were just a little un-inspired.

How would I rate things:

Highest tier - HGVC/Wyndham Presidential
then - Upscale Wyndham Resorts - Emerald Grand/Bonnet Creek/Ocean Blvd.
then - average Wyndham Resorts - Cypress Palms/Destin Beach Club AND I would stick the 2 DRI properties I stayed at HERE
then - lower Wyndham (older and smaller locations ( Fairfield Bay, Lake Lure) - likely lower DRI

 

[dayooper]

Putting owners 1st, Another thing hgvc did for owners was to offer free enrollment last year for sw fl affiliates. Maybe that way to encourage those deposits, as there’s such limited availability?
my concerns are:
1. Will all dri owners have equal access to hgvc inventory as hgvc owners? That’s a lot more people chasing reservations.
2. Although there are fine dri resorts-we really like greensprings on Williamsburg, imho also many lower quality resorts. I’ve stayed in a some on Rci trades. I doubt hgvc would want to dilute the hgvc brand. So maybe they’ll stay dri or be renamed something else-Hampton inn estates, Hilton flex-space, etc.

1. Who knows, but my guess is there will be some sort of barrier. In the communications given out yesterday, they had mentioned that some DRI resorts would be branded HGV while the majority would be HCV (a lower-tier resort). As @tpdgfmt mentions above (and I agree with), HGVC has treated us owners very well. They stopped most MF increases, even refunding monies paid, gave grace on points roll over (both free 2020 points roll over to 2021 and allowed saved 2019 points to roll over to 2021 as well). They also offered free club booking fees back in May (I'm using 3 of them this year). My guess is they will make a solution that will work for both groups.

2. I don't think they want to dilute the brand either. It would hurt their bottom line. They sell potential members on upscale resorts in upscale places. Many of the DRI resorts do not meet those criteria. As mentioned above, HGVC has already eluded to different branding for some, if not most of the DRI resorts. Could they try and screw all of us over? Absolutely! Their non-sales department history just doesn't sync with that, though.

 

[tschwa2]

I own HGVC and Wyndham.

I have stayed at 2 DRI - Grand Beach and Santa Fe. I do know know for sure what level these resorts are in the DRI portfolio. While these resorts and units were fine, I thought they were not cleaned well, and that their décor and resort amenities were just a little un-inspired.

My experience with Diamond is they put exchangers in rooms that have not been renovated. In the past they nickeled and dimed exchangers by charging for amenities that other systems include for everyone including exchangers (internet, mini golf, etc). Now they charge a per day resort fee for those things but Hilton does too, difference may be that the hiltons are nice enough that it may overall be worth it while most diamonds are not worth the extra $10-30 per day resort fee through II or RCI.

 

[Sandy VDH]

Now they charge a per day resort fee for those things but Hilton does too, difference may be that the hiltons are nice enough that it may overall be worth it while most diamonds are not worth the extra $10-30 per day resort fee through II or RCI.

HGVC only charges those fees to exchangers. No resort fee is paid if you book through HGVC directly Does DRI only charge fees to exchangers and NOT to internal bookings?

Perhaps that is why as an exchanger I was less than impressed with DRI. Does not inspire someone who who stays via an exchange to want to take a tour and purchase. Their experience is already tainted.

 

[tschwa2]

HGVC only charges those fees to exchangers. No resort fee is paid if you book through HGVC directly Does DRI only charge fees to exchangers and NOT to internal bookings?

Perhaps that is why as an exchanger I was less than impressed with DRI. Does not inspire someone who who stays via an exchange to want to take a tour and purchase. Their experience is already tainted.

yes exchangers only for diamond.

 

[DazedandConfused]

perhaps HGVC will buy Westgate next....

 

[Sandy VDH]

perhaps HGVC will buy Westgate next....

Oh please NO, just NO. Stay away from wastegate please.

 

[dioxide45]

Resort fees really burn my ribbon. I would probably have a negative view of any resort I exchange into and have to pay a resort fee. Is there a lot more HGVC availability in RCI now because of these fees? I avoid exchanging into any DRI resorts that we see simply because of this fee. They aren't charged that fee if they trade into the Sheraton or Marriott resorts we own.

 

[T_R_Oglodyte]

HGVC only charges those fees to exchangers. No resort fee is paid if you book through HGVC directly Does DRI only charge fees to exchangers and NOT to internal bookings?

Perhaps that is why as an exchanger I was less than impressed with DRI. Does not inspire someone who who stays via an exchange to want to take a tour and purchase. Their experience is already tainted.

Diamond tends to waive fees in tiers based on ownership as part of the sales program. E.g., owners might not get charged an energy usage for the AC. Silver members get a few freebies. Gold members get more freebies, including free internet. Platinum gets more benefits.

 

[CalGalTraveler]

The only Maui property owned/managed by DRI (i.e. not an affiliate) is KBC and to be honest, it's very dated and the beach in front isn't ideal (disappears almost completely during high tide). There is some potential there with upgrades....the fact it is a high rise makes for a LOT of great views from the rooms and the pool is pretty decent given the age of the resort (although I wonder if it's undersized for the number of units on site). I'm also spoiled with access to the Westin properties for Ka'anapali.

Totally agree that if I took my list of 8 resorts (plus the Embarc/Intrawest Resorts) alone and HGVC added these, I would not be complaining. I think it's hard to focus on these gems given there's another 75 less than interesting resorts being added.

With pent-up demand for Maui, HGVC's big Asian customer base who pay full price for Hawaii, and the oceanfront location, I wouldn't be surprised if gutting and renovating KBC to HGVC standard becomes a top priority. I am a Westin TS owner next door, and I would gladly exchange our points for a week or a few days to our Westin fixed week if KBC were renovated. There is a grocery store across the street and a beach next door at the Westin/Hono Koa so beach is not a problem. The walk to this beach is probably about the same distance from the back of the HGVC Kihei resort across the street.

 

[dayooper]

Diamond tends to waive fees in tiers based on ownership as part of the sales program. E.g., owners might not get charged an energy usage for the AC. Silver members get a few freebies. Gold members get more freebies, including free internet. Platinum gets more benefits.

What does Diamond charge its owners when they stay? With those high MF's you would think not much.

 

[tschwa2]

Resort fees really burn my ribbon. I would probably have a negative view of any resort I exchange into and have to pay a resort fee. Is there a lot more HGVC availability in RCI now because of these fees? I avoid exchanging into any DRI resorts that we see simply because of this fee. They aren't charged that fee if they trade into the Sheraton or Marriott resorts we own.

I think it is a combination of 1 in 4 and resort fees but yes in places like Orlando and Vegas, Hiltons don't go as fast. Hawaii and in season Myrtle Beach still fly off the shelves even with the fees.

 

[GT75]

Diamond tends to waive fees in tiers based on ownership as part of the sales program. E.g., owners might not get charged an energy usage for the AC. Silver members get a few freebies. Gold members get more freebies, including free internet. Platinum gets more benefits.

Wow, that is ridiculous. Do you also have a reservation fee?

 

[T_R_Oglodyte]

What does Diamond charge its owners when they stay? With those high MF's you would think not much.

It varies from resort to resort. The HOA at each resort sets that resorts policies, which apply to all owners. If you are not part of the Diamond Club, you pay the fee. If you are part of the Diamond club, you don't reserve at the resort. The Club is the entity that reserves the unit. The Club then covers the resort charges, depending on what your status is in the Club.

When we stay in Hawaii, we are gold members, so the fees we pay are the Hawaii taxes. As gold members we don't pay the internet fee. We also don't pay extra for A/C - I think the resort is policy is charge that fee only to non-owners.

Other resorts might have other fees. For example if a resort is inside some type of resort development that charges resort fees to occupants and residents, those will get passed on in some fashion determined by the HOA at the resort.

Actually, the primary perks from higher tiers more often involve items such as the number of guest certificates allowed per year, rates provided when converting points to services, ability to reserve specific rooms, costs to do upgrades in unit size or location. Things such as that - not quite so much as on-site charges.

 

[elaine]

(repost from the DRI forum on TUG)--here were some analysts' questions/comments:
- Focus / interest / excitement on adding more beach properties - Virginia Beach mentioned specifically in this regard
- The importance of maintaining the Hilton name / standard of excellence
- Analyst question touching on the topic of how HGVC might deal with Diamond's history of questionable sales tactics
- Analyst question basically asking how HGVC might deal with the fact that Diamond was known for high maintenance fees but not the same quality as HGVC