Marriott Vacations Worldwide 2Q 2022 Earnings Conference Call (VAC) Tidbits

[JIMinNC]

I listened to this morning's Marriott Vacations Worldwide's 2Q 2022 earnings conference call. They had a blow-out quarter with contract sales up 40% over 2Q 2021 and earnings up 55%. But just from listening to the call, you would've assumed that the Abound product is fully-launched and going perfectly. No mention at all of the technology missteps that we have all experienced over the last week or so. Here is what CEO Steve Weisz said about Abound:

"During the quarter, we launched Vacation Next, a multi-year journey beginning with the introduction of Abound by Marriott Vacations, which unifies our Marriott-branded vacation ownership products. Through this new program, Marriott, Westin, and Sheraton owners now have direct access to more than 90 branded resorts around the world using a common points currency. The Vacation Next journey will continue to leverage our investment in technology for an enhanced digital experience, while transforming our marketing, sales, and service for our owners and the next generation of travelers.

We began pre-marketing the unified product at out Marriott, Westin, and Sheraton sales centers at the end of March and I'm happy to say that as of today, the majority of our sales centers have started selling our new unified product. While still early in the process, feedback from owners has been very positive."

Hearing that, if I was not an owner, I would believe that the program was fully up and running and Marriott, Westin, and Sheraton owners were now directly booking vacations through their new product. We all know that is not the case. No analyst questioned those statements, so I assume none of the analysts who cover VAC are owners.

Here are a few other points of interest from the call from CFO Tony Terry:

• They ended the quarter with $610 million of excess inventory and no material commitments for new inventory for the "next few years", outside of the Waikiki deal, which they expect to structure in a capital efficient manner, and the normal purchases of low-cost reacquired inventory. That continues to confirm that Waikiki will likely be the only new location we see for at least the next several years.
• They are continuing to allocate a higher portion of their rental inventory for owner usage, which is expected to continue to negatively impact the second half 2022 rental profits. They had previously disclosed during the pandemic that they were repurposing rental inventory as owner inventory to absorb the delayed owner usage and point expiration extensions.
• Higher owner usage of their home resorts continues to negatively impact availability of Getaways and exchanges in Interval International.

 

[dgf15215]

Interesting. I would guess that their adjustment in the allocation of rental inventory is a positive for owners which seems appropriate to meet owner demand as opposed to frustrating it.

 

[dioxide45]

I really wonder if they didn't have a lot of these remarks pre-written and simply failed to go back and update them based on what transpired over the last week or so. There is no Vacation Next and sales centers are still selling their own individual products. I suppose you could make a case that since the individual products can, in the future, convert to the unified one that they are selling a unified product. But that is certainly a stretch. We know we can't book 90+ resorts right now direct with Abound Points.

Certainly they spend several weeks writing everything up and putting the information together. Is it possible they made a huge mistake here?

 

[kozykritter]

I really wonder if they didn't have a lot of these remarks pre-written and simply failed to go back and update them based on what transpired over the last week or so. There is no Vacation Next and sales centers are still selling their own individual products. I suppose you could make a case that since the individual products can, in the future, convert to the unified one that they are selling a unified product. But that is certainly a stretch. We know we can't book 90+ resorts right now direct with Abound Points.

Certainly they spend several weeks writing everything up and putting the information together. Is it possible they made a huge mistake here?

I wonder if the CEO was announcing that the majority of sales centers have started selling the unified product as of today. Does anyone have a sales rep they can check that with? Did anyone go to a sales presentation today?

 

[dioxide45]

I wonder if the CEO was announcing that the majority of sales centers have started selling the unified product as of today. Does anyone have a sales rep they can check that with? Did anyone go to a sales presentation today?

Perhaps he expected they would be since some of the different dates we were hearing were 7/28, 8/1 and 8/7. I would be interested to hear if anyone has been to a sales office today to find out more. I would think if they were, there would be more chatter here and in the Facebook groups.

 

[JIMinNC]

The comments made me wonder if the VAC technology executive was afraid to tell Mr. Weisz and Mr. Geller that the technology launch didn't go well.

 

[jwalk03]

The comments made me wonder if the VAC technology executive was afraid to tell Mr. Weisz and Mr. Geller that the technology launch didn't go well.

I sent a complaint email to Mr. Weisz when I couldnt get in for the 5th day in a row- but thus far it has not gotten any response.

 

[emeryjre]

Earnings calls are pretty well monitored and subject to a variety of legal requirements.

Sounds like some real embellishment from the CEO level. They mentioned that things occurred during the last quarter. I presume the quarter ended on July 31, 2022.

We all know that the CEO is incorrect. I cannot for a second believe any CEO would make these statements at a quarterly earnings call unless they believed them to be true.

"During the quarter, we launched Vacation Next, a multi-year journey beginning with the introduction of Abound by Marriott Vacations, which unifies our Marriott-branded vacation ownership products. Through this new program, Marriott, Westin, and Sheraton owners now have direct access to more than 90 branded resorts around the world using a common points currency. The Vacation Next journey will continue to leverage our investment in technology for an enhanced digital experience, while transforming our marketing, sales, and service for our owners and the next generation of travelers".

There is a long way to go to leverage the investment in technology. The idea of an enhanced digital experience would be a working web site for users at this point.

 

[JIMinNC]

I sent a complaint email to Mr. Weisz when I couldnt get in for the 5th day in a row- but thus far it has not gotten any response.

Maybe his email assistant is afraid to break the news as well...

 

[JIMinNC]

Earnings calls are pretty well monitored and subject to a variety of legal requirements.

Sounds like some real embellishment from the CEO level. They mentioned that things occurred during the last quarter. I presume the quarter ended on July 31, 2022.

We all know that the CEO is incorrect. I cannot for a second believe any CEO would make these statements at a quarterly earnings call unless they believed them to be true.

Quarter end was June 30.

In all likelihood Weisz is referring to the launch of Abound in the sales centers, that is likely the argument they would use if challenged, but the wording does cause you to scratch your head as owners do not yet have access to all 90 resorts as he said/implied.

 

[emeryjre]

Quarter end was June 30

Thanks for the correction. Makes things even worse for the CEO. I cannot believe I am watching this train wreck occur.

 

[CalGalTraveler]

So no one told the Emperor he has no clothes...

I doubt CEO would knowingly state untruths because he could go to jail when representing information to the financial community; that's SEC fraud. However if he is this clueless about his customers and the state of their IT and program implementation...that's a red flag too.

 

[kozykritter]

I was tempted to track down all the analysts at the financial firms that asked the questions during the call and send them an email to let them know that the new program had not been implemented as had been inferred in the comments made by MVW executives during the call.

 

[kozykritter]

So no one told the Emperor he has no clothes...

I doubt CEO would knowingly state untruths because he could go to jail when representing information to the financial community; that's SEC fraud. However if he is this clueless about his customers and the state of their IT and program implementation...that's a red flag.

I know! I tried to get into the question queue on the call so that I could pronounce that in an appropriate way but they already lined up their favorite buddies to ask the questions.

 

[EKniager]

So no one told the Emperor he has no clothes...

I doubt CEO would knowingly state untruths because he could go to jail when representing information to the financial community; that's SEC fraud. However if he is this clueless about his customers and the state of their IT and program implementation...that's a red flag too.

We went to the Myrtle Beach Sales Center Sunday. While we were told that the full integration was still about a month away, it was our impression that what we were buying was their "new unified product." Albeit, the only thing new from our past understanding of the DC points was that it could be used on any of the resorts listed on the poster (MVC, Westin, and Sheraton) plus eventually some Hyatt resorts.

 

[PhoenixCanuck]

My biggest issue with the program now is the company's complete lack of investment in product. These guys are just reselling takebacks now. And in the current environment of recession and high inflation, the level of takebacks is not going to abate anytime soon.

Fifteen or so years ago when I acquired most of my weeks and points directly from Marriott, I knew exactly what I was getting for my purchase price. It went towards the capital cost of brand-new resort properties that I got to enjoy as an owner. Where does such money go today? Frankly, towards the company's common stock buy-back program, dividends for shareholders, and probably executive bonuses too.

New owners today are basically purchasing the right to use a collection of 20-year-old resorts that have long since been built and paid for and are continuing to age. Will this collection of properties be still considered upper-upscale in ten more years? They can continue to distract with acquisitions and integrations. But the resorts they're acquiring aren't any newer on average, and the core problem remains.

Needless to say, I will not be further adding to my ownership under these circumstances.

 

[timsi]

Maybe the emperor has no cloths but that can be said about many around him. I cannot imagine a call like this not being scripted, many around him had to contribute. But frankly I cannot imagine the top executives, including the CEO not knowing what is happening after so many months of problems. Both possibilities are equally disturbing to me.

 

[timsi]

• They ended the quarter with $610 million of excess inventory and no material commitments for new inventory for the "next few years", outside of the Waikiki deal, which they expect to structure in a capital efficient manner, and the normal purchases of low-cost reacquired inventory. That continues to confirm that Waikiki will likely be the only new location we see for at least the next several years.

I wonder how much of the inventory is new and how much is acquired from existing owners (the low cost). Is the low cost stated at the acquisition cost (I assume) or the amount represents what they are expecting to receive from selling it? If it is the acquisition cost, it could be a lot of inventory since they pay very little to acquire units/points from existing owners.

 

[JIMinNC]

I wonder how much of the inventory is new and how much is acquired from existing owners (the low cost). Is the low cost stated at the acquisition cost (I assume) or the amount represents what they are expecting to receive from selling it? If it is the acquisition cost, it could be a lot of inventory since they pay very little to acquire units/points from existing owners.

They stated in the Investor Day presentation back in June that much of the excess inventory came from their acquisitions. They have not specified how much is legacy Marriott, legacy Vistana, Hyatt, or Welk. When they say "low cost" they mean low cost of acquisition through ROFR and foreclosure. Looking at the last few years, I assume they still have unsold inventory from their newer projects - SFO Pulse, Bali, Costa Rica, and maybe Australia on the MVC side; and Westin Los Cabos, Sheraton Kauai, and the second Westin Cancun location on the VSE side. I suspect sales at the Asian locations are still depressed since Asian travel has been the slowest to rebound. Clearly the US Land Trust behind Destination Points/Abound is primarily being funded now through ROFR.

 

[JIMinNC]

My biggest issue with the program now is the company's complete lack of investment in product. These guys are just reselling takebacks now. And in the current environment of recession and high inflation, the level of takebacks is not going to abate anytime soon.

Fifteen or so years ago when I acquired most of my weeks and points directly from Marriott, I knew exactly what I was getting for my purchase price. It went towards the capital cost of brand-new resort properties that I got to enjoy as an owner. Where does such money go today? Frankly, towards the company's common stock buy-back program, dividends for shareholders, and probably executive bonuses too.

New owners today are basically purchasing the right to use a collection of 20-year-old resorts that have long since been built and paid for and are continuing to age. Will this collection of properties be still considered upper-upscale in ten more years? They can continue to distract with acquisitions and integrations. But the resorts they're acquiring aren't any newer on average, and the core problem remains.

Needless to say, I will not be further adding to my ownership under these circumstances.

I think the biggest problem right now with adding new ground-up resorts is where to build them. While we have all identified places we would like to see added to the MVC/Abound network, the fact is, with the merger of MVC, Westin, and Sheraton, most of the obvious resort markets are covered now by one of those brands. While there are clearly places they could go next, one could argue that many of those potential adds are secondary or even tertiary markets where they might question whether the new sales potential there is enough to justify paying high current real estate costs to acquire inventory. With so much ability to repurchase inventory inexpensively through ROFR, new builds are not necessarily in the best shareholder interests, and ultimately that is what does (and should) drive corporate decisions.

 

[jabberwocky]

I know! I tried to get into the question queue on the call so that I could pronounce that in an appropriate way but they already lined up their favorite buddies to ask the questions.

They aren’t going to let a general investor onto the call. You’d be screened out as they generally only allow analysts or major investors onto the call.

 

[JIMinNC]

They aren’t going to let a general investor onto the call. You’d be screened out as they generally only allow analysts or major investors onto the call.

Correct. That is why they offer the audio live stream on their web site - so regular shareholders and others with interest can still hear what is said.

 

[kozykritter]

They aren’t going to let a general investor onto the call. You’d be screened out as they generally only allow analysts or major investors onto the call.

The whole thing seemed like a pointless dog and pony show.

 

[JIMinNC]

The whole thing seemed like a pointless dog and pony show.

You have to look at it for what it is - it is an opportunity for management to put their spin on the results for the last quarter. So in that sense, it is a dog and pony show. But then the Q&A is there to let the analysts who follow the company's stock to ask clarifying questions. These analysts generally set price targets and buy/sell recommendations on the stock for their firms, so their opinions/recommendations can often move the price of a stock. The questions the analysts ask are to try to get more color and to try read between the lines of what management has disclosed in their prepared comments. Based on what they learn, they will update their own projections for future revenue/earnings. All of these analysts have their own models they put data into to help them project company performance and arrive at their estimates for the next few quarters.

 

[dougp26364]

The Emperor has no clothes