Why is Marriott Vacations struggling?

[DanCali]

Maybe the worst is behind Marriott Vacations Worldwide and they are turning things around. I wasn't able to listen to the Earnings Conference Call this morning, but VAC seemed to have a positive earnings report this time around. The market is at least responding positively to their results and commentary as the stock is up over $7 per share today (8%) to $95 at around midday today.

Here is a link to the earnings release:

VAC 4th Quarter 2023 and Full Year 2023 Results

The recording of the call is posted online, so I may try to listen in the next day or so.

The stock is reacting nicely to the earnings and the subsequent call. It's usually related to what the expectations were to begin with.

The link below is a summary from Zacks. Seems like very minor revenue growth (1.8%) from same quarter last year with lots mentions of the Maui wildfires.

Marriott Vacations (VAC) Q4 Earnings Beat Estimates, Stock Up

Marriott Vacations' (VAC) fourth-quarter 2023 results benefit from robust vacation ownership revenues.

www.zacks.com

From press release:

"Consolidated contract sales" for Q4 went down a tiny bit but, if I read it correctly, the MVC portion ("Sale of vacation ownership products"?) was down by a greater amount even after accounting for wildfires. The revenue guidance for consolidated contract sales for 2024 ($1,880-$1,930 million) is higher than the 2022 level of $1,837 million by 2.3% on the low end and 5.1% on the high end. Those numbers don't make me jump out of my seat to buy, but investors seem to like what they heard.

 

[jabberwocky]

My take is there was quite a bit of handwaving. I’m not a fan of “if we didn’t have the wildfires our sales would have been higher.” Sure, there are fewer people coming through (volume decrease) - but why that should result in a decrease in average sales per guest (VPG) is not quite clear.

I tend to judge management by how forthcoming they are. The early questions in the call about the “one trust” concept were evasive and untrue I felt. For example, they insist all sales centers (excluding some in Orlando) have converted to the Abound product; however, we know that they are still selling a flex product in Mexico. They also admitted that the legacy Vistana products would always exist as they will have some buyers that prefer that product.

So if you don’t want Abound, maybe push them to see if they a Vistana week or Westin Flex to sell.

 

[timsi]

There was a question from one of the investors on the call about maintenance fees and if there was concern that they could reach a "tipping point".

There are transcripts online, here is the relevant part about the MF:

“Chris Jon Woronka: Okay. And then as a follow-up, John, I know you just mentioned the maintenance fees are a little bit of a headwind on the unsold inventory. Do you have any visibility? I know that's sometimes an issue of like property insurance and taxes, especially in Florida, but do you have any visibility on that going forward? And then also, is there any concern, I guess, if that ultimately -- those maintenance fees to the customer, not on your unsold inventory, but on the owned inventory, that becomes a tipping point for some folks?
John E. Geller: To start with your last question, I guess it could. Let me give you a little perspective though, in terms of right now, with -- if you're a first-time buyer, right, you come in and buy our product, average first-time buyer buys about $30,000 worth of product.
Their maintenance fee this year would be $1,350 right? So while the percentage increase is big, Chris, right, and we're working to get it back down in that kind of mid- to low single digits, more like we've seen. Even with the higher increases we've seen, if you look at it from like '19 to '24 the compounded annual average increase is in that 4% or 5%, right? Because you had a little increase because of some of the COVID stuff. And so on an average basis, you have that. But you hit on some of the things, property taxes, higher insurance. But labor is your biggest cost and maybe a little different than some of our competitors.
If you look at the markets we're in, we've got 12 resorts in Hawaii, right? We've got 8 in Hilton Head. And in those markets, coming out of COVID, it was -- we saw the wage increases in a lot of our markets. We're in higher cost markets. We've seen that stabilize, right? So that's a good factor going forward. And notwithstanding inflation is not back to where the Fed wants it, that moderation, right? But we're already looking at maintenance fees for next year or -- we're looking for ways to offset increases we've seen and get that back to what we've seen on a more historic level in terms of inflationary increases in the maintenance fees.”

 

[dioxide45]

My take is there was quite a bit of handwaving. I’m not a fan of “if we didn’t have the wildfires our sales would have been higher.” Sure, there are fewer people coming through (volume decrease) - but why that should result in a decrease in average sales per guest (VPG) is not quite clear.

I tend to judge management by how forthcoming they are. The early questions in the call about the “one trust” concept were evasive and untrue I felt. For example, they insist all sales centers (excluding some in Orlando) have converted to the Abound product; however, we know that they are still selling a flex product in Mexico. They also admitted that the legacy Vistana products would always exist as they will have some buyers that prefer that product.

So if you don’t want Abound, maybe push them to see if they a Vistana week or Westin Flex to sell.

I listened to the whole call. The last 15 minutes live then I went back and listened to the first part. I found some of their answered to be kinda dodgy/non answers/half answers. I also don't recall them saying in the past that Charleston was planned as a Westin Vacation Club. Only Savannah. Though in today's call they mentioned both were planned Westin Vacation Club. I suppose things change, but I get the impression that some of the answers are off the cuff. Which I suppose they are, but I would think upper management would know the message there. I guess investors probably don't care all that much about it. I think maintenance fee increases are probably hurting sales to existing owners. Existing owners know what the increases are where a new buyer hasn't done all the math in a 90 minute presentation. Thus fewer existing owners buying results in the lower VPG.

 

[Superchief]

There are transcripts online, here is the relevant part about the MF:

“Chris Jon Woronka: Okay. And then as a follow-up, John, I know you just mentioned the maintenance fees are a little bit of a headwind on the unsold inventory. Do you have any visibility? I know that's sometimes an issue of like property insurance and taxes, especially in Florida, but do you have any visibility on that going forward? And then also, is there any concern, I guess, if that ultimately -- those maintenance fees to the customer, not on your unsold inventory, but on the owned inventory, that becomes a tipping point for some folks?
John E. Geller: To start with your last question, I guess it could. Let me give you a little perspective though, in terms of right now, with -- if you're a first-time buyer, right, you come in and buy our product, average first-time buyer buys about $30,000 worth of product.
Their maintenance fee this year would be $1,350 right? So while the percentage increase is big, Chris, right, and we're working to get it back down in that kind of mid- to low single digits, more like we've seen. Even with the higher increases we've seen, if you look at it from like '19 to '24 the compounded annual average increase is in that 4% or 5%, right? Because you had a little increase because of some of the COVID stuff. And so on an average basis, you have that. But you hit on some of the things, property taxes, higher insurance. But labor is your biggest cost and maybe a little different than some of our competitors.
If you look at the markets we're in, we've got 12 resorts in Hawaii, right? We've got 8 in Hilton Head. And in those markets, coming out of COVID, it was -- we saw the wage increases in a lot of our markets. We're in higher cost markets. We've seen that stabilize, right? So that's a good factor going forward. And notwithstanding inflation is not back to where the Fed wants it, that moderation, right? But we're already looking at maintenance fees for next year or -- we're looking for ways to offset increases we've seen and get that back to what we've seen on a more historic level in terms of inflationary increases in the maintenance fees.”

Right! This is a wishy washy answer typical of the new MVC. If they truly are concerned about these increases, they would look at ways to decrease discretionary expenses and reduce the % management fees imposed on the reserves at resorts with new mandatory requirements. I'd also like to know why there is such a difference between MVC resorts and their competitors.

 

[jp10558]

I listened to the whole call. The last 15 minutes live then I went back and listened to the first part. I found some of their answered to be kinda dodgy/non answers/half answers. I also don't recall them saying in the past that Charleston was planned as a Westin Vacation Club. Only Savannah. Though in today's call they mentioned both were planned Westin Vacation Club. I suppose things change, but I get the impression that some of the answers are off the cuff. Which I suppose they are, but I would think upper management would know the message there. I guess investors probably don't care all that much about it. I think maintenance fee increases are probably hurting sales to existing owners. Existing owners know what the increases are where a new buyer hasn't done all the math in a 90 minute presentation. Thus fewer existing owners buying results in the lower VPG.

To continue my commentary - I think a lot of this works the less info the customers have. So you might well be right - existing owners are saying "Yikes, this has been really high". And anyone who's found TUG or has even gone to more than one timeshare presentation and can do math is also seeing the Marriott premium and unless you're really a Marriott fan might well direct additional purchases they are inclined to make to other brands where just the absolute MFs are lower per week.

I'd also think that given inflation more generally, a luxury product like this is going to be harder to sell - I would guess many people are holding pat or looking to divest as "all costs" rose on them.

 

[Terry D]

I listened to the whole call. The last 15 minutes live then I went back and listened to the first part. I found some of their answered to be kinda dodgy/non answers/half answers. I also don't recall them saying in the past that Charleston was planned as a Westin Vacation Club. Only Savannah. Though in today's call they mentioned both were planned Westin Vacation Club. I suppose things change, but I get the impression that some of the answers are off the cuff. Which I suppose they are, but I would think upper management would know the message there. I guess investors probably don't care all that much about it. I think maintenance fee increases are probably hurting sales to existing owners. Existing owners know what the increases are where a new buyer hasn't done all the math in a 90 minute presentation. Thus fewer existing owners buying results in the lower VPG.

One of the question where I did not hear a clear answer was why their tour % growth is in single digits and their competitors in double digits. They answered the question by talking about where tours originate (existing owners, rentals, packages, etc.). Overall a good 4th quarter and their share price jumped up as a result.

 

[DRH90277]

One of the question where I did not hear a clear answer was why their tour % growth is in single digits and their competitors in double digits. They answered the question by talking about where tours originate (existing owners, rentals, packages, etc.). Overall a good 4th quarter and their share price jumped up as a result.

They are great talkers, but their results are not much to brag about, and I didn't hear anything that made me want to jump. Please keep in mind that even some real "dogs" were up the last few days.

Would you rather buy the stock or the product? Keep in mind that the stock value over time is reflective of the perceived value of the product.

 

[pspercy]

Do you really think we need more resorts in Florida?


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Take it a bit further west too, I’d like gulf coast, about anywhere !

 

[cubigbird]

They are great talkers, but their results are not much to brag about, and I didn't hear anything that made me want to jump. Please keep in mind that even some real "dogs" were up the last few days.

Would you rather buy the stock or the product? Keep in mind that the stock value over time is reflective of the perceived value of the product.

The more we see these annual insane maintenance fees increases, the lower the value of the product becomes. MVW can’t maintenance fee increase their way into profits. At some point something is going to give and investors may already believe the breaking point is in the foreseeable future.

 

[goodbadugly]

They are great talkers, but their results are not much to brag about, and I didn't hear anything that made me want to jump. Please keep in mind that even some real "dogs" were up the last few days.

Would you rather buy the stock or the product? Keep in mind that the stock value over time is reflective of the perceived value of the product.

The ONE big advantage owning the stock is you can get out at anytime. You re stuck with the product. Especially the points!!!

 

[DRH90277]

The ONE big advantage owning the stock is you can get out at anytime. You re stuck with the product. Especially the points!!!

You seem to be saying to buy the stock over the participations in points or weeks. I don't know what to do with this as they are both bad uses of resources with low and questionable prospects of success.

To meet user expectations, my suggestions are to just to buy great and/or usable resale weeks (can resell these to get out), to rent points (an annual and flexible spend), or to rent just what you need (for the best selection and availability).

The combination of cash, RedWeek, Interval, and a few great resale weeks is hard to beat over most "need or use-based" timeframes. I think the real competition for VAC is the resourcefulness of a bunch of smart users coupled with knowledge and use of alternative providers.

Only my view from what I've seen and experienced.....

 

[goodbadugly]

Those "smart" users are mostly MVC sales people!!! Their first job is renting out their properties and their second is "inventing" reasons why folks should buy MVC points.

 

[jwalk03]

Those "smart" users are mostly MVC sales people!!! Their first job is renting out their properties and their second is "inventing" reasons why folks should buy MVC points.

I think the vast vast majority of sales weasels that claim to be owners are lying. There may be a few that are owners- but few and far between.

 

[DRH90277]

I think the vast vast majority of sales weasels that claim to be owners are lying. There may be a few that are owners- but few and far between.

MVC undoubtedly want their salespeople to experience the product so I'm confident the sales personnel are provided low or no cost means to do this and special incentives. I suspect most of the salespeople don't really own much. I often ask about their ownership participations during sales presentations and the responses are interesting. A very telling question is to ask about their resale purchases. These are likeable people and they like to talk.

 

[jmhpsu93]

MVC undoubtedly want their salespeople to experience the product so I'm confident the sales personnel are provided low or no cost means to do this and special incentives. I suspect most of the salespeople don't really own much. I often ask about their ownership participations during sales presentations and the responses are interesting. A very telling question is to ask about their resale purchases. These are likeable people and they like to talk.

The guy we enrolled our weeks with has a portfolio similar to ours, points and resale weeks. He fully acknowledges the value of a good trader and does it himself.

 

[Eric B]

The guy we enrolled our weeks with has a portfolio similar to ours, points and resale weeks. He fully acknowledges the value of a good trader and does it himself.

Same for us - the salesman had picked up several Lagunamar weeks and enrolled them prior to 2022 in anticipation of their usefulness as traders into Abound. He also owns a hotel that he's trying to get into Bonvoy.

 

[Ken555]

Same for us - the salesman had picked up several Lagunamar weeks and enrolled them prior to 2022 in anticipation of their usefulness as traders into Abound. He also owns a hotel that he's trying to get into Bonvoy.

Yeah, right. Owns a hotel and sells timeshares. Sssuuuuuurrrrreeee.


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[Eric B]

Yeah, right. Owns a hotel and sells timeshares. Sssuuuuuurrrrreeee.


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There are an awful lot of people in the tourism industry in Mexico. We've actually met more than one salesman that either own a hotel themselves or their families do. Given the potential income for folks in that line of work, it didn't surprise me and there was an established website for the hotel for both of them. That portion of the discussion took place well after any sales efforts, so I had no reason not to believe the assertion - it also was not anything that they could have profited from telling us unless they had actually owned a hotel and would have gotten something out of us staying there and good word of mouth.

It does help to consider what someone could possibly get out of a lie to help figure out if something is believable. I can actually see someone taking over a hotel and rehabilitating it using their income from timeshare sales or some other line of work, but reasonable minds can disagree so I don't have any opinion on your criticism.

 

[Ken555]

There are an awful lot of people in the tourism industry in Mexico. We've actually met more than one salesman that either own a hotel themselves or their families do. Given the potential income for folks in that line of work, it didn't surprise me and there was an established website for the hotel for both of them. That portion of the discussion took place well after any sales efforts, so I had no reason not to believe the assertion - it also was not anything that they could have profited from telling us unless they had actually owned a hotel and would have gotten something out of us staying there and good word of mouth.

It does help to consider what someone could possibly get out of a lie to help figure out if something is believable. I can actually see someone taking over a hotel and rehabilitating it using their income from timeshare sales or some other line of work, but reasonable minds can disagree so I don't have any opinion on your criticism.

The fact that you believe anything from a timeshare salesperson says it all. There is no acceptable way to normalize this… timeshares sales lie, it’s in their nature, and I wouldn’t expect that to change even when they’re not in active sales discussions.


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[Eric B]

The fact that you believe anything from a timeshare salesperson says it all. There is no acceptable way to normalize this… timeshares sales lie, it’s in their nature, and I wouldn’t expect that to change even when they’re not in active sales discussions.


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Ok - you do you. If I wake up on a Wednesday and a timeshare salesperson tells me it's Wednesday, I don't automatically categorize it as a lie. They do tell quite a few but can be sources of information on subjects they don't have a profit motivation to lie about. I don't begrudge you the right to be prejudiced on the subject and wish you a happy life.

 

[dioxide45]

I will mention that profit isn't the only motivational factor behind someone lying. They could just do it because they like to "jerk your chain", it give them a sense of superiority, perhaps some kind of dopamine drip. Rich people have been known to shoplift too.

 

[5finny]

Ok - you do you. If I wake up on a Wednesday and a timeshare salesperson tells me it's Wednesday, I don't automatically categorize it as a lie. They do tell quite a few but can be sources of information on subjects they don't have a profit motivation to lie about. I don't begrudge you the right to be prejudiced on the subject and wish you a happy life.

If a timeshare salesman told me it was Wednesday I would not automatically categorize it as a lie
I would check a calendar however

 

[Eric B]

I will mention that profit isn't the only motivational factor behind someone lying. They could just do it because they like to "jerk your chain", it give them a sense of superiority, perhaps some kind of dopamine drip. Rich people have been known to shoplift too.

Roger that. There are, of course, other indicators that can help out in judging the truthfulness of something. I've seen the one salesman several times over a few years and discussed his hotel without the typical slips from a fabrication. He's had progress pictures of renovations on his phone and a website. I have nothing else I would buy from him as all my resale voluntary weeks are reauthorize now. If he's lying about it, he's put an awful lot of work into it and practiced this same set of lies to all. I could believe that of a politician, but don't think TS salesmen invest that kind of effort.

 

[Eric B]

If a timeshare salesman told me it was Wednesday I would not automatically categorize it as a lie
I would check a calendar however

Well, it's Saturday and has been since this morning.