Why is Marriott Vacations struggling?

[sparty]

Below is one analysts take - reminds me of what I said 1 year ago

Shares of Marriott Vacations Worldwide (NYSE:VAC) have been hit hard thus far in 2023, falling 44%. Shares have suffered for a number of reasons, including:

• Significant reduction in full year guidance
• Fears that a pullback in consumer spending could further dampen results going forward
• Relatively high financial leverage with net debt at ~3.6x 2023e EBITDA
• Lowered guidance/tougher outlook coupled with financial leverage could lead to reduced capital returns (buybacks) going forward
• General lack of enthusiasm for the timeshare industry
• I also suspect year end (tax loss) selling has driven shares down

 

[DanCali]

If you dump crummy (bad seasons with high MF/point ratios) weeks in a trust, and sell them as points with high MFs, and keep adding crummy weeks to that trust over 13 years, and then get caught in an inflation tsunami, and you do a bad job managing it (unlike other timeshare companies), at some point you run out of buyers for that product.

They simply need to make the product more attractive. I'm unhappy with the MFs for my Platinum and event weeks, and trust point MFs are a couple of levels above that. Maybe they will add a new Elite level to induce sales from existing customers, but that seems like a band aid. Unless they start ROFRing Platinum and event weeks, which can actually reduce MF/point even if MFs at the underlying resorts increase moderately, it will be hard to get people to buy for $15/point and $0.80 in MFs (7000 points for a Maui weeklong reservation = $5500 in MFs)- even the best salesperson will have trouble selling that. But adding those expensive weeks to the trust will definitely hurt profitability in the short-term too.

 

[emeryjre]

Zack's equity research report on VAC
From Nov 2, 2023
Earnings missed estimates
This is a no no
Mutual Funds and Hedge Funds do not hold stocks with falling earning
Earning has to be rising quarter over quarter for stock price to increase

Marriott Vacations (VAC) Q3 Earnings Lag Estimates, Stock Down

Marriott Vacations' (VAC) Q3 performance is hurt by the decline in VPG and tours and the impact of the Maui wildfires.

finance.yahoo.com

 

[Superchief]

We now understand why they are increasing their Management fee revenue by increasing maintenance fees. This is penny wise and pound foolish and will drive sales down while increasing bad debt.

 

[Bodie]

If you dump crummy (bad seasons with high MF/point ratios) weeks in a trust, and sell them as points with high MFs, and adding crummy weeks to that trust over 13 years, and then get caught in an inflation tsunami, and you do a bad job managing it (unlike other timeshare companies), at some point you run out of buyers for that product.

They simply need to make the product more attractive. I'm unhappy with the MFs for my Platinum and event weeks, and trust point MFs are a couple of levels above that. Maybe they will add a new Elite level to induce sales from existing customers, but that seems like a band aid. Unless they start ROFRing Platinum and event weeks, which can actually reduce MF/point even if MFs at the underlying resorts increase moderately, it will be hard to get people to buy for $15/point and $0.80 in MFs (7000 points for a Maui weeklong reservation = $5500 in MFs)- even the best salesperson will have trouble selling that. But adding those expensive weeks to the trust will definitely hurt profitability in the short-term too.

Agree, the product simply isn't that attractive anymore. Certainly not at $15-$16 per point. It's too hard for families with kids in school to book anything and it seems MVC is flat footed on addressing other cohorts i.e. seniors with money, in good health and want to travel. They seem to be stuck in a version of family that hasn't existed in more than 20 years. The cross ties with Collette, cruises, special events, et al are sorely lacking. . I bought in the early 2000s and have enjoyed it but the thought of now paying over $140K for what we hold is absurd. (Maintenance fees, etc are a whole other category) A minimum buy of 2500 pts is $40K and that doesn't really get one much of anything. No doubt recovering from COVID restrictions has hurt sales but MVC really needs to make the product less stodgy which means more than window dressings of digital enhancements and new technology. Not only is there no sizzle, there's no steak.

 

[DRH90277]

Pretty disturbing comments so far in this forum. I hope MVC is paying attention.

Vacation Club management may have forgotten who their customer is. The customers are certainly not the shareholders of VAC, the public entity. Perhaps, they should review their actions to enhance the value proposition for the real customer.

MVC should ask themselves why my college educated, and successful children are not buying the product. Why am I not referring them to a sales agent? And, they should be praying our children will want to take over our interests when we are gone.

 

[jrb916]

Probably also why they had the ‘advertisement’ in USA Today a few weeks back to interest the younger crowd. I’m not interested in points, but just bought a resale week which works great for our needs.

 

[hcarman]

Maintenance fees have increased significantly pricing many families and retirees out of the product. And inventory seems to be even harder to get. I used to be able to get most resorts at 13 months out, but now seeing very low availability during the 13 month mark and reading that some resorts have put in place restrictions to booking fewer than 7 days during certain times of the year.

 

[PhoenixCanuck]

They did well just after the pandemic, due to the revenge travel surge and stimulus fund windfalls. But that party is over, and now there has been a pull-back in consumer discretionary spending as inflation continues to bite. Add to that the multi-year, double-digit increases to maintenance fees, and I think a lot of existing owners have decided that "enhancing their ownership" is a hard pass.

At one of their earnings calls early this year, they highlighted that first-time owners were an increasing share of their contract sales. They actually spun it as a positive at the time. But we all know otherwise, as existing customers are always your best customers.

And then there are the higher loan default rates that were discussed on the most recent earnings call for Q3. Their spin on that one was, "Oh, it's a one-time adjustment to the loan loss provision because we were using faulty methodology before, and we don't expect any further hits to earnings going forward." But no, more people are actually walking away from their loans, so the loss estimate changed, and as a result you had to increase your provision. But I digress.

 

[emeryjre]

They have run out of high value weeks at high value destinations
Points covered it for a while, but that has caught up as well
Nobody is going to continue to pay for hurricane weeks in Florida
5 minutes after the 13 and 12 month mark high value weeks are gone

 

[WBP]

I find it mind boggling that Marriott International (Marriott Lodging) continues to allow the unscrupulous people at Marriott Vacation Club to poach/mine the Marriott Bonvoy database, and to strongarm Marriott's most loyal guests on the false promise that "We're the Marriott that you've known and loved, throughout your life." That's Lie #1, as MVW/MVC is not Marriott, but a franchisee, and not the Wholly Owned Subsidiary that MVCI once was. From that point (Lie #1) the lies ensue.

One day, the Board of Directors of Marriott International will wake up. In the meantime, I believe that the MVC Leadership will continue their implosion course.

 

[WBP]

Agree, the product simply isn't that attractive anymore. Certainly not at $15-$16 per point. It's too hard for families with kids in school to book anything and it seems MVC is flat footed on addressing other cohorts i.e. seniors with money, in good health and want to travel. They seem to be stuck in a version of family that hasn't existed in more than 20 years. The cross ties with Collette, cruises, special events, et al are sorely lacking. . I bought in the early 2000s and have enjoyed it but the thought of now paying over $140K for what we hold is absurd. (Maintenance fees, etc are a whole other category) A minimum buy of 2500 pts is $40K and that doesn't really get one much of anything. No doubt recovering from COVID restrictions has hurt sales but MVC really needs to make the product less stodgy which means more than window dressings of digital enhancements and new technology. Not only is there no sizzle, there's no steak.

The smoke and mirrors have finally been realized.

Fortunately, the "(MVC) Resort Operations" staff, continue, in my opinion, to do a good job.

 

[geist1223]

Are there going to be similar down turns at HGVC, Wyndham, etc?

 

[davidvel]

They have run out of high value weeks at high value destinations
Points covered it for a while, but that has caught up as well
Nobody is going to continue to pay for hurricane weeks in Florida
5 minutes after the 13 and 12 month mark high value weeks are gone

Agreed, which continues to make me wonder why the resistance to allowing post 2010 high value weeks to be enrolled for a minimal cost (like pre-2010 weeks) continues. I know the fear is that people will buy weeks resale and then enroll vs. buying points, but what % is this really?

They need more higher value weeks in the trust as points owners are realizing it is all smoke and mirrors (ie. you can't just reserve what you want even if you have enough points like they claim at presentations), and though there is no transparency about how many garbage weeks exist in the trust, points owners are frustrated. This is probably why they have such a higher percentage of first time buyers: they are uneducated in how the system really works.

One can presume that first time buyers are not going to be high probability "buy resale and then enroll" people. But they continue down the path of their pyramid-scheme style points trick.

 

[bizaro86]

Any business will eventually only be able to earn profits by adding value to its customers. MVC has continually been trying to sell their product at higher and higher prices while reducing its value in a variety of important ways (less good weeks in trust, high points on new resorts, higher MF). It doesn't seem surprising to me that adding less value eventually results in lower sales.

 

[CO skier]

• General lack of enthusiasm for the timeshare industry

Year-over-year comparison of TNL (Wyndham) down 9% versus VAC (Marriott) down 51%.

With VAC, the "trend is definitely not your friend" and it must be for more than just lack of enthusiasm for the timeshare industry or missing the latest quarterly numbers.

 

[pchung6]

Just look what Marriott did to Vistana. Not many Vistana owners really want to convert. Vistana owners were happy with Vistana, they don’t see much value out of MVC points. That’s why they don’t buy more. I can’t imagine people without timeshare knowledge would buy MVC. A week of Maui gonna cost them $5000+ in MF plus $15/pt.

 

[davidvel]

I can’t imagine people without timeshare knowledge would buy MVC. A week of Maui gonna cost them $5000+ in MF plus $15/pt.

People without timeshare knowledge have no knowledge that a "week of Maui gonna cost them $5000+ in MF plus $15/pt."

They are told (so "have knowledge") of something entirely deferent that convinces them to buy, because, they are "people without timeshare knowledge."

 

[pchung6]

People without timeshare knowledge have no knowledge that a "week of Maui gonna cost them $5000+ in MF plus $15/pt."

They are told (so "have knowledge") of something entirely deferent that convinces them to buy, because, they are "people without timeshare knowledge."

That’s exactly why MVC sales are struggling. There are just so many sales can fool, people are trimming discretionary spends. Existing owners, especially Vistana owners, won’t buy. The result is the fall in earnings.

 

[jwalk03]

I find it mind boggling that Marriott International (Marriott Lodging) continues to allow the unscrupulous people at Marriott Vacation Club to poach/mine the Marriott Bonvoy database, and to strongarm Marriott's most loyal guests on the false promise that "We're the Marriott that you've known and loved, throughout your life." That's Lie #1, as MVW/MVC is not Marriott, but a franchisee, and not the Wholly Owned Subsidiary that MVCI once was. From that point (Lie #1) the lies ensue.

One day, the Board of Directors of Marriott International will wake up. In the meantime, I believe that the MVC Leadership will continue their implosion course.

The Marriott you know and love is also mainly franchises too. I mean something like 95% of all Marriott hotels are just franchises run by 3rd party group. Marriott Corp manages very few hotels.

 

[Fasttr]

The Marriott you know and love is also mainly franchises too. I mean something like 95% of all Marriott hotels are just franchises run by 3rd party group. Marriott Corp manages very few hotels.

As I understand it, almost all are OWNED by 3rd parties, but more than 5% are MANAGED by Marriott. No?

 

[dioxide45]

The Marriott you know and love is also mainly franchises too. I mean something like 95% of all Marriott hotels are just franchises run by 3rd party group. Marriott Corp manages very few hotels.

According to information on the Marriott website, they manage about 2,100 of the total 8,700 properties. So a little over 20%. Just about all the lower tier properties (Fairfield Inn, Residence Inn and such) are franchise operations. Many of the full service properties are managed by Marriott International.

 

[dioxide45]

I think the biggest issue facing MVC is that they can only sell to the same onwer a limited number of times before those owners are tapped out. Since the inception of DC (now Abound) Marriott Vacation Club has relied heavily on their existing owner base to make new sales. They say this makes sense because your existing customer is your best future customer. That is true, but only for so long. The people who owned back when they reinvented themselves with the points product are now nearly 15 years older. They may no longer have a need for more timeshare and they are seeing the prices continue to rise. It is hard to sell to the existing customer if they start to see the value proposition start to erode. We also have a bit of a slowdown in the travel industry overall. The riding of the post Covid wave is over and now will be the time to see if the new CEO is up to the task or if he will become early collateral damage. His main objective is to bring value to the shareholder and he isn't doing a very good job of that. Though it isn't like the other two big timeshare brands (T&L and HGV) are soaring. HGV is down year over year, though not by as much as VAC and T&L is mainly at where they were this time last year.

 

[Big Matt]

That's why I don't have any stocks in the travel industry. Too fickle.

 

[GTLINZ]

It is hard to sell to the existing customer if they start to see the value proposition start to erode.

Well said.

I think this is true for the overall industry, and i believe it to be true with my ownerships. I have been selling in the last 5 years, not buying.

I believe there also may be a backlash to the new rental rules with MVC.