Interval Leisure Group Expands Its Resort Management Business in Q4 as Timeshares Face Pressures

With relatively no growth in its timeshare membership in 2013, and the base getting more corporate -- which pressures margins -- Interval Leisure Group is diversifying its business and expanding in the resort management sector.

For example, Interval acquired Aqua Hospitality and Aqua Hotels and Resorts, a management company with 20 properties in Hawaii and Guam, in December 2013. Interval didn't disclose the terms and conditions of the acquisition.

And, in November an Interval and CLC World Resorts & Hotels UK-based joint venture, VRI Europe Ltd., a resort management company, acquired CLC's European shared ownership business.

"We executed two acquisitions in the fourth quarter that support our long-term strategy to expand ILG's footprint in the attractive resort management sector," CEO Craig Nash told analysts during the company's fourth quarter earnings call February 27. "This deliberate expansion has positioned ILG for growth as the exchange business continues to face headwinds from industry factors that are beyond our direct control."

Nash said although Interval increased its average revenue per member in the timeshare/exchange business in the fourth quarter, "developer sales to new owners continue to be slower than we need to grow the membership base."

"Additionally, the membership mix shift to more corporate relationships has put increased pressure on M&A margins," Nash said.

In 2013, some 40% of Interval Network members were corporate, up from 38% a year earlier.

For the fourth quarter, Interval Leisure Group's net income rose 25% to nearly $19.1 million, while revenue increased 10.3% to nearly $122.2 million.

The company attributed the jump in net income primarily to a tax benefit.