Skift Take

Vacasa will roughly double the inventory its team has to manage. That's a lot to chew on. The risk is falling prey to hubris.

Vacasa, the vacation rental management service, will buy Wyndham Vacation Rentals from Wyndham Destinations, the companies said Tuesday.

Vacasa will pay $45 million in cash at closing and will give Wyndham Destinations up to $30 million of equity interest in the newly formed company. Vacasa will pay the remaining balance in either seller financing or cash, for a total of $162 million in value.

The deal is a milestone for the Portland, Oregon-based Vacasa and its founder and CEO Eric Breon. It nearly doubles the startup’s inventory to more than 23,000 homes.

The transaction makes Vacasa the largest property management service provider in North America’s vacation rental sector by revenue, though Vacasa also manages properties in some locations outside of North America.

Evaluating the Deal’s Value

In recent years, Wyndham Destinations decided to off-load its vacation rental businesses to instead focus on its vacation ownership and exchange, or timeshare, business.

Wyndham Vacation Rentals accounted for $237.5 million of revenue for Wyndham Destinations in 2018, or about 6 percent of the company’s revenue that year.

While the numbers are approximate, they do suggest the challenge facing Vacasa. Can it truly use its technologies and best practices to wring enough inefficiencies out of the Wyndham Destinations portfolio of properties to significantly boost earnings and profit at a pace that exceeds its costs?

Vacasa would only say that it expects its revenue to soar. In the next year, the company believes it will generate more than $500 million in net revenue on gross bookings volume more than double that.

Serious Bidding

In a statement, Wyndham Destinations CEO and president Michael D. Brown said that its sale process “generated strong interest from multiple parties.” That comment raises the tantalizing question of who else might have bid on the business. Did Airbnb make a serious offer, for example?

Until now, Wyndham Vacation Rentals has been North America’s largest professional manager of vacation rental properties, with more than 9,000 vacation rental properties. Between 2010 and 2016, parent company Wyndham Destinations had rolled up property management regional services across North America. It built a portfolio of 10 brands that include Hatteras Realty, ResortQuest, and Smoky Mountains Property Management at nearly 50 destinations. The brands will remain as-is for now, but Vacasa will fully integrate them under its own umbrella by the fall of 2020, a spokesperson said.

Breon founded Vacasa in November 2009 and has since grown the company from two to more than 3,300 employees prior to this Wyndham deal. Breon has secured more than $200 million in funding for Vacasa, more than any other vacation rental industry startup.

Meanwhile, operational details of the deal are still being worked out. Some property owners participating in Wyndham Vacation Rentals, depending on the regional brand, enjoyed a perk of access to Wyndham Home Exchange program. Will they lose access to the home exchange club? The companies are evaluating whether access to Wyndham Home Exchange® will continue and will announce the decision at the time of closing.

One thing is certain: Wyndham Destinations has been raking in cash to fuel its core business of ownership and exchange. Last year it sold its set of European vacation rental businesses to Platinum Equity for $1.3 billion. The new private equity owner has since rebranded that group Awaze.

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Tags: vacasa, wyndham, wyndham vacation rentals

Photo credit: Wyndham Vacation Rentals is the property manager of its ResortQuest brand for The Pointe, a resort property In South Walton, Florida. The property's management will pass over to Vacasa as the result of a new deal. Wyndham Destinations

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