How Hilton Grand Vacations Digests a $1.4 Billion Takeover Will Test Hot Timeshare Market

It’s no longer your grandparent’s timeshare market — just in time for millennials and Gen Z to be in the buyer’s seat.

Timeshares were rare growth opportunities for the hospitality industry over the last year of cratered demand amid the global pandemic. Hilton Grand Vacations acquired Diamond Resorts for $1.4 billion. Wyndham Destinations became the Travel + Leisure Co. as part of a $100 million takeover of the media and travel club brand.

It may just seem like a typical round of hospitality brand mergers and acquisitions until you look closer at the changing face of this overlooked travel sector.

“As companies have grown, they’ve gotten very sensitive to where to owners want to go and what kind of experience do they want to have,” Gordon Gurnik, chief operating officer at Hilton Grand Vacations, told Skift. “Timeshare is also a very attractive product for an urban market where someone may want to come experience the city, but they maybe can’t or don’t want to invest in a whole condominium.”

Hilton Grand Vacations wrapped up a $50 million renovation this summer on the Quin, a 212-unit timeshare club the company bought in 2018 for $175 million. HGV is calling the property one of its flagships following the renovation.

It also plans to open another New York property, the Central at 5th, later this year. The company was one of the first to open a New York City timeshare when it opened the Hilton Club — New York in 2003.

HGV isn’t the only brand pursuing city timeshares. Travel + Leisure Co. has pushed into markets like Nashville, Portland, and Austin in recent years. The company also has a dual-branded Margaritaville Vacation Club and Club Wyndham property expected to open next year in Atlanta.

Marriott Vacation Club Pulse also made a push into cities in recent years by adding timeshare resorts in major markets like Boston, New York City, and Miami.

Chasing Cities … and Youth: Timeshares might be more associated historically with rigid schedules in more leisure-oriented destinations like Las Vegas and the Caribbean, but the sector’s urban push also comes with more flexibility.

More companies offer flexibility in booking different units in a variety of locations instead of going to the same place at the same time each year. Part of this stems from demographic trends with younger travelers craving flexibility.

Millennials in 2019 accounted for twenty percent of sales at Wyndham Destinations — now known at Travel + Leisure Co. — the company’s fastest-growing sales demographic.

“There is still a broad misperception out there that timeshare is same unit, same week, same location, same time of the year,” Travel + Leisure Co. CEO Michael Brown told Skift last year. “That’s the perception, and — broadly — timeshare now is all about flexibility. The urban city center downtown destination is the prime leading indicator that trend has changed.”

Future Growth: HGV’s Diamond Resorts takeover still isn’t finalized, but that isn’t stopping the company from keeping an eye on further growth opportunities.

“There’s definitely going to continue to be consolidation in the hospitality space in timeshare and, generally, in the hospitality space,” Gurnik said. “There’s some great opportunities out there, and it’ll be a growth market in general.”

Some of those opportunities also include organic growth. The company continues to invest in individual properties, but leaders also hope to capitalize on travel trends that emerged during the pandemic like guests craving control over larger spaces that feel more residential in nature.

“From a developer perspective, we get a lot of phone calls from people interested in the opportunity to maybe do something with us,” Gurnik added. “It gives us an opportunity to look at new real estate opportunities.”

As for investors angling to get into the greater hospitality industry, Gurnik doesn’t buy the argument the best deals and investments from the pandemic are in the rearview mirror.

“There’s a lot of money looking to find a place to do activity, be it hospitality or really any business sector right now. As the pandemic recovers, there will be be a lot of opportunity,” he added. “You’ll still see things occurring going forward, but I don’t think the window has passed. Let me put it that way.”

Omni’s Labor Woes

Before the July jobs report comes out in two weeks, there is a fresh reminder that the hotel industry’s hiring problems aren’t just a result of the extra $300 in weekly unemployment benefits running through early September.

Kurt Alexander, chief financial officer at Omni Hotels & Resorts, portrayed just how startling the swing in hospitality’s labor crisis has been over the pandemic.

Omni went from 22,000 employees to roughly 1,800 early in the pandemic as a result of layoffs and furloughs due to the plummet in demand. But adding workers back has been grueling, even more than what was already a tough recruiting environment prior to the health crisis. The company is now at about 10,000 employees.

The hiring efforts are particularly brutal when it comes to the company’s food and beverage sector.

“We just can’t find anybody,” Alexander said on a Bloomberg podcast last week.

A Drained Labor Pool: Alexander admitted what analysts have been saying over the last few months: Part of the labor crunch stems from the fact back-of-house hotel work entails grueling shifts. Housekeepers, maintenance workers, and kitchen staff work long shifts — often at wages below industries with easily transferrable skills like retail, according to some reports.

“It’s a really hard job and glamorous and kind of posh would not be adjectives to describe it,” Alexander said of housekeeping work.

Most analysts and economists points to low wages as the culprit of the hotel industry’s hiring problems. Pay people more, and hiring will pick up, the thinking goes. But hotel companies are reticent to boost wages as a result of labor costs already running high. Labor costs accounted for $750 million of Omni’s $2 billion 2019 revenue, Alexander said.

Many hotel companies have instead offered signing bonuses, sometimes as high as $2,000, for employees — a short-term expense as opposed to a permanent increase in wages. While the industry continues to debate the best approach to solving the labor shortage issue, Alexander did admit losing workers to outside industries is clear threat.

“We’re competing with the Amazons and Walmarts and Targets of the world for talent. Whereas hospitality, we lost a lot of jobs, a lot of the retail — like Target, for example — they added jobs,” he said. “You can make $15 an hour cleaning 15 rooms a day, or you can make $15 an hour cleaning carts … I think that it starts to become pretty evident as to why it is so hard for the hospitality industry to bring people back to work.”

Soho House’s Disappointing Stock Market Debut

There were signs Soho House parent company Membership Collective Group wasn’t likely to have a stellar start on its debut last week on the New York Stock Exchange.

The global brand of membership clubs, which have never posted profit, raised $420 million in its initial public offering — about $30 million below expectations. While the company’s stock, trading under the “MCG” symbol, debuted at $14, it sank 6 percent in its first day of trading and spent the rest of the week generally in the $12 per share range.

It’s certainly bad optics for a brand that touted its relative pandemic resiliency: MCG managed during the pandemic to actually grow its membership wait list, which swelled from about 33,000 people at the end of 2019 to 59,000 at the end of May.

But the $420 million will still come in handy for MCG, which plans to use the cash to pay down its more than $800 million deficit and focus on future growth. The company plans to triple its Soho House portfolio from its current 30 locations in the next ten years.