Providing younger travelers with more flexibility makes the timeshare sector more appealing to millennials with disposable income. And that makes properties in the sector more attractive for M&A.
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The timeshare sector emerged as one of the hospitality industry’s earliest comeback stories during the pandemic — and one of the most active in terms of mergers and acquisitions.
Hilton Grand Vacations acquired Diamond Resorts for $1.4 billion. Wyndham Destinations became the Travel + Leisure Co. after acquiring the media and travel club brand for $100 million. Marriott Vacations Worldwide took over Welk Resorts earlier this year for $485 million.
The takeovers are unlikely to stop there.
“We will continue to look and see if there are other [mergers and acquisitions] opportunities out there,” Marriott Vacations CEO Stephen Weisz said in an interview with Skift. “But, you know, we’re pretty selective about what we look at.”
The criteria for the timeshare company, which encompasses seven brands like Marriott Vacation Club and Hyatt Residence Club, boils down to three things: The takeover target has to expand the company’s footprint. It has to benefit shareholders, and it has to be a good cultural fit.
“That’s one of the things about the Welk acquisition that has been really important to see,” Weisz said. “We thought it was going to be the case, and it’s proven out to be everything that we wanted it to be because the culture of the organization and ours dovetails very nicely.”
The eight-resort Welk portfolio will get rebranded under the Hyatt Residence Club flag within the Marriott Vacations brand line-up. Yes, you read that correctly: Marriott Vacations is a separate company from Marriott International and acquired Hyatt’s timeshare business in 2018 as a result of a $4.7 billion deal in 2018.
Starwood spun out its timeshare business, encompassing Sheraton and Westin brands, shortly before Marriott acquired it in 2016. That standalone timeshare business, Vistana, was then sold to Interactive Leisure Group, which also owned Hyatt’s timeshare business.
Marriott Vacations, which spun out of Marriott International in 2011, then acquired ILG in 2018.
The Welk takeover and ensuing Hyatt rebranding will expand Marriott Vacations’ Hyatt Residence Club portfolio by 90 percent, Weisz said.
“We’re very excited about where that where that’s going to take us,” he added.
Younger Owners: The timeshare and vacation ownership business has a reputation of being a bygone travel sector for older folks. It seems like everyone had a grandparent with a timeshare for the same week every year in the Bahamas or some other sunny destination.
But the timeshare business expanded into new territories and monikers, now using terms like vacation ownership and travel clubs. Owners, or members, redeem points on different resorts and destinations at various times throughout the year.
A key factor behind Wyndham Destinations’ Travel + Leisure takeover was the company’s travel club business. Meredith Corp. still operates the media side of the business.
Something that may surprise people is how much younger the timeshare and vacation club traveler profile became amid the push toward flexibility. Sixty-two percent of buyers in the Marriott Vacations network are millennials.
“People have had a tough time shedding the idea that it’s kind of an older generation product,” Weisz said. “We’ve never found that to be the case.”
Keep in mind: These are affluent millennial buyers. The typical buyer has an annual household income north of $135,000 with a self-reported net worth of at least $1.5 million.
“We don’t cast a net broadly to every millennial or every Gen X traveler,” Weisz said. “But the ones that we do, our product resonates very, very well with them.”
The Power of Upselling: One of the more interesting aspects of the timeshare business is how much money each company has the potential to make off existing clients. Travel + Leisure Co. estimates there is $12.5 billion in owner upgrade potential from current members over the next decade
The figure soars even higher to $19.3 billion when factoring in other revenue streams like management and resort fees and interest payments. A brand just needs travelers to get that first taste of timeshares to get the upgrade momentum moving.
Updated Apr. 27, 2021
“The more owners we get back to our resorts on an annual basis, the more they enjoy it, [and] the more they buy,” Travel + Leisure Co. CEO Michael Brown told Skift earlier this year.
Marriott Vacations is no different.
“The other traditional belief about the timeshare business was that it was kind of a one trick pony where you made the initial sale and were done,” Weisz said. “Our experience has shown that after the first five years of ownership, on average, people spend an equivalent amount to buy additional points within our system.”
Sixty percent of the company’s sales in recent years came from existing owners, and Weisz doesn’t think the Travel + Leisure upgrade figure is an industry anomaly.
“What Mike may have said is not inconsistent with how we believe our product is going to resonate,” he added. “In fact, I would argue, given the multi-brand nature of our company, we probably have even more opportunity than they do.”
Marriott’s China Snafu
Marriott International did an about-face last week following a report that one of its hotels in Prague declined to host a conference of political activists from China’s Uyghur population.
The Uyghurs are a primarily Muslim group of people residing in northwestern China. The Chinese government detained more than a million Uyghurs in internment camps, and the U.S. government has labeled such policy as genocide.
Marriott initially defended its decision to refuse the Uyghur group as part of the company’s political neutrality despite Marriott hotels routinely hosting political fundraisers, Axios reported.
But a Marriott representative later told Axios the hotel would apologize to the group as “the hotel’s response was not consistent with our policies.”
Marriott has found itself in hot water with China before. The hotel company previously apologized to the Chinese government in 2018 for listing Hong Kong, Macau, Tibet, and Taiwan as separate countries. China claims all four as part of China, with Taiwanese independence generating the most geopolitical tension in recent months.
The hotel company has economic reasons to keep Chinese leaders happy. Marriott and other western hotel chains see the country as fertile soil for brand expansion and development.
Marriott has the second-largest development pipeline, behind Hilton, in China, according to Lodging Econometrics. Hilton had 124,602 rooms in its Chinese construction pipeline at the end of the third quarter while Marriott had 104,674 rooms.