Skift Take
Publicly traded hospitality companies need to reveal shareholders signs of growth and growth. Travel + Leisure Co.’s message of multibillion-dollar sales development from existing clients isn’t as improbable as the cost may sound.
Cameron Sperance
There’s a lot of benefit in the timeshare industry– that is, if you can make that first sale.
Executives at Travel + Leisure Co., formed earlier this year when trip rental and timeshare company Wyndham Destinations acquired Travel + Leisure for $100 million, see chances in getaway clubs and other revenue streams. The business’s financier day this month usually focused on how Travel + Leisure Co. can grow exponentially by taking advantage of consumer-facing travel clubs in addition to corporate accounts.
However what may stun some is just how much cash the company believes it has sitting on the table from its existing base of members. Travel + Leisure Co. estimates there is $12.5 billion in owner upgrade capacity from current members over the next decade.
The number creeps even higher to $19.3 billion when considering other income streams like management and resort fees and interest payments. They just need travelers to get that very first taste of timeshares to get the upgrade momentum moving.
“It’s not about marketing. It has to do with owner tenancy,” Travel + Leisure Co. CEO Michael Brown said in an interview with Skift. “The more owners we return to our resorts on an annual basis, the more they enjoy it, [and] the more they purchase.”
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The Travel + Leisure takeover and accompanying branding overhaul continued Wyndham Locations’ push into revealing it is a business that has much more to offer than the stodgy timeshare reputation of yore.
Going to the same condominium in the Bahamas the very same week every year was how older generations enjoyed this sector. Travel + Leisure Co. is expected to be about versatility. The more people come to that realization, the more they’ll wish to take a trip that way, the thinking goes.
“The typical length of getaway time in America is somewhere in between 25 and 28 days, and, when you’re first finding out about a timeshare ownership, there’s a lot of education and thinking about, ‘You know, I’m not sure that this is right for me, and I’m willing to commit 5 or seven of my 28 days to this product, so let’s see how it goes,'” Brown said. “That’s the initial dollar, so to speak, and after that, as time goes on, typically in the very first 5 years, they’ll invest another dollar since they’ve experienced it.”
Business like Travel + Leisure Co. as well as competitors like Hilton Grand Vacations have had the ability to market themselves to possible clients around the ideas of having more area. Members end up costs 2.6 times their initial purchase over the period of a lifetime, according to Travel + Leisure’s investor documents.
Upgrades and upselling aren’t unique to the timeshare organization. Low-priced air carriers Allegiant, Spirit, VivaAerobus, and Wizz Air all made more cash last year from add-on charges than they did off their base airfares, Skift reported today.
While $12.5 billion in timeshare upselling may appear like a stretch, analysts don’t think it is outside the realm of possibility. Travel + Leisure Co. had 867,000 owners in its subscription base at the end of last year and a 98 percent yearly retention rate of owners over the last decade.
But all those deals of complimentary Broadway tickets and other rewards aimed at getting tourists to sit through a lengthy timeshare presentation play an enormous role in hitting that financial target.
“The very first sale is the most challenging sale for a timeshare,” said Patrick Scholes, managing director of lodging and leisure equity research at Truist Securities. “To get the person in the door, you’ve got to give them great deals of luau tickets, Disney tickets, suppers, ski tickets, totally free hotel space nights, and so on”
Very first sales in the timeshare orbit are usually low in margin due to all the accompanying sales rewards. The second and third sales or upgrades are where the earnings margins truly start to start. That upgrade food cycle can even chart a course to billions of dollars in untapped sales.
“They find, as soon as you purchase the item, the huge bulk of customers are incredibly delighted with it and it’s a lot easier to get to,” Scholes said. “They in fact wish to just purchase more, and they do not require to be incentivized by the freebies and whatnot.”
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