• Wyndham up on timeshare bounce

Wyndham Worldwide raised its full-year guidance after reporting a 13% increase in second-quarter revenue, to $1.1bn.
The company has seen a gradual recovery behind the more rapid growth seen by some of its more corporate-driven rivals, as its mid-market leisure offering suffered as its consumers remained cautious when buying room nights. These latest results have, however, been bolstered by a resurgance in its timeshare business.

Revpar at the group's hotel business was up 9.7%, with the company reporting growth in rate across all chain scale segments in the US. The group now sees full year adjusted earnings in the range of $2.32-$2.40 per share on revenue of $4.2bn to $4.3bn, from between $2.15 and $2.25 on revenue of $4bn to $4.2bn.

At a time when rival Marriott International is planning to spin-off its timeshare, Wyndham saw revenue at its timeshare business, its biggest contributor, increase 7.1%, with vacation-exchange and rentals revenue up 28%.

Steve Holmes, CEO, told an analysts' call that growth in the offering was driven by first-time buyers, with a heavy focus in Orlando. He said: "We have a target for first-time buyers of around 25,000 new members coming in as first-time buyers – we're running a little bit ahead of that now."

Holmes added that the downturn had allowed Wyndham Vacation Ownership to acquire high-quality inventory at "very attractive prices" and drive improved margins. The recent growth had also allowed the group to put property management fees within timeshare up 8%, a figure he said was sustainable.

Marriott International, which reported a 7.2% increase in revenue across its more corporate-focused estate two weeks ago is shifting its hopes from timeshare to a growing international portfolio. The group's timeshare business did not match Wyndham's growth, and, excluding a $6m allowance for contract cancellations, the adjusted contract sales figure for the second quarter fell 21% to $167m, a figure the group explained as the previous year had seen extensive promotions to coincide with its  25th anniversary.

Wyndham, which has made recent efforts to diversify overseas – notably through its acquisition of Tryp – has a large presence in China, with over 50,000 rooms, which it expects to double in the next five years.

The group's total pipeline of nearly 111,000 rooms was up 3% from a year ago, with 64% of that pipeline is international, up from 49% a year ago. The new construction pipeline was up 10%, all international, indicating the financing issues which remain in the US market.

The group is nonetheless eager to consolidate its position within its domestic market and said that it was planning to invest approximately $200m in mezzanine and other financing over the next "several" years to support the growth of the Wyndham Hotel and Resorts brand in key cities.

Holmes said: "The development environment is improving, but financing still remains tight. Developers are looking to diversify the composition and geographic reach of their portfolios to include economy and mid-scale properties outside major city centres, which is where the majority of our brands are positioned. And of course, the conversion market is always important in a tight credit environment."


HA Perspective: Wyndham is a giant timeshare business with a hotel company on the side. Not surprisingly then, it kept faith with the timeshare market during the downturn, when others were dramatically scaling back.

Holmes said that, while there was growth in the timeshare industry, "it's just not growing at the pace it was several years ago". However, he felt that the group's access to capital put it in a strong position within the sector and there were good opportunities with distressed inventory, both existing timeshare and condominiums (although this was unlikely to top $100m of spending in 2012 and would be much less this year).

What is far from clear, however, are the synergies between the timeshare business and hotels. Marriott has already declared its hand in spinning-off timeshare while Starwood has said it is not going to expand its rapidly shrunken operation either.

Prior to the downturn it was argued that timeshare was a prop for the hotel business. It now seems the other way around.

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