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HGVC Investors Call

Discussion in 'Hilton Grand Vacations Club / HGVC' started by 1Kflyerguy, Mar 17, 2017.

  1. 1Kflyerguy

    1Kflyerguy TUG Member

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    I finally got around to listening to the HGVC quarterly conference call recording. Obviously mostly focused on the financial of the business but a few points were interesting as an owner:

    The stated their network definitely will grow, as they have a smaller footprint than their competitors. While nothing specific was listed they stated interesting in adding properties in urban markets like Chicago and San Diego. They said the West Coast is under represented, and both Japan and China look really attractive for expansion. Japan has over 60K members, or around 20% and is up to 8 sales centers so its strong contender for new resorts.

    They are also looking at mid-market opportunities to expand the customer base.. I am not entirely sure where those locations will be..

    When asked about Maui…. They said no start date yet.. guess that is still pending, but not close enough to share a date.

    On a separate note they also said they were being much more aggressive recently in buying back inventory off the open market as highly profitable for them. I know I lost a Kings Land unit to ROFR earlier this month, so guess I was not just unlucky and might be a trend… .
     
    presley and ljmiii like this.
  2. GregT

    GregT TUG Member TUG Member

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    Maui Ocean Club Lahaina Villas (3BRx4), Marriott Ko Olina, Marriott Shadow RidgeII, Marriott Willow Ridge, HGVC HHV Lagoon, HGVC(x3), Aulani, Starwood(x4), Worldmark
    Thank you for these comments, it will be interesting to continue to track HGVC's development as an independent company. Urban locations are certainly becoming popular with Marriott and not surprising to see HGVC pursuing the same strategy. I still hope to get a property in the Caribbean for HGVC, and perhaps their enthusiasm for expansion will cause them to rectify the hole in the locations. We will see.

    Thanks again for the comments!

    Best,

    Greg
     
  3. thare

    thare Guest

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    One interesting thing will be to see what happens in the next downturn. Timeshares are REALLY economy dependent. They got absolutely crushed last downturn, and without the Hilton group to prop them up, HGVC could get pummeled (between bankruptcy of purchasers, fewer purchasers, financing costs increasing, fewer people taking vacations, etc), resulting in some dramatic changes to their business (IE no repurchases for sure).
     
  4. tk25

    tk25 Guest

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    Hello how many points were you trying to buy at King's Land and for what price did HGVC exercise their ROFR? thanks in advance
     
  5. Tamaradarann

    Tamaradarann TUG Review Crew: Veteran TUG Member

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    On a separate note they also said they were being much more aggressive recently in buying back inventory off the open market as highly profitable for them. I know I lost a Kings Land unit to ROFR earlier this month, so guess I was not just unlucky and might be a trend… .[/QUOTE]

    I guess buying back is very profitable for them. I have heard that it costs the developer about 1/2 of the price they charge for a timeshare unit in marketing the timeshares. If that is true then a unit that they sell for $40,000 cost them about $20,000 to build. If they buy a timeshare for $5,000 via ROFR they save the $20,000 cost to build so their profit is about 400% more.
     
  6. buzglyd

    buzglyd TUG Member

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    I wouldn't say $20,000 to build. Developer profit has to be in that $20,000 as well.

    But yes it has been said many times that Sales and Marketing costs are about 50% give or take.

    Years ago the goal in the industry was to make timeshare a "sought good" like a TV or car. They were doing pretty well especially pushing the high end of the market and then the crash happened. Then the sharing economy happened.
     
  7. thare

    thare Guest

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    I think base cost is about 25% of sale price. As mentioned above, you then add on profit, sales, marketing, admin costs, etc to get to the current sale price. It probably varies by specific developer.
     
  8. 1Kflyerguy

    1Kflyerguy TUG Member

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    I agree the Caribbean would be great! That was not a location they mentioned or hinted at... Personally Japan and China don't excite me all that much, If i were to vacation there chances are i would look to hotels, as i would probably be moving around to see the sights be moving around. But i understand their desire to grow in Asia.
     
  9. 1Kflyerguy

    1Kflyerguy TUG Member

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    Vacations and Time Shares in particular are indeed tied to the economy. But I suspect HGVC should fare OK. As an independent company they will need to react to changes in the market, they can easily slow down on development, and yes possibly slow their ROFR buy backs... or they could see that as a buying opportunity and buy more units back if they are selling for less. Plus as an independent company all their capital can be used an ways to maximize the returns for the T/S business. When they were a division of a larger company like Hilton, the corporate parent would be making all the capital allocation decisions and HGVC would just be one option.
     
  10. GregT

    GregT TUG Member TUG Member

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    Agreed on all points - the one reason I can think of for a Caribbean property is many of their shareholders (and institutional investors) are East Coast, and will likely ask management if there are plans for Caribbean. It's all speculation of course, but I could see it - them adding a Caribbean property to be responsive to their shareholders. It is a hole in their portfolio and what serious leisure company can ignore the Caribbean?

    Best,

    Greg
     
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  11. thare

    thare Guest

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    My experience with timeshares is that there is significant sales volitility. Currently the stock is priced at a P/E of 16 - basically assuming good times stay good forever. The company easily could lose 20-30% of its sales in a recession, resulting in a major restructuring of the employee base, and could put the company into losses. I don't work there though, so it is just speculation, and their revenues are up 20% in the last 4 years, which is pretty damn good.
     

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