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HGV 2Q Earnings Call/New Locations & Possible Trust Product

GregT

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I agree that management needs to answer to these issues. A lot of shareholder value has been wiped out since May 1. If you look at where the stock was on May 1 before their 1Q earnings, it was $32/share. After the 1Q miss and now the 2Q miss they are at about $26.50 - a 17% drop. By all accounts, it's because of the lack of high end inventory, mainly in Hawaii, so someone in management should have to answer to that.

The clear impression I got was that Ocean Tower sold out a lot faster than they had expected. Given the lead time on these kinds of projects - legal approvals, registration of each phase, etc. - maybe they couldn't accelerate it much, or maybe the 2020 target for Phase 2 is accelerated. I'm not sure what the original phasing plan was and if the current 2020 schedule was what was originally planned or an acceleration of the original plan.

Any idea how far along they are on selling-out Kings Land Phase III? Could that be already sold out? Or maybe that's the "mid-tier inventory" they spoke of trying to shift buyers into, but they didn't bite. Since a big part of their Hawaii sales is targeted to Japan, perhaps the Japanese are attracted to the hotel-like project at Ocean Tower as opposed to the more condo-like Kings Land.

I think you're right and they are seeing more people than expected trading in their Kings Land week for the Ocean Tower week. That creates two problems -- too much absorption of the higher demand stuff and too much supply of the mid-tier Kings Land (if I'm correct that this is happening). I don't know why they are making it so easy to upgrade, which creates this (predictable) problem.

Personally, I much prefer Kings Land so I'm happy to see more supply at KL -- that's where I want to use my HGVC points. Interesting. Thanks for posting this.

Best,

Greg
 

GregT

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Phase 3 at KL was only 3 buildings so very little to sell. The problem with expanding KL is the site prep, it took them a long time to pulverize the lava for a stable base.

You are right on about OT, the asian buyers are more attracted to the location and smaller units with high point values.


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That's interesting, I'd not thought about the difficulty the lava presented. Do we have any idea if they are going to continue with a Phase 4 (I think there were 6 phases total?) I do love an expanding KL....

Best,

Greg
 

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Personally, I much prefer Kings Land so I'm happy to see more supply at KL -- that's where I want to use my HGVC points. Interesting. Thanks for posting this.

We'll be at Kings Land for the first time in February, staying in a 1KP, which is supposed to be a 1BR Plus second floor and is one of the higher-point units from Phase 1/3. Any idea which building these are in? We toured Phase 1 many years ago on a presentation tour when we were staying at Kohala Suites on an RCI exchange. Since 2005, we have stayed at Kohala 4 times, so we are looking forward to trying Kings Land.

That's interesting, I'd not thought about the difficulty the lava presented. Do we have any idea if they are going to continue with a Phase 4 (I think there were 6 phases total?) I do love an expanding KL....

Best,

Greg

I thought I had read here on TUG that someone was told that Phase 4 would follow Ocean Tower. But that begs the question, when that high-end Ocean Tower inventory is 100% gone, all phases, is more Kings Land going to be able to satisfy the potential buyers from Japan?
 

Tamaradarann

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I disagree with your conclusions in #2 and #4.

This whole issue of inventory availability first reared its head in the 1Q 2019 earnings, when they also missed targets. In that call, Mark Wang said where they have inventory, they are getting good results. In that call back in early May, an analyst basically asked about the topics you allude to in #2 & #4 - that could there be other "macro issues" impacting the results? Here is the Q&A:

Analyst Stephen Grambling: So one last one. Just given that, you know, the availability could be important, how can you get comfortable that the trend that you saw in March wasn’t just because of the availability versus something going on in the macro? Do you see that in the conversion rates, or is there something else from a tour standpoint?

CEO Mark Wang: Well, it’s interesting, from a consumer standpoint, our consumers are behaving very good in markets where we have inventory. A great example, we just launched Central toward the middle of March. That’s our new property in New York. Consumers are behaving really good. We’re exceeding expectations there. Orlando, where we have ample inventory, again, another really strong market, and we’re starting to see this pick up in Myrtle Beach as we will be opening the Enclave there, and so in markets where we have inventory, the consumer is behaving better. In markets where in APAC in particular, where we’ve exhausted most of Ocean Tower and we don’t have that high-end upgrade inventory, that’s a market that we’re struggling with.

And so it’s hard for me to really quantify and judge the consumer based on that, so I guess what I’m saying is where we have ample inventory, we’re good. Where we don’t, we’re seeing lower commitment levels.

They have said repeatedly that what their customers are demanding - in Hawaii and New York particularly - is higher-end inventory to fuel upgrades. If you look at some of their other investor presentations that are on their web site, you can see upgrades are a big part of their sales strategy. I suspect there is less of that higher-end stuff coming in via ROFR than the more mid-tier stuff in Vegas and Orlando. In any event, if development delivers a new phase of Ocean Tower with - just guessing here - 30 new units, then that's over 1500 intervals available to sell. Might be hard to find 1500 high-end Hawaii intervals via ROFR in a short period of time.

Here are two charts from a May 2019 investor road show that talk about the importance of upgrades and discusses their demographic targets. It's still not a heavily Millennial target market - only 22%. And there are many Millennials who are doing very well. Our son is making six figures less than two years out of undergraduate college.

View attachment 13226

View attachment 13227
 

Tamaradarann

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Here are two charts from a May 2019 investor road show that talk about the importance of upgrades and discusses their demographic targets. It's still not a heavily Millennial target market - only 22%. And there are many Millennials who are doing very well. Our son is making six figures less than two years out of undergraduate college.

Millennials are in a different stage of life than Baby Boomers! Millennials have a different agenda at this time of their lives than Boomers. Millennials are trying to save to buy a house. Unless they are single or married with no intention of having children soon or ever they are starting or getting ready to start on the raising a family treadmill!

Also, when I first got marred my husband was making about 13K per year. However, that was in 1977 and our house cost 33K. While over 100K sounds like a lot, there has been a lot of inflation since 1977. You can't buy a house on Long Island for anywhere near 33K; more like $330,000 for an low priced house.

Boomers are for the most part finished with having and raising children. Therefore, boomers are at the stage of their life when nice frequent vacations may be a high priority.
 

GregT

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We'll be at Kings Land for the first time in February, staying in a 1KP, which is supposed to be a 1BR Plus second floor and is one of the higher-point units from Phase 1/3. Any idea which building these are in? We toured Phase 1 many years ago on a presentation tour when we were staying at Kohala Suites on an RCI exchange. Since 2005, we have stayed at Kohala 4 times, so we are looking forward to trying Kings Land.

I thought I had read here on TUG that someone was told that Phase 4 would follow Ocean Tower. But that begs the question, when that high-end Ocean Tower inventory is 100% gone, all phases, is more Kings Land going to be able to satisfy the potential buyers from Japan?

Jim,

We really like Phase 1 and we request Building 6, because we like the proximity to the Super Pool and the fitness center (not that I spend much time in it). I would call them a few weeks before check in and ask for a building close to the Super Pool, assuming that is your preference. I've attached a property map if you want to study the different layout, but it lacks the building numbers. This is Phase 1 only and Building 1 starts next to service building A. Building 6 is right next to the Super Pool.

I think it was me that posted about Phase 4 but information would have been pretty dated (2 years old?) and things seem to change. I hope you enjoy KL as much as we do! It's only rap is that it is not on the water, but that has never bothered us, it's a great property.

Best,

Greg
 

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JIMinNC

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Here are two charts from a May 2019 investor road show that talk about the importance of upgrades and discusses their demographic targets. It's still not a heavily Millennial target market - only 22%. And there are many Millennials who are doing very well. Our son is making six figures less than two years out of undergraduate college.

Millennials are in a different stage of life than Baby Boomers! Millennials have a different agenda at this time of their lives than Boomers. Millennials are trying to save to buy a house. Unless they are single or married with no intention of having children soon or ever they are starting or getting ready to start on the raising a family treadmill!

Also, when I first got marred my husband was making about 13K per year. However, that was in 1977 and our house cost 33K. While over 100K sounds like a lot, there has been a lot of inflation since 1977. You can't buy a house on Long Island for anywhere near 33K; more like $330,000 for an low priced house.

Boomers are for the most part finished with having and raising children. Therefore, boomers are at the stage of their life when nice frequent vacations may be a high priority.

Also the younger Millennials are the AirBnB generation. That may make them harder sells than their parents were for the timeshare developers.
 

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Jim,

We really like Phase 1 and we request Building 6, because we like the proximity to the Super Pool and the fitness center (not that I spend much time in it). I would call them a few weeks before check in and ask for a building close to the Super Pool, assuming that is your preference. I've attached a property map if you want to study the different layout, but it lacks the building numbers. This is Phase 1 only and Building 1 starts next to service building A. Building 6 is right next to the Super Pool.

I think it was me that posted about Phase 4 but information would have been pretty dated (2 years old?) and things seem to change. I hope you enjoy KL as much as we do! It's only rap is that it is not on the water, but that has never bothered us, it's a great property.

Best,

Greg
Looks like the property map attachment didn't make it through cyberspace.
 

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Looks like the property map attachment didn't make it through cyberspace.
Sorry !!! Attached to the original message now....
 

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Sorry !!! Attached to the original message now....

Thanks!

Since we are not traveling with kids, Building 6's proximity to the Family Pool/Kids Pool isn't necessary (or maybe even desirable, but I guess the rooms look the other way toward the golf course, so noise wouldn't be an issue). Looks like Building 7 is closer to the Adult Pool, but looking at the satellite view, buildings 10 and 11 have nice views overlooking the lake and the 4th green on the Kings Course. Buildings 6 and 4 would have nice sunset views in February. Decisions, decisions!
 
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I disagree with your conclusions in #2 and #4.

This whole issue of inventory availability first reared its head in the 1Q 2019 earnings, when they also missed targets. In that call, Mark Wang said where they have inventory, they are getting good results. In that call back in early May, an analyst basically asked about the topics you allude to in #2 & #4 - that could there be other "macro issues" impacting the results? Here is the Q&A:

Analyst Stephen Grambling: So one last one. Just given that, you know, the availability could be important, how can you get comfortable that the trend that you saw in March wasn’t just because of the availability versus something going on in the macro? Do you see that in the conversion rates, or is there something else from a tour standpoint?

CEO Mark Wang: Well, it’s interesting, from a consumer standpoint, our consumers are behaving very good in markets where we have inventory. A great example, we just launched Central toward the middle of March. That’s our new property in New York. Consumers are behaving really good. We’re exceeding expectations there. Orlando, where we have ample inventory, again, another really strong market, and we’re starting to see this pick up in Myrtle Beach as we will be opening the Enclave there, and so in markets where we have inventory, the consumer is behaving better. In markets where in APAC in particular, where we’ve exhausted most of Ocean Tower and we don’t have that high-end upgrade inventory, that’s a market that we’re struggling with.

And so it’s hard for me to really quantify and judge the consumer based on that, so I guess what I’m saying is where we have ample inventory, we’re good. Where we don’t, we’re seeing lower commitment levels.

They have said repeatedly that what their customers are demanding - in Hawaii and New York particularly - is higher-end inventory to fuel upgrades. If you look at some of their other investor presentations that are on their web site, you can see upgrades are a big part of their sales strategy. I suspect there is less of that higher-end stuff coming in via ROFR than the more mid-tier stuff in Vegas and Orlando. In any event, if development delivers a new phase of Ocean Tower with - just guessing here - 30 new units, then that's over 1500 intervals available to sell. Might be hard to find 1500 high-end Hawaii intervals via ROFR in a short period of time.

Here are two charts from a May 2019 investor road show that talk about the importance of upgrades and discusses their demographic targets. It's still not a heavily Millennial target market - only 22%. And there are many Millennials who are doing very well. Our son is making six figures less than two years out of undergraduate college.

View attachment 13226

View attachment 13227
I see over 20 Hawaii units listed for sale just on tug.

I am sure more are comming online on Ebay every day.

If the inventory issue was serious like they say, I would expect to see resale prices rising as they begin to more aggressively take rofr (think dvc).

I think they are telling only part of the story, I tend to take most investor relations stuff with a grain of salt because it is designed to make company look as good as possible.

As for market penetration.. the melenials are now in their 30s with gen x being in their 40s.

These are the "prime years" of selling them timeshare products. And they are not buying.





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I see over 20 Hawaii units listed for sale just on tug.

I am sure more are comming online on Ebay every day.

If the inventory issue was serious like they say, I would expect to see resale prices rising as they begin to more aggressively take rofr (think dvc).

I think they are telling only part of the story, I tend to take most investor relations stuff with a grain of salt because it is designed to make company look as good as possible.

As for market penetration.. the melenials are now in their 30s with gen x being in their 40s.

These are the "prime years" of selling them timeshare products. And they are not buying.

But most of the inventory on TUG and elsewhere are at Kings Land, Kohala Suites, Bay Club, Lagoon Tower, etc., plus a few at the Grand Waikikian. They said on the call that they had Hawaii inventory, just not the right mix for their demand - not enough entry level and not nearly enough higher-end upgrade inventory (i.e. - the high-point stuff they sold $57 million of at Ocean Towers in 2Q 2018.) As you say, they can get all of that KL, KS, BC, LT stuff they need from ROFR and upgrades. What they said they don't have enough of is the higher point inventory needed to entice their Japanese and other Hawaii prospects to upgrade. When you see that sales of Ocean Tower inventory dropped from $57 million to $9 million from 2Q 2018 to 2Q 2019, it's easy to see where that could create a revenue shortfall, and difficult to see how ROFR could generate similar inventory. It doesn't exist. Basically, the huge success of Ocean Tower in 2018, created a problem for 2019, since for whatever reason, Phase II was not ready to sell yet. That does beg the question, once Ocean Tower is all gone, all phases, where is that high end inventory going to come from?

I agree investor relations tries to put a positive company spin on bad results, but if they were intentionally misleading analysts about the reasons for the issue, they would be in big trouble with the SEC.

I agree that Millennials are probably not going to adopt timeshares to the degree that Boomers have, but if you look at the demographics of both HGVC and Marriott, their market is 50+. HGVC average owner is 56; MVC average is 59; and MVC's first time buyer is 52. It's been that way for a long time. I think I saw something from a Marriott presentation in the last year that said the demographics of their typical buyer has been fairly stable over the last 10-20 years. I think the long term issue they may have with Millennial's is real, but I think it will be another 10 years at least before that starts impacting their sales growth. They can still make a lot of hay with the older Gen Xers and the younger Boomers.

Also, since it appears that a big piece of their high-end inventory issue is directly related to Hawaii, don't underestimate the impact of the Japanese tourist. They say 20% of their owners are from Japan, I bet that is an even bigger - probably significantly bigger - portion of their Hawaii owners. They mentioned that a lot of their Hawaii inventory is actually sold in their sales offices in Japan.
 
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If they sell their ocean tower inventory from all phases, their are lots of other buildings at Waikoloa that they could buy rooms in and convert. The owner of that resort is a REIT - if the price is right they will sell.

I also wonder if it's possible that they are re-jigging the inventory mix in the later phases. Add more bigger units by combining multiple smaller units. Could slow them down but be more profitable in the end if they have demand for high point units.
 

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If they sell their ocean tower inventory from all phases, their are lots of other buildings at Waikoloa that they could buy rooms in and convert. The owner of that resort is a REIT - if the price is right they will sell.

I also wonder if it's possible that they are re-jigging the inventory mix in the later phases. Add more bigger units by combining multiple smaller units. Could slow them down but be more profitable in the end if they have demand for high point units.

Yeah, they have the Palace Tower and Lagoon Tower which are also hotel rooms, although it might be hard to imagine them converting that entire property to timeshare. You can fit so many more people into a property when its just hotel rooms, I would think they would need the volume to keep the restaurants and shops in business. Converting one tower to timeshare makes sense because the property is so big, and having one tower with the more predictable guest flow of a timeshare makes sense because it takes that tower "off-budget" and increases occupancy in the rest, but there are still guests in the timeshares to pay for the use of the amenities. Anything can happen of course, and money talks, but the expense to maintain that facility with the monorail and the boats and all of that probably dictates that there will always be a hotel on that site.
 

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Yeah, they have the Palace Tower and Lagoon Tower which are also hotel rooms, although it might be hard to imagine them converting that entire property to timeshare. You can fit so many more people into a property when its just hotel rooms, I would think they would need the volume to keep the restaurants and shops in business. Converting one tower to timeshare makes sense because the property is so big, and having one tower with the more predictable guest flow of a timeshare makes sense because it takes that tower "off-budget" and increases occupancy in the rest, but there are still guests in the timeshares to pay for the use of the amenities. Anything can happen of course, and money talks, but the expense to maintain that facility with the monorail and the boats and all of that probably dictates that there will always be a hotel on that site.

I think the convention center will probably dictate that some of it stays as a hotel. I suspect the timeshare owners are paying their proportionate share of the boat/monorail costs already.

All that said, I don't think they've even bought the whole ocean tower, so before they move on to other towers I'd expect them to buy the rest of that one.

Also, I'd imagine they would consider adding new buildings to the resort (as they have in HHV on Oahu) assuming zoning allows.
 

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I think the convention center will probably dictate that some of it stays as a hotel. I suspect the timeshare owners are paying their proportionate share of the boat/monorail costs already.

All that said, I don't think they've even bought the whole ocean tower, so before they move on to other towers I'd expect them to buy the rest of that one.

Also, I'd imagine they would consider adding new buildings to the resort (as they have in HHV on Oahu) assuming zoning allows.

Very good point about the convention center. That requires a hotel portion to be significant.

Their development partner, I believe, has acquired the entire Ocean Tower, but is only turning over inventory to HGVC as they complete each phase. Until they turn it over to HGVC to sell, they are renting it through Hilton.com. If you look at Hilton.com, you'll see Ocean Tower is listed as a separate hotel from the rest of the Hilton Waikoloa Village (at least it was when we made our reservations for a one night stay there back in March). I believe that is because Ocean Tower is now owned by the separate entity from the rest of the hotel. Eventually, it will all be turned over to HGVC and then they will rent any excess nights on Hilton.com, just as they do for other HGVC resorts.
 

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But most of the inventory on TUG and elsewhere are at Kings Land, Kohala Suites, Bay Club, Lagoon Tower, etc., plus a few at the Grand Waikikian. They said on the call that they had Hawaii inventory, just not the right mix for their demand - not enough entry level and not nearly enough higher-end upgrade inventory (i.e. - the high-point stuff they sold $57 million of at Ocean Towers in 2Q 2018.) As you say, they can get all of that KL, KS, BC, LT stuff they need from ROFR and upgrades. What they said they don't have enough of is the higher point inventory needed to entice their Japanese and other Hawaii prospects to upgrade. When you see that sales of Ocean Tower inventory dropped from $57 million to $9 million from 2Q 2018 to 2Q 2019, it's easy to see where that could create a revenue shortfall, and difficult to see how ROFR could generate similar inventory. It doesn't exist. Basically, the huge success of Ocean Tower in 2018, created a problem for 2019, since for whatever reason, Phase II was not ready to sell yet. That does beg the question, once Ocean Tower is all gone, all phases, where is that high end inventory going to come from?

I agree investor relations tries to put a positive company spin on bad results, but if they were intentionally misleading analysts about the reasons for the issue, they would be in big trouble with the SEC.

I agree that Millennials are probably not going to adopt timeshares to the degree that Boomers have, but if you look at the demographics of both HGVC and Marriott, their market is 50+. HGVC average owner is 56; MVC average is 59; and MVC's first time buyer is 52. It's been that way for a long time. I think I saw something from a Marriott presentation in the last year that said the demographics of their typical buyer has been fairly stable over the last 10-20 years. I think the long term issue they may have with Millennial's is real, but I think it will be another 10 years at least before that starts impacting their sales growth. They can still make a lot of hay with the older Gen Xers and the younger Boomers.

Also, since it appears that a big piece of their high-end inventory issue is directly related to Hawaii, don't underestimate the impact of the Japanese tourist. They say 20% of their owners are from Japan, I bet that is an even bigger - probably significantly bigger - portion of their Hawaii owners. They mentioned that a lot of their Hawaii inventory is actually sold in their sales offices in Japan.
Gen x is moving into that 52.. many were screwed by recessions).

As for the sale of inventory issues... consider this. The Hawaii hgvc properties started in what early 2000s/late 90s?

That means that the average owner is now in their 70s if bought in 50s...I see a lot of inventory starting to become available for those original Hawaii properties.

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Gen x is moving into that 52.. many were screwed by recessions).

As for the sale of inventory issues... consider this. The Hawaii hgvc properties started in what early 2000s/late 90s?

That means that the average owner is now in their 70s if bought in 50s...I see a lot of inventory starting to become available for those original Hawaii properties.

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Yes, but the inventory from those older Hawaii properties is not the issue based on the call. They noted in both the 1Q and 2Q calls that they do have Hawaii inventory (I assume fueled by trade-ins/upgrades, ROFR, etc), the problem is the mix. Their buyers are wanting the newer, high-value inventory like what they were selling at Ocean Tower for upgrades. That is a very popular property with their prospects from Japan. They stated specifically that they have plenty of what they called "mid-tier" Hawaii inventory, but their problem is mainly a lack of the higher end inventory, and that is where they said the demand was. Their supply is not matching their demand.
 

CalGalTraveler

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MVC (incl. Vistana and Hyatt) and HGVC have been unable to provide products that attract significant Gen X and Millennials. What I am trying to square is whether this is a concern? or simply an attribute of the product? i.e.

Is it a downtrend? i.e.
a) The proliferation of travel points from credit cards is at an all-time high - why pay for rooms when you can get them for free with a new credit card?
b) AirBnBs offering unique stays in treehouses, glamping etc. that Millennials value
c) The timeshare exit ads create fear so avoid long-term commitment

Despite this... ARDA claims the industry grew 9% last year.

or

Is this simply the mark of a product designed primarily for this age group which tends to have more disposable income?
a) Many people don't consider timeshares and air travel until they are at a later stage in life (with teens, pre-retirement)
b) ARDA cites average TS buyer median of 39 and 30% of new timeshare buyers are millennials (vs. HGV at 22% and 55 avg owner age). MVC and HGVC are at the top of the food chain attracting buyers with average $150k income.



ARDA_Owner_Study_Infographic_Final_SMALL.jpg
 
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GT75

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MVC and HGVC have been unable to provide products that attract significant Gen X and Millennials. What I am trying to square is whether this is a concern? or simply an attribute of the product?. i.e.

I think that you have brought up some of my concerns also about where HGV is heading and if they are completely missing the indicators. I reread the summary and @JIMinNC comments. What both you and I are missing in our views is the non-American contribution specifically the Japanise market. This was discussed in detail on the call. I have been wondering who is buying these high priced OT units (~$180K). Now, I know.

The other thing which I am not sure that @JIMinNC mentioned is that total contract sales were up 1.7% and revenue was up 3%. HGV had an increase of sales tours of 8%. So my takeaway is that both HGV and the investors want more. To me, it looks like HGV is going after higher point value sales.
 

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I think that you have brought up some of my concerns also about where HGV is heading and if they are completely missing the indicators. I reread the summary and @JIMinNC comments. What both you and I are missing in our views is the non-American contribution specifically the Japanise market. This was discussed in detail on the call. I have been wondering who is buying these high priced OT units (~$180K). Now, I know.

The other thing which I am not sure that @JIMinNC mentioned is that total contract sales were up 1.7% and revenue was up 3%. HGV had an increase of sales tours of 8%. So my takeaway is that both HGV and the investors want more. To me, it looks like HGV is going after higher point value sales.
Interesting take on it GT75 -do you suggest this means they are after more bHGV, and will leave HGVC out of the equation?
 

GT75

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do you suggest this means they are after more bHGV, and will leave HGVC out of the equation?

I think that we need to realize the reason behind the SEC fillings and who the audience is for this telecon. Also as @JIMinNC pointed out to me, HGV isn't discussing making these changes to benefit us current owners but to generate greater profits. I don't think that they will abandon HGVC just continue to throw both HGVC and bHC into the mix.
 

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Interesting take on it GT75 -do you suggest this means they are after more bHGV, and will leave HGVC out of the equation?

NYC and Hawaii are hot markets for HGVC right now.

Comparing the calls of MVC and HGVC you get a sense of different business models driving their decision-making.

HGVC's business model is still very developer-centric with deeds that have fixed point values to trade. They have strength in Japan where pure points programs are disliked. HGVC is much more affiliate related with asset light models and fee for service.

MVC has shifted completely to a points vacation club model where you can only buy points as a new buyer so selling real estate is in the background in an opaque trust. Although a significant part of their business is still managing legacy weeks and II. (won't rehash but both models have pluses and minuses for the buyer.)

It appears that HGVC will continue to drive high-end projects similar to OT and Central to feed the development beast, and add more locations to compete with MVC. This will have good and bad implications for HGVC owners. More locations, more options, more inventory. On the downside it will take more points so requiring owners to pick up another resale or two to get trades into newer properties. Resales will have lower ROFR as HGVC will need to manage inventory levels so will need resale buyers to pick up and make the HOA payments on these older properties hence the need to be good to resale buyers. (good for buyer, bad for seller). OTOH, buyer financing over 10 years delays inventory entering the market and ease supply so will put less pressure on downward resale prices and ROFR budgets.

In contrast, MVC will not be adding new properties but will be consumed absorbing the ones' they acquired - namely Vistana and Hyatt - for the foreseeable future. They will be focusing on upselling and cross-selling their existing base. They will have a hard time selling into Japanese/Asian markets due to the reported skepticism of pure points programs.
 
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I think that you have brought up some of my concerns also about where HGV is heading and if they are completely missing the indicators. I reread the summary and @JIMinNC comments. What both you and I are missing in our views is the non-American contribution specifically the Japanise market. This was discussed in detail on the call. I have been wondering who is buying these high priced OT units (~$180K). Now, I know.

The other thing which I am not sure that @JIMinNC mentioned is that total contract sales were up 1.7% and revenue was up 3%. HGV had an increase of sales tours of 8%. So my takeaway is that both HGV and the investors want more. To me, it looks like HGV is going after higher point value sales.

The other thing I learned after skimming the transcript for their 1Q call back in May was that one of the reasons they are in this position is they slowed/stopped some development activities in 2017 when they were dealing with the spinoff from Hilton Hotels. They started working on development actively again in 2018, but the lead times on some of the projects mean those won't be ready for sales until 2020. So it seems the spinoff contributed to this inventory gap they had, as did a more rapid sell-out of Ocean Tower, partially fed by Japanese buyers who were trading-in their older Hawaii weeks and upgrading to Ocean Tower. When they ran out of Ocean Tower inventory, they didn't have the right mix of inventory to sell. Their buyers didn't want Kings Land or Kohala.
 
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