HGV Third Quarter 2019 Results

[CalGalTraveler]

HGV 3Q results released today.

Financial Results:
https://www.businesswire.com/news/h...-Grand-Vacations-Reports-Quarter-2019-Results

“We saw strong Adjusted EBITDA growth and healthy NOG this quarter, driven by record owner engagement,” said Mark Wang, president and CEO of Hilton Grand Vacations. “We are starting to realize the benefits of the operational and cost improvements that we announced last quarter. Overall, I am encouraged by our progress and believe we are well positioned for growth as we exit this year and prepare for the launch of our highly anticipated new inventory beginning in 2020.”​

As of today the stock is up slightly.

I didn't see any mention of the sale or Apollo status in this press release, but didn't have time to listen to the call. Perhaps someone else could weigh in here.

Moderator added link to previous thread on Apollo Group looking to buy HGVC

 

[terces]

I listened to the call. They would not discuss anything about the rumours of a merger or acquisition.

 

[dayooper]

I listened to the call. They would not discuss anything about the rumours of a merger or acquisition.

I didn’t think they would. Was there’s any talk of new resorts?

 

[dayooper]

So, I found a transcript of the call and some interesting things were said about new locations.

1. They said Pigeon Forge has been announced. This was mentioned last quarter as a fee-for-service resort.

2. They will have an Okinawa resort partnered with Mori Trust (another fee-for-service resort?).

3. Mentioned California and Texas as places where they have a high member base (1st and 3rd respectfully) and are under represented. Looking at expanding there to give those members a more local resort.

4. Arizona was also mentioned as a place they were looking to expand to.

5. Talked about Chicago and Charleston as great additions.

6. Said Ocean Tower Phase 2 would be “registered” in the first part of 2020 while Maui and Cabo will be registered in the summer. Waikiki will be registered in the last portion of 2020.

7. Couldn’t specifically talk about a merger, but said consolidation is a good thing. Mentioned the relationship with Hilton is very profitable. Keeps a solid customer flow and the brand is a great asset.

8. Said Myrtle Beach was very profitable and also mentioned Hilton Head (maybe alluding to more building there?).

 

[Tamaradarann]

So, I found a transcript of the call and some interesting things were said about new locations.

1. They said Pigeon Forge has been announced. This was mentioned last quarter as a fee-for-service resort.

2. They will have an Okinawa resort partnered with Mori Trust (another fee-for-service resort?).

3. Mentioned California and Texas as places where they have a high member base (1st and 3rd respectfully) and are under represented. Looking at expanding there to give those members a more local resort.

4. Arizona was also mentioned as a place they were looking to expand to.

5. Talked about Chicago and Charleston as great additions.

6. Said Ocean Tower Phase 2 would be “registered” in the first part of 2020 while Maui and Cabo will be registered in the summer. Waikiki will be registered in the last portion of 2020.

7. Couldn’t specifically talk about a merger, but said consolidation is a good thing. Mentioned the relationship with Hilton is very profitable. Keeps a solid customer flow and the brand is a great asset.

8. Said Myrtle Beach was very profitable and also mentioned Hilton Head (maybe alluding to more building there?).

While they didn't talk about a merger, #7 certainly sounds like HGVC would not look favorably on a merger that would hurt or impede the relationship with Hilton Hotels.

 

[dayooper]

While they didn't talk about a merger, #7 certainly sounds like HGVC would not look favorably on a merger that would hurt or impede the relationship with Hilton Hotels.

I agree.

 

[Cyberc]

While they didn't talk about a merger, #7 certainly sounds like HGVC would not look favorably on a merger that would hurt or impede the relationship with Hilton Hotels.

Could one then conclude that an acquisition by Apollo is not on the table then?

 

[JIMinNC]

Could one then conclude that an acquisition by Apollo is not on the table then?

No. That is almost certainly still one of their strategic options. Even if Apollo wins the ultimate battle for HGV, that doesn't automatically mean that HGV becomes Diamond. Apollo has one, and only one, goal - to build as much value in their investments as they can, for benefit of their investors. If you assume that the Hilton affiliation is a significant asset for HGV - maybe the primary thing that sets HGV apart from non-branded timeshares - Apollo will not want to do things that causes Hilton to end their licensing agreement. I may be wrong, but I suspect Apollo may see HGV as an opportunity to rehabilitate the image of Diamond more so than seeing it as an opportunity to make HGV part of Diamond. While Hilton Hotels may be more comfortable with someone they know like Blackstone acquiring HGV, if Apollo pays the highest price and can assure Hilton Hotels that the Hilton brand will be protected, then I think they would probably still be in the mix.

Not all mergers result in the acquiring company becoming the dominant surviving brand - US Airways bought American Airlines, but the US Airways name went away and the American brand survived. Two decades ago, NationsBank bought Bank of America, but kept the Bank of America name.

The devil will be in the details, and I suspect with HGV, many options are on the table.

 

[Tamaradarann]

No. That is almost certainly still one of their strategic options. Even if Apollo wins the ultimate battle for HGV, that doesn't automatically mean that HGV becomes Diamond. Apollo has one, and only one, goal - to build as much value in their investments as they can, for benefit of their investors. If you assume that the Hilton affiliation is a significant asset for HGV - maybe the primary thing that sets HGV apart from non-branded timeshares - Apollo will not want to do things that causes Hilton to end their licensing agreement. I may be wrong, but I suspect Apollo may see HGV as an opportunity to rehabilitate the image of Diamond more so than seeing it as an opportunity to make HGV part of Diamond. While Hilton Hotels may be more comfortable with someone they know like Blackstone acquiring HGV, if Apollo pays the highest price and can assure Hilton Hotels that the Hilton brand will be protected, then I think they would probably still be in the mix.

Not all mergers result in the acquiring company becoming the dominant surviving brand - US Airways bought American Airlines, but the US Airways name went away and the American brand survived. Two decades ago, NationsBank bought Bank of America, but kept the Bank of America name.

The devil will be in the details, and I suspect with HGV, many options are on the table.

I can relate to what you are saying here if the diamond resorts just become part of the HGVC just like the affiliates are and the HGVC system stays as it is. The collection trust system that diamond set up would also be an affiliate since in that system there is no resort ownership only shares in a trust. In that way the Hilton Brand would be preserved.

 

[CalGalTraveler]

Great examples of mergers and brands. The biggest indicator will be who is in charge and whether Apollo or Diamond play any role in management.

 

[dayooper]

Great examples of mergers and brands. The biggest indicator will be who is in charge and whether Apollo or Diamond play any role in management.

If Apollo wins out, they most assuredly will have representation in management. The biggest factor would be how they deal with existing owners followed by how they deal with the MF’s.

 

[JIMinNC]

If Apollo wins out, they most assuredly will have representation in management. The biggest factor would be how they deal with existing owners followed by how they deal with the MF’s.

Apollo will have a big voice if they win out, but that doesn't mean Diamond management will be chosen to run HGV. As owner of Diamond, Apollo exerts control through seats on the board and by having a big say in who is hired to run Diamond. But Apollo does not directly manage the day-to-day operations of Diamond, the DRI management team does that. Diamond was run the way they are long before Apollo acquired them. Increasing maintenance fees/management fees and their sales approach were the Diamond model even back when we owned in their system pre-2014. That is not something Apollo brought to the table.

If Apollo wins the competition for HGV, the decisions they make afterwards would be the key ones. If they decide to combine some or all aspects of DRI and HGV into a unified operation as Marriott Vacations Worldwide is doing with their ILG acquisition, and if they then put Diamond management in charge of the new entity, HGV owners would have more reason for concern than if Apollo put HGV management in charge of the new entity. I would think Hilton Hotels would also have concern if DRI management and their business model were given control of HGV, so I would expect that message to be communicated loud and clear to Apollo in the negotiations that are undoubtedly taking place.

 

[2travelinggoatz]

So, I found a transcript of the call and some interesting things were said about new locations.

1. They said Pigeon Forge has been announced. This was mentioned last quarter as a fee-for-service resort.

2. They will have an Okinawa resort partnered with Mori Trust (another fee-for-service resort?).

3. Mentioned California and Texas as places where they have a high member base (1st and 3rd respectfully) and are under represented. Looking at expanding there to give those members a more local resort.

4. Arizona was also mentioned as a place they were looking to expand to.

5. Talked about Chicago and Charleston as great additions.

6. Said Ocean Tower Phase 2 would be “registered” in the first part of 2020 while Maui and Cabo will be registered in the summer. Waikiki will be registered in the last portion of 2020.

7. Couldn’t specifically talk about a merger, but said consolidation is a good thing. Mentioned the relationship with Hilton is very profitable. Keeps a solid customer flow and the brand is a great asset.

8. Said Myrtle Beach was very profitable and also mentioned Hilton Head (maybe alluding to more building there?).

I am wondering when they will expand to New England...sure would be nice.

 

[dayooper]

I am wondering when they will expand to New England...sure would be nice.

Or a Great Lakes resort. That being said, they are being very picky on where they expand. It sounds like they are going all in on the fee-for-service model. They potentially would have to find a backer for any resorts they build.

A question was asked about a strategic plan on expanding and Mark Wang kept talking about 10-20 locations they are looking at. Didn’t say what they were, but limited it to 10-20.

 

[CalGalTraveler]

So it sounds like HGV is trying to parallel HLT which has moved to Fee-For-Service for hotels in becoming a "Fee-for-Service" provider for Timeshares. If this is the case, they may be trying to sell the property assets they own to Apollo Diamond in exchange for continued Fee-For-Service arrangements of those properties. Still noodling on what this would look like for owners. Who operates the sales at fee-for-service properties? Other operations? HOA control? HGV or the other party?

 

[GT75]

So it sounds like HGV is trying to parallel HLT which has moved to Fee-For-Service for hotels in becoming a "Fee-for-Service" provider for Timeshares. If this is the case, they may be trying to sell the property assets they own to Apollo Diamond in exchange for continued Fee-For-Service arrangements of those properties. Still noodling on what this would look like for owners. Who operates the sales at fee-for-service properties? Other operations? HOA control? HGV or the other party?

I really don't see how this would work.

When I read the transcript, I felt like HGV management was actively continuing to pursue growth. They didn't seem to be a "lame duck" management team about to be replaced. I was "hoping" that this meant that the Apollo Diamond buyout was off the table but I am sure that @JIMinNC analysis is more correct.

 

[GT75]

Just saw a report that Apollo Global Management is the lead bidder to acquire the company and plans to merge HGV with Diamond Resorts - refer to link here.

@CalGalTraveler also started a very interesting thread in the Diamond Resorts forum on How Happy are you with Diamond Ownership

 

[mjm1]

Just saw a report that Apollo Global Management is the lead bidder to acquire the company and plans to merge HGV with Diamond Resorts - refer to link here.

@CalGalTraveler also started a very interesting thread in the Diamond Resorts forum on How Happy are you with Diamond Ownership

Thanks for sharing this information. The key if that happens is which management team will run things. One would think they would want to keep the HGVC name and hopefully management team.

Best regards.

Mike

 

[dayooper]

Just saw a report that Apollo Global Management is the lead bidder to acquire the company and plans to merge HGV with Diamond Resorts - refer to link here.

@CalGalTraveler also started a very interesting thread in the Diamond Resorts forum on How Happy are you with Diamond Ownership

Not what I was wanting to hear. Changes are a coming no matter who the management team is. Hopefully they will keep things the same, but not optimistic they will. It seems like every other system bought by Diamond has gotten worse. I feel for those that just bought into the system through the developer.

 

[dayooper]

Just saw a report that Apollo Global Management is the lead bidder to acquire the company and plans to merge HGV with Diamond Resorts - refer to link here.

@CalGalTraveler also started a very interesting thread in the Diamond Resorts forum on How Happy are you with Diamond Ownership

From the article the Seeking Alpha site was linked to

Apollo Remains Lead Bidder for Hilton Grand Vacations (HGV) as Field Narrows, Deal Drags - Sources

January 2, 2020 12:24 PM

The potential sale of Hilton Grand Vacations (NYSE: HGV) is taking longer than expected. Bidding is still said to be ...

(Premium-only article. Please sign in or upgrade to SI Premium to view.)
[/QUOTE

The top part is the headline.

 

[JIMinNC]

Not what I was wanting to hear. Changes are a coming no matter who the management team is. Hopefully they will keep things the same, but not optimistic they will. It seems like every other system bought by Diamond has gotten worse. I feel for those that just bought into the system through the developer.

Just keep in mind that those acquisitions were where Diamond was clearly acquiring a smaller player and the Diamond management team was still in charge. In this case, Apollo appears to technically be the acquiring entity, and they plan to merge HGV with Diamond. As @mjm1 noted, the key will be which management team survives. If the HGV team survives, then maybe they can repair Diamond. If the Diamond team winds up being in charge...not good at all.

 

[dayooper]

Just keep in mind that those acquisitions were where Diamond was clearly acquiring a smaller player and the Diamond management team was still in charge. In this case, Apollo appears to technically the acquiring entity, and they plan to merge HGV with Diamond. As @mjm1 noted, the key will be which management team survives. If the HGV team survives, then maybe they can repair Diamond. If the Diamond team winds up being in charge...not good at all.

I know, I know. Just not the news I was looking for today.

 

[GT75]

I know, I know. Just not the news I was looking for today.

I agree. I certainly didn’t want to start out the new year with this news.

 

[JIMinNC]

Obviously, knowledgeable timeshare owners like those of us here on TUG know about Diamond's bad rep. Does anyone have any idea if that bad reputation extends beyond into the broader marketplace and the investment community - to the extent that Apollo is aware of that bad juju and would be motivated to make a management change and might view HGV as the vehicle to do that? Or do they like the job Diamond management has been doing - in which case HGV may be toast?

 

[dayooper]

Obviously, knowledgeable timeshare owners like those of us here on TUG know about Diamond's bad rep. Does anyone have any idea if that bad reputation extends beyond into the broader marketplace and the investment community - to the extent that Apollo is aware of that bad juju and would be motivated to make a management change?

That could be, or are they going to try and put lipstick on a pig and milk the Hilton name/HGVC rep till it runs dry?

Obviously, I like your scenario better. Apollo’s work with Diamond hasn’t filled me with confidence, though.