Tags: Marriott | Vacations | timeshare | VAC

Marriott Spins Off Pure Play Timeshare Firm

By Tim Plaehn   |   Wednesday, 21 Dec 2011 10:52 AM

Marriott Vacations Worldwide (VAC) is a newly listed way to participate in a very different sector of the real estate market. This recent spinoff is a pure-play firm on the market for timeshare sales, the vacation properties in which people buy set periods of time during the year but can stay at multiple locations and, they hope, eventually sell their interest in the plan at a profit.

In October 2011, the board of Marriott International (MAR) approved the spinoff of the company's timeshare division in the form of a stock dividend of the new company — Marriott Vacations Worldwide — to existing Marriott shareholders.

The timeshare company launched as a separate public company and began trading on the NYSE on Nov. 22, 2011. In 2010 Marriott Vacations had 6.5 percent of a very fragmented time share market.

Projected 2011 revenues for the newly separate company is $1.3 billion. The company filed a Form 10-Q for the 2011 third quarter with reported revenues of $378 million and $1.13 billion for the quarter and nine months, respectively. Excluding a one-time impairment charge incurred in the third quarter, net income was $103 million and $138 million for the quarter and nine month periods.

Multiple revenue streams

The timeshare business generates revenues from several different sources. Sales of timeshares are the largest stream and provide about 40 percent of revenue. Other sources are net financing profits, resort management fees and rental of units. Outside of the sales revenues, the other sources are long-lived revenue streams which can increase over time as the company builds and sells off more resorts.

As a side note, the product cost of the sale of a timeshare unit is less than 40 percent of the selling price. Marketing costs will be up to 50 percent of the unit sales revenues.

Out the door, the analysts from Goldman Sachs have initiated coverage on VAC with a neutral rating and a target price a few dollars above the initial trading price. Deutsche Bank analysts initiated coverage with a hold rating.

The company reports next on Feb. 8.

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Marriott Vacations Worldwide (VAC) is a newly listed way to participate in a very different sector of the real estate market. This recent spinoff is a pure-play firm on the market for timeshare sales, the vacation properties in which people buy set periods of time during...
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