Want to buy timeshare stocks?
Timeshares tend to get a bad rap sometimes, but as a happy, long-time timeshare owner, you won’t hear a negative word from me. In fact, investors in timeshare stocks Travel + Leisure Co., Ltd. (NYSE:TNL), formerly known as Wyndham Destinations, probably isn’t complaining either, as its stock price has been trending upward recently.
Shares of Travel + Leisure rose about 6% Wednesday after the company reported earnings that beat consensus estimates. The stock has already returned about 12% year to date, which is roughly equal to its return for all of 2023. Now the question for investors is do you want to buy timeshare stocks?
As mentioned above, Travel + Leisure was spun off from Wyndham Hotels and Resorts (NYSE:WH) in 2018 and then went by a different name, Wyndham Destinations. In 2021, Wyndham Destinations later rebranded to the current Travel + Leisure Co. Wyndham bought a magazine of the same name. So the company is now more than just a timeshare company, it also provides media content and travel services to its members and subscribers.
Travel + Leisure owns more than 245 resorts, including Wyndham, Margaritaville, Sports Illustrated and Accor timeshare brands, and has more than 830,000 timeshare owners. It also owns the timeshare trading network RCI.
Short summary aside, what boosted Travel + Leisure’s revenue in the fourth quarter was its timeshare, or vacation ownership, business. Overall, revenue for the quarter hit $935 million, up 5% year-over-year, with its vacation ownership business generating $776 million of that, up 5%. But solid fourth-quarter sales were slightly below expectations.
Vacation Ownership Equity (VOI) net sales for the quarter were $410 million, up 7% year-over-year. This was driven by 172,000 tours in the fourth quarter of 2022, up from 147,000 in the fourth quarter of 2022. However, volume per guest (in dollars) decreased 11% to $3,058, in part due to a higher mix of new owner tours.
For the year, vacation ownership revenue rose 7% to $3 billion.
“Our core vacation ownership business performed better than expected across all key metrics and effectively capitalized on continued leisure travel demand,” Michael Brown, president and CEO of Travel + Leisure Co., said in the earnings report.
In the small travel and membership segment, revenue for the quarter was down 3% year-over-year to $158 million, and for the full year it was down 3% to $711 million.
Overall, Travel + Leisure’s expenses were little changed in the quarter, and operating income rose 18% to $190 million. Net income for the quarter increased 43% year-over-year to $129 million, or $1.78 per share. Full-year net income rose 11% to $396 million, or $5.31 per share.
Bright outlook partly due to dividend hike
Travel + Leisure shares were on the rise not only due to the earnings results, but also due in part to the company’s bright outlook for 2024. Travel + Leisure expects fiscal 2024 adjusted EBITDA to be between $980 million and $910 million to $940 million.
Total VOI revenue is expected to be between $2.25 billion and $2.35 billion in 2024, up from $2.15 billion in 2023. Meanwhile, volume per guest (VPG) is expected to decline slightly in 2023, from an average of $3,128 to $2,900. And $3,000.
Looking more broadly, Travel + Leisure is targeting first-quarter adjusted EBITDA of $185 million to $190 million, up from $184 million in the same quarter a year ago. Expectations for total VOI revenue in the first quarter are $460 million to $480 million, up from $454 million in the first quarter of 2023. However, VPG is expected to range between $2,925 and $3,025, which is lower than VPG’s $3,215 in Q2 2023. Same quarter a year ago.
Travel + Leisure also plans to increase its first quarter dividend to 50 cents per share, up from 45 cents last quarter. This will be the third consecutive dividend increase, and will restore the dividend to the same level it was at when COVID-19 hit. The company is currently paying a nice yield of 4.1%.
Travel + Leisure won’t put out the lights. However, at this very cheap valuation, its forward price-to-earnings ratio of 7.9, decent earnings potential, and good dividends still make it attractive, especially in travel. An industry expected to see significant growth. The agreed target price is approximately $50 per share, which is 15% higher than the current price.
So even if you don’t want to buy timeshare stocks, these timeshare stocks may warrant a tour to see if they are worth your investment. (Full disclosure: I do not own TNL stock or TNL timeshares.)
disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.
