I saw Hilton Grand Vacations just agreed to buy Diamond Resorts. What's the big picture impact of this transaction and, more importantly, what does it mean for owners of both timeshare companies?
Big Changes Ahead for Hilton and Diamond Owners
Whopping changes are ahead for members of both clubs, but none will surface until after the deal is closed, and approved by regulators, this summer. But sometime down the road, the two clubs are likely to be combined under one roof — named Hilton — with all the brand-name benefits that Hilton Grand Vacations (HGV) already provides existing owners. For Diamond owners, that should be an upgrade, according to the industry experts who talked to us about Hilton's buyout of Diamond.
Short term, both companies will remain separate entities while their management teams figure out how to consolidate them into the world's #2 timeshare company, right behind #1 Wyndham Destinations and just ahead of #3 Marriott Vacations.
A year from now, or so, all vestiges of Diamond Resorts will likely disappear from marquees and lobbies as HGV absorbs Diamond resorts and rebrands them as part of a new Hilton entity, called Hilton Vacation Club. That will include a centralized call center for all members to make reservations through Hilton, new travel packages that incorporate HGV and Diamond properties, new sales presentations for prospective buyers, new upgrade offers for existing members, etc.
In the meantime, Diamond owners who have purchased Getaway or Sampler packages should pursue reservations through Diamond's existing reservations system. The companies provided no guidance on what happens to those pre-paid vacation packages after HGV completes the buyout of Diamond Resorts.
In late 2021 and 2022, the bigger-than-ever Hilton Vacation Club will then include 154 resorts and 720,000 owners with a global footprint that offers travel to mid-level, upscale and luxury resorts.
"Our plans are to re-brand Diamond properties to a new sub-brand of HGV, which will be called Hilton Vacation Club," said a spokesperson for HGV. "As Diamond properties are rebranded under the HGV umbrella, they will be available for rental on Hilton.com."
To book stays at non-HGV resorts and Diamond inventory, HGV owners will need to go through an exchange company — probably RCI or Interval International — to secure a reservation. For the shorter term, Diamond owners will have to go through the same exchange exercise to book rooms at non-Diamond properties.
"Over time, we will provide additional details on how these two clubs might function together," HGV said in response to our questions.
When the transition is complete, HGV's management team, headed by CEO Mark Wang, will run the combined company. HGV offered no information on what will happen to Diamond's executives.
The Big Picture? Consolidation Continues in Timeshare Industry
The pandemic gave all major travel companies, including timeshares, a yearlong timeout to recalibrate for travel to resume. The result, so far: Wyndham Destinations rebranded its entire company to shift towards a travel-club model that offers all travel services, not just reservations at timeshares. Marriott Vacations Worldwide bought independent Welk Resorts to add eight more high-touch resorts to its portfolio. And now HGV has made the biggest adjustment of all, buying Diamond, the largest independent timeshare company, to its portfolio. It's a world where, in times of economic crisis, the toughest survive.
On paper, the HGV buyout of Diamond appears to be a big win for HGV and a muddled ending for Diamond, which was bought by Apollo Global Management (an investment fund) in 2016 for $2.2 billion. On March 10 of this year, Apollo agreed to sell Diamond to HGV for $1.4 billion in a non-cash, all-stock transaction that will give Apollo 28 percent of HGV's stock and membership on its board of directors.
Two years ago, the tables were turned, when news reports surfaced that Apollo had submitted an offer to buy HGV. In August 2019, HGV announced it had hired an investment firm to review offers, which meant it was really up for sale.
At the same time, industry execs were fielding (and repeating) rumors that Diamond was simultaneously in talks with Wyndham about a potential purchase or buyout. All sides denied it, but kept talking about it, because a Wyndham-Diamond merger sounded like a good fit of timeshare cultures.
All for naught, until now.
The success of the buyout hinges on the following projections from HGV, including $125 million in "cost synergies" achieved by reducing payroll and consolidating operations over two years. HGV's expanded network will include 20 new markets and many drive-to destinations that Diamond offered to customers. According to Diamond CEO Mike Flaskey, HGV will also incorporate Diamond's "events and concerts platform" to deliver expanded vacation opportunities to owners.
The long-term success of the acquisition, analysts told us, will depend on HGV's plan to integrate Diamond's mid-level resorts into HGV's high-level resort portfolio while upgrading the overall customer experience of Diamond owners into HGV's culture. Not an easy task.
For a full view HGV's position on the acquisition, see this presentation made for investors.
Full disclosure: the author of this Ask RedWeek is a longtime owner at Diamond Resorts.
