Ask RedWeek / May, 2017

What will Wyndham's timeshare spin-off mean for owners?

I am a longtime Wyndham owner and very happy with my Bonnet Creek timeshare. It is one of the best timeshares I have ever visited. That said, I saw a news article on Forbes which said that Wyndham was considering spinning off its timeshare unit into a separate company. As an owner, what does this mean for me? Will my maintenance fees go up?

Great question — one that millions of timeshare owners have asked themselves in recent years as their companies have consolidated with other programs and restructured. RedWeek consulted several longtime industry experts to provide some answers. Here is their consensus. The short-term answer is pretty easy: nothing should change right away. Beyond that, all programs and policies will be reviewed by Michael Brown, the brand new CEO of Wyndham Vacation Ownership and former Hilton COO who helped engineer Hilton's recent spinoff from the parent company.

The potential spinoff of Wyndham's timeshare division is part of an ongoing story that's been unfolding since the financial collapse of 2008. During the recession, timeshare sales crashed, so developers adopted new "asset-light" business models to cut costs, bolster sales, and add new inventory. Companies without the wherewithal to compete during the downturn either folded or became a takeover target. Even though the overall US and travel economy is improving, with sales growing at a rate of 6 percent per year, major public hospitality companies are still taking steps to ensure their sustainability in the future. For the first time in a decade, they are also building new luxury resorts.

One proven way to "maximize shareholder value" is for hotel companies to jettison their capital-intensive timeshare divisions into separate companies. The Marriott hotel chain started this trend in 2011, spinning off its successful timeshare club to stand on its own. The result? Shares of the publicly trade MVC have tripled since the spinoff. In short order, Hyatt followed suit, sending its timeshare division to the ILG hospitality group. Then Starwood busted itself in two, creating Vistana for the Westin and Sheraton timeshare brands and selling the hotel group to Marriott. Last year, ILG formally took ownership of Vistana. Diamond Resorts, meanwhile, publicly announced that its board would explore all strategic alternatives to boost stock prices. Several months later, the Apollo group bought out Diamond's shareholders and took the company private.

This year, Hilton Grand Vacations joined the spin-off club when it launched itself as a stand-alone timeshare company in January.

So now, according to recent statements from company executives, it is Wyndham's turn to split off its highly profitable timeshare division into a separate company. The possibility was discussed by Wyndham Worldwide CEO Stephen P. Holmes in an almost off-handed manner during Wyndham's April 26th earnings call with Wall Street analysts. He said a spinoff was possible because "we remain dissatisfied with our business valuation relative to our peers."

Wyndham's stock value has risen 30 percent already this year. A spin-off, presumably, would spike those values even higher.

New CEO Mike Brown Helped Hilton Grand Vacations go Public in January

During the earnings call, Holmes touted Brown as the ideal executive to preside over a possible spinoff. Brown has 25 years of experience and was one of the primary architects of Hilton's spinoff.

Brown will have his hands full. Wyndham is the world's largest timeshare company with 900,000 owners and a mixed bag of 219 properties in the Western Hemisphere. His predecessor, Franz Hanning, was ousted last year after a California jury awarded $20 million in damages to a former Wyndham sales agent who was fired after she blew the whistle on objectionable sales practices, including targeting the elderly. The day after the New York Times ran a Sunday story on the lawsuit, Hanning was out.

RedWeek asked Wyndham for more information about the possible spinoff. Here's how they responded: "Wyndham's Board of Directors will continue to look at all options to best unlock the full potential of Wyndham Worldwide for shareholders. Management's role is to stay focused and successfully execute our strategy to maximize shareholder value. We also need to be ready for any direction the Board of Directors decides is best (to) maximize value in the long term."

Wyndham also told RedWeek: "Holmes didn't announce any further plans and there has been no change to vacation ownership benefits."

Owners Pay Attention to Changes in Benefits

"Ownership benefits" is where most owners tune in to talk of corporate takeovers, if at all. Reservations, maintenance fees, new resorts, along with airfare prices, are the issues that drive most owners to distraction — especially if they are not handled right by the timeshare companies.

Corporate changes rarely have instant impacts on timeshare owners. Over time, however — and Diamond is a good example of this model — corporate changes trickle down to individual owners. In Diamond's case, the recent announcement of a new CEO, Michael Flaskey, was accompanied by Diamond's rollout of a new program, called Clarity, which is designed to provide new consumer protections for owners and potential buyers. Diamond also announced a "relinquishment" program where it will, in some circumstances, take back timeshare from longtime owners who can no longer use their intervals. Neither program existed a year ago. Today, they are part of the new Diamond under the new CEO. In addition to launching new programs, Flaskey's team also jettisoned many longtime Diamond employees.

Similar changes are already underway at Wyndham. Shortly after Fanning left, his top communications leaders also left Wyndham. Wyndham's new VP of communications, ironically, just came over from Hilton Grand Vacations Club. And the only announcement that the "new" Wyndham PR group has issued in recent weeks is a very friendly email to owners announcing the hiring of CEO Mike Brown.

About the author

This answer was provided by RedWeek's Chief Correspondent, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of RedWeek.com.

Leave a comment

    2 Comments

  • Avatar for cynthial20
    cynthial20
    May 09, 2017 (4 months ago)

    Great Job Jeff. As an owner of two timeshares RCI and Marriott I have always felt very strong about their properties which are top in my book, but RCI I feel has been struggling for years, maybe time to sell that one. Your information has been priceless for all of us timeshare people still trying to make it work. Great work! Kind regards, Cynthia Luke

  • Avatar for nancym1095
    nancym1095
    Jun 05, 2017 (3 months ago)

    Hi Jeff. Great article. On another note, I have Diamond Resorts due to the bankruptcy of Monarch Grand. Rather enjoying the timeshare but ended up purchasing a Sampler package of points in Las Vegas two weeks ago and the benefits were definitely misrepresented. Any suggestions for us to escalate our complaint? I have been subjected to high-pressure sales tactics before in the timeshare industry and expect it but not overt misrepresentation. Feel free to contact me at nancyjanemurray@gmail.com