Timeshare vacation lodgings are not cheap, but they are increasingly popular. Think of it: Instead of renting a couple of hotel rooms for your family at a vacation spot, you can have an apartment. And you can have a place waiting for you in cities around the world.
How to cash in on this growing trend? Buy stock in the best one, Travel + Leisure Co. Once known as Wyndham Destinations, Travel + Leisure is the biggest timeshare company, by revenue and locations.
The company and its rivals benefit from larger units than hotels, often with multiple bedrooms, living space and kitchens. “The idea of a 250 square foot hotel room is not as appealing” by comparison, reasoned Mike Brown, the Travel + Leisure Co. CEO, in an interview.
There is a cyclicality risk here, so this is best-used as a long-term investment. The stock took a pummeling once interest rates began to rise in 2022, as we detailed when last we looked at this stock. But today the shares are heading back up, and have clocked a 41% rise this year. Further, Travel + Leisure, with a price/earnings ratio of just 10, is a bargain compared with its chief rivals, Marriott Vacations Worldwide (P/E: 18) and Hilton Grand Vacations (48).
The wind is at Travel + Leisure’s back. It reported a strong third quarter, with earnings of $97 million on revenue of $993 million. One key performance measure, known as volume per guest, or VPG (revenue per guest divided by total ownership sales), has remained consistently lofty, over $3,000 in the September-ending quarter, on 4% higher sales tours.
Another plus is Travel + Leisure’s robust buyback program, with $70 million spent on purchasing 1.6 million shares in the third period. There is $509 million remaining in its buyback authorization. Loan losses—many timeshare buyers borrow money to enter the program—are small, with delinquencies lower than the pre-pandemic 2019 year.
The work-from-home movement, which the pandemic accelerated, also is a help, Brown told analysts in the most recent earnings call. A quarter of Travel + Leisure’s occupants do work from its units, and this has resulted in ever-lengthier stays, he said.
For families, a big part of the travel industry, timeshares are ideal. “You can make your family’s breakfast and the kids don’t have to get ready” to go out to a restaurant. Brown observed.
“The state of travel in 2024 is strong,” noted a report by industry analysts at Skift Research. “Travel businesses are growing with healthy margins.” Spending on experiences, meaning mostly travel, has soared by 50% since 1960, according to the U.S. Bureau of Economic Analysis.
Of course, concerns do exist about the future, a McKinsey report warned, such as the possibility of a recession (whose imminence was predicted two years ago, although a downturn has not yet occurred), the impact of artificial intelligence on the industry and the continued enthusiasm of Chinese overseas tourists, who after a pandemic-induced shutdown are back in large numbers.
Still, plenty of trends exist that are tailwinds for timeshares. For instance, the customers for these products are getting younger, now around 50, from 60 not long ago, per Brown. ”The leisure market remains consistent,” he added. “We have a lot of optimism about 2025.”
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