Hilton Grand Vacations Sees Inflation Boosting Timeshare Sales

25.08.2023 - 14:41 / skift.com / Sean Oneill / David Katz

Many consumer businesses bemoan rising inflation as a buzzkill, but not Hilton Grand Vacations. The timeshare company believes that consumers will find its stably priced product relatively more attractive compared to increasing rates for hotels and vacation homes.

“If you’re a hotel, you’ve got your own costs to cover plus the overall profit you’re trying to drive,” said Gordon Gurnik, chief operating officer. “In our product, fees for maintaining a property really are set at the resort level by the resort homeowners association, and they’re just looking to cover their expenses. There is some inflation in that, for sure. But you don’t have the profit factor.”

To evaluate the inflation-themed sales pitch, know that Orland-based Hilton Grand Vacations was an early industry adopter of a points-based system. Old-school timeshare contracts were title-based, meaning consumers bought a contract for years of access to a specific property. Points-based models offer a more contemporary twist where members typically buy an interest in a club where they can exchange points for stays at a variety of condos or hotels. About 512,000 of Hilton Grand Vacation customers have bought the flexible membership program, while another 210,00 are just owners.

In the past year, Hilton Grand Vacations hasn’t boosted the cost per point in its program, in contrast with sharply rising hotel rates.

Sellers of timeshares can make up net income over the long term by first boosting the percentage of customers who agree to buy after listening to sales pitches. Then the companies can cross-sell or upsell those owners over the years. This latter tactic boosts “volume per guest,” a key industry metric.

David Katz and fellow analysts at Jefferies wrote in a November report that they’re expecting Hilton Grand Vacations’ “volume per guest” to grow between 10 percent and 15 percent a year next year, which would be relatively high compared to the brand’s peers.

Hilton Grand Vacations keeps improving its skill at coaxing current owners to spend more. For September 30, the company reported $4,229 a year in volume per guest, up 23 percent versus the pre-pandemic year of 2019.

“When people look at the overall cost of transient travel, they’re looking at room rates per night,” Gurnik said. “When somebody buys a timeshare product, they’re looking at an investment for the rest of their life.”

Might possible recessions in some markets boost default rates?

“Generally, we’ve had fairly good default rates in the industry because I think we have very good consumers in general,” Gurnik said.

The company said it had gotten better at only selling to qualified individuals, and that helps keep its default rates low. In August, the company said the annualized