Despite Losses, Marriott Vacations Remains Optimistic as Sales Centers Reopen, Occupancy Returns

ORLANDO, FL—Marriott Vacations Worldwide Corporation has reported second quarter 2020 financial results and provided an update on business conditions in light of the COVID-19 pandemic. Although rising COVID-19 cases have caused occupancy numbers to plateau, promising leisure travel and reopened sales centers provide optimism.

“The COVID-19 pandemic continues to severely impact our business and create nearer-term uncertainty,” said Stephen P. Weisz, president/CEO, Marriott Vacations Worldwide. “However, beginning in late May, we saw our resort occupancies quickly build in states where restrictions had been lifted, illustrating the resilience of our customers and our leisure-focused business model. With occupancies returning, we have already reopened approximately 70% of our sales centers and are very encouraged as sales start to return. With results improving, we now expect cash flow in the second half of the year to be positive.”

Weisz noted that leisure travel drove the initial recovery, especially in its Florida, South Carolina, mountain region markets, and in Caribbean markets like St. Thomas, St. John and Aruba. A market that has not bounced back however is Orlando, which represents almost 20% of the company’s keys. Orlando ran in the low single digits at end of May, but as theme parks reopened, occupancy spiked to 35% by July 4.

Although these numbers are promising, Weisz said that rising COVID-19 cases have caused Orlando’s occupancy to drop to 25%. “Understandably, owners are concerned about a second wave of the virus affecting their near-term travel plans,” Weisz said.

He continued with optimism, however, noting that the company has nearly 30,000 tourists scheduled for this year excluding Hawaii, with a total tour pipeline roughly the same as it was this time last year. Because of the healthy occupancy numbers in the Caribbean, Weisz expects Hawaii to follow suit. And, with increased occupancy in drive-to markets, the company expects its remaining sales centers to reopen this year.

Second Quarter Highlights and Operational Update:

  • Consolidated Vacation Ownership contract sales totaled $30 million in Q2.
  • Net loss attributable to common shareholders was $70 million, or $1.68 loss per fully diluted share.
  • Adjusted net loss attributable to common shareholders was $72 million and Adjusted fully diluted loss per share was $1.76.
  • Adjusted EBITDA reflected a loss of $10 million in the second quarter.
  • Cash and cash equivalents totaled $566 million at the end of the second quarter and the company had nearly all of its capacity available under its $600 million Revolving Corporate Credit Facility.
  • Subsequent to the end of the second quarter, the company completed a securitization of timeshare receivables, issuing $375 million of notes at an overall weighted average interest rate of 2.53% and a 98% gross advance rate, generating net proceeds of $53 million after payoff of the company’s Warehouse Credit Facility and required expenses.

Segment Results:

Vacation Ownership
Revenues excluding cost reimbursements decreased 69% in the second quarter of 2020. Growth in management fees and financing revenue was offset by a 92% decline in contract sales and a 91% decrease in rental revenues due to substantially lower resort occupancies resulting from the COVID-19 pandemic. Vacation Ownership segment financial results were a loss of $34 million in Q2. Vacation Ownership segment adjusted EDITDA was a loss of $19 million in Q2.

Exchange & Third-Party Management
Exchange & Third-Party Management revenues decreased 50% in the second quarter of 2020 primarily due to lower exchange and rental transactions due to the impact of the COVID-19 pandemic on its Interval International business. Interval International average revenue per member decreased 30% to $30.17 compared to the prior year and active members declined 7% to 1.6 million. Exchange & Third-Party Management segment financial results were $14 million for Q2. Exchange & Third-Party Management segment Adjusted EBITDA was $19 million in Q2.

Corporate and Other
General and administrative costs improved $45 million in Q2 related mainly to synergy savings and lower costs associated with the furlough and reduced work week programs, including reduced salary-related costs, as well as a $6 million credit available under the CARES Act legislation, which incentivized companies to continue paying associates’ benefit costs while not working.

Operational Update to COVID-19
The company has begun reopening its resorts and sales centers.

  • In its vacation ownership business, eight of the company’s sales centers were open as of the end of Q2 with an additional 34 sales centers having since reopened.
  • In its Interval International business, fewer than 240 resorts remain closed today.
  • The company has 40% of its associates still on furlough and 16% on reduced work week or reduced pay. Of the associates who have returned from furlough, 80% are in the resort operations area.
  • Share repurchases and dividends continue to be temporarily suspended.

Balance Sheet and Liquidity
On June 30, 2020, cash and cash equivalents totaled $566 million and the company had $47 million of gross notes receivable that are eligible for securitization. The company had $4.6 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the second quarter of 2020, an increase of $0.5 billion from year-end 2019. This debt included $2.7 billion of corporate debt and $1.9 billion of non-recourse debt related to its securitized notes receivable. During the second quarter of 2020, the company issued $500 million of senior secured notes and repaid the entire outstanding balance on its Revolving Corporate Credit Facility. Subsequent to the end of the second quarter, the company completed a securitization of timeshare receivables, issuing $375 million of notes at an overall weighted average interest rate of 2.53% and a 98% gross advance rate, generating net proceeds of $53 million after payoff of the Company’s Warehouse Credit Facility and required expenses.