Back to top

Image: Bigstock

Here's Why Investors Should Retain Marriott Vacations (VAC) Now

Read MoreHide Full Article

Marriott Vacations Worldwide Corporation (VAC - Free Report) is benefiting from robust contract sales, improvement in occupancy rate and focus on digitalization. Consequently, the company’s shares gained 17.7% year to date, compared with the industry’s growth of 4.4%. However, coronavirus pandemic and high expenses hurt the company. Let’s delve deeper and analyze the factors that have been impacting the company’s performance.

Robust Contract Sales

Recently, Marriott Vacations updated its second-quarter 2021 outlook. The company continues to witness robust recovery during second-quarter 2021. While both occupancies and tours are witnessing sequential growth in the second quarter, VPGs remain well above 2019 levels. The company anticipates contract sales in the range of $345 million to $355 million in the second quarter, up from the prior estimate of $320 million to $340 million. Contract sales are likely to increase 55% sequentially at the mid-point of aforementioned estimated guidance.

Zacks Investment ResearchImage Source: Zacks Investment Research

Occupancy Gradually Increasing

During first-quarter 2021, the company witnessed strong occupancy rates at short-haul fly-to locations. Notably, occupancy rates at Florida Beach resorts increased in the high-80% range, while occupancy rates in South Carolina resorts, and Colorado and Utah Mountain resorts rose 80% and 85%, respectively. Moreover, U.S. Virgin Island resorts reported occupancy rates of more than 85% during the quarter.

During the quarter, the company also witnessed improvement in occupancy rates in states that previously lagged the same. Notably, occupancy rates in Orlando averaged nearly 60% during the quarter, including more than 75% during March 2021 — representing more than 20% of North America keys. Also, the company witnessed solid improvement in Hawaii occupancy rates (excluding Kauai), following the lifting of restrictions in October 2020. Notably, occupancy rates for Hawaii averaged nearly 70% during the quarter, with March 2021 averaging nearly 85%.

Digital Innovation

Hoteliers are adopting aggressive technological initiatives to sustain competition and meet the changing nature of consumer demand. Marriott Vacation has also been focusing on digital expansion and innovation of latest techniques. In second-quarter 2019, the company launched its digital marketing program with Marriott, which will allow users of to receive attractive offers and promotions. Marriott Vacations is also pursuing opportunities in other social media and digital advertising platforms. Management is optimistic about integrating further data analytics into its marketing strategy.


Given the widespread nature of the business, Marriott Vacations suffered downfalls in occupancy, rentals and contract sales due to “stay-at-home” recommendations (or requirements), quarantines and the reluctance of consumers to travel.

Despite cost synergies from the ILG acquisition, the company has been bearing the brunt of steep expenses. In spite of limited operations in 2020 due to the pandemic, total expenses amounted to $2,984 million compared with $3,801 million in 2019. Although total expenses declined to $759 million in first-quarter 2021 from $1,010 million in the prior quarter, the company is still witnessing some wage inflations and general and marketing cost hikes. Notably, escalated marketing and sales expenses along with management and exchange costs affected total costs. Going forward, costs are likely to escalate further due to the coronavirus impact.

Marriott Vacations, which shares space with Choice Hotels (CHH - Free Report) , Hilton Grand Vacations Inc. (HGV - Free Report) and Playa Hotels & Resorts N.V. (PLYA - Free Report) , carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks' Top Picks to Cash in on Artificial Intelligence

In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.  

See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>