Timeshares tend to get a bad rap sometimes, but as a happy, long-time timeshare owner, you won’t hear anything negative from me. In fact, investors in the timeshare stock Travel + Leisure Co. (NYSE:TNL), formerly known as Wyndham Destinations, are probably not complaining either as the stock has been trending higher as of late.
The share price of Travel + Leisure rose about 6% on Wednesday after the company delivered earnings that beat consensus estimates. The stock has already gained roughly 12% year to date, which is about equal to its return for all of 2023. The question for investors now is: do you want to buy a timeshare stock?
As noted above, Travel + Leisure used to be called Wyndham Destinations under a different ticker after it was spun off from Wyndham Hotels and Resorts (NYSE:WH) in 2018. In 2021, Wyndham Destinations rebranded to the current Travel + Leisure Co. after Wyndham bought the magazine of the same name. Thus, the firm now is not just a timeshare company as it also offers media content and travel services to its members and subscribers.
Travel + Leisure owns more than 245 resorts, including the Wyndham, Margaritaville, Sports Illustrated, and Accor timeshare brands, and has more than 830,000 timeshare owners. It also owns the timeshare trading network RCI.
That short recap aside, it was the timeshare, or vacation-ownership business, that drove earnings higher for Travel + Leisure in the fourth quarter. Overall, its revenue rose 5% year over year in the quarter to $935 million, with the vacation-ownership business generating $776 million of that, a 5% increase. However, while solid, the company’s Q4 revenue slightly underperformed projections.
Net sales of vacation ownership interest (VOI) hit $410 million in the quarter, up 7% year over year. That was driven by 172,000 tours in Q4, up from 147,000 in the fourth quarter of 2022. However, volume per guest (denoted in dollars) was down 11% to $3,058, due in part to a higher mix of new owner tours.
For the full year, vacation ownership revenue was up 7% to $3 billion.
“Our core vacation-ownership business performed at or better than our expectations on every key measure, effectively leveraging continued leisure travel demand,” said Michael Brown, president and CEO of Travel + Leisure Co., in the earnings report.
The smaller travel and membership segment saw its revenue decline 3% year over year in the quarter to $158 million and drop 3% for the full year to $711 million.
Overall, Travel + Leisure’s expenses were pretty much flat in the quarter, and its operating income grew 18% to $190 million. Net income was up 43% year over year in the quarter to $129 million or $1.78 per share. For the full year, net income rose 11% to $396 million or $5.31 per share.
Partly sunny outlook with dividend raise
Travel + Leisure stock got a boost not just from the earnings results but also from the company’s partly sunny outlook for 2024. Travel + Leisure anticipates between $910 million and $940 million in adjusted EBITDA for fiscal 2024, which would be up from $908 million.
Gross VOI sales are anticipated to be between $2.25 billion and $2.35 billion in 2024, which would be up from $2.15 billion in 2023. Meanwhile, volume per guest (VPG) is predicted to be down slightly from an average of $3,128 in 2023 to between $2,900 and $3,000.
Zooming in a little closer, Travel + Leisure is targeting adjusted EBITDA of $185 million to $190 million in Q1, up from $184 million in the same quarter a year ago. The expectation for gross VOI sales in Q1 is $460 million to $480 million, which would be up from $454 million in Q1 2023. However, VPG is anticipated to come in between $2,925 and $3,025, which would be lower than the $3,215 in VPG in the same quarter a year ago.
Travel + Leisure also plans on boosting its dividend in the first quarter to 50 cents per share, up from 45 cents last quarter. It would be the third straight year of dividend increases and put the payout back at the same level it was when COVID hit. The company currently pays out a nice 4.1% yield.
Travel + Leisure is not going to shoot the lights out, but at this very cheap valuation, with a forward price-to-earnings ratio of 7.9, decent earnings potential, and a good dividend, it still has some appeal, especially in a travel industry that is poised for decent growth. The consensus price target is about $50 per share, which is 15% higher than the current price.
Thus, even if you don’t want to buy a timeshare, this timeshare stock might warrant a tour to see if it might be worth your investment. (Full disclosure: I do not own TNL stock or a TNL timeshare).
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
