February 28, 2024

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

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

Marriott Vacations Worldwide Corporation VAC is likely to benefit from digital initiatives, vacation ownership business and robust contract sales. Also, the emphasis on Abound program bodes well. However, inflationary pressures are a concern.

Let’s delve deeper into the factors highlighting why investors should retain the stock for the time being.

Growth Catalysts

Marriott Vacations emphasizes on increasing the use of digital tools to strengthen its infrastructure, grow online package sales, enable self-service bookings, make real-time offerings to enhance the overall customer experience and drive back-office efficiencies. Management is optimistic about integrating further data analytics into its marketing strategy. The company continues to use technology to lower back-office costs and improve associates’ experience by leveraging artificial intelligence to augment and automate many high-volume internal transactional processes. Also, the company is making good progress on the technology needed to link Marriott, Westin and Sheraton products into a single points-based offering. The initiative brings the respective vacation ownership products together, allowing users with more destinations and flexible usage options across the Marriott-branded portfolio.

During the third quarter of 2022, the company rolled out Abound by Marriott Vacations (comprising Marriott-branded vacation ownership products) at most of its Marriott, Sheraton and Westin sales centers and reported positive owner feedback on account of the same. The program focuses on unifying Marriott branded vacation ownership products by providing access to more than 90 branded resorts (including Marriott Vacation Club, Sheraton Vacation Club and Westin Vacation Club) using a common points currency. It also offers access to more than 8,000 Marriott Bonvoy hotels, 2,000 vacation homes and 2,000 unique experiences (like cruises, guided and culinary tours, premiere events and outdoor adventures). The program harmonizes fee structures and owner benefit levels and allows the transition of sales galleries to sell Marriott Vacation Club Destinations products. The company intends to leverage the program with technological investment to drive growth in the upcoming periods.

Marriott Vacations focuses on high vacation ownership business to drive growth. In April 2022, the company rebranded Welk’s points program as the Hyatt Vacation Club Platinum program and allowed the conversion of Welk sales centers to sell Hyatt-branded vacation ownership products. The Platinum program includes expanded vacation benefits and access to a collection of upscale resorts. It stated that initiatives concerning Welk owners with the ability to trade their points for World of Hyatt points are in the pipeline. VAC focuses on its partnership with Interval International to provide its members with comprehensive exchange services and various other benefits that offer value and convenience. During the first quarter of 2022, the company renewed its agreement with Westgate Resorts, extending its tenured affiliations for another five years. Given the growth in the tour package pipeline, the company anticipates the initiative to drive tours and sales in the upcoming periods.

Marriott Vacations continues to witness robust recovery during third-quarter 2022. While occupancies and tours are witnessing growth in the third quarter, Volume per guest (or VPG) remains well above the 2019 levels. The company reported benefits from its development and rental businesses. VAC reported contract sales of $483 million in the third quarter of 2022, up 27% from $380 million reported in the prior-year quarter. For the fourth quarter of 2022, VAC anticipates contract sales to grow 13% (on a year-over-year basis), backed by an increase in tours and strength in VPGs.

Concerns

Zacks Investment Research
Image Source: Zacks Investment Research

Shares of Marriott Vacations have gained 0.5% in the past three months compared with the industry’s 5.8% growth. The downside was mainly due to inflationary pressures. During the third quarter of 2022, total expenses in the quarter increased 12.9% year over year to $1,012 million from $896 million reported in the year-ago quarter. Escalated marketing and sales expenses and management and exchange costs affected total costs. The company anticipates the inflationary environment to affect margins for some time.

Although improvements were noted in rental occupancies because of easing travel restrictions and quarantine requirements, the company stated complete recovery to take time. Uncertainty related to pandemic-induced implications remains a concern.

Zacks Rank and Stocks to Consider

Marriott Vacations currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Monarch Casino & Resort, Inc. MCRI, Hilton Grand Vacations Inc. HGV and Hyatt Hotels Corporation H.

Monarch Casino sports a Zacks Rank #1. MCRI has a trailing four-quarter earnings surprise of 9.1%, on average. The stock has gained 20.5% in the past year.

The Zacks Consensus Estimate for MCRI’s 2022 sales and earnings per share (EPS) indicates growth of 21.1% and 29.2%, respectively, from the year-ago period’s reported levels.

Hilton Grand Vacations currently has a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 3.7%, on average. The stock has declined 6.2% in the past year.

The Zacks Consensus Estimate for HGV’s 2022 sales and EPS indicates a rise of 63.8% and 60.9%, respectively, from the year-ago period’s levels.

Hyatt currently has a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 20.9% in the past year.

The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates a surge of 91.9% and 121%, respectively, from the year-ago period’s reported levels.

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