As younger travelers discover the timeshare experience, many prefer it over vacation rentals because of convenience, better food options, prime locations, and luxurious amenities.
Some travelers find rental services like Airbnb (ABNB 1.09%) much more risky, and view vacation rentals as requiring excessive research, preparation, and a "do-it-yourself" attitude. Sometimes that can take the fun right out of a vacation.
With the leisure travel market anticipated to hit $1.7 trillion by 2027, let's take a look at two travel stocks in the timeshare industry -- and how each is positioned for the future.
1. Marriott Vacations Worldwide
Marriott Vacations Worldwide (VAC 1.30%) operates more than 120 vacation ownership resorts across the globe. The company's diversified portfolio of brands covers timeshare stays that range from family friendly to high-end luxury.
Entering the timeshare space in 1984, Marriott (MAR -0.91%) was the first hospitality brand of its kind to take business in that direction. Marriott's timeshare business grew to the point that the division was spun off in 2011 to become its own entity, Marriott Vacations Worldwide. Now boasting roughly 700,000 owner families, Marriott Vacations has emerged as a leader and innovator in the travel industry.
Now, to capitalize on recent pent-up demand for leisure travel, the company has launched Abound by Marriott Vacations. Targeting millennials specifically, this new owner benefit program provides access to over 90 exclusive resorts, 8,000 hotels, and 2,000 vacation homes.
Investors should pay close attention to the success of Abound and whether other timeshare companies launch similar programs.
According to Executive Vice President Lori Gustafson, Marriott Vacations Worldwide is currently booking up to 90% occupancy at all of its resorts. Vacationers are definitely getting back out there. In fact, the company just posted $506 million in contract sales for the second quarter, a 40% increase year over year.
Image source: Getty Images.
2. Hilton Grand Vacations
Hilton Grand Vacations (HGV 0.12%) develops and operates a portfolio of high-end vacation ownership resorts. With more than 150 properties, Hilton Grand Vacations offers leisure-filled stays in the continental U.S., Hawaii, Europe, and the Asia-Pacific region.
Although Hilton (HLT -0.83%) broke into the timeshare game in 1992, eight years after Marriott, the company soon made its mark. Hilton's timeshare division differentiated itself with innovative and flexible timeshare offerings, allowing owners to easily alter bookings and maximize their membership experience.
Still one of Hilton's 18 "distinct hotel brands," Hilton Grand Vacations was spun off in 2017 to become its own business. As a result of Hilton Grand Vacations' flexible timeshare options, the Orlando, Florida-based company now retains over 720,000 owners.
Also focusing on younger travelers, Hilton Grand Vacations is adapting its offerings to cater to millennial and Gen Z customers. Senior Vice President Gordon Gurnik describes the Gen Z jet-setting mindset as seeking "affordable, safe, and unforgettable experiences."
To accommodate this emerging customer segment, Hilton Grand Vacations plans to offer safer travel experiences with added peace of mind, more authentic local experiences, memorable adventures, and cost-sharing options. In Q2 of this year, the company posted $617 million in contract sales -- a 105% increase from the same period in 2019.
Which travel company is the better buy?
To gauge whether Marriott Vacations Worldwide or Hilton Grand Vacations is a better buy, let's compare market capitalizations, price-to-earnings ratios, and price-to-sales ratios. Although Airbnb is in a league of its own, it is also listed for comparison's sake.
| Metric | Marriott Vacations Worldwide | Hilton Grand Vacations | Airbnb |
|---|---|---|---|
| Market capitalization | $5.0 billion | $4.1 billion | $71 billion |
| Price-to-earnings ratio | 22.6 | 13.9 | 60.5 |
| Price-to-sales ratio | 1.14 | 1.17 | 9.62 |
Data source: E-trade, quarterly earnings reports.
Since the two companies' price-to-sales ratios are nearly identical, a much lower price-to-earnings ratio makes Hilton Grand Vacations the better buy over Marriott Vacations Worldwide.
Long term, the fate of the timeshare industry will depend on whether companies can appeal to younger generations as successfully as they have to baby boomers. The leaders will be those companies that can best attract younger vacationers.
