While the hospitality industry at large is growing on both a consumer and business level, the world of timeshares may be even better. Marriott Vacations Worldwide (NYSE:VAC), one of the industry's biggest players, is poised to continue rising on both industry trends and competitive advantages. The company is seeing higher contract sales and development margin, even while tours of properties (where sales are sourced) in the core U.S. market fell year over year in its first quarter. The time-share-only Vacations Worldwide stock has gone nowhere but up since spinning off from parent Marriott International in late 2011 -- appreciating more than 215% in value. Investors are likely due for even more gains. 

The advantages of vacation ownership
Many shudder at the thought of being in a small vanilla room, lured by the promise of free tickets to Disney World if you listen to just one simple presentation, but that's how the timeshare business works -- and it does work. These are marketing-oriented businesses with a proven track record of converting leads on the back of sales gimmicks. Timeshares fit the economic climate: Compared to owning a vacation home, they are maintenance-free, relatively low-cost leisure options that allow customers a variety of locations in which to spend their travel time.

A key to the business is consistent new customer generation, as turnover can be high. Marriott Vacations is addressing this via new locations and greater outreach programs. While the aforementioned tour numbers were down in the U.S., the company is gaining traction with new customers as evidenced by a higher value per guest. VPG rose 6.5% in the past quarter, making for a two-year gain of nearly 18%.

Value per guest is a great metric to watch for timeshare businesses, as it's essentially a unit measure of sales efficiency. While a retailer may look at sales per square foot or comparable sales, this metric looks at the sales volume for a given period divided by the number of groups toured. In context, Marriott Vacations is showing fewer groups than it would like (part of this is weather-related from the recent quarter), but making more per tour, on average.

Contract sales get up-front cash and the customer in the door, but the fun doesn't stop there. Marriott Vacations' resort management segment makes a high-margin mint from association fees, club dues, and other areas. In the recent quarter, the segment booked a 12.5% revenue gain to $18 million.

The road ahead
Marriott Vacations' recent success is largely due to its sales and marketing efficiency. This is the single most important thing for investors to watch in timeshare earnings reports. Salespeople's ability to close prospects keeps the business moving forward. With its positive trends, management increased the low end of its guidance for free cash flow $10 million to $145 million for the full year. The high end remains at $160 million.

For a sub-$2 billion market cap, the business has an attractive free cash yield (about 8% on the high end). On top of that, an overall shareholder value-oriented management team and strong industry tailwinds points to good things in the near term and beyond. Marriott is a trustworthy, iconic name throughout the world of hospitality and leisure. The timeshare business, though a stand-alone organization, continues that trend.

Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.