Hilton Grand Vacations CEO on Diamond acquisition: it 'really sets us up for recovery'

Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi speak with Hilton Grand Vacations CEO Mark Wang about the company's $1.4 billion Diamond Resorts Acquisition, and timeshare industry outlook.

Video Transcript

JULIE HYMAN: We were just talking about the reopening trade and how that's affected, say, hotel and lodging REITs. We want to talk about the timeshare side of that business as well. Shares of Hilton Grand Vacations up 29% this year on anticipation for reopening. And the company just made an acquisition, buying Diamond Resorts International. It's a timeshare company owned by Apollo Global Management, the deal worth about $1.4 billion.

Mark Wang, the CEO of Hilton Grand Vacations, the CEO and President, is joining us right now. Mark, thanks for being here. Talk to me about the timing of this deal. Is this in anticipation of a lot more people getting out there and traveling over the course of this year?

MARK WANG: Yeah, sure. First, we're very confident in the leisure recovery, and we're seeing very, very positive trends. We just-- I just reported a couple of weeks ago on earnings call our reservations are up 100% over the last 60 days versus the last 60 days in 2020, and those trends continue now. So I think as the broader distribution of vaccine continues, we're going to see a significant rebound in leisure travel.

And-- and this-- this opportunity really sets us up for this recovery. When you think about this acquisition, you know, we're in the business of providing great vacation experiences, and with Diamond, the largest independent timeshare operator out there, we're going to add 92 properties, a lot of great drive-to properties, and we'll combine those with our 62 properties. So we're going to have a great footprint, especially around domestic leisure.

BRIAN SOZZI: Mark what are your plan-- are you going to rebrand Diamond Resorts? How do you think about the integration of the asset?

MARK WANG: Sure. No, great-- great question. That's where we can bring significant value. We have this iconic brand with Hilton Grand Vacations, and we're going to be rebranding the Diamond portfolio. It'll take a couple of years to get the rebranding completed.

But when you think about the power of putting the Hilton brand on and connecting it to the Hilton [? engine, ?] it will, number one, create a tremendous amount of credibility. It'll allow us to attract customers, higher-quality customers than Diamond was able to attract. And we think the performance of the combined entity is going to be very powerful.

JULIE HYMAN: And when you're talking about that acquisition, Diamond is a little bit more targeted sort of younger timeshare users. I think, you know, the sort of stereotypical idea of a timeshare buyer is on the older end of the spectrum. So is this an explicit effort to appeal to younger buyers? And is it-- is it going to be successful? How-- how well do you think you're going to do with that?

MARK WANG: Look, one of the benefits with Diamond and what we're planning to do is we're going to be-- we're launching a new brand called Hilton Vacation Club. And Hilton Vacation Club will be positioned just below Hilton Grand Vacation Club, which is an upper upscale brand. And Hilton Vacation Club will be an upscale brand. And the entry price points are significantly lower, about $20,000 lower to-- to enter the system.

And so our goal is to capture these customers in a earlier part of their life cycle. And-- and that's-- when you look at Diamond's success over the last couple of years, they have been driving a higher percentage of millennials than we have. And so we see this as an opportunity over the long term to-- to widen-- widen our ability to attract new customers and provide great vacation experiences.

MYLES UDLAND: And you know, Mark, you talked about some of those rebounding trends that-- that you're seeing in your bookings already. And I'm just curious-- as you look forward over the next several years of what consumers want with their travel, I'm curious how much you're thinking about the way things were in '18 and '19 and the kinds of changes the industry was seeing then. Do you think some of those changes have kind of been, you know, permanently embedded in the space, or did some of those fads go away after COVID and just where you guys see things headed as we hopefully normalize here through the next decade.

MARK WANG: No. No, great question. And I think one thing that we're seeing is I think there's a much better appreciation for the type of product that we're providing out there. When you think about our units, 90% of our units are one or two bedroom with parlors and [INAUDIBLE], tremendous amount of space when you think about the full kitchens in the units, laundry facilities in the units.

I think there's a big appreciation for providing more space. And-- and our-- our, you know, the quality of our product, when you look at the quality of our product and the experience that the customers are enjoying, I think when you combine all of that together with the CleanStay Program that we've developed with-- at Hilton Grand Vacations, people are very comfortable in the environment that we're providing.

JULIE HYMAN: And speaking about being comfortable in the environment, what are you guys doing about potential COVID cases? What has been your policy? I know we've heard-- we've seen some stories of-- of various competitors who might say if you get COVID while you're with us, we'll fly you home or we'll give you some extra time to stay. How are you approaching those kinds of questions?

MARK WANG: Well, those are-- we've-- we've been very, very careful in protecting the environment at our properties with our CleanStay Program. And in a COVID-- in a COVID situation, these are one-offs, and we're working with each one of our customers if that should occur. But we're not having many of those occurring, and the trends are way down. So you know, we've been very fortunate, I think. Our teams have done a great job during this period of time protecting themselves and protecting our customers.

JULIE HYMAN: Mark Wang is Hilton Grand Vacation CEO and President. Thanks for being here, Mark. Appreciate it.