Here’s Why Investors Should Keep Marriott Vacations (VAC) Now – July 2, 2021

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Marriott Vacations Worldwide Corporation (ACC Free Report) benefits from strong contract sales, improved occupancy rates and the focus on digitization. As a result, the company’s shares have gained 17.7% year-to-date, compared to industry growth of 4.4%. However, the coronavirus pandemic and the high spending took a toll on the business. Let’s dig deeper and analyze the factors that have had an impact on the performance of the company.

Robust contract sales

Recently, Marriott Vacations updated its outlook for the second quarter of 2021. The company continues to post a strong recovery in the second quarter of 2021. As occupancy rates and visits grow sequentially in the second quarter, VPGs remain well above 2019 levels. The company expects contract sales in the range of $ 345 million to $ 355 million in the second quarter, from an earlier estimate of $ 320 million to $ 340 million. Contract sales are expected to increase by 55% sequentially at the midpoint of the aforementioned estimated forecast.

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Gradually increasing occupancy

During the first quarter of 2021, the company recorded high occupancy rates in short-haul flight destinations. Notably, occupancy rates at resorts in Florida Beach increased in the upper 80% range, while occupancy rates at resorts in South Carolina and resorts in Colorado and Utah increased by 80% and 85%, respectively. In addition, resorts in the US Virgin Islands recorded occupancy rates of over 85% during the quarter.

During the quarter, the company also saw improved occupancy rates in states that previously lagged behind. Notably, occupancy rates in Orlando averaged nearly 60% during the quarter, with more than 75% in March 2021, or more than 20% of North American keys. In addition, the company saw a solid improvement in occupancy rates in Hawaii (excluding Kauai), following the lifting of restrictions in October 2020. Notably, occupancy rates for Hawaii have averaged nearly 70% in the past. during the quarter, with an average of nearly 85% in March 2021.

Digital innovation

Hoteliers are adopting aggressive technology initiatives to compete and respond to the changing nature of consumer demand. Marriott Vacation has also focused on digital expansion and innovation of the latest techniques. In the second quarter of 2019, the company launched its digital marketing program with Marriott, which will allow Marriott.com users to receive attractive offers and promotions. Marriott Vacations is also looking for opportunities on other social media and digital advertising platforms. Management is optimistic about incorporating new data analytics into its marketing strategy.

Concerns

Given the widespread nature of the business, Marriott Vacations has experienced declines in occupancy, rentals, and contract sales due to ‘stay at home’ recommendations (or requirements), quarantines, and reluctance. of consumers to travel.

Despite the cost synergies resulting from the acquisition of ILG, the company incurred significant expense costs. Despite limited operations in 2020 due to the pandemic, total spending amounted to $ 2,984 million from $ 3,801 million in 2019. Although total spending decreased to $ 759 million in the first quarter of 2021 from $ 1,010 million in the previous quarter, the company still sees some wage inflation and increases in general and marketing costs. In particular, escalating marketing and sales expenses as well as management and trading costs affected total costs. In the future, costs are expected to increase further due to the impact of the coronavirus.

Marriott Vacations, which shares space with Choice hotels (CHH Free report), Hilton Grand Vacations Inc. (heavyweight Free report) and Playa Hotels & Resorts NV (PLYA Free Report), carries a Zacks Rank # 3 (Hold). You can see The full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.

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