Wyndham Destinations investing $1B to expand urban footprint amid upheaval in hospitality industry

Wyndham Destinations is investing more than $1 billion to grow its timeshare offerings in major city centers across the U.S., an expansion that comes as the hospitality industry seeks to reinvent itself amid the explosive growth of home-sharing firms like Airbnb and changing customer preferences.

Last year, Wyndham Destinations broke off from Wyndham Worldwide, splitting the vacation exchange company and Wyndham Hotels and Resorts into two different companies. The Orlando-based firm has a 100-year licensing agreement with the chain and is banking on the brand to help sell the new resorts as it also seeks to scale up its technology offerings.

Over the next five years, the company expects to spend up to $300 million annually on growing their property offerings, as much as $25 million on modernizing sales centers and $10 million on new customer relations tools.

“We’re not looking at timeshare the way the industry has always looked at it, the way the public perception is,” CEO Michael Brown told FOX Business. “Because we are the biggest and because we generate so much cash flow, we are taking our investment and directing it towards reshaping the way not only the industry but specifically our company is viewed."

Aiding that quest is an aging population with vacation preferences that trend in the direction of what timeshares offer. Of Wyndham Destination's total membership, those born between roughly 1965 and 1994 make up 60 percent of the current ownership, the firm says.

“As the millennial has gotten a little bit older, incomes are a little higher, households have begun to form, their vacation tolerance for volatility is a little bit lower,” Brown said. “It really starts to get into our sweet spot.”

The hospitality industry is in the midst of an upheaval, as home sharing firms expand into the traditional hotel business and companies like Marriott seek to regain some of the territory lost to Airbnb and others.

While Wyndham Destinations doesn’t count the sector as a direct threat, the rise of VRBO, Homestay and others is part of a broader shift that is forcing the company to transform itself, including greater investments in locations in major metropolitan cities and larger living spaces.

“They’ve provided great support to the idea that space is the way to travel. But our owner base of 880,000 really likes that assurance of where they are going to, what they get when they check-in,” Brown said. “With our level of investment, the competition is: can we stay ahead of where the consumer is going and can we consistently find new avenues to attract customers to our ownership.”

To aid in the reinvention, Wyndham Destinations has tapped top talent from the traditional hospitality industry. Among them is former Mövenpick Hotels & Resorts CEO Olivier Chavy, who joined the firm earlier this year.

And the resort expansion will give the company a foothold in some of the most popular U.S. vacation destinations, including property in Austin and Portland, Oregon, where bookings filled up for the rest of 2019 shortly after opening earlier this year.

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The firm is expecting topline revenue growth of up to 7 percent annually, as well as up to 8 percent growth in vacation ownership.

With 75 percent of their yearly revenue reoccurring year-over-year and 14 percent annual cash flow yield, Brown believes Wyndham’s business model is largely resilient against any major shifts in economic activity.

“What we’ve seen with ownership is that when people own something they are still going to go on vacation in good times and in bad, they may change how they vacation,” he said.