For the past two years, the timeshare companies were greatly affected by the economic downturn. These companies faced the challenges of profitability and the many owners trying to get out of their timeshares. One of these companies is Wyndham Worldwide Corp. But recently, it lifted their 2010 outlooks which were spurred by signs that the industry can command higher rates and occupancies.
According to one analyst, Wyndham's reliance on its timeshare business to drive its outlook may have disappointed investors. The US lodging industry was hammered in 2009 as consumers and businesses trimmed their travel budgets, thus, hurting revenue per available room, an industry metric of profitability. Meanwhile, the trend hit luxury and upscale hotels hardest, while economy properties were more resistant.
Wyndham boosted its earnings and revenue outlook for the year, due largely to its vacation ownership unit. According to FBR Capital Markets analyst Patrick Scholes, some Wyndham investors could be turned off by the fact that timeshare gains were driving the increase in outlook. He added that compared to its two other businesses, generally, timeshare is not valued as highly.
Wyndham shares shed $1.30 to $25.33. The said company raised the low end of its 2010 revenue outlook to $3.6 billion from $3.5 billion, while leaving the high end at $3.9 billion. According to Thomson Reuters, it sees full-year earnings of $1.56 to $1.71 per share, excluding items, while analysts expect $1.60.
On the other hand, Wyndham said it would restructure its vacation ownership, or timeshare, business in late 2008 by cutting jobs and targeting consumers with higher credit scores. But now as the signs of recovery are already on sight and the owners trying to get rid of their timeshares are starting to diminish, the momentum of the company give them confidence to raise their revenue. According to Stephen Holmes, Wyndham CEO, much of the upside is being driven by vacation ownership.