ORLANDO, FL—Hilton Grand Vacations Inc. has reported its Q2 2020 results, citing revenue loss, but the company believes its flexible business model paired with an increased desire to travel will allow it to rebound.
Among the highlights:
- Established HGV Enhanced Care Guidelines to provide owners, guests and team members with cleaning protocols and safety standards
- Began welcoming back guests, with approximately two-thirds of HGV resorts opening during the second quarter
- Successfully completed a $300-million term securitization along with amendments to the company’s credit facility and warehouse facility to strengthen near-term liquidity and long-term financial flexibility
“Over the past several months we’ve acted decisively to respond to the global pandemic, with an emphasis on protecting our owners, guests and team members, along with making critical decisions to support our business model,” said Mark Wang, president/CEO of Hilton Grand Vacations. “As we resumed operations in June, we saw our owners and guests quickly return where conditions permitted, signaling their continued desire to travel. We’re prepared to open the remainder of our properties and sales centers over the coming months and have made a number of process and organizational changes to further enhance our industry-leading efficiency as we resume full operations. While a return to truly unrestricted travel will take time, our flexible model will continue to allow us to manage our cost structure and take necessary actions to preserve our liquidity in the near term.”
Wang noted that close rates have improved for both owners and new buyers, a sign that we’re on the rise; however, the company is keeping an eye on “hot spots” around the country.
“Three-quarters of our resorts have resumed operations and we continue to monitor the situation in Hawaii, New York City and Chicago,” Wang said. These locations are heavily dependent on government restrictions and travel demand, he noted, and represent more than a quarter of tour flow from last year, with Orlando and Las Vegas representing half.
Second Quarter 2020 Results
- Contract sales in the second quarter were $35 million.
- Net Owner Growth (NOG) for the 12 months ended June 30, 2020, was 3.2%.
- Total revenues for the second quarter were $123 million compared to $454 million for the same period in 2019. Total revenues were affected by deferrals of $4 million and $34 million in the current period and the same period in 2019, respectively.
- Net loss for the second quarter was ($48) million compared to $39 million net income for the same period in 2019. Net income (loss) was affected by net deferrals of $3 million and $18 million in the current period and the same period in 2019, respectively.
- Diluted EPS for the second quarter was ($0.56) compared to $0.43 for the same period in 2019. Diluted EPS was affected by net deferrals of $3 million, or $0.04 per share, and $18 million, or $0.20 per share, in the current period and the same period in 2019, respectively.
- Adjusted EBITDA for the second quarter was ($19) million compared to $90 million for the same period in 2019. Adjusted EBITDA was affected by net deferrals of $3 million and $18 million in the current period and the same period in 2019, respectively.
In addition to the adverse impact from the closure of HGV sales centers and resort operations, the COVID-19 pandemic had the following impacts on total revenues, net income, diluted EPS and adjusted EBITDA:
- $8 million or $0.10 per share of one-time payroll related expenses incurred primarily related to payments made to team members as a result of operational closures caused by the COVID-19 pandemic
- $6 million or ($0.07) per share employee retention credit granted under the CARES Act, primarily related to payments made to employees as a result of operational closures caused by the COVID-19 pandemic
- $1 million or $0.02 per share related to the refunding of club transaction fees to accommodate guests impacted by the COVID-19 pandemic
The company has withdrawn its prior Full Year 2020 Guidance due to the increased uncertainty created by the impact of COVID-19. Prior to reopening the company’s resorts and sales centers, the company introduced the HGV Enhanced Care Guidelines. Along with providing personal protective equipment to team members, these Enhanced Care Guidelines include low-touch arrivals and departures, frequent and thorough cleaning, reduction of paper items, reduced capacity for its pool decks and fitness centers and new technologies.
The company began a phased reopening of resorts and resumption of its business activities during the second quarter of 2020, but under new operating guidelines and with safety measures. As of July 2020, the company has nearly three-quarters of its resorts and sales centers open and currently operating. However, many of HGV’s resorts and sales centers are operating with significant capacity constraints and subject to various safety measures. As HGV responds to changes in tour flow, the company intends to adjust its sales operations accordingly while complying with all applicable social-distancing rules and its own safety measures.