Timeshare giants: ILG's new heft
Acquisitions have made the company a player to be reckoned with.
One of the biggest developments in the evolution of the timeshare industry was the emergence of “exchange companies,” which wove together networks of timeshares from different locations and allowed owners to swap their week in one place for a week somewhere else.
The first big exchange appeared in Indianapolis in 1974. Founded as a network for condo owners called Resort Condominiums International, it is known today as RCI and is part of the Wyndham Worldwide empire.
The second big exchange firm — Interval International — surfaced two years later in Miami, founded by attorney Tom Davis and real estate developer Mario Rodriguez. Like RCI, Interval made its money in two ways: Resorts paid membership dues to belong to the exchange network, and individual owners who used it paid exchange fees.
Over 20 years, Interval International passed through half a dozen owners, eventually becoming a division of Barry Diller’s USA Networks and getting spun off in 2008 as a stand-alone company called Interval Leisure Group (ILG) — just months before Lehman Bros. Collapsed and the global recession hit full force.
“It was an interesting time for us to basically be thrown into the deep end of the pool,” says Craig Nash, a Florida State University alum who joined ILG in 1982 as the company’s legislative counsel. He’s now chairman, president and CEO.
The recession exposed one of ILG’s biggest vulnerabilities: The company had generated $360 million in revenue in 2007, and 88 cents of every dollar came from its original vacation exchange business.
That was problematic because during the recession all of the major timeshare developers cut back on sales to new buyers, focusing instead on more efficient sales to their existing owners. Fewer sales to new buyers meant fewer new members for ILG’s network.
Adding to the challenge, all the big timeshare developers had moved to points-based networks of resorts that functioned just like exchange networks. It wasn’t all that clear how much demand there would be down the road for independent exchange providers.
In response, Nash and his team intensified a diversification push that has transformed the company into one of the largest, most diversified timeshare businesses in the world, with a stable of top brands — including Hyatt, St. Regis, Westin and Sheraton — and nearly $7 billion worth of expected sales inventory in its pipeline.
The May 2016 acquisition of Starwood’s timeshare business, in particular, was “company transforming,” Ian Zaffino, an analyst with Oppenheimer, wrote in a recent note to investors. “It could firmly ensconce ILG in the uppertier of the upscale vacation-ownership development industry and afford it a stronger, more competitive platform to drive growth.”
Perhaps most importantly, getting into the timeshare development business ensures ILG will have more control over its fortunes. The Starwood and Hyatt deals meant that ILG now owns or manages about 25% of the Interval exchange network, corporate members who are automatically renewed by the developer.
“In all of our other businesses, we’re intermediaries where others control the content,” Nash says. “In this case, we control the content and the brands.”
ILG (Nasdaq: ILG)
» Headquarters: Miami
» Employees: 10,000
» CEO: Craig M. Nash
» Revenue: $708.2 million (2015)
ILG acquires a condo-rental business in Hawaii called Aston Hotels & Resorts.
ILG adds Trading Places and Vacation Resorts International, turning itself into the largest U.S. manager of “legacy” timeshares (older, independent resorts no longer controlled by a developer).
ILG establishes VRI Europe, a management joint venture in Europe and acquires Aqua Hospitality. For a time, ILG was the largest provider of transient-rental condo units in Hawaii.
ILG acquires the timeshare division of Hyatt Hotels for $225 million.
ILG completes a $1.5-billion acquisition of the timeshare division of Starwood Hotels & Resorts, which is now called Vistana Signature Experiences. Starwood shareholders own more than half of ILG after the deal closes in May 2016.