Marriott Vacations CEO: Leisure travel becoming less discretionary

Marriott Vacations Worldwide CEO Steve Weisz joins Yahoo Finance Live to discuss the state of travel, leisure travel, consumer spending, inflation, rate hikes, and the outlook for summer travel.

Video Transcript

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BRIAN SOZZI: Marriott Vacations is launching a new ownership program, Abound, targeting leisure travelers, as the hospitality industry looks to capitalize on the summer season and bounce back from COVID-19. Joining us now to discuss is Marriott Vacations Worldwide CEO Steve Weisz.

Steve, good to see you here this morning. So talk us through a little bit about this program. Why now?

STEVE WEISZ: Well, thanks, Brian. Appreciate it very much. If you step back from it a little to look at it, I mean, leisure is absolutely booming. And we're very well-positioned for that because we're 100% leisure-focused with some of the greatest brands in the travel and hospitality business.

And as we have looked at it and we understand that vacations are becoming less of a discretionary decision. Many people now think that they're going to take a vacation regardless of what happens in the economy. We have gone about, over the last two years, kind of repositioning our offerings going forward to try to come up with what we think is the next generation of vacation ownership.

And as a result, we've launched an initiative called Vacations Next. And a big component of that is our Abound program which we announced this morning. And what that does is it allows the members of our three different Marriott-branded vacation clubs that heretofore have interacted independent of one another to be consolidated into one program with a single currency, the ability to be able to travel across 90 properties, et cetera. So we think with that and the relevance of vacations becoming even more important that we're very well-positioned for the future.

BRIAN SOZZI: Steve, when you look at all the incoming data in your business, are you seeing any signs of a more cautious consumer?

STEVE WEISZ: At this point in time, no. We're running some of the highest occupancies we've ever seen. And I think a lot of it has to do with the fact that we have our owners that bought the product and want to use the product. They want to be on vacation. And as a result, they're out traveling as much as possible.

In fact, if you look at our forward bookings for both the owners and our preview guests, they're up about 14% for the balance of this year over what they were at this time in 2019, pre-pandemic. So we're not seeing anything yet. Having said that, obviously we'll keep our eye on it and try to react to it accordingly.

JULIE HYMAN: When we look at the rate environment right now, Steve, what kind of effect are you guys going to see on your business as a result of that, even as you're seeing this high demand from customers?

STEVE WEISZ: Well I assume you're talking about lending rates?

JULIE HYMAN: About interest rates.

STEVE WEISZ: Interest rates, yeah. As about 60% of our customers take our financing, we have enjoyed the ability to lend at, call it an average coupon rate, of 12%, 12 and 1/2 percent. And up until recently, our cost of funds have been sub-2%. So it's been a very lucrative business.

Obviously, as the base rates go up, the spreads will tighten a little bit. And as a result, we'll see a little bit of degradation in the spread. But it's still a very, very positive and profitable business for us.

One would say, well, just raise your coupon rate accordingly. But based on the customers that we deal with, which are typically at the higher end of the spectrum, they're a little more sensitive to those high interest rates. So we have to temper whether or not we raise the rates and then, potentially, somebody says, well, I'll just write a check, versus doing it at a slightly lower rate and taking a little less spread.

BRAD SMITH: What kind of change have you seen in the customer profile, especially considering even with Abound, you look across Millennials who are looking at travel as an aspiration? But what we've also seen over these past few years is a rise in the number of rentals, excuse me, even for some of those kind of unique or niche experiences. So where does Marriott Vacations also kind of lean further into where it can bring that into the portfolio?

STEVE WEISZ: That's a great question, Brad. The way we think about it is that, by putting Abound together, we have 90 world-class resorts. We have the ability to use your points currency across 8,000 Marriott-branded hotels, 2,000 rental homes, a couple of thousand of different kinds of experiences, whether they be culinary or arts or guided tours or everything else.

We actually think this is very, very positive for folks that are looking for a variety of vacation experiences where they don't have to go outside the system to be able to take advantage of that. And that's one of the reasons why we've moved in this direction.

JULIE HYMAN: Steve, thanks for being here. Steve Weisz is Marriott Vacations Worldwide CEO. Thank you.