Marriott Vacations Worldwide announced that due to quickly accelerating travel restrictions and restrictions on business operations as a result of the COVID-19 pandemic, the Company has decided to close all of its North America sales centers for two weeks effective March 23, 2020.
In addition, beginning March 25, 2020, we are closing our resorts for rental guests with stays at our branded North America vacation ownership resorts for the next 30 days, and are reducing operations and amenities at all of our resorts based on various governmental mandates and advisories.
“From Singapore to London to Hawaii, the effect on our business is both widespread and profound,” said Stephen P. Weisz, president and chief executive officer. “We have a resilient business model with nearly half of our Adjusted EBITDA Contribution coming from recurring revenue streams. While we’ve never seen anything of this magnitude, we have seen other disruptions in the past and we’ve been able to manage through them.”
As previously announced, the Company started the year off strong, with first quarter consolidated contract sales up 10% through March 13th. In addition, North America resort occupancy was above 80% for the week ended March 16th. Since then, the Company has seen marked declines in occupancy, rentals, and contract sales due to the COVID-19 pandemic. As a result, the Company is taking a number of mitigating actions, including:
- The Company’s executive leadership team is taking a 50% salary reduction.
- All new hires, with the exception of mission-critical needs, have been frozen.
- The Company is implementing furloughs and reduced work hours.
- The Company is deferring its employee 401(k) match.
- The Company has developed plans that could reduce investment on capital expenditures and inventory by up to $240 million if necessary.
- The Company has suspended share repurchases under its share repurchase plan.
“We expect that we can make the changes needed so that we can run the business at close to cash flow neutral until the business returns to a more normal level,” said Mr. Weisz. “Thanks to the resilience of our business model and the extremely difficult decisions we are making, I firmly believe that we will come through this an even stronger company.”
Balance Sheet and Liquidity
As previously announced, as a precautionary measure to ensure adequate liquidity for a sustained period, the Company drew down the remainder of its $600 million Revolving Credit Facility on March 17th to increase its cash position, bringing the Company’s current cash balance to $670 million. In addition, the Company had gross vacation ownership notes receivable of nearly $140 million that it expects to be eligible for securitization under its warehouse facility. The Company has suspended all share repurchases for now and will work with its board of directors to make decisions on future dividend payments. In addition, the Company has no corporate debt maturities until September 2022.