Moving to ‘The Heart of The Industry’

When a company has been run as a conglomerate for decades, breaking up can be hard to do. If management fails to dedicate the appropriate pre-spinoff resources or to develop the right story for the Street, a divestiture can make markets nervous and damage both brands.

So when the board of Wyndham Worldwide decided in 2017 to split into two separately publicly traded companies, they were fortunate to find an ace like Michael Brown to lead its timeshare company, Wyndham Vacation Ownership. Brown was battle-tested, having just helped Hilton complete the successful spinoff of its own vacation ownership company.

Brown also knew the geographic terrain. Wyndham Worldwide had been based in Parsippany, N.J., pre-spinoff, but he decided Orlando would be a far better fit for the new vacation ownership headquarters, given the industry’s presence there. Brown had been living in Central Florida more on than off for decades, including more than 16 years with Marriott, and had plenty of experience with local government and universities.

As he explains in the following interview (conducted on November 2, 2018), a business-positive climate, access to talent—and balmy weather—make the region a perfect launch site for the new company.

When you joined Wyndham, did you know you’d be doing a spinoff?

I knew [a spinoff] was a strong possibility given that Marriott and Hilton had done it prior and it had unlocked a lot of shareholder value for both those companies. After more than 25 years in the hospitality industry in a variety of roles, from sales to operations, finance and development, working in the U.S. and abroad for global brands, I was excited to join Wyndham in the spring of 2017 as president of the Wyndham Vacation Ownership business unit to lead their global team. The spinoff was announced in August 2017, and it created the new company Wyndham Destinations with two focused business lines: the largest vacation ownership company with $2.2 billion of sales annually, 221 resorts and 880,000 owners; and the world’s largest vacation exchange business, RCI, with 3.8 million members generating $955 million of EBITDA, which will convert about 60 percent to free cash flow for return to shareholders. When it was completed on June 1 of this past year, and we re-branded to Wyndham Destinations, I was excited to then be 100 percent focused on the vacation ownership business. [Our 3rd quarter call was the first time] we got to speak to investors just about our operating results, and not about separating the two companies.

Those must have been some enjoyable calls given your recent numbers?

Yes, it was a phenomenal quarter. We delivered on all our key operating metrics, and we’ve been very concise in what our objectives were, both prior to the separation and after. The market did not know us as a leadership group or have a track record on us or know how we would perform, so, candidly, there was skepticism that we could deliver on the promises we were making. November marked our first full quarter of earnings and we were able to communicate great results, hitting all our key operating metrics, delivering top and bottom line results and returning a lot of cash to shareholders. To give you an idea, since we completed the spinoff, we’ve returned 7 percent of market cap to shareholders in the first five months. That percentage changed [after results announcement] because market cap went up 19 percent the day of our Q3 earnings call, but when we started the day, it was 7 percent to shareholders in five months. We spoke to a few shareholders that day and they were very happy.

(Update: on Feb. 26, Wyndham reported fourth quarter numbers, including an increase in net revenue of 3 percent to $956 million and gross VOI sales grew by 5 percent to $564 million. The board also authorized a 10-percent increase in the quarterly dividend.)

As CEO, what is the biggest difference between your role during a divestiture vs. post-spinoff? Is one harder than the other?

Once the spin-off of the hotel business was announced, I knew there were two key focus areas. First, the business needed to continue to run and perform as it had always done and secondly, the two businesses needed to separate in a way that we were fully operational on day one of being a new company. Our teams did a phenomenal job and we achieved both of those efforts. As a new company, our strategic goals for the business were to develop a sharper focus on our core business and growth opportunities and position us to create shareholder value wherever possible. Following the spin, Wyndham Destinations has significant scale and a leadership position within our industry, along with strong cash flow, a rich portfolio of trusted brands, and the existing relationships in place to drive attractive growth and shareholder value.

Now, as a pure play company, I have the privilege of leading our talented global team of 25,000 associates with a clear strategy. Our company’s vision is to put the world on vacation. We are a hospitality company, and we believe strongly in being a company with heart. Our nearly one million owners look to us to provide unforgettable family vacation experiences and memories, year after year, and we have a strong focus on delivering on that promise. One of our strategic pillars is customer obsession—that means ensuring that everything we do, at every level of the business, keeps the customer at the center of focus at all times.

Why did you decide to move Wyndham Destinations’ HQs to Orlando?

When Wyndham Worldwide was a conglomerate serving in a number of business lines, the idea of being in Parsippany was right, but when you look at the overall goal for a separation, it’s always to create clarity in the market for what a business is all about and unlock shareholder value. Investors today want to invest in a business with a singular vision and now we have that around vacation ownership. The heart of that industry is in Orlando and always has been. If you were to draw a five-mile radius around our office, you’d hit every major time-share brand in the world. So it made sense to relocate to Central Florida where the home of the industry really is.

Second, the vacation exchange business, RCI, is all about serving the affiliate members, so we’re better able to do that from Orlando. It just made sense. Add that to the fact that Orlando is a vibrant, growing community, and has great support from Orange County government. Once you get beyond the obvious choice of it’s the home of vacation ownership, it checks all the other boxes that are very important to us—high tourism, great support from local government and business community, improving infrastructure, and a tremendously vibrant and diversified workforce that allows us to meet our growing needs.