Marriott Vacations Worldwide (NYSE:VAC) raised its full-year contract sales and adjusted earnings outlook after a 29% increase in third-quarter contract sales helped drive a sharp improvement in development profit.
Contract sales reached $565 million, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 27% to $216 million from $170 million a year earlier. The company increased the midpoint of its 2026 contract sales guidance to $2.13 billion and its adjusted EBITDA midpoint to $820 million.
Chief Executive Officer Matt Avril said the updated earnings outlook includes an estimated $16 million in lost profits from Hurricane Lowell, which affected the company’s properties on Kauaʻi, Hawaii. The storm’s impact was not included in the guidance provided after the second quarter.
Sales Gains Boost Development Profit
Third-quarter VPG rose 30% to $4,822 from $3,700 a year earlier. President and Chief Operating Officer Mike Flaskey said the increase was driven by a $7,020 rise in average transaction size. During the question-and-answer session, he also cited a 50-basis-point increase in the close rate.
Development revenue increased 28% to $459 million, while development profit nearly doubled to $142 million from $72 million. Chief Financial Officer Jason Marino attributed the improvement to contract sales growth, lower-cost inventory repurchases and greater marketing and sales efficiency. Development profit margin was 31%.
Marketing and sales costs fell to 48% of contract sales, an improvement of 600 basis points from a year earlier. North American tours grew 4%, helped by higher connection rates with existing owners, while the company continued a deliberate reduction in Asia-Pacific tours.
Flaskey said enhancements to owner loyalty tiers contributed to a 43% increase in owner VPG. He also pointed to a sales-matching algorithm and the company’s Inner Circle events, which are designed to increase owner engagement and generate tour opportunities.
Inner Circle’s first 23 headline events generated VPGs “well north of $20,000,” Flaskey said. The company is targeting 1,000 events in 2027, with approximately 20% of them headline events and the remainder regional events.
Marriott Vacations has hired 398 sales executives in the past six months, according to Flaskey. Those hires collectively produced a third-quarter VPG of $5,036, above the companywide figure. He said September was the second-largest contract sales month in the company’s 42-year history.
Hurricane Impact and Fourth-Quarter Outlook
Marriott Vacations operates five properties on Kauaʻi, including the owned Sheraton Kauaʻi Resort. Marino said storm-surge damage is expected to keep the hotel closed for the entire fourth quarter and delay its planned sale by a couple of quarters. The company still expects to sell the property in 2027 and plans to submit a business interruption insurance claim.
Of the $16 million in estimated lost profits, $5 million occurred in the third quarter and $11 million is expected in the fourth quarter, Marino said. He added that the hotel accounts for most of the impact and is expected to resume operations early next year.
For the fourth quarter, the company forecast contract sales of $599 million to $619 million and adjusted EBITDA of $218 million to $238 million. At the midpoints, those ranges represent increases of 33% and 23%, respectively, from a year earlier.
The company expects full-year adjusted free cash flow of $420 million at the midpoint of its guidance. Marino said the largest factor in a lower cash flow outlook was the acceleration into the fourth quarter of maintenance fee obligations that otherwise would have been paid in the first quarter of next year.
Financing and Debt
The sales reserve rose to 14.8% of contract sales from 13.4% in the second quarter. Marino said the increase was driven by approximately $60 million more in financed contract sales, which led to a roughly $10 million increase in the reserve. He said underlying portfolio assumptions had not changed and that the additional financing volume should contribute to future financing profit.
Marriott Vacations ended the quarter with $2.8 billion in net corporate debt and leverage of 3.6 times, down from 4.2 times at the start of the year. Its board extended a $322 million share repurchase authorization through December 2027.
The company also said it had agreed to terminate a timeshare project in Puerto Vallarta, reducing a future inventory commitment by $46 million in 2028. Marino described the decision as a mutual agreement with the developer and said it did not represent a broader change in strategy.
Management plans to discuss its longer-term growth and capital allocation plans at an investor day on December 9 in New York.
About Marriott Vacations Worldwide (NYSE:VAC)
Marriott Vacations Worldwide Corporation (NYSE:VAC) is a global vacation ownership and leisure travel company. It develops, markets, sells, and manages vacation ownership interests, which provide customers with access to accommodations and resort experiences through points-based and deeded ownership programs. The company also operates related vacation exchange, rental, resort management, and travel businesses.
Its portfolio includes vacation ownership and related offerings under brands such as Marriott Vacation Club, Sheraton Vacation Club, Westin Vacation Club, Grand Residences by Marriott, and Aqua-Aston.
