Hilton Grand Vacations Inc

Earlier this year, the Fund initiated a position in Hilton Grand Vacations (HGV), a global timeshare company that has grown to more than 200 properties and over 700,000 Club members. HGV's vacation ownership interests allow customers to advance-purchase a lifetime of stays, with a median purchase price of around $30k. The company generates over $750mm of adjusted free cash flow in 2025, translating to a high teens FCF yield on the current market cap. HGV has been repurchasing stock aggressively, planning to reduce its share count by 15% this year. Given expectations for free cash flow to keep growing, HGV has the potential to generate close to its entire current market cap in free cash flow over the next five years.

We re-initiated a position in Hilton Grand Vacations (HGV), the market leader in the timeshare industry and a stock we have followed for a number of years. HGV has demonstrated sales resilience through multiple cycles, with nearly 60% of its segment-adjusted EBITDA coming from recurring sources. The company is trading at just 6x FCF, and management is buying back at least 15% of the company per year. This low valuation, combined with the potential for rapid earnings growth, presents an attractive investment opportunity. We believe HGV should trade at 10-15x FCF, indicating a potential IRR north of 30% at current prices.

Hilton Grand Vacations is a leading global timeshare company that develops, markets, and operates a system of brand-name, high-quality vacation ownership resorts in select vacation destinations. The company's proprietary relationship with Hilton Worldwide Holdings allows it to market exclusively to Hilton Worldwide Holdings’ 180 million Hilton Honors members, capitalizing on growing demand for travel. Recent acquisitions have broadened the company’s resort base to include properties appealing to higher-income consumers, enhancing its market position and growth potential.

Hilton Grand Vacations (HGV) is a leading global timeshare company that develops, markets, and operates a system of brand-name, high-quality vacation ownership resorts in select vacation destinations. HGV’s proprietary relationship with Hilton Worldwide Holdings allows it to market exclusively to Hilton’s 180 million Honors members, capitalizing on the growing demand for travel. Recent acquisitions have broadened the company’s resort base to include properties appealing to higher income consumers, positioning HGV for significant growth in the travel sector.

The manager mentioned Hilton Grand Vacations (HGV) in the context of reducing exposure to hospitality plays. They noted that HGV might be interesting as a re-opening trade, suggesting that stimulus checks could go towards downpayments on timeshares and that people may prioritize vacations again. However, the manager ultimately decided to sell their position to allocate funds elsewhere.