Diamond Resorts Acquisition: Key Details, Impact, and What Comes Next

Hilton Grand Vacations' acquisition of Diamond Resorts marks a significant shift in the timeshare industry. This $1.4 billion transaction combines two major players, creating the largest upper upscale and luxury timeshare operator. The merger is set to enhance vacation options for owners, expand market reach, and generate substantial cost synergies, reshaping the landscape of vacation ownership.

What Is Diamond Resorts?

Founded in 1992, Diamond Resorts offers a comprehensive vacation ownership program, providing members with access to a wide range of destinations and resorts. Its core services include a points-based timeshare system, expert travel advice, and exclusive vacation packages. Diamond Resorts differentiates itself with its distinctive Hilton service, extensive destination options, and valuable membership benefits, catering to approximately 720,000 members worldwide.

Who Acquired Diamond Resorts?

Hilton Grand Vacations is a prominent leader in the vacation ownership industry, offering a points-based timeshare program that provides members access to a variety of resorts and destinations. Key services include vacation ownership membership, travel planning tools, and promotional offers. The company boasts a strong market position, leveraging Hilton's global brand recognition and high service standards. With approximately 720,000 members worldwide, Hilton Grand Vacations holds significant influence in the vacation ownership sector.

When Was Diamond Resorts Acquired?

Hilton Grand Vacations completed its acquisition of Diamond Resorts on August 2, 2021. This strategic move came at a time when the timeshare industry was witnessing significant consolidation and expansion. The merger aligns with industry trends of creating larger, more diversified portfolios to offer a broader range of vacation options. The timing also reflects Hilton's efforts to strengthen its market position and enhance shareholder value through increased efficiencies and expanded market reach.

Why Was Diamond Resorts Acquired?

• Market Expansion: The acquisition of Diamond Resorts significantly broadens Hilton Grand Vacations' market reach. By integrating Diamond's portfolio, HGV adds over 380,000 new owners and expands into more than 20 new markets, including key destinations like Lake Tahoe and Sedona, Arizona. This expansion diversifies HGV's offerings, creating a premier timeshare network with 154 resorts and 48 sales centers.
• Technology Integration: Although not explicitly detailed, the merger implies a strategic integration of technologies. HGV can leverage Diamond's innovative Events of a Lifetime® experiential platform and combine it with its own points-based deeded product. This integration aims to enhance customer experience and operational efficiency, driving incremental growth in a capital-efficient manner.
• Competitive Advantage: The acquisition positions HGV as the largest upper upscale and luxury timeshare operator. The combined entity benefits from significant cost synergies, expected to exceed $125 million within the first 24 months. Additionally, the merger introduces the Hilton Vacation Club sub-brand, offering more affordable entry points and attracting a broader customer base. This strategic combination leverages the strengths of both companies, enhancing financial performance and shareholder value.

Acquisition Terms

• Acquisition Price: Approximately $1.4 billion.
• Payment Method: The transaction was completed through a stock-based transaction. Apollo Funds and other Diamond stockholders received 34.5 million shares of HGV common stock.
• Key Conditions or Agreements:
  • The transaction was subject to customary closing conditions and regulatory approvals.
  • The issuance of HGV common stock in the transaction required shareholder approval.
  • The acquisition was unanimously approved by the Board of Directors for both companies.
  • HGV’s Board of Directors expanded from seven to nine members, with Apollo Funds having the right to appoint two directors as long as their equity ownership remains at or above 15% of the outstanding stock at closing, and one director as long as their equity ownership remains at or above 10%.
  • The combined company is expected to generate over $125 million in run-rate cost synergies within the first 24 months of operation.

Impact on Diamond Resorts

The acquisition of Diamond Resorts by Hilton Grand Vacations has led to significant changes in operations and management. The integration process involves merging Diamond's collection, owners, and sales teams into the Hilton brand, enhancing the overall service quality and operational efficiency. The management structure has also seen adjustments, with the expansion of HGV’s Board of Directors to include two new members from Apollo Global Management. This strategic move aims to align Diamond's operations with Hilton's high standards, ensuring a seamless transition and improved customer experience.

In terms of product offerings and services, the merger has expanded the vacation options available to members, introducing new destinations like Lake Tahoe and Sedona, Arizona. The launch of the Hilton Vacation Club sub-brand offers more affordable entry points for timeshare ownership, broadening the customer base. While some employees have expressed excitement about the new opportunities, customer reactions have been mixed, with some expressing concerns about changes to the points system and potential renovations. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.