Marriott Vacations Worldwide's (NYSE:VAC) Decelerating Rates Of Return: A Closer Look

Marriott Vacations Worldwide (NYSE:VAC) has been facing a deceleration in its rates of return, as indicated by its Return on Capital Employed (ROCE) of 6.2%, which is below the Hospitality industry average of 9.1%. This article aims to provide a closer look at the factors contributing to VAC's lower ROCE and discuss the potential implications for investors.



1. Lower Profitability: VAC's profit margin of 6.36% is lower than the industry average of 9.1%. This lower profitability contributes to a lower return on capital employed (ROCE). For instance, in the last 12 months, VAC's net income was $203.00 million, which is lower than the industry average.
2. Higher Capital Employed: VAC has a higher amount of capital employed compared to its peers. As of the latest data, VAC's total assets were $9.7 billion, which is higher than the industry average. This higher capital employed, without a proportionate increase in profits, leads to a lower ROCE.
3. Lower Asset Turnover: VAC's asset turnover ratio is 0.33, which is lower than the industry average. This indicates that VAC is not efficiently utilizing its assets to generate revenue, contributing to a lower ROCE.
4. Higher Debt Levels: VAC has a higher debt-to-equity ratio of 2.24 compared to the industry average. This higher debt level increases the cost of capital, which in turn reduces the return on capital employed.

These factors combined contribute to VAC's lower ROCE compared to its industry peers. However, it is essential to consider the company's unique business model and the competitive landscape in the Hospitality industry.



VAC's competitors in the Hospitality industry, such as Marriott International (MAR) and Hilton Worldwide Holdings (HLT), have ROCEs of 10.5% and 9.8%, respectively. These companies have been able to maintain higher profitability and more efficient capital utilization, contributing to their higher ROCEs. Some key drivers of their success include strong brand recognition, effective cost management, strategic expansion and acquisitions, successful implementation of technology and digital initiatives, and effective revenue management strategies.



In conclusion, Marriott Vacations Worldwide (NYSE:VAC) has been facing a deceleration in its rates of return, primarily due to lower profitability, higher capital employed, lower asset turnover, and higher debt levels compared to its industry peers. While these factors contribute to VAC's lower ROCE, it is essential to consider the company's unique business model and the competitive landscape in the Hospitality industry. Investors should carefully evaluate VAC's prospects and consider the potential impact of regulatory and competitive pressures on the company's financial performance.