Hilton Grand Vacations' ROE Dilemma: A Test of Sustainability and Capital Allocation

The return on equity (ROE) of 4.5% reported by Hilton Grand Vacations (HGV) in 2025 raises urgent questions about the sustainability of its business model and the efficiency of its capital allocation. This figure, significantly below the U.S. industry average of 0.5% in 2023 Vacation Ownership Market size was valued at USD 11.9 billion in 2023^[1], appears paradoxical given the broader vacation ownership sector's robust growth. The global market, valued at $21.08 billion in 2025, is projected to expand at a 7.1% CAGR to $38.94 billion by 2033 Vacation Ownership (Timeshare) Market - 2025 To 2033 Report^[6]. Yet HGV's ROE has plummeted from 14.8% in 2023 to its current level, a decline that demands scrutiny.

A Tale of Volatility and Structural Weakness

HGV's historical ROE reveals a pattern of instability. Over the past decade, its average ROE was 7.48%, with extremes ranging from a high of 293.75% in 2016 to a low of -137.14% in the same year Hilton Grand Vacations Inc. - ROE^[4]. Such volatility suggests a business model prone to cyclical shocks and poor capital allocation discipline. The recent 4.5% ROE, while an improvement from the 2.52% average of the previous four quarters Hilton Grand Vacations Inc. - ROE^[4], remains far below the 10.92% trailing twelve-month (TTM) ROE as of September 2025 Hilton Grand Vacations Inc. - ROE^[4]. This inconsistency undermines investor confidence in management's ability to sustain profitability.

The decline must be contextualized within broader industry challenges. The U.S. timeshare sector, despite $10.6 billion in sales in 2023 2024 State of the Vacation Timeshare Industry^[2], faces inflationary pressures and rising maintenance fees (up 8% to $1,260) 2024 State of the Vacation Timeshare Industry^[2]. Compounding these issues, U.S. tariffs on imported smart home devices and IoT tools threaten to erode margins by increasing operational costs Vacation Ownership Market size was valued at USD 11.9 billion in 2023^[1]. HGV's failure to adapt to these headwinds—particularly its reliance on fixed-week ownership models in an era favoring points-based flexibility Timeshare Statistics and Trends: Analysis of the Industry^[5]—highlights a misalignment with market trends.

Capital Allocation: A Critical Shortcoming

ROE measures how effectively a company generates profits from shareholders' equity. HGV's weak ROE implies suboptimal capital allocation. While the company's occupancy rate of 76.8% in 2023 2024 State of the Vacation Timeshare Industry^[2] suggests operational resilience, its ability to convert this into returns has faltered. This disconnect may stem from overinvestment in low-yield assets or underperformance in high-growth segments. For instance, the sector's shift toward digital transformation and premium experiences for high-net-worth individuals Vacation Ownership (Timeshare) Market - 2025 To 2033 Report^[6] appears to have outpaced HGV's strategic response.

Comparative benchmarks further underscore the problem. The U.S. vacation ownership market, valued at $10.08 billion in 2022 U.S. Vacation Ownership Market - Industry Outlook & Forecast 2023-2028^[3], is projected to grow to $15.32 billion by 2028. Yet HGV's ROE lags behind the median U.S. industry average of 0.5% Vacation Ownership Market size was valued at USD 11.9 billion in 2023^[1], even as the global market expands. This suggests that HGV is not only failing to capitalize on macroeconomic tailwinds but also underperforming relative to peers.

Implications for Long-Term Sustainability

A low ROE signals a company's inability to create value for shareholders. For HGV, this raises concerns about its capacity to fund innovation, reward equity holders, or withstand future downturns. The company's historical volatility—marked by a -137.14% ROE in 2016 Hilton Grand Vacations Inc. - ROE^[4]—demonstrates a lack of resilience. In contrast, the sector's average occupancy rate of 80% in 2024 U.S. Vacation Ownership Market - Industry Outlook & Forecast 2023-2028^[3] and $3.2 billion in rental revenue U.S. Vacation Ownership Market - Industry Outlook & Forecast 2023-2028^[3] highlight the potential for stable cash flows when managed effectively.

Investors must also consider the broader economic environment. With interest rates remaining elevated and inflation persisting, capital-intensive industries like timeshare ownership face higher hurdle rates for profitable investments. HGV's inability to generate ROE above its cost of capital—a critical threshold for long-term value creation—suggests a misalignment with these realities.

Conclusion: A Call for Strategic Reassessment

Hilton Grand Vacations stands at a crossroads. Its 4.5% ROE, while modestly improved from recent lows, remains a stark contrast to the sector's growth trajectory. The company's historical volatility and structural misalignments with market trends—particularly in capital allocation and product innovation—pose significant risks. For HGV to regain investor trust, it must demonstrate a clear strategy to enhance ROE through disciplined capital deployment, digital transformation, and alignment with consumer preferences for flexible ownership models. Until then, the sustainability of its business model remains in question.