Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. MARRIOTT VACATIONS WORLDWIDE Corp (1524358) 10-K published on Feb 23, 2017 at 12:34 pm
Reporting Period: Dec 29, 2016
Our business and the vacation ownership industry are particularly affected by negative trends in the general economy, and the recovery period in our industry may lag behind overall economic improvement. Demand for vacation ownership industry products and services is closely linked to a number of factors relating to general global, national and regional economic conditions, including perceived and actual economic conditions, exchange rates, availability of credit and business and personal discretionary spending levels. Weakened consumer confidence and limited availability of consumer credit can cause demand for our vacation ownership products to decline, which may reduce our revenue and profitability. Because a significant portion of our expenses, including personnel costs, interest, property taxes and insurance, are relatively fixed, we may not be able to adjust spending quickly enough to offset revenue decreases. Adverse economic conditions may also cause purchaser defaults on our vacation ownership notes receivable to increase. In addition, adverse global and national economic events, as well as significant terrorist attacks, are likely to have a dampening effect on the economy in general, which could negatively affect our financial performance and our stock price.
In September 2016, Marriott International completed its acquisition of Starwood. While the acquisition does not impact our rights under the License Agreements, we cannot predict whether changes in the operations of Marriott International that result from the acquisition over time may impact our business. For example, Marriott International announced in September 2016 that it is permitting Marriott Rewards members to link their Marriott Rewards and Starwood Preferred Guest accounts and to transfer points between the two programs. If Marriott International pursues further integration of these loyalty programs, Marriott International may seek changes to the License Agreements. Any changes to the License Agreements could unfavorably impact our business. In addition, our relationship with Marriott International could be adversely impacted by negotiations regarding potential changes to the License Agreements.
Some of our rental customers book their stays at our resorts through third-party internet travel intermediaries, such as expedia.com, orbitz.com and booking.com, as well as lesser-known and/or newly emerging online travel service providers. If the percentage of bookings through these intermediaries increases, they may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to commoditize lodging by increasing the importance of price and general indicators of quality (such as “three-star property”) at the expense of brand identification. These intermediaries also generally employ aggressive marketing strategies, including expending significant resources for online and television advertising campaigns to drive consumers to their websites. Additionally, consumers can book stays at our resorts through other distribution channels, including travel agents, travel membership associations and meeting procurement firms. Over time, consumers may develop loyalties to these third-party reservation systems rather than to our booking channels. Although we expect to derive most of our business from traditional channels and our websites (and those of Marriott International and the Ritz-Carlton Hotel Company), our business and profitability could be adversely affected if customer loyalties change significantly, diverting bookings away from our resorts.
From time to time, the several banks and other financial institutions or entities from time to time parties to the Revolving Corporate Credit Facility, JPMorgan Chase Bank, N.A., the administrative agent under such facility, Bank of America, N.A. and Deutsche Bank Securities Inc., the co-syndication and co-documentation agents under such faculty, or any of their affiliates may have performed, and may in the future perform, various commercial banking, investment banking and other financial advisory services for us for which they have or will receive customary fees and expenses. In particular, some of these financial institutions or their affiliates participate, or may in the future participate, in the Warehouse Credit Facility and may also have participated, or may in the future participate, in our vacation ownership notes receivable securitization transactions.
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-01, which revises the definition of a business to assist entities with evaluating when a set of transferred assets and activities constitutes a business. Under ASU 2017-01, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities is not a business. Determining whether a set of transferred assets is a business is critical because the accounting for a business combination differs significantly from that of an asset acquisition. In addition, the definition of a business also affects the accounting for dispositions and the identification of reporting units. It also may affect how an entity applies consolidation guidance. The update is effective for public companies for annual periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted. Our early adoption of ASU 2017-01 in the fourth quarter of 2016 did not have an impact on our financial statements or disclosures. We expect that new guidance will likely result in more of our real estate acquisitions being accounted for as asset acquisitions, with related transaction costs capitalized, rather than business combinations.