Franz S. Hanning is president and chief executive officer of Wyndham Vacation Ownership, which markets and sells vacation ownership interests and provides consumer financing to owners through its three primary consumer brands, Wyndham Vacation Resorts, WorldMark by Wyndham, and Wyndham Vacation Resorts Asia Pacific. Wyndham Vacation Ownership has developed or acquired more than 160 vacation ownership resorts throughout the United States, Canada, Mexico, the Caribbean and the South Pacific that represent approximately 20,000 individual vacation ownership units and more than 800,000 owners of vacation ownership interests.
Under the direction of Hanning, the company has posted the strongest gains among the Wyndham Worldwide business units, representing the largest contribution to its EBITDA (earnings before interest, taxes, depreciation and amortization).
Hanning joined one of the country’s largest land development entities, Fairfield Communities, Inc., in 1982 as a sales professional. He was later selected to join the company’s first exclusive timeshare resort,
Fairfield Williamsburg, and based on his outstanding sales results, was appointed sales manager for Fairfield Resorts in 1987. In 1992, after just 10 years with the company and having successfully served as sales manager, Hanning was appointed as sales vice president for Williamsburg and Myrtle Beach, Fairfield’s first destination resort. In 1996, his next promotion took him to Orlando where he servedas regional vice president of sales for that market. One year later, he assumed responsibility as vice president of sales for all of Fairfield’s 20 sales locations. Hanning continued to demonstrate effective leadership and from 1998 to 2001 served as chief operating officer for Fairfield Resorts. In 2001, culminating his nearly 20-year career with Fairfield, Hanning was named president and CEO of Fairfield Resorts upon its acquisition by Cendant Corporation.
In 2004, Hanning was named president & CEO of Wyndham Vacation Ownership (previously Cendant Timeshare Resort Group) and his role was extended to oversee the operations of Wyndham Vacation Resorts, WorldMark by Wyndham and Wyndham Vacation Resorts Asia Pacific. In 2007, Hanning marked his 25th anniversary with the company he originally joined as a sales professional. Today, he leads a worldwide staff of more than 12,500 employees. He is based at the company’s headquarters in Orlando, where he took the time to speak with Perspective Magazine North America Editor Matt McDaniel in January 2011. [member]
In 1982 you joined Fairfield as a sales representative. Did you have any idea at the time that you’d stick around for almost three decades?
Well, Matt, I think if you asked anybody who was in the timeshare business back in the early 80s – I actually started in 1980 at Marco Island – if they thought they were going to be in it for three decades, they’d tell you no.
I had been at Marco Island for about six or seven months, and I remember calling my mom and telling her I thought this would probably last a couple of years – and then I’d go out and get a real job.
When I got to Fairfield it was different because Fairfield was an established company, primarily in the land business, that was just starting out in the timeshare business … so I felt like I was in a little more stable environment then I had been. But no, the thought of doing it for 30 more years wasn’t creeping into my mind at that time.
You’ve certainly been in the timeshare industry long enough to see a lot of change. At its core, has the timeshare product changed much since the industry began?
From a physical-product, the sticks-and-bricks standpoint, yes. When I started at Marco Island there were a lot of motel conversions – timeshare was just a solution for people who had assets that they couldn’t monetize. Today, the product has changed dramatically. More purpose-built, standalone, huge resort communities are built as timesharing.
But the basic concept of delivering a lifetime of memorable vacations for people, and away for people to prepay those vacations, that hasn’t changed. Fundamentally, that’s what we do. The reason it’s been so successful for so long is that, for the most part, all of us have delivered on that promise. I see it every day – I get emails and letters from people because of the fact that the product that we sell changes people’s lives – and that’s a good thing. Everyone’s out there looking to build a better mouse trap – a better timeshare experience and a better product, and that’s evident from the great resort locations that people in the industry build and create for people today.
What’s a typical day like for you? Do you spend most of your time in your Orlando office?
Yes, although one of my responsibilities as the CEO is to get out and visit our resorts, to talk to all our people who work for the company – whether it’s sales and marketing people, or people who are delivering the great experiences that we provide on the property management side, or our consumer finance team in Las Vegas. Right now we have more than 150 resorts, so it’s difficult for me to get to every one of those resorts in a year. But I try to make it out to each, and that’s what really energizes me.
I love being in Orlando. We have what I consider to be the most talented team in the industry; we challenge each other and push each other to get better in everything that we do, whether it’s innovating our product, delivering a better experience for owners or providing career paths for our employees.
I like to be home to see my wife and my kids – I have two small children – so making travel as efficient as I can is always in the back of my mind. The balance part of it is something that people struggle with, and I’m no different from anyone else.
So is there a typical day for you?
I guess I’ve stayed around so long because there’s nothing typical about a day in our industry. There’s always something; we have a lot of employees and a very complicated business model, and now, we’re doing our Wyndham Asset Affiliation Model (WAAM), which is a fee-for-service business, so I get people calling me all the time about potential deals.
I have my meetings with my direct reports and their teams, and I certainly try to keep my finger on the pulse. I don’t consider myself a micromanager, but I’m certainly very engaged.
The relationships we have with our partners, whether it’s Harrah’s or local partners or alliances, and leveraging our relationship with the Wyndham Hotel Group – that’s all part of my job. And just like everyone else, I have a boss – he lives a thousand miles away so we keep in close contact. There’s nothing typical about my day, and that’s what I like about it.
You’ve lived in Orlando since 1996. How do you like living there?
I wouldn’t live anywhere else. When you tell people you live in Orlando, they assume you live inside one of the theme parks. Orlando’s a beautiful city, and when people fly in, they’re amazed at how many lakes there are. It’s got everything that I would look for in a place to live – there’s great neighborhoods, great weather, a fantastic airport that’s easy to get in and out of, and we’ve got the beaches an hour-and-a-half either way. There’s a lot to do. I couldn’t imagine living anywhere else.
Let’s switch gears a bit. Some people get confused about WVO’s relationships with Wyndham Exchange
& Rentals (WER) and RCI®. Could you give us the big picture and tell us how you personally interact with each?
The big picture is that we are sister companies in part of a big company, but we’re totally two separate businesses.
We’re a member of RCI and a lot of our owners utilize RCI – and just like any other company, we pay our exchange fees. I think there’s always been a perception that there’s some kind of preferred relationship – that’s 100% false. We deal with RCI just like Hilton, Disney or any other developer does.
On the rental side, WER has been expanding; it’s primarily in Europe, although they just acquired a rental business in the U.S., Resort Quest, which is their first one here. But that’s not something that’s a part of our business model at all.
I have a great relationship with [WER President and CEO] Geoff Ballotti; he’s done a phenomenal job in focusing the exchange business and being a great partner for all the companies that are affiliated with RCI.
The Great Recession hit our industry hard. How is WVO faring now? How has your business model changed? You mentioned the fee-for-service model.
If we rewind the tape back to the summer of 2008, Wyndham Vacation Ownership did right at $2 billion in sales, which no one else in the industry has come close to doing. I had discussions with Steve Holmes, chairman and CEO of Wyndham Worldwide, about where we were going to take the business, and even prior to the collapse of the credit markets we had stated publicly that we were going to start slowing the growth of the business – because, quite frankly, at $2 billion, trying to grow 12% or 14% a year isn’t a sustainable model. We could do it, but anytime you’re growing at a pace like that you’re going to have to dig deeper and deeper as far as creditworthiness of the people you’re trying to attract.
And then when the credit markets crashed, I had mixed feelings about that. I was energized because I knew it was going to give me the opportunity to right-size our business and to cut out some of the marketing programs that I knew we were not making money on. The downside of having to shrink the business was the fact that we were going to have to lay people off, and that’s always tough. But even more than having to cut our workforce, I knew this was different than anything that had happened in the industry before.
There’s a saying in the timeshare industry on the sales and marketing side that you don’t lose your people, you just lose your turn – because people tend to go from one developer to the next, and there’s always a job available. I’ve said this many times that the timeshare business is like Hotel California – you can check out anytime you want, but you can never leave. People get it in their blood and are passionate about what they do, and they want to stay in the industry. But unlike before, where people could land at another developer, there weren’t going to be those opportunities and people were going to actually have to exit the industry – and that was a sad day.
We made some tough decisions and we made them quickly. We didn’t drag it out; we knew what we had to do. We cut the top line of our business fairly dramatically, from $2 billion down to $1.3, $1.4 billion.
But the reality looking back is that was probably the best thing to ever happen to us – we became a leaner company, and we changed the business model in terms of the consumer who we were attracting. We set personal financial hurdles that people had to adhere to in terms of FICO scores, we increased the down payment amount, and we changed the profile – our goal was to talk to people who not only had the propensity to buy our product, but more importantly who had the ability to pay. Subsequently, we’ve had what I consider to be the best two years that the company has ever had. 2010 was just phenomenal, completely off the charts. Our margins have never been better, our portfolio has never been better from a performance standpoint, we’re delivering a greater experience for our owners, and we are
more strategic in terms of where our growth is going to be and where are new resorts are going to be – and the results are reflective of the things that we’ve done.
You mentioned looking for customers who not only had the propensity to buy, but more importantly the ability to pay. Would you say that trend is true for the industry on the whole?
It has to be. If you look at just the securitization market, which has come back for the public companies but not so much for the independents out there, it’s tough out there to be able to borrow money against your receivables. And it’s extremely difficult to get any type of financing for new construction.
We had to do that; we did it very quickly, and the dividends have been huge. If you look at the last term deal we did, the advance rates and interest rates that we pay are as good if not better than what we were paying before the meltdown in the credit markets. It’s a testament to a strong business model, but also to the fact that we’ve changed the profile of the people who are financing with us.
Getting back to the fee-for-service model you mentioned, we’re seeing an increase in the use of that in the industry – tell me what WVO’s philosophy is with that and how it relates to new construction initiatives.
Again, this was a byproduct of what was happening in the marketplace. You had two things: limited access to capital and a free fall in the real estate market, especially the condo market. So we started looking at deals, because even if you’re going to do $1.4 billion, there’s a minimum amount of inventory that you have to deliver every year. What we found was that there was existing standing inventory out there that you could buy for a lot less than you could build – properties for 40¢ or 50¢ on the dollar. And there were also bankers that were holding resort condo inventory that really had no chance of monetizing that inventory within any acceptable length of time. So we started thinking about what we do best: sales and marketing, management and things like that, and decided to offer our services for a fee to see if we could make it work. We knew we had a great idea, and once we got the word out the deals started lining up like airplanes coming into O’Hare.
That gave us the opportunity to be very selective – if somebody’s looking for you to help them with their project it usually means it has its own unique set of challenges, but we said yes to the ones that made sense for us from a product quality standpoint, from a location stand point, and from a deal-structure stand point. Right now we’ve announced three, and we’ve got another that we will probably announce in the next few weeks. We’re already in sales and operations in the three we’ve announced, and they’ve exceeded our expectations in terms of what we’ve been able to do.
Now that the markets have come back, it’s a different game. WAAM is going to be a part of our business model for the foreseeable future. We’ve stated publicly we think it’s going to be an important part of our business model, but we are still excited about our own projects, whether it’s completion of construction that we already have in the ground or looking at new opportunities. But the big change in the landscape is rather than us looking for a piece of land to go out and build, now we’re looking for deals that really make sense to us and where we can capitalize on the soft condo market and add high-quality inventory at a really phenomenal price – and we’ve been able to do that.
What’s next for WVO? Where do you see the company in five or 10 years?
We will continue to be the leader in the industry. We’ve developed presidential units and the Presidential Reserve product because we think that there is an appetite out there for a more elegant, more upscale experience – our owners have told us that. Maybe they don’t have the time to take more vacations but they would like a different experience, and we’ve been able to deliver that.
We are the number-one leader in urban timesharing. We felt a long time ago that our points-based system was a perfect match to the attraction that people have to go to the cities, and certainly that’s been borne out. We’ve got great resorts in metropolitan areas like San Francisco, Washington, D.C., New Orleans, San Diego and Seattle that our people just rave about. You’ll see us continue to focus on and do more with that.
From a technology standpoint, we’re focused on making it as easy as we can for people to go on vacation.
And the thing that has really separated us from everyone else is the quality of our people, and we spend a lot of time and money developing our associates and providing great opportunities for people to grow – and you need look no further than me – someone who started as a salesman and ends up CEO – to see the opportunities at Wyndham Vacation Ownership.
Our future has never looked brighter. The demand for our product is going to continue to be very strong. For Americans – certainly Western Europeans have known this for a long time – vacations need to be a birthright. Spending quality time, whether it’s with your family or just enjoying life, that’s what it’s about, and that’s what we do. Anytime you have those two things match up you have a great future ahead of you. [/member]