Fairfield, RCI to rejoin

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Cendant Corp. issued a long, highly technical press release yesterday that mostly addressed the ongoing problems in its Travel Distribution Services division. Buried in the release was a short announcement that affects the structure of the four new companies to be created next year out of the current Cendant organization. In the original October announcement of the split-up, the new Hospitality company was slated to include the Fairfield Resorts and Trendwest Resorts timeshare development, marketing and ownership units but not the RCI timeshare exchange and services division or the Vacation Rental Group. Perhaps illogically, RCI and VRG were slated to be part of the new Travel Distribution Services company.

In yesterday's release, Cendant switched gears and said that all of the timeshare-related businesses—RCI, vacation rentals, Fairfield and Trendwest—will now be included in the yet-unnamed new Hospitality company. Here are some thoughts on this development:

• As Cendant Chairman Henry Silverman said in way of explanation, keeping RCI and VRG out of the distribution company will free up management to focus on its significant problems. And since the hospitality group will roll out several months before distribution, "We will be able to distribute about two-thirds of our EBITDA to our shareholders more quickly," said Silverman. Of course, maybe the distribution company is the one that will need that EBITDA to keep it afloat during what will undoubtedly be a rough start for the new venture. But distributionâ€â„¢s loss is a gain for the hospitality companyâ€â„¢s bottom line.

• While it seems to make sense to unite all vacation ownership activities under one umbrella, one Cendant insider said to me at the time of the announcement that it's better operationally to have RCI separate from Fairfield and Trendwest. The reasoning is that like most of RCI's customer base, Fairfield and Trendwest are timeshare operating companies, and some of RCIâ€â„¢s clients feel—probably unfairly—that the company gives preferential treatment to its in-house cousins. I'm not sure how serious of a problem that poses for RCI, but if it is one management will need to face the issue all over again.

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