Wyndham Worldwide CEO discusses hotel and timeshare giant's recent split

  • "Mad Money" host Jim Cramer spoke with Wyndham Worldwide Chairman and CEO Steve Holmes about his company's breakup into two parts.
  • Holmes discussed why his business can survive alongside the likes of Airbnb.
  • The CEO also shared his concerns about the default levels in timeshares.

It is not secret that Jim Cramer loves when companies engineer rational break-ups, and in the case of Wyndham Worldwide, his sentiments were no different.

Wyndham Worldwide CEO Steve Holmes told the "Mad Money" host on Thursday that the split would, indeed, be "great for the business," particularly because Wyndham's hotel and timeshare components had never truly been integrated.

"We were a very large timeshare company, and we had hotel as well, but the timeshare wasn't born from the hotel side of the business. So we had these two businesses that were never really completely connected, and over the last couple of years, we've been able to connect the dots. We call it the blue thread between the business[es]," Holmes said. "We've done things that have allowed us to get to this point, and I think that it's going to be great for the businesses."

The split is set to occur sometime in 2018, and from then on Holmes will cede his duties as CEO and become the executive chairman of both entities.

Holmes' focus moving forward is redirecting the timeshare arm to draw more new customers rather than cycling through its existing owners.

"You need to have new people as owners, allow them to experience timeshare, and then they'll probably buy more," the CEO said. "More than 50 percent of the people end up buying more timeshare. So we need to get that new flow. We had moved more to just the upgrade model, now we're swinging back towards the new owners."

Holmes added that the ultimate goal in the timeshare industry is to have prospective customers seek out opportunities to purchase timeshares.

As it stands, the timeshare business operates by drawing in and teaching people about the product so that they get interested and make a purchase. Given that over 50 percent of owners are satisfied enough with their purchase to buy more, Holmes said the product is not particularly difficult to sell, but to market properly.

"The purchase price is not what it would be to go buy a cup of Starbucks, so you're talking about a $20,000 purchase price. You need to get people really interested and engaged to take that step," Holmes told Cramer.

That said, Wyndham's business is functioning well, seemingly immune to the threat of do-it-yourself listing companies like the up-and-coming (and millennial-loved) Airbnb.

"We're on the ground, feet on the ground, in markets like Denmark and Holland and the U.K., where we provide services to the owner of the home, villa, cottage, and that's a full-service approach," Holmes explained. "That's different than just the listing approach."

Holmes' chief concern about the business was the rate of default among existing timeshare owners.

"We're not happy with it. It's too high now. We need to get that down, and we've been working to get that down," he said. "The FICO scores are good, so we feel good about the customer that's entering, but we're not engaging them enough, quite frankly, and we need to get them more rabid about what they own, and that's on us to make happen and we've got a lot of things that are moving to make that happen."

Watch Steve Holmes' full interview:

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