Q4 2019 Earnings Call
Greetings and welcome to the Marriott vacations worldwide fourth quarter and for your and conference call.
This time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Mr. Neal Goldman Vice President Investor Relations. Please go ahead Sir.
[music]. Thank you Hector and welcome to the Marriott vacations worldwide fourth quarter 2019 earnings call Conference call.
I'm joined today by Steve Wise, President and Chief Executive Officer, and John Keller, Executive Vice President and Chief financial and administrative officer.
I do need to remind everyone that many of our comments today are not historical facts and are considered forward looking statement under federal Securities laws.
These statements are subject to numerous risks and uncertainties as described in our FCC filings, which could cause future results could differ materially from those expressed or implied by our comments.
Forward looking statements in the press release that we issued last night I won't look I'll comment on this call our effective only at the time. They are made and will not be updated its actual events unfold.
Throughout the call, we will make references to non-GAAP financial information.
You can find a reconciliation of non-GAAP financial measures referred to in our remarks into schedules attached to our press suite as.
Well at the Investor Relations page and financial information page on our website at <unk> M.B.W. Si Dot com.
It's now my pleasure to turn the call back over to Steve Wise, President and Chief Chief Executive Officer, Marriott vacations worldwide.
Thanks Neil.
Good morning, everyone and thank you for joining our fourth quarter earnings call.
2019 was certainly a year of change for our organization.
From harmonizing sales practices across the business, so implementing new human resource and accounting and financial systems, we accomplished a lot.
It certainly wasn't easy and as you might expect when integrating two companies of similar size is everything didn't go exactly as planned.
But looking at our full year results with contract sales, increasing roughly 605% to $1.5 billion total company VPG, expanding by 3% and adjusted EBITDA growing 14% I couldn't be more satisfied with how the year came together.
We ended the year on a high note as well growing contract sales by 10% in the fourth quarter, driven by 9% improvement in VPG and delivering 15% adjusted EBITDA growth once again illustrating the strength of our business model.
So let's discuss how we achieved these results and our plans going forward, starting with our vacation ownership business.
As we've discussed with you in the past we spent a large portion of 2019, making changes in our sales and marketing programs and operations to capitalize on the long term opportunities. We envisioned when we acquired I LG and I believe we started to hit our stride.
As I mentioned.
We feel very deliberate 10% contract sales growth in the fourth quarter, which is right in line with what we said we would do back in November.
Looking at the components of that growth, we drove a 7% increase in sales that legacy M.B.W. with North America, VPG, improving to $3727 with first time buyers, representing a larger mix of our tours and nearly a third of our sales.
And sales growth at legacy ISL G accelerated again growing 16% in the quarter with VPG improving double digits as we made further progress narrowing the gap with legacy and BW.
Our tour package pipeline was also very strong in the fourth quarter growing 13% year over year, given that giving us a good start for 2020.
Well, we made good progress in capturing some of the revenue synergies from the acquisition I believe we still have opportunities ahead of us.
For example, while VPG at legacy I LG expanded at a low double digits in the second half of 2019, it was still more than 15% lower than legacy M.B.W. North America for the full year.
I believe we have further opportunity to close the gap and we'll continue leveraging best practices across all of our brands to drive sales.
We made good progress driving encore trials crackers at legacy Iology in 2019, one of our higher BPG channels, increasing package sales there by more than 30% last year, yet with encore penetration still below that of legacy M.B.W.. We continued to have opportunity to drive more profit.
Tours through this channel.
While we made good progress improving the tour quality at legacy Iology, we can still further optimize our channel mix as wells continue to increase the income qualifications of those we tour.
And we also kicked off some exciting new sales and marketing initiatives towards the end of last year geared towards improving first time buyer vpgs and the results have been very encouraging we look forward to continuing those efforts for all of 2020.
We're also working hard to develop new resorts for owners to enjoy while adding new flags on the map to grow sales.
Following our announcement late last year of our attention to open a Marriott vacation club property in Costa Rica, just last week, we announced our plans to develop a marriott branded resort in Waikiki.
Waikiki hosts almost 6 million visitors annually and it's a highly sought after destination by our owners.
Once constructed the new 110 unit resort, one could a mix of studio a one bedroom units and offer rooftop amenities, such as a pool bar and fitness center and as a short walk to the beach.
The resort will also include a 10000 square foot sales center, which we expect to open in mid 2022.
Consistent with our strategy, we anticipate developing the property in a capital efficient manner with a phase take down overtime. After the resort opens allowing us to begin sales before acquiring the inventory.
I'm also excited to announce that we recently finalized a long term license agreement with Hyatt.
Hi, This is a great brand with 22 million members and its world of Hyatt loyalty program that we think offers tremendous growth opportunities for the Hyatt residence club.
We've already identified a number of key locations that we think make sense to add a new Hyatt vacation ownership resort and I look forward to sharing more with you in the future as our plans come together.
Moving to our exchange and third party management segment interval International membership declined 2% sequentially from the third quarter, while average revenue per member increased 3% year over year.
And our whole recently joined our vacation ownership brands in offering it online booking platform powered by place pass. This new feature offers over 250000 activities and experiences and more than 800 destinations around the world that can be booked digitally at the lowest priced offer on lie.
This will provide interval members additional value for their membership fees.
Looking ahead I continue to be excited about the opportunity to transform all of our business is utilizing new digital tools to deliver in even more connected guest experience.
2019 was an important year for our company as we made progress developing and delivering digital offerings.
We showed early success in our vacation ownership business growing online points transactions by 23% last year, enabling our owners to transact with us more easily when and where they want it while reducing our operating costs along the way.
We also expanded our agreement with Salesforce <unk> Salesforce life late last year and are currently implementing new digital tools, which will allow us to better automate our digital marketing campaigns.
In addition, we also expanded our Wi Fi digital onsite program to more resorts last year ending the year with this program at 35 locations.
This program launched early last year, we've been able to deliver thousands of tours at a lower cost and some of our more traditional channels.
This year, we plan to deliver additional value added features and in areas of owner self servicing and Onboarding as was on property experience and education. These will include improved online points reservation capabilities and greater digital offerings for our onsite activities management and our interval international.
Business also continued to build upon its digital and mobile first strategies last year as well.
In 2019 more than 50% of all interval confirmations were booked online downloads of intervals app increased over 175% and transactional revenue on the app more than doubled.
This year, we'll see the introduction of more consumer facing digital tools and capabilities across all of our businesses, including a manou Marriott vacation club mobile app, providing benefits throughout the customer journey.
I'm looking forward to sharing our successes with you as the year progresses.
Moving to synergies, we made excellent progress last year, enabling us to increase our synergy production compared to our estimate at the beginning of year.
We achieved roughly $65 million or run rate savings by the end of 2019, and we expect to achieve at least $95 million by the end of 2020.
This puts us well on our way towards achieving at least $125 million in run rate savings by the end of 2021.
While these operating efficiencies are very important we continue to view the transaction as a way to fundamentally transform how we do business from repositioning our product offerings to modernizing systems to employing new technologies and exciting ways.
For example, we've already started employing intelligent automation to handle some of our more manual and repetitive tasks and we're utilizing advanced analytics to drive higher yielding tours.
I believe we have numerous opportunities to use technology to lower cost and drive efficiencies in our business and I look forward to discussing many of these with you on future calls.
Before moving to guidance I wanted to address the Corona virus.
The safety of our owners visitors and associates as always Paramount and we have initiated precautionary matters measures to address this rigs.
To put things in perspective Asia Pacific as they are relatively small region for us and Chinese residence represented only about 1% of our global contract sales last year.
In Asia Pacific, we've seen a small percentage of our owners rescheduling their trips this year.
We've had a relatively small number of preview package customers cancel their upcoming arrival with 97% of those customers, indicating that they are only postponing their visits.
In addition, cancellations from upcoming rental guests have been minimal thus far given our limited exposure to the region. The overall numbers at this point our aren't material to our results.
Now, let's turn to our full year outlook.
As you saw in our press release that we issued yesterday, we expect to grow contract sales by 7% to 11% this year.
Adjusted EBITDA as a test as anticipated to grow between eight and 13% and adjusted earnings per share growing 15% to 24%.
Adjusted free cash flow is expected to be between 425 million to $500 million. This year, bringing our two year free year free cash flow generation to more than $900 million at the midpoint of the range.
Our uses of free cash flow remain the same.
First we will focus on organic growth in our existing businesses.
Second we will look for strategic acquisitions and investments that can accelerate our growth and provide an attractive return.
After that we anticipate any remaining free cash flow will be a return to shareholders in the form of dividends and share repurchase.
In summary, we ended the year on a very positive note and look to build on that momentum in 2020 and with that let me hand, the call over to John.
Thank you, Steve and good morning, everyone.
Hi, too I'm very pleased with out 2019 ended as well as the progress we've continued to make on the integration and transformation of the two businesses.
Adjusted EBITDA increased 15% in the fourth quarter, driven by strong growth in our vacation ownership segment as well as benefits from our synergy efforts.
Looking first at vacate our vacation ownership segment, adjusted EBITDA increased 15% to $226 million and margin expanded by 150 basis points.
Consolidated contract sales increased over 10%, our best sales growth quarter of the year and adjusted development margin, which adjusts for revenue Reportability and other charges increased 18%.
Our adjusted development margin percentage increased 220 basis points to 25.6% driven by a higher percentage of lower cost inventory being sold and more efficient marketing and sales fat.
In our financing business after excluding the impact of purchase accounting adjustments revenues increased 13% to $72 million and financing revenue net of expenses and consumer financing interest expense increased 18%.
This growth.
Merrily reflects the higher contract sales as well as strong financing propensity consumer financing interest expense increased due to a higher outstanding debt balance, partially offset by lower interest rates on our securitizations.
The average FICO score buyers, who financed with us in the quarter remains strong at 737.
We have seen slightly higher defaults in our portfolio, mostly attributable to loans that were originated under sales and underwriting standards used by ISL G.
As we have discussed previously in order to drive sales prior to our acquisition I LG reduce down payment requirements for buyers with sub 600, FICO scores and ramped up less sufficient off premise for OPGC marketing channels with little or no income were qualifications for potential buyers.
We have eliminated or substantially improve these practices to better align with those of legacy VW and as a result, we expect defaults to improve over time with these changes.
And our rental business revenues increased 19% to $139 million and rental revenues net of Ics net of expenses decreased $2 million. This was driven by higher plus point revenues and increases in transient keys rented offset by higher inventory costs after stand up.
And our resort management and other services business revenues increased 5% while revenues net of expenses increased 14%. This growth reflects higher ancillary an exchange company activity as well as higher fees from managing our per our portfolio of resorts.
Turning to the exchange and third party management segment, adjusted EBITDA was down $5 million year over year. After adjusting the prior year to exclude the sale of the our Europe.
As we've discussed previously the majority of the year over year decline was primarily due to non renewal of certain corporate contracts last year.
Our exchange business added new affiliations across exchange network during the quarter. We also continue to add clients outside the timeshare industry to use our products as we work to identify incremental revenue streams for this segment.
As Steve mentioned, the integration of LG continues to go well and we realize $49 million and synergies in 2019, including $16 million of additional synergies in the fourth quarter.
We expect to deliver an additional $25 million to $30 million up in the year savings in 2020 and remain on track to achieve at least $125 million of run rate synergies by the end of 2021.
Moving to the balance sheet, we ended the year with cash and cash equivalents of $287 million and had roughly $567 million in available capacity under our 600 million dollar revolving credit facility.
Our total corporate debt outstanding at the ended the quarter was $2.2 billion. This excludes 1.9 billion associated with our non recourse securitized notes receivable.
From a leverage perspective, and including a $125 million of total synergy savings our debt to adjusted EBITDA ratio at the ended the quarter was 2.4 times inline with our longer term target of two to two and a half times.
We replaced our warehouse facility during the quarter, increasing its capacity to $350 million.
In addition to the higher capacity the new facility also enable enables us to monetize our Sheraton west and Hyatt branded loans, which was precluded under the old facility.
We also amended our existing term loan credit agreement, reducing the interest rate by 50 basis points saving us more than $4 million annually. This brings our weighted average cost of our corporate debt to approximately 4.7% at the end of 2019.
Regarding our return of capital in the fourth quarter, we repurchased 1.1 million shares for $123 million at an average price of $115.48 per share.
Bringing our total capital returns for 2019, including dividends to $546 million.
We generated adjusted free cash flow of 464 million in 2019, as we continue to optimize development spending and manage our investments, which we estimate benefited free cash flow by roughly $40 million to $50 million in total last year.
This excludes the majority of proceeds we generated from the securitization of notes from our Asia Pacific region, as well as more than 60 million, we generated from the sale of excess parcels and can't Coon and Colorado, both of which closed in the fourth quarter.
In summary, our fourth quarter results were strong with contract sales growing 10%, while also continuing to enter integrate and transform our business. We're excited about the changes we have already implemented and the results. We are beginning to generate particularly around technology and improved processes.
Now, let's turn to our 2020 guidance as Steve mentioned, we are targeting contract sales growth of 7% to 11% with growth coming from a combination of higher tours and continued improvement in VPG.
While these higher volumes.
Continued low product costs, and our ability to leverage fix marketing and sales cost we expect our adjusted development margin to remain strong in 2020.
And while contract sales would be the primary driver of growth in the vacation ownership segment, we expect to benefit from improvements in all parts of our vacation ownership business.
For the exchange and third party management segment active members are projected to remain relatively stable average revenue per member is projected to increase at slightly higher than inflationary levels and we have opportunities to further transform these businesses.
Longer term our strategy for these businesses continues to include diversifying beyond their traditional exchange business, increasing average revenue per member identifying and expanding benefits to exchange members and of course, focusing on adding new resorts and properties to the network.
For adjusted EBITDA, we are projecting 800 and quantify the $860 million in 2020 or 11% growth at the midpoint of our guidance.
We expect we estimate that nearly two thirds or the growth will come from our core businesses with the remainder remainder coming from incremental synergy savings.
We are targeting a run rate synergy savings to approach $95 million by the end of 2020 as we progress towards our goal of at least $125 million of run rate synergy savings by the end of 2021.
While we do not provide quarterly guidance, it's important to remember that our first and second quarters are typically never negatively impacted by unfavorable revenue reportability.
Given the normal growth in sales as a reminder, our first quarter results in 2019 were unfavorably impacted by $21 million and I would expect a similar amount this year.
Again this is only timing as the revenue will get reported as we go through the year with most of the deferral being recovered in the fourth quarter. However, it does affect the cadence of our adjusted EBITDA growth, resulting in ramping up as we progress throughout the year.
We expect our adjusted fully diluted earnings per share to increase nearly 20% at the midpoint of the range before factoring in any effect of this year or share repurchase activity.
Lastly, with these projected financial results, we are targeting adjusted free cash flow of between 425 and $500 million for 2020, highlighting the continued benefits of our capital efficient development model, coupled with attract are with the attractive cash flow pro profile of our exchange.
I'd management businesses.
This projection does assume more normalized levels of development and other capital spending as we look to achieve our 7% to 11% long term sales growth targets, we highlighted during our Investor day.
I should also note that this free cash flow guidance does not include proceeds we may generate from the non strategic asset dispositions, we first talked about during our Investor day.
It also does not include the roughly $60 million to $80 million of cash we expect to invest this year to achieve further synergies from the ISL G acquisition.
As we've done in the past, we will continue to identify ways to enhance cash flow generation, while also ensuring our spending supports future sales growth.
With our pro forma leverage now inline with our longer term target rate of two to two and a half times debt to adjusted EBITDA, Our capital allocation strategy remains the same.
We will look to use free cash flow to invest in growing the business, both organically or through strategic acquisitions in the absence of compelling acquisitions, our best to use of excess free cash flow remains returning capital to shareholders through dividends and share repurchases.
In summary, we finished the year strong and we expect 2020 to be another strong year growth for the company as always we appreciate your interest in Marriott vacations worldwide and with that we will open the call up for Q1 AG Hector.
Thank you.
Tom we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q.
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Your first question comes from line Jared Shojaian with Wolfe Research. Please proceed with your question.
Hi, Jerry Hi, good morning, good morning.
John maybe just going back to the comments on the free cash that you just gave us some hoping you can walk us through the potential capital return build for 2020, I guess, if we start with your adjusted free cash flow guide of for 25 to 500 and worked down making all the adjustments on the one timers.
Any new debt you may take on excess cash from I guess the land sales that you just did how are you thinking about how much I guess discretionary capital is going to be available for buybacks dividends or any other.
Outside our activity. Thank you.
Sure Jared.
So yes, if you start with the for 25 to 500 as you highlighted.
Given some of the sales we did late last year.
As well as the the Asia note securitization, which generated about 65 million to cash we start the year actually with call. It roughly an additional 100 million plots of cash.
That just given the timing of those so you can add that if you will do the for 25 to 500.
The other thing we had was we probably had another call it.
$80 million of notes.
Our available for securitization.
Within our.
Our trust or excuse me, our our warehouse line at the beginning of the year.
And then the opportunities are really around asset dispositions additional ones this year as well as.
Offset for the big additional spending that we have on the integration and transformation costs, which on an after tax basis, yes, thats, probably roughly $50 million to $60 million. So when you kind of put it all together.
You're talking roughly 500 to close to 700 million of cash before dividends given our current dividend pace of call. It roughly 90.
You're in a similar scenario today were we return we bought back shares north of 470 million.
At a minimum we should have somewhere in that facility and then there's potential for some upside depending on the timing of some of the asset dispositions.
Alright, Thats very helpful. Thank you and then just I guess on Corona virus can you help us understand what percentage of your costs are fixed costs that are not tied to tour volumes and how that might help you with corona buyers were to inspire a lot of controlling the U.S. and then if you could also give us.
The percentages of your EBITDA.
Outside the U.S. I think you said Asia Pacific was was.
Immaterial.
Impact, but I guess what percentage your EBITDA is outside the U.S. and maybe if you could break it up by geography that would be helpful. Thank you.
Sure I'll I'll I'll take a stab at it probably do a better job of answering the second question on the first part of it.
The just to give you a specific Asia Pacific in 2019 was 2.6% of our adjusted EBITDA.
So again, not all that mature and of course.
Asia Pacific as represented by not only sales to Chinese residents, but also some predominance of our sales are relate to X pads that are.
Based elsewhere in that part of the world.
In terms of I can give me a sales volume I havent broken down the actual EBITDA number yet because I had an anticipation. Your question I can tell you total north American sales volume from international customers was about 10.7%, let me break that down for you.
About $50 million or that was east bound from Japan to Hawaii.
30 million was Latin America.
And another $18 million was specific to resorts in Florida from both Latin America and from Europe.
So if you apply the call it hotter than $50 million.
Sales in North America from International customers, you take our development margin against that and 20 plus percent, let's call. It $30 million of EBITDA. If at all went away, which certainly we wouldn't anticipate as far as you know.
Fixed cost versus the variable.
And I guess.
And try to swagger and now.
30% of it is fixed and 70% variable roughly.
So I.
We'd be happy to come back in with some more specifics if you'd like but that kind of gives you at least a high level view on it.
And just kind of an adjusted EBITDA overall, if you looked at our Europe and Asia operations its.
Less than 5% of our.
And probably.
A little bit more than half of that 5% Europe and a little bit less than the 5% is coming from Asian Thats, both our vacation ownership as well as our exchange.
EBITDA.
Okay. Thank you very much.
Thank you. Thank you.
Your next question comes from line, Brian Dobson with Nomura Instinet. Please proceed with your question.
Good morning, Brian Hi, good morning, and good morning.
So you had mentioned.
Intelligent automation and also advanced analytics deal that you could give us a little bit more color on how you're using that to drive tour flow and perhaps give us an update on your on online marketing efforts.
Sure.
So in terms of.
Automation, sometimes called our PPA robotic process automation much of that is back of the how stuff, where we're using it to kind of leverage some of our cost structure.
You might imagine there anything from.
The balance sheet.
Validation up through mechanical entries that today or before today.
People were actually having to do it and then you'd have some variability in terms of how much the cost was as well as the accuracy.
With Rps Jay.
We have been able to do a number of things where we've taken some of those previously manual functions and automated.
And as you might imagine there are much more precise in terms of how they get executed and they're also very helpful and reducing costs.
In terms of.
Artificial intelligence or.
Automation on the on the tour side. So we've done some testing and with the results have been very encouraging thus far to look at.
Tour flow and try to profile, which tours are the most inclined to make purchase versus those that are not.
We now have being able to apply some of that same logic stream to looking at.
How we sourced tours out of channels.
Figuring out that there are certain channels in which you have a deeper vein of those folks that are more inclined to purchase versus those that are not and we are adjusting our channels. Accordingly, it's early on Brian I don't want to declare victory yet except to say that what we have seen thus far has been very very encouraging for us.
That's great and then do.
Do you think you could also expand upon the new partnership agreements that you alluded to in the rental business as far as getting.
Getting new users to temperature product.
I don't recall.
Talking about that specifically in the exchange business you mean.
Yes, that's right in the exchange business.
Okay, well this is simply a matter of the way you think about the exchange business in kind of goes on a couple different ways number one trying to sign up new corporate affiliations when I say Corp. That's the.
The broader definition not the specific.
Delaware Corporation things.
Where we assign up a new developer to be affiliated with interval international.
And they in turn pay a corporate membership fee to avail. Their owners new members with the benefits of being affiliated through the exchange company in turn once and member decides they want to make an exchange there is an exchange fee.
That comes along with that so there is that part of it on the traditional kind of exchange stuff.
We've talked before about the planet fitness affiliation where.
We realized that the growth of new timeshare developers in the affiliations is certainly not been at a pace than it has been historically so now we're looking to go outside of the traditional timeshare channel and make benefits available of the services that interval provides in terms of travel.
So whether it be.
Cruises hotels air et cetera.
As well as there are obviously their ability to use there.
Their inventory that they have available to them to those members. So as an example, and planet fitness planet fitness pays us a modest.
Affiliation fee.
And then we are in commissions.
For booking cruises or air or hotels, we also sell them.
They're getaway.
Packages.
And that is a benefit that they pass on obviously to their members.
And in return interval numbers also get a bit of a benefit in terms of their membership and planet fitness as but one example, and we continue to have dialogue with a number of different organizations about trying to expand on those kind of relationships as a way of broadening intervals footprint in the marketplace.
Great. Thank you very much.
Thank you.
Your next question comes on line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone.
And thanks for taking my question I appreciate it.
With respect to the synergies I just want to make sure that.
Mapping and hearing correctly, we're at 95 run rate for the ended the year.
Another 25 to 30 was that something to come on line this year and.
Or is that something because the stated goal is really by the end of 21 to get to around 125 is there am I thinking about that wrong as our deceleration there or are you quite frankly, Johnny you sandbag and I was here.
[laughter], let let let's go let's go through the numbers I don't think were sandbagging here, but.
At the end of 19, we exited the year with 90 or excuse me $65 million. So 65 million of run rate synergies in place. So said another way if we put nothing else in place during.
2020, we would end the year was $65 million of synergy savings. If you will in 2020, what we said was we expect to exit the year at a minimum of $95 million of run rate synergies at the end of 2020 and given the timing of when those will come into place, we expect to get $25 million to $30 million.
As of incremental in the year savings okay.
And then by the end of 2021 once again thats the minimum of 125 of run rate savings.
As we've always said, we can we continue to look harder, we see additional opportunities and we're working through all that but.
So we're going to do everything we tend to get more synergy savings demo weve, what we've talked about.
Perfect and mice my follow up is.
Apologies for dealing in term hypothetical statistics that we don't normally deal with but do you happen to know what percentage of your owners.
Or visitors are drivers rather than flyers.
Well I'm going to give you acute answer and then I'm going to try to get better.
I believe everybody drive.
Even if one flies in the airport and rent a car they have to get to the resort in some way shape or form we don't have any resorts that are at airports.
With that with that with that said.
Obviously, Hawaii as 100% fly.
There are as you get to some of the.
Some resorts on Hilton head.
I would get I'm going to give you a swagger that's all I can give you.
As we don't bother to ask people how they got there.
As I would say a greater panarin, so people drive to Hilton head versus flight Hill.
Because quite frankly.
The the orientation of the ownership is basically east of the Mississippi and.
Most of those folks will simply drive to get there.
As you go across the waterfront, if you've got a palm desert Palm Desert, it's almost 100% drive market those are mostly people coming out of southern California.
Again, I'm, giving you some some process so that gives the idea so depending on the location.
That's that's driven I mean, we do not have a lot of resorts save some of our pulse properties that are a major metropolitan areas, which would lend themselves to be more of a fly market than a drive market.
But.
Again, we never attempted to try to pull people to say how did you get here because quite frankly, we're not sure exactly what we do with it even we got the information but.
That should give you. Some so thanks, so unofficially quantitatively or qualitatively rather it does sound as though and majority it's fair to classified our drivers.
I think thats, thanks, guys, probably right and I think I think I know, where you're going with it. So let me try to to get there.
If you think about.
Because of you know probably 19 and all of that.
To what degree people would be less inclined to take rifts outside of the North America so to speak.
I think.
We are well positioned given their distribution of our product about where we have property et cetera.
So.
In a guy.
I think we're all hopeful that.
This fall, we give rise to the occasion that some people are imagining it do but I look back on the Sars stuff of 2003 and to be honest with you and Sars.
Now.
Our sales grew in the same here this ours came out.
Check with the ardent Arda numbers and we saw that they saw increased sales and timeshare in the United States you know in in 2003 of 8%, 9% in 2004. So I think again, we're we're doing everything that we know how to do to make sure to take precautions.
Not only for our guests.
But also our associates.
And we're well prepared if we need to continue to escalate, what we do office properties et cetera, but I think we're I think we're dealing with it as best as we can.
Perfect. Thank you very much.
Thank you thanks.
Your next question comes from line of Patrick Shoals with Suntrust Robinson Humphrey. Please proceed with your question.
Hi, Good morning, Hi, Good morning, Steven John.
Just one question here.
I Wonder if you can call out any particular properties or projects that.
Our driving that acceleration in.
Sales growth this year. Thank you.
That is I'm, sorry, a disproportionately are driving that 7% to 11% growth.
Yes, I think let me.
Giving just specific properties, let me say that I think we'll get a an outsized proportion of that growth from the former Vistana properties.
Based on these kind of sequential growth that we've been able to see in terms of.
VPG growth et cetera, I mean, do you kind of a sense of how all that worked.
We've got.
You may recall that in the first quarter Vistana was actually down.
Call it five almost 6%.
Q2 was up 4% Q3 was up 9% Q4 was up 12%.
And we believe than what we've seen thus far this year that we'll continue on that kind of cadence and growth.
So.
And then I think we'll still see.
Mid to high single digits growth in the and the MVC business, but if had a breakup between the two I would say it'd be a higher percentage of growth on the on the far vistana properties and everything else.
Just looking at our results. So far this year, it's that growth is is.
Pretty well distributed throughout the system, we're not seeing any any.
Any particular property or resort because keep in mind, we're not selling.
Individual property result resorts were selling the portfolio.
And so you look at the sales distributions of that portfolio product and but it's breaking down basically as I described.
Okay. Thank you.
Thanks, Greg.
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Your next question comes from a line of Brandt Montour with JP Morgan. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions. So I'm just wondering if you could maybe talk a little bit about close rate for new owners sort of how that's tracking over the past few quarters, and then specifically with regard to tie LG.
Maybe remind us of the major deficiencies.
That you fixed but then but then how many are left to go so what if any are we in that specific segment. Thank you.
Yes, So let me back up a little bit as you probably are well aware closing rates of existing owners are higher than closing rates on first time buyers stands to reason the owner.
Modified.
Hi for penetrated equation.
Then a first time buyer.
Where we have seen some very encouraging results as I referenced in my remarks is in first time buyer.
If the Vpgs.
And thats been driven by the close rate improvement.
And now that's again, we started late third quarter into the fourth quarter.
We've seen close rates quite frankly go up.
I think to point in half.
Which is very material when you get to the VPG calculation in the flow through rate on the sales and marketing cost.
The Vistana has a higher percentage of first time buyers.
Than existing owners, although it's not overly dramatic but it is something that that you need to these I understand.
And so.
I gave a statistic in my remarks that about a third of our sales came from first time buyers.
And for the full year.
And.
If you if you break it down.
The tour volume about half of our tours came first time buyers.
So as we make continued improvement in first time buyer closing.
You might imagine that unless we have a dramatic change in the shift of first time buyers versus existing owner tours that you'll start to see the percentage of sales from first time buyers go up.
Somewhat materially.
Does that help I mean, we don't disclose closing rates as I think you're well aware, but that should give you have somewhat of a leased atmospherically backdrop to do what you need to do with it.
No that was that was really good Colin thank you.
And then just maybe you could expand on your sort of thoughts on M&A in the landscape.
In the industry as a whole.
I guess how could.
Okay.
Marriott vacations benefit from your from your position and what would be sort of an ideal.
Sort of ultimate outcome of the ongoing M&A.
Well as you might imagine we don't really discuss a lot about M&A because awful lot of its speculative and everything else. Let me just say this that we have said all along that there's a number of different things. We look at in terms of any kind of acquisition candidate we might be reviewing.
One of which is at a good strategic fit what it give us.
You know a broader footprint in the marketplace that.
But we don't enjoy today at we can't get there as we go through normal organic growth.
Two would there be a good cultural fit.
Which means and one of the things I can report.
On the ISL G acquisition is that spend the while we thought it was going to be a good cultural fit I'm happy to report, it's been a great cultural fit.
We had a long term relationship with.
With the exchange company of interval and we knew that that was a good fit but it really has worked very very well and so we're very pleased with that and then of course a third most important thing is you know is it accretive.
Given our various uses of cash as we've talked about.
And growth of the business.
If there is an M&A candidates out there that makes it makes the screen and goes through those kind of three.
Tests that we apply to them then we certainly are interested.
But.
I got to tell you I think I think we've got.
Very nice stable of brands, particularly in the vacation ownership business.
That.
You know is hard to find a comparison elsewhere in the in the landscape.
And but we'll always be on the look out and what we see something that makes sense for our shareholders will certainly for so.
Great. Thanks, a lot guys.
Thank you thanks.
Ladies and gentlemen, we have reached the end of the question answer session and I would like to turn the call back to Mr., Steve Wise for closing remarks.
Thanks sector.
Thank you for your time today I hope todays call here with the same sense of optimism that we have for our company.
We are leading player in a growing industry and I believe our competitive position is second to none with the best collection of brands in the business. We grew contract sales by 10% in the fourth quarter and this year has started out strong.
The integration of ISL G is going well and we've seen numerous growth opportunities ahead of us and we expect to deliver another $25 million to $30 million of into your its energy savings this year, putting us well our way towards achieving a minimum of $125 million of run rate savings by the end of next year.
With that I want to thank you for your interest and Marriott vacations worldwide and finally to everyone on the call and your families enjoy your next vacation.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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