Q2 2020 Hilton Grand Vacations Inc Earnings Call
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I would now like to turn the call over to Mark Melnick, Vice President of Investor Relations. Please go ahead Sir.
Thank you operator, and welcome to the Hilton Grand vacation second quarter 2020 earnings call.
Before we get started please note that we have prepared slides that are available to download from a white collar workers.
And also on the maintained your website and investors dot each GB dot com.
We may refer to these slides during the course of Oracle.
<unk> answer session.
As a reminder, or discussion. This morning will include forward looking statements actual results could differ materially from those indicated by these forward looking statements. These statements are effective only as of today.
It takes no obligation to publicly update or revise these statements.
For a discussion at some of the factors that could cause actual results to differ please see the risk factor section of our 10-K.
As well as similar sections in our 10-Q, which reflect the file soon after the conclusion those calls and any other applicable SEC filings.
Well also be referring to certain non-GAAP financial measures you could find definitions and components of such non-GAAP numbers as well as reconciliations of non-GAAP non-GAAP financial measures discussed today in earnings personally.
And on our website investors study TV dot com.
As a reminder, our reported results for both periods in 2020, and 2019 reflect accounting rules under 86, six which we adopted in 2018 battery systems. So six we're required to the first certain revenues and expenses related to sales made in a period. When a project is under construction and then hold off on recognizing those revenues and expenses until the carry when construction was completed.
To help you make more meaningful period to period comparisons you can find details of our current and historical deferrals recognitions in table T. One in our earnings release.
Freed the comparability in to simplify our discussion today or comments on adjusted EBITDA and our real estate results for our results excluding the net impact of construction related deferrals and recognition for all reporting period.
Unless otherwise noted results discuss today were for a second quarter 2020 at all comparisons are accordingly against second quarter 2019.
In a moment mark weighing our president Chief Executive Officer will provide highlights from the quarter. In addition to an update of our current operations and company strategy.
After my comments are called our Chief Financial Officer, Dan Matthews will go through the financial details for the quarter.
Mark and Dan will then make themselves available for your questions with that let me turn the call over to our president and CEO Mark way Mark.
Good morning, everyone earlier today, we released our second quarter results over the past several months, we acted decisively to respond to the global pandemic with an emphasis on protecting our owners guest and team members along with making critical decisions to support our business model.
We opened many of our properties and are beginning to see positive signs that our customers are responding favorably.
Evidenced by reset conversion trends are contractual recurring revenue streams continued to generate meaningful ankle.
And while we're cautiously optimistic.
Being prudent in our valuation travel environment and the fact that it will take time to fully recover.
We're prepared to sustain the business during this period of uncertainty by effectively managing our cost structure to ensure were protecting cash flow and by taking necessary actions to preserve our liquidity.
And we kept an eye on the long term to make sure we're well positioned to lead to travel industry out of the crisis and return to a path to sustainable growth in cash generation.
First I'd like to cover the status of our resorts in sales centers, along with somebody initial results that we've seen since opening.
We reopened our first major resorts on May 21st welcoming gets back to our properties in South Carolina, Orlando and Utah and subsequently opened their onsite sales centers in the weeks to follow.
We are great feedback on our A.H.D.V. enhance care initiative and our guests were overwhelmingly positive that the guidelines made them feel safe without feeling constrained during their vacation.
We saw solid levels of occupancy at our South Carolina, and Utah resorts, particularly over the Memorial day and fourth of July holidays.
Our South Carolina occupancy levels have consistently held in the 70% to 90% range since we reopened and Utah spending 85% to 95% range.
Orlando occupancy levels have remained in a 30% to 40% range down from prior year levels is so popular tourist attractions either remained close or were running at reduced capacity.
In mid June we opened our Las Vegas properties and sales centers, where we also saw occupancy you send a 30% range.
However, similar to Orlando many casino destinations are currently operating with significant capacity constraints.
We expect that we'll see improved trends in these markets as restrictions are lifted and utilization rates improve.
As of today, approximately three quarters of our resorts have resumed operations.
We continue them honor the situation in Hawaii, New York City in Chicago, and anticipate rolling openings of our sales centers in those markets based on factors, including government restrictions and more normal levels of travel demand.
Overall since we began reopening we've seen our members returning and our occupancy is improving.
And we've got a robust pipeline of over 400000 marketing packages that we sold to potential new buyers and that we've recently started to activate.
Ultimately increases in occupancy will lead to more tours, which it turns rise our sales cycle.
And the weeks following our resort Reopenings. We also resumed operations at several of our sales centers. Although they have initially been running at lower levels the utilization as we reengage our marketing efforts.
We'll continue to wrap our sales operations in response to tour flow levels.
And we believe the process improvements we've made over the past few months well able us to service the same level tours as we did in 2019 with a leaner and more efficient team.
Yes, despite lower tour flow our sales execution in this challenging environment has been commendable are close rates improved significantly for both honors a new buyers driving in mid teens improvement in our new buyer VPG and nearly 20% gain in our older VPG for the quarter.
Those improvement in close rates combined with a mix shift to owners drove overall VPG up 41% to over $4700.
As a result of these efforts during the month. The June our teams were able to generate contract sales at 21% of last years levels on only 14% of last year's tour flow.
We anticipate our VPG to trend toward more historical levels as we add back additional tours and sales down although the process and organizational changes we made as part of our strategic priorities should result in a sustained improvement in our efficiencies.
The defensive characteristics of our business model. We're also evident this quarter the EBITDA up our financing business was relatively flat despite carried a lower receivable Dallas.
And our cost savings program allowed us to grow our E Club M resort EBITDA, despite revenue headwinds from lower transaction related fees.
D. stable sources of EBITDA or one of the key differentiating factors of our business model.
So there were some nice positive trends the point too, but they're also clearly challenges that remain outside of our control debtor drag on our tour volumes.
Travel restrictions remain in place and then number of markets and others have various limitations of businesses that appeal to travelers.
New York in Hawaii for instance accounted for over a quarter of our tour flow last year, and we'll likely see limitations on travel through the rest of the year.
And nearly half of our tour flow was generated in Las Vegas, and Orlando, which are still experiencing capacity limitations on their key tourist attractions.
We've recently seen upticks in cobot cases in several key markets, including Florida, South Carolina in Nevada, and the new cycles continue to focus on hot spots in various areas of the country.
Well I will continue to do our utmost to provide a safe environment for our guests and team members. We seem to consumers will continue to show varying levels of comfort with travel, particularly among new buyers.
We do believe that as we progressed through the pandemic, we'll see our K T always returned to normal run rate levels, although the timing remains uncertain.
With that said, our strategic priorities have guided our approach leading up to and during our opening process and while there's more work to be Doug adhering to these priorities as we navigate through this crisis will set us up for strength as we complete our property reopening. Some proceed through the period of Rick.
Robert.
First priorities to safeguard our owners guest and team members, we've been extremely focused here and along with social distancing and free pp any for our guests we've rolled out or enhance care program in alignment with felt was claims day initiative.
The program further elevates, our already rigorous cleaning and hygiene crosses in a way, there's thorough visible and continuous and as I mentioned earlier, we for great feedback from our guests about the enhancements.
The second priorities to streamline our operating and capital spending.
Last quarter, we shared the steps we took to bolster our balance sheet and provide 22 months of available liquidity and we made further strides this quarter with a credit facility Amendment and securitization is Dan will share with you shortly.
Turning to our operating expenses, we've been laser focus on controlling cost and reducing our cash burn to a minimum.
And we were nearly breakeven on an EBITDA basis in June despite contract sales being only a fraction of last years levels.
We're in the process of identifying additional permanent cost savings.
As I indicated earlier, we won't be able to fully optimize our expense structure until we return to more normalize operations, but we do know that will come back even more efficient than we were prior to the crisis bolstering our historical record of margin outperformance.
Our capital spending plans on inventory development. It technology have also been revamp to strike at optimal balance between returning to growth and preserving capital.
The third priority is to protect our recurring revenue and embedded value.
Teams have been working tirelessly with our member base to assist them with Rebooking, we're changing their vacation plans. This year and we've made sure that none of our members lost any other point values due to travel disruption related to cope with 19.
We've begun to Reengage, our members with special offers and highlighted our enhanced care guidelines to promote a return to travel, particularly at 70% of our locations that are dr. too.
The results of these initiatives is that the attrition rate within our order base remains low.
All of these efforts are in support of our fourth and final priority, which is of course to grow our business. We've introduced several new projects. Thus far in 2020, starting with Ocean tower phase two and the Quinn followed by Maui in June and our Cabo project in coming months.
As we reopened our resorts, we've begun to activate packages from our marketing pipeline to drive new buyer tour flow.
So I just mentioned, we're working with our owners to preserve their ability to travel when they're able to do so.
Weve pair these efforts with promotional offerings and enhance value to encourage upgrades and new sales.
The same time, we've embraced the evolution of the timeshare business model. During this pandemic, having successfully expanded our virtual sales process and transition some of our staff to a more efficient work from home model.
We continue to evaluate distressed opportunities with a number of new and familiar fee partners.
Although it's still too early in the cycle to see compelling assets hit the market.
Focusing on our strategic priorities isn't able to us to concentrate our efforts. During this unique time by giving a shorter term objectives in guidelines as we navigate our way through the recovery.
To sum up I'm proud of our teams in our execution today.
Q2, likely mark the bottom the path to truly unrestricted travel and increased consumer tougher remains uncertain and will require patience to return to our prior run rates.
As we've seen in past crises.
Not a matter if our owners and guess what return but wed.
In addition, our customers have a strong affinity for the HCV, Brad and our owners, 70% who own their intervals outright ever pre paid vacation waiting for them.
We continue to see a desire and willingness to travel under the right circumstances as evidenced by our booking data.
For bookings are down just die per cent compared to last year in first quarter bookings for 2020 Watt are actually ahead of where they were at the same time a year ago.
Well not necessarily indicative of future occupancy these trends give me confidence that our owners and guests are eager to return.
We're better positioned than any other time in our history to withstand the current environment and lead to travel industry on that path to recovery.
As I mentioned earlier, we have more than 400000 packages in our pipeline.
Near the most we've had in our history and the vast majority of these package holders have not yet booked vacations.
And we have nearly 330000 owners and all time high that it's a result, a decade just focusing on dog.
Ultimately this means we have three quarters of a million opportunities to engage and win new business in the coming quarters is travelers return.
In the meantime.
We show that we can operate efficiently and approach breakeven in a low volume environment.
And we've also proven we can flex our business quickly to responded different levels of demand.
In closing my conviction in our operating model is as strong as it ever bad led by our multichannel marketing strategy embedded owner base and strategic competitive advantage of our Hilton relationship.
I'll now turn the call over to debt.
Thank you Mark and good morning, everyone as Mark mentioned in his introduction to our call. Our results for the quarter included 4 million in sales deferrals impacting 40 revenue.
Net deferrals of 3 million impacting both adjusted EBITDA and net income all references to the consolidated net income adjusted EBITDA and real estate segment results on this call for the current and prior periods will exclude the impact of deferrals and recognition.
A complete accounting of our historical deferrals recognition activity can be found in itself format on the financial reporting section of our Investor Relations site.
Let's review the results for the quarter.
Total second quarter revenue dropped to $127 million, reflecting declines in a real estate resort and club in rental and ancillary segments, while the finance businesses was flat year over year.
This decline in revenue was due to the result of having a resorts closed for the majority of the quarter due to the appropriate 19 endemic.
Due to adjusted EBITDA was a loss of $16 million as we incurred fix operating expenses with little associated revenue in a real estate and rental divisions as result of the closures or even though it was also impacted by $5 million of onetime charges, primarily due to restructuring and severance related expenses during the period.
In addition, as we laid out in our press release, there or another 3 million of covered related charges that were not added back to EBITDA, including 8 million of payroll cost and 1 million of member fee refunds offset by 6 million dollar benefit of payroll tax credits under the cares Act.
Net income was a loss of 45 million diluted earnings per share was a loss of 53 cents compared to net income of 57 million diluted earnings per share of 63 cents in the second quarter of 2019.
Within real estate Q2 contract sales were 35 million or 10% of prior year, reflecting roughly one month of domestic sales operations at a limited number of sales Adams.
The quarter tours were down, 94%, partially offset by gain and VPG of 41%.
Looking specifically at June our contract sales were down 79% driven by an 86% decline in October.
This was partially offset by VPG growth of VPG growth of 37% year over year.
Reflecting a 21% close rate during the month.
Close rates were up for both owners and new buyers during the month and the quarter.
Our fee for service mix for the quarter was 54%.
On the consumer lending side, our provision for bad debt was $8 million and our overall allowance on the balance sheet was 200 210 million or 16.6% of gross financing receivables.
Some DNA was $57 million, which largely reflects the fixed expenses absorbed during a period the shutdown offset by a portion of the cost reductions that we referenced in our first quarter call.
Real estate margin was a loss of $43 million.
In our financing business second quarter margin was 30 million with a margin percentage of 69.8% versus a margin of 31 million in the margin percentage of 72.1% last year.
Gross receivables balance was stable at just under 1.3 billion.
Our average down payment year to date is 12.2% and our average interest income rate increased to 12.6% from 12.4% last year.
Over the past three months, we've seen an expected increasing our delinquency rate.
3.5% of a receivables portfolio versus 3.2% at the ended the first quarter.
In addition, we've begun to see an uptick in our annualized rate of default at 5.5% versus 5.3% at the end of the first quarter and 5.1% at the end of 2019.
These increases are currently consistent with our expectation to sing upward pressure on both our delinquencies and defaults over the near term as the cycle progress is as we did detailed in our first quarter call. We took a conservative approach to our portfolio risk provisioning given the unprecedented nature of this been Demicks and we believe we are adequately reserved.
At this time.
With respect to request for payment to for it in early April as Lars mortgage lenders announced for Barents programs. We also saw an uptick in our inbound call volume inquiring about payment relief, we worked with their owners on an individual basis, providing borrowers with relief in cases, where it was appropriate.
As we progress through the quarter and the new cycles about mortgage for Barents subsided. The number of calls we received also declined and is down 88% across our platform from the peak in mid April roughly one third of our members carry a loan balance with us and to date, we've extended deferrals to 1.4% of these members. This represents.
Just over $27 million over 1.3 billion dollar portfolio balance were roughly 2% at the end of Q2, which remained stable today.
Turning to our resort and club business NOG was 3.2% at the end of Q2 revenue of 39 million was down 9.3% from prior year, driven by lower transaction fees from reduced member activity due to resort closures as well as certain refunds to members, whose travel was impacted by some of it 19.
EBITDA for Q2 was 33 million with margins of 84.6% versus EBITDA of 31 million and margins of 72.1% last year.
These and margins this quarter was driven by cost reductions as part of the company's recent cost saving initiatives.
Rents on ancillary revenues were 5 million for the quarter expenses in the quarter were 24 million as we end for fixed costs, primarily developer maintenance fees with no associated revenues during the close the closure period.
Our EBITDA was a loss of $19 million.
Bridging the gap between segment adjusted EBITDA in total adjusted EBITDA second quarter, corporate Gionee was $15 million down 7 million or 32% versus the prior year, reflecting our cost savings programs.
Since fees were 6 million and EBITDA from Jvs was $1 million.
On the balance sheet front, we had two significant revisions to our lender agreements this quarter that further mitigate the potential risk of a prolonged downturn.
The first as an update to the terms of a warehouse facility, enabling us to repurchase any delinquent loans from a warehouse after passing 60 60 days past due rather than waiting for a full charge off after 120 days past it.
Historically, a high percentage of loans that pass the 60 day delinquency Mark tend to ultimately charge off what our prior agreement required that we wait another 60 days before repurchasing them back from the warehouse.
The terms of the new agreement provides us with the ability to begin that process sooner mitigating any impact on triggers from a spike in delinquencies, thus preserving the revolving characteristics of the facility and maximizing our flexibility.
The second change was an update to our credit agreement. It gives us an additional security from near term covered related risks as well as provides us with additional flexibility over the long term.
And then there in the near term our first lien net leverage covenant ratio has been expanded to three and a half times for the rest of this year from the prior to tons threshold starting in the fourth quarter 2020, we're also able to utilize an annualized EBITDA calculation versus the TTM calculation that would be significantly paralyzed by this call.
It was shutdown related performance, but also maintained the flexibility to continue investing in our business and structurally amended the regular first lien that leverage test three times positioning us to be opportunistic coming out of endemic.
Finally, we completed a 300 million dollar terms securitization last month.
Our ABS transaction reopen the timeshare ABS public credit market and we are thrilled with the execution on the deal we received at 91% advance rate on the Triple class structure against our receivables with an overall cost of funds of 3.66%. The offering was 14 times oversubscribed, allowing us to improve our initial rate.
Indicating the strong levels of demand in the term market for our high quality timeshare paper.
A portion of the funds we used to pay down our warehouse line, which is now fully undrawn. We also continue to receive inbound interest from private securitization investors, which gives us additional options to way as we seek to maximize our financial flexibility.
As of June Thirtyth, our liquidity position consisted of $733 million up unrestricted cash 39 million of availability under our revolving credit facility and 450 million of capacity on the warehouse. We currently have 63 million timeshare receivables available for Collateralization in the warehouse.
On the debt front, we had corporate debt of 1.3 billion and nonrecourse debt balance of 926 million factoring in our recent securitization.
Turning to our credit metrics at the end of Q2 net leverage and first lien that leverage for covenant compliance purposes stood at 1.53 times and 0.69 times respectively.
Interest coverage ratio for the covenant compliance purposes at the ended the quarter was 8.54 times.
We will now turn the call over to the operator and look forward to your questions operator.
Thank you we will now be conducting a question and answer session. We ask that all callers limit themselves to one question and one follow up.
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Thank you. Our first question comes for line of Jared Show again with Wolfe Research. Please proceed with your question Matt.
Hi, Good morning, everyone. Thanks for taking my question.
Dan I appreciate the commentary on on the June trend does helpful. Do you have the same data you can share for July on towards BPG in contract sales.
Yeah, So Jared this mark so.
You know directionally things are.
Improving in July and we continue to build off of.
The early success, we had in June and that momentum is I think as we look at its going to ebb and flow on them.
On a market by market basis.
You know with some choppiness around the cases that are out there in the news flow and restrictions and.
It obviously consumer perception around the risk the travel, but but overall I think our pace will recover it appears to be.
Really correlated to.
Travel trends right now and I think were really get positioning is we've got all its built in demand and we talked about our prepared remarks, we are ours or.
Are.
They want to travel.
Looking forward.
We're activating new buyers and and so.
All at all I think we we continue to see things improve.
As we go through July and it's going to be choppy, but.
But demands there and people want to deepwater travel and we've been very very pleased with our conversion rates.
I talked about those in my prepared remarks are up.
What are PPG, if you exclude any direct sales, which is virtual sales.
41% and we're seeing those trends, it's kind of a it's a mix between closing percentage and mix between owner in new buyers were seeing more orders in our mix.
But both are new buyers at our owners are closing at much higher rates. So we're really pleased with the other consumers behaving.
Great. Thank you Mark and obviously, the second quarter kind of throw away quarter here, just given the circumstances, but contract sales were actually a little bit better than your peers I think that I'm doesn't surprise to a lot of people. Just there was a view that you were maybe a little bit more disadvantaged with your Hawaii exposure maybe.
Did we spaced model in Japan, and some other things.
Can you maybe talk about that I guess, maybe what your what you're seeing with cancellations or pricing or intra Japan, maybe performing a little bit better.
Anything you can speak to you on that.
Yeah, Let me, let me cover off on Japan.
First but.
Japan's actually recovered very well, we're we're actually pacing about 50% of last years level.
We actually never shut down in Japan, though there was a period of time, where the business had dropped off considerably, but but as you know the pandemic and the impact in Japan.
So as not bad to same extent as we've had here in the U.S., maybe able to control it a lot better up a couple of other advantages we have in Japan as most of our sales are are off site right and what I mean by that work, they're not on a property and so.
We have 12 different sales centers, there and we can attract regional travel and so we're not relying on people having to travel to one of our property. So we essentially we've brought our sales operations to the market.
And we can cater locally to them. So very pleased with the engagement there up as it relates to I think you mentioned, Hawaii interest seen enough Hawaii made up 35% of all the inventory we sold from April through July and where we were not even open.
In Hawaii, So lot of that's been sold out of Japan, and we're also selling that out of a number of are you us mailings.
Operations so.
So all at all pleased with the initial results for Japan.
Great. Thank you very much appreciate it.
Our next question comes the line of Brandt Montour with JP Morgan. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions and I appreciate all the color today so.
Mark you talked about the the large basket of on booked packages that you have.
And I think you mentioned that you're starting to activate those and you could just add some color here how big of a priority is it to activate then is it more efficient to wait until people are on the road and traveling more.
And we also also know that you have a very you know.
Non exhausted owner base that you can tap instead. So the question. It is how big focus is that.
Yeah look it's a big focus for us it and you know what we've talked about our pipeline is very healthy.
We've got over 400000.
You know.
Customers, who have committed to a future vacation with us to to take a tour with us and and so you should know we never shut down our new generation for packages, though.
As you can imagine.
Excuse me a sales of new packages went down considerably they went down probably 95%.
But today.
Our marketing engines are all up and running and we continue to invest in as to our pipeline and and our pace is now up to around 60%.
Recovered level. So we're we're preselling packages for future tour. So we're really really happy about.
About how receptive the customers bed out there and I think you know in this environment.
Subsidize package a discounted vacation.
It is important and I think in this recovery stage to value proposition is played out well. So so very focused now the activation part of it are obviously, we're being very sensitive on on activation, we understand that with all the restrictions and the mobility issues out there today and travel restrictions.
That field fewer people.
I'm going to be traveling right now so we're trying to be very strategic and how we activate.
We're looking at how we're we're out there promoting use and Hilton additional sell notter points Hawaiian Airlines points.
To create some additional motivation to travel we're we're really focusing our efforts around the drive to market as you can imagine too and we're going out inactivating within a reasonable driving Todd.
So all in all very pleased with that our marketing teams effort I think direction shooting at a high level.
We really benefit with this relationship with Hilton that is shelton's business is continuing to ramp up we're starting to see.
Better and better results there.
Great. Thank you that's helpful. And then just maybe digging a little bit deeper on the owner arrivals data that you provided.
Looks like and I don't know I'm splitting hairs, but it looks like the fourth quarter pace.
Well below the pace you were at as a three months ago.
And it but obviously your first quarter next year pace is really strong. So I guess I think you made a note that part so half of that was from New York at Hawaii are these cancellations that have accelerated for those two markets.
Have they are those we are those whats rebooking were part of why one key was so strong and and what's the other 50% I guess in terms of the adjustments yeah.
Yeah look certainly we're very encouraged by the that booking data, particularly against the backdrop of everything that's going on right now and and I think this really indicates you know the underlying demand that.
We have for traveling and with our base of voters in in Q4 of 20 and in Q1 at 21.
Bookings are of running about 90% or prior level and as you mentioned Q1 is actually 30% up over last year.
If he can if you actually go back and you do the math I think that net we have actually in the fourth quarter net bookings have gone up but we had to take out a lot of reservations, Hawaii accounted for half of our cancellations.
Since we last reported.
In 95% of that travel was planned for 2020 quite a destination in a market that people booked farther and and dancers you can imagine because of the airline.
Left requirement to get to why people book out further so up that we took a big hit a daily in the.
Mainly this quarter in the third quarter and add to certain extent in the fourth quarter, but we're getting picked up in other markets. So so it's a you know there's it for us it's less about cancellation, it's more about people pushing their their their vacations forward.
Perfect makes sense. Thank you guys.
Our next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.
Hey, Thanks, when you think about the better close rates on new owners I guess, what do you think it's been the primary driver. There is just better filtering the final changes in sales practice changing consumer behavior.
Change a preference for the product and how does that change maybe your own thought process.
As we come out of this in terms of maybe being more efficient.
Yeah no.
Great question first of all we are really really pleased with.
The execution and what's happening in that are on that part of the business. Obviously, that's a this business. It starts with tour flow and then you've got to then you got to convert the conversion part is going good I think it's interesting I think was we think about it.
We think that the value proposition is really showing well in this environment and and when you know 90% of our units up kitchens said, we have spacious wanted two bedroom units. These are units that are very desirable the travel in this environment. So I think the value proposition is playing out in it I think our customers are are looking at this card.
No you guys have put a lot and to the protecting the customer when you get to the property our customers can see that.
They are very comfortable staying in the roads.
And and eating at home and this environment. So I think that helps clearly oh.
Talked about the mix shift.
We were historically been running at about 50% sales to order is 50% sales to new buyers and that shifted to 70 30, 70% to owners. So our owners are coming back and I think.
Our auto start coming back quicker because they've got a higher level commitment with the prepaid.
Aspect to the business, but they're just they've bought into the Brad right and they feel.
They feel safe with that and then I'd also.
Echo what some of our competitors have also said look we brought back our best team members right and ER and the teams are just doing a great job executing.
Great and as an unrelated follow up you had referenced.
It's maybe a little bit early to see fee for service they'll start to hit the market I guess when you look back over time when does that typically happen. We generally think that in this case it'd be more independent timeshare properties coming up or could we also see hotel conversions.
Yeah look up I think obviously this the impact.
On this pandemic.
Travel lodging add resort condos.
It is gonna be significantly and to you know those things.
The.
My prediction is that a we you know obviously, we're building a number of properties right. Now my prediction is you know.
Over the next 10 years, what I have to build anything there's going to be a plentiful amount of inventory thats can be re purpose.
And I think the highest and best Fusin number cases are going to be timeshare.
That being said you know we've got a we've got a good slate of inventory. We've got a good balance of inventory, we are getting ready to complete a never think deals right now better.
Not new deals, but deals that have been in the pipeline that we're finishing up so so overall up you know these things take time, Steve as you know a the work through the process, but Ah you know I think a net net the our industry as a whole will will benefit unfortunately from a.
Ill.
The dislocation it's going to occur from this.
Yes.
Got it thanks, so much.
And as a reminder, if he would like to ask your question Press Star one on your telephone keypad.
Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone.
Thanks for taking my question you covered obviously quite a bit of apparel I wanted to just go back to the amendment who are flow.
Involved and I recognize that there are number of crackers that Mary carve York heard on what we've seen some of the other public.
You know talk about so far broker core core was a bit lower would you mind revisiting that matter and talk about what kind of went into the core world in the quarter.
Yeah look I think.
David covered off on the fact that our owners.
Or making up a bigger percentage of the tour flow than we've put forth historically have seen a in the past stand and up you know we're very up you know we're cautiously optimistic that a you know this tour flow will continue to to be a.
Continue to improve over time, though it's going to be choppy in its got to you know obviously depend.
Somewhat on mobility, and and ER, especially on the shared mobility on people as willingness to get on planes and and as such but the good thing is we've got a strong pipeline and we talked about how we're working to the accurate to activate now what's what's interesting is we're seeing a booking.
In a rivals up vary by market and if we have a couple of markets that are performing at 75% of historical levels and we have other markets are performing at 20% of historical levels and then of course, we've talked about Hawaii, New York and Chicago are still not open.
As point.
But I think is we look at where were performing better it's really a round up in markets that are perceived to be safer and are not as crowded beach resorts are not resorts are all performing well.
Orlando in Vegas, sure, where we rely on either good or came at.
The theme parks for a the entertainment that Vegas provides you know those markets.
Coming back but.
You know they came back around 30, 40% and it's kind of stabilized off at that point.
At that level right now.
So I think it really depends.
Oh It go it varies by market. It's almost like we have these micro cycles that are that are going on right now and I think it you know as we move forward a these will improve as conditions improve.
I do believe watts, Hawaii opens theres going to be relatively strong demand. We have been the books, it's going to be seat perceived as a very safe place to travel to it.
Okay. Thank you very mark.
Thank you we have no further questions at this time before we and I will turn the call back over to Mark Wang for any closing remarks Mr. Wang.
Yeah again, thank you for joining us this morning, and I want to.
I've got a special thanks and call out to our team members, who have been working so hard over the last few months very proud of the way you guys have navigated the change in the uncertainty while continuing to focus on what's most important and that's the safety and well being of our orders our guest and of course one another.
We look forward to speak can you do you over the coming weeks and updating you.
Our next call. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.