Q4 2020 Marriott Vacations Worldwide Corp Earnings Call

February 25, 2021

[music].

Greetings and welcome to Marriott vacations worldwide fourth quarter, 'twenty and 'twenty earnings Conference call.

At this time, all participants are on a listen only mode.

<unk> and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder of this conference is being recorded.

Now like to turn the conference over to your host Neal Goldner. Thank you you may begin.

Thank you, Rob and welcome to the Marriott vacations worldwide fourth quarter 2020 earnings call.

I am joined today by Steve Wise, Chief Executive Officer, and John Geller, President and Chief Financial Officer.

I need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under the federal Securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.

Forward looking statements and the press release that we issued last night and the presentation. We added to our website. This morning as well as our comments on this call are effective only one made and will not be updated as 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 and our remarks and the schedules attached to our press release.

As well as the Investor Relations page of our website at IR Dot and the WC Dot com.

It's now my pleasure to turn the call over to our CEO Steve lives.

Thanks, Neal and good morning, everyone and thank you for joining our fourth quarter call.

Before we get started I'd appreciate it if you would indulge me for a moment to reflect on the passing of Arnie Sorenson and last week and.

As many of you have noted Arnie was an outstanding business person with a keen understanding of not only where to take Marriott international but also with the future looked like for the hospitality industry.

I think it goes without saying that leaders with the combination of outstanding intellect, coupled with a passion for the business and a true ability to relate to associates of all level of the cover of the company are not easy to come by.

Bill Marriott once again showed our industry his wisdom and selecting our need to be the only person to be CEO that did not have marriott as the last name and he chose wisely.

And I'd like to take just a moment to reflect on the army of the person.

And I had the good pleasure to be able to work as both a colleague of <unk> as well as having a is the loss per short period of time before our spin off and to 11 2011 excuse me.

Not only was already a good friend of mine, but he was a good friend of our business.

His unique understanding of the timeshare business and the connectedness that I've had with the core lodging business helped the frame his recommendation to create two separate public companies as a way to unlock considerable value for the Marriott shareholders. Now almost 10 years later I believe the history has shown that to be and outstanding the decision.

And for the shareholders of both of our companies.

I ask you to join me and all of the members of our team here at Marriott vacations worldwide and when I say, Thank you Marnie Godspeed, you will be missed but surely not forgotten.

Thank you for allowing me the opportunity to express my thoughts and the now I appreciate on to our call.

What are the difference of your mix.

It was just one year ago, when we reported double digit fourth quarter year over year contract sales growth and we were talking about the resiliency of our business model.

And one month later, we closed all of our sales centers and recommended that owners not come to our resorts due to the pandemic, even going so far as the canceled transient rental bookings.

But once government restrictions started the lift Occupancies quickly returned beginning first and our drive to markets, but expanding as the year went on illustrating timeshare owners desire to get back on vacation.

As a result, we ended the fourth quarter at nearly 70% and North America occupancy.

Our higher margin resort management financing and exchange membership business businesses prove their resiliency last year with that revenue declining only 2% despite the global pandemic.

We also ended the year with more liquidity and liquidity than we had at the end of the second quarter further illustrating the strength of our leisure focused business model.

Sitting here today I am extremely optimistic about the continued recovery and our business.

Occupancies and a number of our drive to and fly markets are holding up well.

And as more and more people get vaccinated I expect some of the pent up demand to continue to manifest itself and.

In fact reservations on the books for the second half of the year are currently 8% higher than they were at the same time in 2019.

So while the recovery most likely won't be linear and government actions could posit in some markets I do expect our business to continue to improve as we move throughout the year.

We announced in January of the pending acquisition of Welk resorts, one of the largest remaining independent timeshare operators, which we expect to close early in the second quarter.

Well <unk> operates a portfolio of eight upper upscale of vacation ownership resorts, primarily on the west coast with approximately 1400 keys more than 55000 owners and over three years of built inventory.

These resorts will be of Great addition to our portfolio and we intend to rebrand all of the Welk resorts as Hyatt residence club once we've obtained and necessary approvals.

This will dramatically increase our hyatt footprint, while providing us substantial future growth opportunities.

Through a combination of margin improvement and sales growth, we expect the acquisition to generate between 60 and $70 million and adjusted EBITDA by 2020 for if not sooner, making this both the very attractive financial transaction as well as a great strategic one.

So let's talk about our fourth quarter results, starting with our vacation ownership business.

While 2020 was certainly challenging for the entire travel and hospitality industry being completely leisure focused with certainly a better segment to be at <unk>.

And being on the timeshare business with our much larger square footage units and amenities, coupled with the pre paid and nature of our offering was clearly a more attractive option for our owners and guests as evidenced by our strong occupancies and many of our locations to.

To give you a few examples of.

<unk> at our Florida Beach resorts averaged in the mid 70% range during the quarter, including nearly 80% for the month of December.

Our South Carolina resorts ran and the low 70% occupancy range during the quarter.

Our Colorado and Park City Mountain resort average nearly 75% occupancy.

And our Aruba resorts ran over 60% and November and December while our U S. Virgin Island resorts ran over 70% during the quarter.

Even some of our larger market set of previously lagged the recovery continued to improve during the quarter for.

For example, Orlando, which represents more than 20% of our North America keys averaged about 50% occupancy during the quarter roughly double the occupancy we ran in quarter three including nearly 70% during the holiday break.

Hawaii, which ran low single digit occupancies and the third quarter lifted as the restrictions on October 15th and average nearly 50% occupancy during the fourth quarter. Excluding <unk> were the 14 day quarantine restrictions were reinstituted and in early December.

The <unk> were again very strong during the quarter, including 9% year over year, and and north of year over year growth and North America <unk> was up 17% excluding Hawaii.

We continue to benefit from a higher mix of existing owners as well as higher promotional activity.

And as a result, we increased contract sales by 27% sequentially from the third quarter. Despite the increased government restrictions in California, and Hawaii and December.

Within the other parts of our vacation ownership business are stickier management fees delivered 3% year over year revenue growth and the quarter.

Our financing revenue declined slightly on a year over year basis, and the quarter, despite significantly lower contract sales, reflecting the recurring nature of this high margin revenue stream.

And rental revenue grew 29% sequentially from the third quarter, reflecting the broader travel recovery.

Our interval International business also continued its recovery during the fourth quarter with interval exchange transactions, increasing 17% on a year over year basis, reflecting members desire to travel as well as from pent up demand.

Before turning the call over to John I wanted to talk about synergies.

As you might remember, we increased our synergy target to at least $200 million back in November.

And these are permanent savings that will not return with volume and will help us drive substantial margin improvement going forward.

We made a lot of progress and the fourth quarter and by the end of 2020, approximately $135 million of these synergies have been achieved on a run rate basis.

Getting us closer to our target.

So, let's talk about where we go from here and.

In late January we reopened the California sales centers that we closed in December.

That still leaves coli and a handful of smaller sales centers that haven't reopened yet, but with most of our major locations up and running we expect to continue to grow contract sales sequentially and the first quarter.

We ended the year with the tour pipeline of more than 165000 and sold packages with more than 30% of those already activated.

That means more than 50000 customers of already booked the vacation and related tour for 2021, and we expect that number to grow as the year progresses.

We're also ramping up our package pipeline engine after curtailing it last year, which will add future tours.

And we were very pleased with the sequential recovery of interval last year with exchange transactions growing nicely and the second half of the year.

One of them and our intervals corporate customers has decided not to renew its affiliation going forward choosing only to offer its owners membership and its own internal exchange program instead.

It is important to note that only a portion of these of on 165000 members are active interval users and we have been marketing to them since mid last year, we've already retained a high percentage of those who have been active users, reflecting the breadth of intervals of offerings.

So we expect the bottomline impact on our business going forward will be largely immaterial.

Finally, a recent survey showed that one third of American travelers have begun planning and booking trips trips, specifically and anticipation of vaccines being available.

Searches on the Marriott vacation club on our website site.

Show of rising interest and getting back on vacation with January searches for keywords, such as book and make of reservations for times higher than the prior year with a clear sign of increased demand for the Orlando.

However, more than half of the people. We've surveyed have also stated that they will not travel until they get their vaccination.

And that's reflected on our first quarter bookings, which currently are holding below where they were last year.

But looking further out we have more reservations on the books for the second half of this year than at the same time and 2019 illustrating the pent up demand for travel with that I'll turn the call over to John.

Thanks, Steve and good morning, everyone.

And I'm going to review our fourth quarter results. The recovery, we've continued to experience across our business the status of our synergy initiatives and the overall strength of our balance sheet and liquidity position.

Our fourth quarter results reflect the strong sequential improvement from the third quarter illustrating the resiliency of our business with resort Occupancies contract sales and exchange transactions all improving.

As a result, we reported $72 million of adjusted EBITDA for the fourth quarter more than doubling our third quarter results. Once again, demonstrating the strength of our leisure focused business model.

Looking first at our vacation ownership business with continued with the continued improvement and Occupancies contract sales improved 27% sequentially.

We also saw a significant improvement and our development profit this quarter with adjusted development margin, increasing to $14 million compared to just $6 million and the third quarter.

And our stickier resort management and financing businesses again provided a strong contribution to our bottom line as a result of our vacation ownership segment delivered $73 million of adjusted EBITDA and the quarter a significant improvement from the 28 million, we reported and the third quarter.

Our resort management business generated $58 million of profit and the quarter, 10% lower than the prior year due to reduced ancillary revenue, resulting from lower year over year, Occupancies and limited operations at many of our outlets.

We did however, see of 3% increase and are stickier high margin high margin management fee revenues.

As I've mentioned in the past the majority of the financing revenue, we generate and any given year comes from prior year note originations, so even with lower contract sales or financing business delivered $30 million $39 million of profit and the quarter only one only a $1 million decline from the prior year refer.

<unk>, the stickier and nature of this revenue stream and the benefits of our synergy and cost saving initiatives.

We have continued to work closely with the owners, who are who have temporarily lost store income due to the virus deferring loan payments, where we can by the end of the quarter roughly one 5% of our borrowers have taken advantage of this program speaking to the creditworthiness of our owners. In addition, and more than 40% of these borrowers who had a payment due by the <unk>.

And of the quarter had made it.

We now expect to experience a slightly higher COVID-19 related default within and we estimated back in Q1 and took of $13 million net charge this quarter to increase our notes receivable reserve.

Similar to our treatment and May we have excluded this charge for adjusted EBIT the purposes.

The great news is that by the end of the year delinquency rates at all of our brands were in line with 2019 levels and we've continued to see both sequential and year over year improvement, thus far and 2021.

Finally, our rental business has also continued to improve transient keys rented were up 34% versus the third quarter, reflecting improved occupancies. Similarly rate improved 1% from the third quarter as a result, while our rental business generated a $24 million loss and the fourth quarter that.

It represented more than a 40% sequential improvement.

Turning to the exchange and third party management segment exchange transactions at our integral business were up 17% and the fourth quarter compared to the prior year.

Average revenue per member was down nearly 5%, primarily due to a decline and getaway rentals and other travel related services.

As a result of adjusted EBITDA was $28 million and the fourth quarter with margins in line with prior year, despite lower revenues, reflecting the benefit of our cost saving initiatives.

G&A expense declined $27 million of 45% improvement from the prior year. We achieved this primarily through a combination of synergy savings and lower costs associated with furlough and reduced workweek programs lower overall spending across the business on technology travel and training.

And for millions of savings due to the cares Act retention tax credit we received in the quarter.

Moving to the balance sheet, our liquidity increased by roughly $60 million and the second half of that of last year. We ended the year with nearly $1 $3 billion and liquidity, including $524 million of unrestricted cash of $147 million of gross notes receivable that were eligible for securitization.

And $597 million of availability under our revolving credit facility.

We had $4 3 billion and debt outstanding at the end of the year, including $2 7 billion of corporate debt and $1 6 billion of non recourse debt related to our securitized notes receivable.

Earlier earlier this year, we issued $575 million of zero percent convertible notes due 2026.

Reflecting the strong demand from investors, we use part of the proceeds to enter into a cost spread transaction, increasing the conversion price to roughly $214 per share, 70% higher than our stock price on the day, we price the offering.

We plan to use of portion of the net proceeds to finance the wealth transaction and we also used of $100 million of proceeds to pay down of portion of our term loan.

We still have no corporate debt maturities until September 2022, which is our 2017 convertible notes and Thats only $230 million given the uncertainty of the timing of the recovery. We also extended the suspension of our financial maintenance covenant and our revolving credit facility through the end of this year.

Before I move to 2021, let me touch briefly on our $200 million plus synergy goal, while the pandemic did cause us to temporarily pause were paused. Some of the work on these initiatives we made very good progress throughout the year.

As Steve mentioned by the end of 2020, our run rate savings was approximately $135 million of which roughly $85 million of the program to date savings has been realized and our 2020 earnings that means there is roughly $50 million of run rate savings achieved by the end of 2020 that have.

<unk> been fully realized yet all of which will benefit us benefit this year's financial results.

Looking forward, we continue to aggressively pursue additional synergy and cost savings on our weighted towards delivering at least $200 million of total run rate savings by the end of 2021.

Looking ahead, we still have limited visibility on the trajectory of the recovery and while we and while we will not be providing full year guidance. This morning, I do want to help you think through the what the first quarter could look like as there are certain items that will impact our results the.

These include reinstating a portion of our variable compensation plans and bringing back associates work to support the further recovery of the business in total we expect the impact of these incremental cost and the first quarter to be roughly $10 million, which will be spread throughout the business and.

And our vacation ownership segment, we have seen our business recovered nicely and expect it to continue into the first quarter.

From a development perspective, given that most of our sales centers have already reopened we expect contract sales to grow sequentially to $190 million to $210 million and the first quarter with a higher percentage of that amount coming in March as.

As a result, we are expecting roughly $15 million to $20 million of negative EBITDA reported <unk> and the first quarter compared to the $7 million benefit we had and the fourth quarter of 2020.

Is important to remember that this is only timing. In addition, we are projecting higher marketing and sales cost and the first quarter as we ramp up tour production, which will negatively impact our adjusted development margin and in the quarter, but will help drive future sales.

And our resort management business, we expect the recurring management fees to remain stable and ancillary margins to improve compared to the fourth quarter as occupancies continue to recover.

However, given the timing of certain fee revenues as well as the higher cost I mentioned earlier, we expect our video management and exchange profit to be flat or down slightly on a sequential basis.

And our rental business, we expect the occupancies and rate to grow sequentially, reflecting the continued recovery and leisure travel as well as the normal seasonality.

This will be partially offset by higher maintenance expense largely associated with higher inventory balances.

As a result, we expect rental profit could improve by $5 million to $10 million compared to the fourth quarter.

And for our financing business, we expect profit and the first quarter to be in line with the fourth quarter as the benefits of lower cost and interest expense on the declining debt balance are offset by lower interest income from of declining notes receivable portfolio.

Turning to our exchange and third party management business, we expect transactions at our interval business to continue to improve a few percentage points year over year, reflecting the recovery.

We also expect average revenue per member to be largely unchanged on a year over year basis.

And finally, we expect G&A could be down roughly 20% on a year over year basis, reflecting the ongoing benefits of our synergy work and restructuring effort efforts, partially offset by and REIT by reinstating our variable compensation incentive plans.

Associates, returning back to work to support the further recovery of the business.

And lower cares act retention tax credits.

Turning to cash flow, while we're not giving annual guidance at this time I did want to highlight some timing aspects of our cash flow for the year as well as longer term benefits to our cash flow given our current inventory position.

As we've discussed before the largest component of our rental expense is maintenance fees on unsold inventory.

Like any other owner of these fees are typically do at the end of the year or early in the first quarter.

And this causes of our rental business to be a drag on cash flow and the first quarter. However, once we get past the first quarter of disproportionate amount of our rental revenue tends to turn into free cash flow and the business continues and as the business continues to recover this year should be no different.

And our vacation ownership business, we came into 2021 with more than $900 million of completed inventory on our balance sheet and had commitments to purchase another $165 million. This year with a large portion of this happening and the first quarter.

When you add in the excess inventory, we are acquiring with the wealth of acquisition that brings our total inventory balance.

More than $1 $1 billion today or $580 million of excess inventory at a normalized sales pace. So as our contract sales continue to ramp up and with limited inventory commitments going forward, we expect to generate significant free cash flow over the next few years as.

We monetize this excess inventory.

With that Steve and I will be happy to answer your questions Rob.

Thank you at this time, we'll be conducting and question and answer session I'd like to ask a question. Please press star one on your telephone keypad and <unk>.

Confirmation tone will indicate your line is and the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up of your handset before pressing the star of keys, one moment. Please while we poll for questions.

Our first question comes from David Katz with Jefferies. Please proceed with your question.

Hi, David.

Good morning, gentlemen.

I appreciate all of the detail I wanted to go back on two things if I may.

There's so much discussion about pent up demand and if we could maybe break that down just a little bit farther right. We would expect that there is pent up tours and right.

Pent up marketing packages.

And pent up visitation, alright, but can you maybe give us just a bit more detail as to how we would breakdown and the notion of pent up demand, which which seems obvious and intuitive, but some more detail would help.

Sure.

No.

If you look I think I reported and my remarks that the second half of the year. It looks like were 8% higher than we were at the same time and 2019. If you look at the first half of the year, it's actually down 16% on the same comparable basis to where we were in 2019. However, the bulk of that is largely.

In Q1.

Q2 is down a couple of points.

But so when you average it all out for the full year, it's down about 8%.

I think it all stands to reason if you sort through it I mean is on a reported people are anxious to travel they are already looking to book travel, but they want to make sure that they have the benefit of the vaccine and you've heard about the rollout of vaccines and some prognostications that.

The bulk of America will be vaccinated by the summer. So I think that all kind of sinks up well with without it and the other point and.

I cant regurgitate the number but there was a huge percentage of the population and 2020 that never took on vacation.

And that stands to reason given the circumstances, we all found ourselves and so.

In addition to their normal inclination to take of vacation I think it's been amplified by the fact that they haven't been able to get away in 2020. So.

That's the best visibility, we can give you right now.

The <unk>.

And 80% of our of our sales and our resorts come from people that are in residents at our resorts.

50% basically our in house guests and another 30% are people that are on vacations on packages.

<unk> is our resorts continue to fill up we.

We will continue to see sales grow proportionately.

Understood and just a quick follow up if I may the.

<unk> opportunity I think highlights what.

Maybe some latent value with respect to Hyatt.

Can you color of sent a bit on what you what we could reasonably expect that Hyatt brand to bring in terms of tour flow sales visitation anything qualitative.

Because I think we per.

Your name, we usually think of you with Marriott, but there is this other thing there too.

Sure.

I think probably the easiest way to think about it is that.

When we acquired <unk>.

I would I would tell you that the Hyatt vacation.

And its businesses was basically.

Relatively dormant in terms of of what people were doing actively to try to grow the business I think of reported in previous calls that when <unk> acquired Hyatt. They had 16 resorts and when we acquired <unk>. They had 16 resorts that was four years later.

So we do believe that there is.

And quite a bit of opportunity there and the wealth business the way in which they typically source customers because they didn't have kind of one of the major hospitality brands affiliated with it.

And they did a lot through sports marketing and OTC venues, where they generate of customers typically speaking those are.

Low yield high cost kind of channels to source customers out of.

We believe that we will start to strip out some of those cost as we replace them with things, where we'll continue to obviously look to penetrate the world of Hyatt program, just as we have done and the Marriott <unk> program.

We will.

<unk> continued to change practices about how sales are done at the site level for instance.

And putting in the equivalent of our Encore program, which has proved to be very successful for us and has a very high <unk> number and we'll put that in.

And the only caveat I would throw into this is it's going to take us a little while for us to re badge. The welk resorts as Hyatt call that at the end of this year first quarter next year.

But then there is another impediment to being able to integrate all of the inventory and that is the fact that well today is on RCI affiliate.

And interval international affiliates, so that makes putting and the exchange program and in place much as we have done on the Marriott side, a little more and more problematic that affiliation and in 2022.

And obviously, we would look to then re affiliate.

The fact with the interval international for them once they used to be by the way.

So.

The I think I reported that we said that.

And we think by 2024 and <unk>.

And hopefully sooner.

It's going to mean somewhere in the neighborhood of $60 million to $70 million of adjusted EBITDA.

I think we should look to take their development margin, which is today low single digits up into that 20% to 30% range.

And and the contract sales, obviously, we want to try to grow.

Substantially and we think contract sales by 2020 for could be.

$160 million to $180 million and that range roughly.

John.

For the reference at David I'd add there I mean, and then 60 70 million of as Steve mentioned.

Versus call it Hyatt on a pre COVID-19 basis of EBITDA and.

It is a.

Fraction of that 60 to 70 million of incremental just to put it in relative size. All of the improvements you are talking about are really going to the drive not only the top line, but on a percentage basis huge EBITDA growth over the next two to three years within the combined Hyatt wealth business.

Thank you very much.

Thank you.

Our next question comes from Patrick Sholl with true of Securities. Please proceed with your question.

Good morning.

Good morning, good morning.

Thoughts on timing of reopening the Hawaii sales centers and can you give us a little bit of additional color on how some of those preliminary.

The rest of the islands are are open.

And as occupancy continues to build I think I think you'll find that will continue to see.

Good thing I will give you a couple of statistics. So just looking at this past week, Maui Rand, 75% occupancy of Wahoo brand, 85% occupancy.

So.

That's contrasting to kawaii and the 20 per cent range.

So we feel reasonably good about how Hawaii will respond obviously is a very important market for us in terms of what percentage of our of our are not only of our combinations, but also our sales are of representative there.

But we think it's starting to see a rebound clearly.

Hawaii remains and aspirational destination for the.

The vast majority of our owners.

Yes, absolutely and I aspire to be bored of July of this and some.

<unk>.

The ego and then a question.

Thank you.

And.

John of question for you expectations thoughts around a securitization or securitizations.

For this year. Thank you.

Yeah sure.

And we're targeting one here.

And the second quarter.

Just from Ah kind of where rates are today.

We see.

Potentially some significant improvement even over of the cost of funds. We did last year of call at 2.5%. So yeah. We still got a few months of your obviously before we execute that deal, but the demands there.

See and spreads continue the Titans since of the deal we did last year. So the setup looks pretty good right now and and no different than we've done in the past is recovery comes back.

And will target and that call at 350 $400 million type securitization and once again, we similar to last year and what we've done historically, we expect probably and the 98% of advanced right.

Okay. Good to hear thank you very much.

Thanks.

And.

Bob.

Uh-huh.

Yes Jared.

And you there.

Hello can you hear me.

Yes, [laughter] little technical Snafu there.

Good morning, Alright, and I get good good morning, everyone and thanks for taking my question.

So you talked about reservations being up 8% and the back half of the year verses 2019 and.

Hypothetically and assuming that the largely materializes and.

The reservations and up coming in pretty similar to 2019, and and we assume the world is largely back to normal can you help us think about what that translates into for contract sales and revenue relative to 2019, because obviously I know I know, there's a little bit of of lag you're not gonna have the same level of.

<unk>, new owner sales I think the the financing portfolio is obviously smaller today than it than it was then so I think we're kind of struggling to understand what that revenue ramp is gonna look like assuming the the forward bookings and of materializing. So anything you and kind of share to help us think about the.

Puts and takes would be helpful.

Sure Hey, Jeff.

Sure. It's John Yeah, all kind of step through some different parts of the or the business clearly like we've always said.

The majority of our sales come on site right. So is occupancies come back and a combination of owners packages all of the tours and all of that as well as the rental side that all bodes well when youre doing 80 plus per cent of your sales for people. If you will staying at the resort right. So I would expect.

Active to your point and you get back to those occupancies that should be help what I think there will be of greater mix of owner usage and the second half of the year versus being able to maybe the package tour. So we're working through all of that there's pros and cons with that obviously owner sales have higher bbeg's or more efficient, but they typically.

Come at on average a lower overall first time purchase right and and so there's that mixed there but.

I think we're we're continuing to build the pipeline is back and market and and that includes reopening linkage that we have on a lot of our resorts, but the one thing we were going to start to not bring back if you will and really look the to focus more on our package pipeline to replace.

Was on the really excuse me on the Sheraton side some of the off premise contact mainly and Orlando and Myrtle Beach. So that's not a huge percentage of the tours, but we're not looking to turn those low efficient towards back on and it's going to be better cost going forward, but it is also going to help us with better PPG. So I do think of.

You kind of get back to that on a run rate basis and fourth quarter.

You're going to get your contract sales closer to where you were and 19 and have a great opportunity obviously improve on that as you go into the to 2022.

And too bright and the other parts of the business will recover with Occupancies I mean, the the resort management.

And we're we're missing a little bit right now is this the the on site ancillary businesses right. So once again as of as Occupancies come back and the third and fourth quarters, we should be able to drive that ancillary profit and get that year over year growth going.

Financing the good news is notwithstanding the the notes receivable balance has been coming down like we talked about here for the first quarter given the timing of some of the interest expense as well as synergies and other cost. We've continued to take out of the business. We expect financing profit and the first quarter to be relatively flat from the fourth quarter right. So that's.

And and a sales start to go back up and we start to grow that notes receivable balance later and the year that hopefully will start getting us grow on our financing profits as we move through the end of this year and the next year.

And so the the other big question Mark is rentals, we'll continue to have some of that compression. If you will of owners wanting to stay more on the second half of the year. We've got the Steve mentioned lower occupancy here and the first quarter less book less.

And that nights on the on the books right now so with that compression of owner that will that will impact our ability to do open market rentals, but once again, the offset is you have more owner staying at the resort and that's going to help you on the contract sales side. So.

Not necessarily a horrible trade off but rentals, we'll take a little bit more time to come back as you go through 2021.

But once again as you start to get into 22, assuming more normalised occupancies a lot of that shift and compression will start to make its way through the system and then on the exchange a third party management side.

We continue to see sequentially here.

Some growth there in terms of the business coming back so hopefully from here and that kind of continued progression up obviously that business was not is impacted in terms of revenues going down as much as the the business. So.

Very resilient and then our G&A once again and and more broadly just the synergies that we're talking about.

That's going to help too and the recovery of your going forward.

And let me just have one of the thing and this is probably not in the surprise too.

In 2019, and I don't have the exact number of here in front of me, but I think.

And what we typically call the linkage sales.

Sales what are the people that are staying in and hotels and.

And markets, where we have sales centers et cetera.

Those were close to a couple of hundred million dollars worth of sales. Obviously is hotel occupancies continue to lag the recovery that we're seeing although it would be less people for us to be able to the target and recruit.

Towards from and and so that's just the other little bit of of headwind that we have to face, but everything of the John just articulated very well and my opinion.

We should come into play and I.

I said as of my remarks, I said I'm I'm very optimistic about how we look the Alice this year is building and what is going to deliver for us towards the end of the year.

Okay. Thank you very much for that and then John.

John just going back to the the first quarter you gave a lot of really helpful commentary on a on a bunch of different line items, which I'm going to have to go back and and aggregate, but at a high level to summarize.

You did $72 million of adjusted EBITDA on the fourth quarter do you think first quarter is higher or lower than that number of based on all of the the.

The puts and takes you gave us.

Yeah, It will be lower primarily due to the revenue reported ability right. We always have and this should just keep this in mind as of the business recovers every quarter right and the normal year, we've got the revenue reported ability and the first quarter that's negative right because you are.

March and of February and March is typically hire contract sales then that November December right and that and as we've talked about and the past that notwithstanding contract sales being higher you don't get necessarily the benefit of that until the second quarter right when those contracts sales clothes.

And what you have in the Helen of recovery right is that even more exaggerated right. So not only do you have the normal seasonality of that November December timeframe, you have the acceleration of sales quarter to quarter right and that's why it's going to be a little bit more pronounced and arguably right. If the recovery continues you're going to see that kind of every quarter.

Right and even on a full year basis, just given where you ended up 2020, you're probably going to have higher negative reported ability for the full year. Once again, just timing right. It's the the nuance of when we actually make the sale and when it actually comes through the P&L, but.

And that's going to be as you think about the recovery.

That's why we always report contract sales as of better leading indicator right in terms of what's happening in the business people buying et cetera, but the the reporting lags out a bit. So that's your biggest thing I mean, obviously of you've got synergies that are helping offset cost increases, but we're bringing back we and we paid no bonuses and 2020 right. We've we've <unk>.

To factor of some of that back in here as we get back to a more normalized basis, we've got reduced most likely depending on what happens with any new and.

Anything that the bite and the administration might do from of Covid relief package, we're expecting.

Less tax credits from the retention tax credits and things that were and the previous package. So that's where you do have a little bit of just as part of the recovery and we still don't have all of our people back to work right, we've been managing that bringing it back with the topline grow so on of pure cost perspective, yes, you've got some things here that will continue to come.

Back with the recovery.

Okay. Thank you very much for all of that color all of that jump back in the queue.

Yep.

Our next question comes from Ben Shock and with Credit Suisse. Please proceed with your question.

Hey, Thanks for taking my question How's it going and he just just to clarify.

Jared question, So maybe you're looking just at the VOI business.

Should contract sales follow bookings, which I think you said and the back half of the year was cost eight.

For the back half of the year or higher level of our sorry, just maybe.

And a little bit total fall and Ah sorry.

I think I think it's just just to clarify.

And we said that our bookings for the second half of the air 8% higher than they were at this time for 2019, which obviously it gives you a sense of what the relative demand is for that period of time, given the fact that 80% of our sales come from people that are in house.

Then one should conclude that the velocity of sales growth will in fact continue to grow as we get into the subsequent quarters to the to the first for.

Yes, yes, thank you for Ya.

Just just the bed on the on the occupancy rate just take fourth quarter of North America occupancy, which I think was in the.

60% 60, North North North North of North America was seven right. So if occupancies get back to the 90 plus percent right, we normally rod and what we're saying is what's on the books that today is showing that trajectory right, we still need to see how it recovers your occupancy on.

The percentage basis is going up and call. It 40%. If you will write that that's what's going to drive your contract sales on a relative basis. It's not the the eight points is just telling you where you're at today versus where you are at the same time and 19, but the bigger story is that recover of the occupancy from where we're at today right.

To something and that 90 plus per cent range.

Which is what we would abroad and and 2019.

I Gotcha makes sense. That's helpful. And then just just quick clarification on the 200 million and synergies can you give us may be broad strokes or I don't know how much granularity you have what basically what would be of that 200, what would be incremental two 2019, because I think you've been working on this for a couple of years now so just trying to figure out what would they be catalog and.

2019 versus what would be incremental to the reported 19 EBITDA number of things.

Yeah, I mean in 19 and I'm looking at Neal here I want to say, we had $40 million to $50 million of in the year savings of that 200 million and we can get through the actual number.

Bed, so it would be that to the 200 right apples to apples when you get a full year run rate of the 200 and it would be something and that 150 million plus or minus I think of incremental as you think about 19 actuals.

Great and a ballpark sign I appreciate it and that's all for me.

Uh-huh.

Our next question comes from the brand on tour with J P. Morgan. Please proceed with your questions.

Hi, Good morning, everyone and think Hey, how are ya. Thanks for taking my questions.

So he's thinking about the sequential list and the <unk> the sequential of progression of of the <unk> versus the for Q.

I just wanted to understand if that is coming from one or two markets one or two large markets that are improving or it's more broad based what did you sort of the ceiling and that guidance.

It's clearly more broad based.

As as you will recall.

We sell portfolio products.

And each one of our sales center is selling the same kind of.

I'm the same products that we are elsewhere and.

We're seeing the build and demand.

To be across the cross the waterfront and it's not does not focused on any one particular area.

But now it's it's across the across the system I guess, the one area of that.

A little bit of the interesting for us will be to see how quickly Europe and Asia Pacific respond.

Europe there are still.

Cross border restrictions that are in place and.

And we will see how long of that takes the sort itself out and largely everything and Asia Pacific is within the country. So there's not much international travel between countries and Asia Pacific's, but again the.

As you well know the the vast majority of of our sales are function of of what goes on here in North America, and we see that to be building very nicely.

Okay. That's great. Thanks for that and then on the consumer loan book and John I think you sort of wrap this up by by giving US the recent delinquency rates, but but just wanted to maybe close the loop. It sounds like there's no sort of incremental reserves that would need to be taken and less something really bad happens I guess the question of.

And what would you have to see.

And this year so far for situations, we used to take more access the reserves.

Yeah, I mean, clearly I think you'd have to see something more broadly from economic impact.

Yes, the it remember.

We took that reserve back in May.

And of April right with our first quarter with very limited visibility. We told you at the time that the reserve actually was based on not only what we saw but what the the stay on a business saw which we didn't know and at the time right. So we didn't know all of their marketing practices and what they were doing but back coming out of the financial crisis obviously.

Not the best comparison, but it was the best we had right and we looked at what the false did back then and and obviously the portfolios different of our portfolio was different coming into COVID-19 than what was coming out of the financial price. So so there were variables and there and.

And.

Our best estimate as we've looked at it I.

I mean, we think this is what we need delinquencies as we mentioned and we're basically at the end of the year back to pre COVID-19 delinquency levels and and even over the last call at 30 to 45 days, we've seen delinquencies by brand come down another 30, 40 basis point, so and a lot of cases.

Below right back, where we were free Covid last year and early on the final point of it'd make on that is which is on of declining notes receivable balance meaning.

A headwind right as you originate new notes and your growing the balance of your delinquencies apples to apples because you have more newer notes generally would trend downright we're on of declining and we continue to trend down so I think it all frames up.

It's what we think we need here going forward, but.

Yes, and we feel we feel like we got a little bit better sense as to how the notes of of performed over the last eight or nine months of obviously with the impact of Covid.

Mmm makes sense of thanks, a lot of guys.

Mhm and Q.

Our next question and comes from Gerets Yohanan with Wolf Research. Please proceed with your question.

Welcome back.

Thanks for taking my follow up.

So you talked about the excess inventory you have on hand, the $580 million and that you expect significant free cash flow over the next few years can you help us frame of way to think about that in terms of maybe of historical conversion rate versus a new conversion rate over the next couple of years or maybe it's an absolute number on free cash flow should be.

X million dollars greater than the normal like how should we think about that excess inventory of resulting in additional above normal free cash flow.

Sure and historically Jared I would say that if you think about our adjusted EBITDA on a more normalised cash flow and we've been converting roughly and that kind of about 55% plus or minus and what I mean by Normalised free cash flow right that would that would assume that from and inventory of perspective.

You are replacing.

What you're selling off the shelf from and inventory expense, so kind of of net neutral right as you think about free cash flow.

And if you look at the conversion rate the pieces of that.

Interest expense.

Is somewhat fixed rate, so EBIT the needs to come back.

The kind of where you were and 19 to get that kind of the same conversion. If you will on interest expense taxes, right, you're going to be tied more of your EBITDA more variable. So you'll have some flexibility and in terms of how you think about cash taxes as a percentage of EBITDA and then the other one that's in there historically, we sped call it the 80 to.

$100 million of corporate Capex.

That 82 of 100, obviously as the businesses recovering or we're going to manage lower.

And then as of the business comes back and we'll get back to probably of more normalised levels. So.

It's really those are those of the different levers as you think about it the opportunity. We're talking about is as your EBITDA comes back and you get to on a.

Call. It of 19 EBITDA more of of 55, plus or minus conversion rate that additional 580 million right is going to help take that all else being equal is going to help take that up over time now the owner.

And the thing I will tell you is will continue to buyback inventory very favorably on the secondary market and do some of the things we do so it will be a multiyear recovery, but the.

That potential of of the 580 is what's kind of above we're going to help your conversion ratio.

Got it okay. Thank you for that and then I wanted to ask about the comment you made about one of the interval customers choose not and chose not to.

The new I know, that's largely immaterial bottom line impact, which you were saying, but can you help us understand and think about the risk of other customers choosing not to renew and I guess what gives you confidence that this is kind of an isolated event rather than potential new trend.

Yeah.

First of all we're not aware of any other significant affiliate of.

Intervals, not choosing to renew or looking to do something Alternatively, I think the other thing I point out typically speaking and the exchange business. As you know it's kind of of two horse race, it's interval and it's RCI.

And the initial usually.

Usually it's of share game.

If and affiliate was of and RCI member of comes or interval or vice versa, and she is moving back and forth and this particular case. This this this affiliate chose not to be involved with any external exchange of company. They have decided that they believe that the strength of their individual portfolio is strong enough to support the.

Needs of of what their owners are looking for in terms of being able to find alternative vacation experiences I think that will remain to be seen now with that said.

You may recall, the back and 2010, when we went to points, we put our own captive internal exchange system in place for.

For people to be able to.

And if they wanted to go from one Mary of brand or to resort to another they didn't have to go through interval of in order to get there.

So this may be a page out of that same book that this other other developers choosing and go to.

We'll wait and see we always maintained our our affiliation with interval only because there are of locations and the world, where we don't have product or of vacation and experiences the people want to go to.

Which I think is one of the strength of the either the two exchange companies I happen to think that intervals as of.

Higher quality exchange company, but be that as of May. This is the decision they've made but we're again, we're not aware of anybody else's contemplating of similar move.

Great. Thank you so much for all the time.

Thank you I share.

We have reached the end of the question and answer session. At this time and I'd like to turn the call back over to see wise for closing comments.

Thank you everyone for joining our call today 2020 was certainly a difficult year for the hospitality industry, but also proved how strong our business model really is.

People liked the vacation and when they on their vacations. They try to find a way to use it you really don't need to look much for the third.

Quarter results and see just how resilient our business really is.

On North America resort Occupancies average nearly 70% during the fourth quarter and the midst of of the pandemic.

Total contract sales increased 27% sequentially.

<unk> and exchange transactions grew 17% on the year over year basis and.

Just and EBIT margin improve nearly 650 basis points sequentially from the third quarter and our run rate cost savings screwed of roughly and $135 million and 2020, nearly double where we were at the end of 2019, and taking us even closer to our goal of at least $200 million and savings.

Looking forward our tour pipeline is now more than $265 and packages sold with more than 50000 of those customers already booked for this year.

And reservations on the books for the second half of this year or 8% higher than at the same time and 2019 illustrating the pent up demand, we think will start to manifest itself later this year.

As always thank you for your interest and Mary and vacations worldwide take care of of yourselves and finally to everyone on the call and your families stay safe and enjoy your next vacation.

Thank you. This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

[music].

Greetings and welcome to Marriott vacations worldwide fourth quarter, 'twenty and 'twenty earnings conference call at.

At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder of this conference is being recorded I would now like to turn the conference over to your host Neal Goldner. Thank you you may begin.

Thank you, Rob and welcome to the Marriott vacations worldwide fourth quarter 2020 earnings call.

I am joined today by Steve Why is Chief Executive Officer, and John <unk>, Our President and Chief Financial Officer.

And need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under the federal Securities laws. These statements are subject to numerous risks and uncertainties as described on our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.

As well as the Investor Relations page of our website at IR Dot and the WC Dot com.

It's now my pleasure to turn the call over to our CEO Steve Wise.

Thanks, Neil and good morning, everyone and thank you for joining our fourth quarter call.

Before we get started I'd appreciate it if you would indulge me for a moment to reflect on the passing of the Arnie Sorenson and last week and.

I think it goes without saying that leaders for the combination of outstanding intellect, coupled with a passion for the business and a true ability to relate to associates of all level of the cover of the company are not easy to come by.

And Bill Marriott once again showed our industry his wisdom and selecting our need to be the only person to be CEO that did not have marriott as the last name and he chose wisely.

And I'd like to take just a moment to reflect on the army of the person.

And I had the good pleasure to be able to work as both a colleague of earnings as well as having a as a boss for a short period of time before our spin off and to 11 2011 excuse me.

Not only was already a good friend of mine, but he was a good friend of our business.

And for the shareholders of both of our companies.

I ask you to join me and all of the members of our team here at Marriott vacations worldwide and when I say, Thank you Marnie Godspeed, you will be missed but surely not forgotten.

Thank you for allowing me the opportunity to express my thoughts and the now I appreciate on to our call.

And what are the difference of the year mix.

And with just one year ago, when we reported double digit fourth quarter year over year contract sales growth and we were talking about the resiliency of our business model.

One month later, we closed all of our sales centers and recommended that owners not come to our resorts due to the pandemic, even going so far as to cancel of transient rental bookings.

But once government restrictions start to lift Occupancies quickly returned beginning first and our drive to markets, but expanding as the year went on and illustrating timeshare owners desire to get back on vacation.

As a result, we ended the fourth quarter at nearly 70% of North America occupancy.

Our higher margin resort management financing and exchange membership business businesses prove their resiliency last year with that revenue declining only 2% despite the global pandemic.

We also ended the year with more liquidity liquidity than we had at the end of the second quarter further illustrating the strength of our leisure focused business model.

Sitting here today I'm extremely optimistic about the continued recovery and our business.

Occupancies and a number of our drive to and fly markets are holding up well.

And as more and more people get vaccinated I expect some of the pent up demand to continue to manifest itself.

In fact reservations on the books for the second half of the year are currently 8% higher than they were at the same time in 2019.

So while the recovery most likely won't be linear and government actions could posit and some markets I do expect our business to continue to improve as we move throughout the year.

We announced in January of the pending acquisition of Welk resorts, one of the largest remaining independent timeshare operators, which we expect to close early in the second quarter.

Well <unk> operates a portfolio of eight upper upscale of vacation ownership resorts, primarily on the west coast with approximately <unk> hundred keys more than 55000 owners and over three years of built inventory.

These resorts will be of Great addition to our portfolio and we intend to rebrand all of the Wolf resorts as Hyatt residence club once we've obtained the necessary approvals.

This will dramatically increase our hyatt footprint, while providing us substantial future growth opportunities.

So let's talk about our fourth quarter results, starting with our vacation ownership business.

For 2020 was certainly challenging for the entire travel and hospitality industry being completely leisure focused with certainly a better segment to be at.

To give you a few examples of.

Occupancy at our Florida Beach resorts averaged in the mid 70% range during the quarter, including nearly 80% for the month of December.

Our South Carolina resorts ran on the low 70% occupancy range during the quarter.

And our Colorado and Park City Mountain resort average nearly 75% occupancy.

And our Aruba resorts ran over 60% and November and December while our U S. Virgin Island resorts ran over 70% during the quarter.

Even some of our larger market set of previously lagged the recovery continued to improve during the quarter for.

Hawaii, which ran low single digit occupancies and the third quarter lifted as of restrictions on October 15th and average nearly 50% occupancy during the fourth quarter. Excluding <unk> were the 14 day quarantine restrictions were reinstituted and in early December.

The <unk> were again very strong during the quarter, including 9% year over year, and and north at year over year growth and North America, <unk> was up 17% excluding Hawaii.

We continue to benefit from a higher mix of existing owners as well as higher promotional activity.

And as a result, we increased contract sales by 27% sequentially for the third quarter. Despite the increased government restrictions and California, and Hawaii and December.

Within the other parts of our vacation ownership business are stickier management fees delivered 3% year over year revenue growth and the quarter.

Our financing revenue declined slightly on a year over year basis, and the quarter, despite significantly lower contract sales, reflecting the recurring nature of this high margin revenue stream.

And rental revenue grew 29% sequentially for the third quarter, reflecting the broader travel recovery.

Before turning the call over to John and I want to talk about synergies.

As you might remember, we increased our synergy target to at least $200 million back in November.

And these are permanent savings that will not return with volume and will help us drive substantial margin improvement going forward.

We made a lot of progress and the fourth quarter and by the end of 2020 approximately of $135 million of these synergies have been achieved on a run rate basis.

Getting us closer to our target.

So, let's talk about where we go from here and.

In late January we reopened the California sales centers that we closed in December.

And it's still leaves <unk> and a handful of smaller sales centers that haven't reopened yet.

But with most of our major locations up and running we expect to continue to grow contract sales sequentially and the first quarter.

We ended the year with the tour pipeline of more than 165000 and sold packages with more than 30% of those already activated.

That means more than 50000 customers have already booked the vacation and related tour for 2021, and we expect that number to grow as the year progresses.

We're also ramping up our package pipeline engine after curtailing it last year, which will add future tours.

And.

We were very pleased with the sequential recovery of interval last year with exchange transactions growing nicely and the second half of the year.

One of the and our intervals corporate customers has decided not to renew its affiliation going forward choosing only to offer its owners membership and its own internal exchange program instead.

It's important to note that only a portion of these are on 165000 members are active interval users and we have been marketing to them since mid last year, we have already retained a high percentage of those who have been active users, reflecting the breadth of intervals offerings.

So when you expect the bottomline impact on our business going forward will be largely immaterial.

And finally, a recent survey showed that one third of American travelers have begun planning and booking trips trips, specifically and anticipation of vaccines being available.

Searches on the Marriott vacation club on our web site.

And so a rising interest and getting back on vacation with January searches for keywords, such as book and make of reservations for times higher than the prior year with a clear sign of increased demand for the Orlando.

However, more than half of the people. We've surveyed have also stated that they will not travel until they get their vaccination.

And as reflected on our first quarter bookings, which currently are holding below where they were of last year.

Thanks, Steve and good morning, everyone.

Our fourth quarter results reflect the strong sequential improvement from the third quarter illustrating the resiliency of our business with the resort Occupancies contract sales and exchange transactions all improving.

Looking first at our vacation ownership business with continued with the continued improvement and Occupancies contract sales improved 27% sequentially.

We also saw a significant improvement and our development profit this quarter with adjusted development margin, increasing to $14 million compared to just $6 million and the third quarter.

And our stickier resort management and financing businesses again provided a strong contribution to our bottom line as a result of our vacation ownership segment delivered $73 million of adjusted EBITDA and the quarter of significant improvement from the $28 million, we reported and the third quarter.

We did however, see of 3% increase and are stickier and high margin high margin management fee revenues.

As I've mentioned in the past the majority of the financing revenue, we generate and any given year comes from prior year note originations, so even with lower contract sales or financing business delivered 30 million $39 million of profit and the quarter only one only a $1 million decline from the prior year refer.

<unk>, the stickier and nature of this revenue stream and the benefits of our synergy and cost saving initiatives.

We have continued to work closely with the owners, who are who have temporarily lost store income due to the virus deferring loan payments, where we can.

By the end of the quarter roughly one 5% of our borrowers have taken advantage of this program speaking to the creditworthiness of our owners. In addition, and more than 40% of these borrowers who had a payment due by the end of the quarter had made it.

We now expect to experience a slightly higher COVID-19 related default then we estimated back in Q1 and took a $13 million net charge this quarter to increase our notes receivable reserve.

Similar to our treatment and May we have excluded this charge for adjusted EBIT of purposes.

Finally, our rental business has also continued to improve transient keys rented were up 34% versus the third quarter, reflecting improved occupancies. Similarly rate improved 1% from the third quarter as the result, while our rental business generated a $24 million loss and the fourth quarter that.

<unk> represented more than a 40% sequential improvement.

Turning to the exchange and third party management segment exchange transactions at our integral business were up 17% and the fourth quarter compared to the prior year <unk>.

Average revenue per member was down nearly 5%, primarily due to a decline and getaway rentals and other travel related services.

As a result, adjusted EBITDA was $28 million and the fourth quarter with margins in line with prior year, despite lower revenues, reflecting the benefit of our cost saving initiatives.

G&A expense declined $27 million of 45% improvement from the prior year. We achieved this primarily through a combination of synergy savings lower cost associated with furlough and reduced workweek programs lower overall spending across the business on technology travel and training and.

$4 million of savings due to the cares act retention tax credit we received in the quarter.

Moving to the balance sheet, our liquidity increased by roughly $60 million and the second half of last year. We ended the year with nearly $1 $3 billion and liquidity, including $524 million of unrestricted cash of $147 million of gross notes receivable that were eligible for secure.

<unk> and $597 million of availability under our revolving credit facility.

We had $4 3 billion and debt outstanding at the end of the year, including $2 7 billion of corporate debt and $1 6 billion of non recourse debt related to our securitized notes receivable.

Earlier earlier this year, we issued $575 million of zero percent convertible notes due 2026.

Reflecting the strong demand from investors, we use part of the proceeds to enter into a cost spread transaction, increasing the conversion price to roughly $214 per share 70% higher than our stock price on the day, we price the offering we plan to use of portion of the net proceeds to finance the wealth trans.

Action and we also used of $100 million of proceeds to pay down a portion of our term loan.

We still have no corporate debt maturities until September 2022, which is our 2017 convertible notes and thats, the only $230 million given the uncertainty of the timing of the recovery. We also extended the suspension of our financial maintenance covenant and our revolving credit facility through the end of this year.

Was approximately $135 million of which roughly $85 million of the program to date savings has been realized and our 2020 earnings that means there is roughly $50 million of run rate savings achieved by the end of 2020 that haven't been fully realized yet all of which will benefit as benno.

This year's financial results.

Looking forward, we continue to aggressively pursue additional synergy and cost savings on our weighted towards delivering at least $200 million of total run rate savings by the end of 2021.

Looking ahead, we still have limited visibility on the trajectory of the recovery and while we and while we will not be providing full year guidance. This morning, I do want to help you think through what the first quarter could look like as there are certain items that will impact our results.

These include reinstating a portion of our variable compensation plans and bringing back associates to work to support the further recovery of the business and total we expect the impact of these incremental cost and the first quarter to be roughly $10 million, which will be spread throughout the business.

And our vacation ownership segment, we have seen our business recovered nicely and expect it to continue into the first quarter.

As a result, we are expecting roughly $15 million to $20 million of negative EBITDA reported ability and the first quarter compared to the $7 million benefit we had and the fourth quarter of 2020.

It is important to remember that this is only timing. In addition, we are projecting higher marketing and sales cost and the first quarter as we ramp up tour production, which will negatively impact our adjusted development margin and in the quarter, but will help drive future sales and.

And our resort management business, we expect the recurring management fees to remain stable and ancillary margins to improve compared to the fourth quarter as occupancies continue to recover however, given the timing of certain fee revenues as well as the higher cost I mentioned earlier, we expect our management and exchange.

Profit to be flat or down slightly on a sequential basis.

And our rental business, we expect the occupancies and rate to grow sequentially, reflecting the continued recovery and leisure travel as well as normal seasonality.

This will be partially offset by higher maintenance fee expense largely associated with higher inventory balances. As a result, we expect rental profit could improve by $5 million to $10 million compared to the fourth quarter.

Turning to our exchange and third party management business, we expect transactions at our interval business to continue to improve a few percentage points year over year, reflecting the recovery.

We also expect average revenue per member to the largely unchanged on a year over year basis.

Finally, we expect G&A could be down roughly 20% on a year over year basis, reflecting the ongoing benefits of our synergy work and restructuring effort efforts, partially offset by and REIT by reinstating our variable compensation incentive plans.

Associates, returning back to work to support the further recovery of the business.

And lower cares act retention tax credits.

As we've discussed before the largest component of our rental expense is maintenance fees on unsold inventory.

Like any other owner of these fees are typically do at the end of the year or early in the first quarter.

This causes our rental business to be a drag on cash flow and the first quarter. However, once we get past the first quarter of disproportionate amount of our rental revenue tends to turn into free cash flow and the business continues and as the business continues to recover this year should be no different.

And our vacation ownership business, we came into 'twenty and 'twenty, one with more than $900 million of completed inventory on our balance sheet and had commitments to purchase another $165 million. This year with a large portion of this happening in the first quarter.

When you add in the excess inventory, we are acquiring with the wealth of acquisition that brings our total inventory balance to more than $1 $1 billion today for $580 million of excess inventory at a normalized sales pace. So as our contract sales continue to ramp up and.

And with limited inventory commitments going forward, we expect to generate significant free cash flow over the next few years as we monetize this excess inventory.

With that Steve and I will be happy to answer your questions Rob.

Thank you at this time, we'll be conducting and question and answer session I'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May press star two and I'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up of your handset before.

And the Star Keys, one moment, please while we poll for questions.

Our first question comes from David Katz with Jefferies. Please proceed with your question.

Hi, David.

Good morning, gentlemen.

I appreciate all of the detail I wanted to go back on two things if I may.

The.

And there's so much discussion about pent up demand and if we could maybe break that down just a little bit farther right. We would expect that there is pent up tours and right.

Pent up marketing packages.

Pent up visitation, alright, but can you maybe give us just a bit more detail as to how we would breakdown and the notion of pent up demand, which seems obvious and intuitive, but some more detail would help.

Sure.

No.

In Q1.

Q2 is down a couple of points.

But so when you average it all out for the full year, it's down about 8%.

I think of it all stands to reason if you sort through it I mean as I reported people are anxious to travel theyre already looking to book travel, but they want to make sure that they have the benefit of the vaccine and you've heard about the rollout of vaccines and some prognostications that.

The bulk of America will be vaccinated by the summer. So I think that all kind of sinks up well with without it and the other point and I.

I cant regurgitate the number but there was a huge percentage of the population and 2020 that never took of vacation.

And that stands to reason given the circumstances, we all found ourselves and so.

In addition to their normal inclination to take of vacation I think it's been amplified by the fact that they haven't been able to get away in 2020. So.

That's the best visibility, we can give you right now.

The <unk>.

And 80% of our of our sales and our resorts come from people that are.

And residents at our resorts.

And 50% basically our in house guests and another 30% are people that are on vacations are on on packages.

The as our resorts continue to fill up we'll continue to see sales grow proportionately.

Understood and just a quick follow up if I may the <unk>.

<unk> opportunity I think highlights what.

And then maybe some latent value with respect to Hyatt.

Can you color and a bit on what you what we could reasonably expect that Hyatt brand to bring in terms of tour flow sales and visitation anything qualitative.

Because I think we.

For your name, we usually think of you with Marriott, but there's this other thing there too.

Sure.

I think probably the easiest way to think about it is that.

When we acquired <unk>.

I would I would tell you that the Hyatt vacation residents and businesses was basically.

Relatively dormant in terms of what people were doing actively to try to grow the business I think of reported in previous calls that when <unk> acquired Hyatt. They had 16 resorts and when we acquired IRG and they have 16 resorts that was four years later.

So we do believe that there is.

And quite a bit of opportunity there and the <unk>.

Wealth business, the way in which they typically source customers because they didn't have kind of one of the major hospitality brands affiliated with it.

Did a lot through sports marketing and OTC venues, where they generate of customers typically speaking those are.

Low yield high cost kind of channels to source customers out of.

And we believe that we will start to strip out some of those cost as we replace them with things, where we'll continue to obviously look to penetrate the world of Hyatt program, just as we have done and the Marriott <unk> program.

We will continue.

Continued to change practices about how sales are done at the site level for instance.

Putting in the equivalent of our Encore program, which has proved to be very successful for us and has a very high <unk> number and we will put that in.

And the only caveat I would throw into this is it's going to take us a little while for us to re badge. The welk resorts as Hyatt call that at the end of this year first quarter next year, but then there is another impediment to being able to integrate all of the inventory and that is the fact that well today isn't ours.

<unk> affiliate.

<unk> and interval International affiliate, so that makes putting in the exchange program and in place much as we have done on the Marriott side, a little more of a problematic that affiliation and in 2022.

And obviously, we would look to then re affiliate.

The fact with the interval international from whence they used to be by the way.

So.

The I think I reported that we said that.

And we think by 2024 at and and hopefully sooner.

It's going to mean somewhere in the neighborhood of $60 million to $70 million of adjusted EBITDA.

I think we should look to take their development margin, which is today low single digits up into that 20% to 30% range.

And and the contract sales, obviously, you on and try to grow substantially and we think contract sales by 2020 for could be.

$160 million to $180 million and that range roughly.

Perfect and just yet.

What I referenced David I'd add there I mean that $60 million to $70 million as Steve mentioned.

Versus call it Hyatt on a pre COVID-19 basis of EBITDA and.

It is a.

Fraction of that $60 million to $70 million incremental just to put it and relative size. All of the improvements you are talking about are really going to the drive not only the top line, but on a percentage basis huge EBITDA growth over the next two to three years within the combined high of wealth business.

Thank you very much.

Thank you.

Our next question comes from Patrick Sholl with true of Securities. Please proceed with your question.

Good morning.

Good morning, good morning.

Thoughts on timing of reopening and the Hawaii sales centers and can you give us a little bit of additional color on how some of those preliminary.

Reservations and bookings and book for Hawaii going forward. Thank you.

Yes.

As I think I reported on the Hawaii X X <unk>.

And are running at roughly 50% of occupancy now theres still the requirement to have to have a negative COVID-19 tests before you arrived at the island's et cetera, and why is the outlier. There is still a 14 day quarantine restriction in place, albeit for instance at the core of each club, where we have it we have kind of a broad area is the.

Long as you stay on campus you don't have to actually stay in your room on your Villa you can move around the resort, but it's relatively restricted.

I wish I had better visibility and as of what the mayor of Hawaii is thinking.

And currently I think they are saying maybe the end of March.

But we hear kind of.

Informally that that may get extended further and coli.

And they wanted to make sure that the vast majority of the population has received.

Received the vaccine now with that said our.

Our sales centers and the rest of the rest of the islands are open.

And as occupancy continues to build on.

I think I think you'll find that we'll continue to see.

Good thing I will give you a couple of statistics. So just looking at this past week, Maui ran 75% occupancy of wahoo around 85% occupancy.

So.

And thats contrasting to coli and the 20% range.

So we feel reasonably good about how Hawaii will respond obviously, it's a very important market for us in terms of what percentage of our of our not only of our combinations, but also our sales of our representative there.

But we think it's starting to see a rebound clearly.

Hawaii remains and aspirational destination for the vast majority of our owners.

Yes, absolutely and I aspire to be there in July of this summer.

And then a question.

John a question for you.

Expectations thoughts around a securitization or securitization.

For the year. Thank you.

Yes sure.

And we're targeting one here.

In the second quarter.

We have just from kind of where rates are today.

We see.

Potentially some significant improvement even over the cost of funds, we did last year of call. It two 5%. So yes, we still got a few months of your obviously before we execute that deal, but the demands there.

We've seen spreads continue to tighten since of the deal we did last year. So the setup looks pretty good right now and no different than we've done in the past as recovery comes back.

And we will target and that call it $350 $400 million type securitization and once again similar to last year and what we've done historically, we expect probably and the 98% advance rate.

Okay. Good to hear thank you very much.

Thanks.

Bob.

Yes Jared.

And you there.

Hello can you hear me.

Yes.

Little technical Snafu there.

Good morning, Alright.

Good morning, everyone. Thanks for taking my question.

So you talked about reservations being up 8% and the back half of the year versus 2019.

Hypothetically, assuming that largely materializes and reservations and upcoming in pretty similar to 2019 and and we assume the world is largely back to normal can you help us think about what that translates into for contract sales and revenue relative to 2019.

And because obviously I know I know theres, a little bit of of lag youre not going to have the same level of new owner sales.

I think the financing portfolio is obviously smaller today than it was then so I think we're kind of struggling to understand what that revenue ramp is going to look like assuming.

On the forward bookings and up materializing. So anything you can kind of share to help us think about those puts and takes would be helpful.

Sure Hey, Jared its John.

Kind of step through some different parts here of the business clearly like we've always said.

And the majority of our sales come on site right. So as Occupancies come back and the combination of owners packages all of the tours and all of that as well as the rental side that all bodes well when youre doing 80 plus percent of your sales for people. If you will staying at the resort right. So I would.

<unk> to your point you get back to those Occupancies that should be helpful. I think there will be a greater mix of owner usage and the second half of the year versus being able to maybe the package tour. So we're working through all of that.

Pros and cons with that obviously owner sales have higher <unk> or more efficient, but they typically come at on average of lower overall first time purchase right and so there's that mix there but.

I think where we're continuing to build the pipeline is back and market and that includes reopening linkage that we have and a lot of our resorts, but the one thing we were going to start to not bring back if you will and really look to focus more on our package pipeline to replace.

And it was on the excuse me on the Sheraton side some of the off premise contact mainly in Orlando and Myrtle Beach. So that's not a huge percentage of the tours, but we're not looking to turn those low efficient towards back on it's going to be better cost going forward, but it's also going to help us with better PPG. So I do think.

If you kind of get back to that on a run rate basis, and fourth quarter Youre going to get your contract sales closer to where you were at 19 and have a great opportunity to obviously improve on that as you go into 2022.

<unk> right and.

The other parts of the business will recover with Occupancies I mean the.

And the resort management.

Where we're missing a little bit right now is this the the on site ancillary businesses right. So once again as of as occupancy has come back and the third and fourth quarters, we should be able to drive that ancillary profit and get that year over year growth going.

And then of sales start to go back up and we start to grow that notes receivable balance later in the year that hopefully will start getting us grow on our financing profit as we move through the end of this year into next year.

And so the other big question Mark as rentals, we will continue to have some of that compression. If you will of owners wanting to stay more in the second half of the year, We've got as Steve mentioned lower occupancy here and the first quarter less book less.

Net nights on the on the books right now so with that compression of owner that'll that'll impact our ability to do open market rentals, but once again, the offset as you have more owner staying at the resort and that's going to help you on the contract sales side, so not necessarily a horrible tradeoff, but rentals will take a little bit.

More time to come back as you go through 2021.

But once again as you start to get into 'twenty, two assuming more normalized the occupancies of lot of that shift and compression will start to make its way through the system.

And then on the exchange of third party management side.

We continue to see sequentially here.

And some growth there in terms of the business coming back so hopefully from here or is that kind of continued progression. Obviously that business was not as impacted in terms of revenues going down as much as the the.

<unk> business so.

Very resilient and that our G&A once again and more broadly just the synergies that we're talking about that.

And that's going to help too and the recovery here going forward Jeff.

And let me just add one other thing this is probably not a surprise to you.

In 2019, I don't have the exact number here in front of me, but I think.

What we typically call the linkage.

Sales, which are people that are staying in and hotels and markets, where we have sales centers et cetera.

Those were close to a couple of hundred million dollars' worth of sales, obviously as hotel Occupancies continue to lag the recovery that we're seeing although it will be less people for us to be able to target and recruit.

Tourists from and so that's just another little bit of a headwind that we have to face, but everything of the John just articulated very well in my opinion.

The should come into play and I.

And I said is and my remarks, I said I'm very optimistic about how we look the Alice this year is building and what it's going to deliver for us towards the end of the year.

Okay. Thank you very much for that and then.

John just going back to the first quarter, you gave a lot of really helpful call.

And Terry on a on a bunch of different line items, which I'm going to have to go back and in aggregate, but at a high level to summarize.

You did $72 million of adjusted EBITDA on the fourth quarter do you think first quarter is higher or lower than that number based on all of the.

The puts and takes you gave us.

Yes, it will be lower primarily due to the revenue reported ability right.

We always have and this should.

Yes, I'll just keep this in mind as the business recovers every quarter right and a normal year. We've got revenue reported ability in the first quarter, that's negative right because you are.

March end of February and March is typically higher contract sales then that November December right and that and as we've talked about in the past that notwithstanding contract sales being higher and you don't get necessarily the benefit of that until the second quarter right when those contract sales close.

What you have now on our recovery rate is thats, even more exaggerated right. So not only do you have the normal seasonality of that November December timeframe, you have the acceleration of sales quarter to quarter, right and thats why its going to be a little bit more pronounced and arguably right. If the recovery continues and youre going to see that kind of every quarter.

Alright, and even on a full year basis, just given where you ended up 'twenty and 'twenty, you're probably going to have higher negative reported ability for the full year. Once again, just timing right. It's just the nuance of when we actually make the sale and when it actually comes through the P&L, but that's going to be as you think about the recovery.

And that's why we always report contract sales as a better leading indicator right in terms of what's happening and the business people buying et cetera, but the reporting lags that a bit. So that's your biggest thing I mean, obviously, we've got synergies that are helping offset cost increases, but we're bringing back we paid no bonuses in 2020 right.

And we started to factor some of that back in here as we get back to a more normalized basis, we've got reduced most likely depending on what happens with any new.

Anything that the buying and administration might do from of Covid relief package, we're expecting less tax credits from the retention tax credits and things of that were in the previous package. So that's where you do have a little bit of just as part of the recovery and we still don't have all our people back to work right.

And then managing that bringing it back with the topline growth. So on a pure cost perspective, yes, you have got some things here that will continue to come back with the recovery.

Okay. Thank you very much for all of that color I'll jump back in the queue.

Yep.

Our next question comes from Ben <unk> with Credit Suisse. Please proceed with your question.

Hey, Thanks for taking my question how is it going hey, just just to clarify.

Jared the question, so maybe youre looking just at the VOI business.

Should contract sales follow bookings, which I think you said and the back half of the year was plus eight.

For the back half of the year or higher or lower sorry, and just maybe.

And a little bit trouble following that.

Well I think I think it's just just to clarify.

And we said that our bookings for the second half of the era of 8% higher than they were at this time for 2019, which obviously gives you a sense of what the relative demand is for that period of time, given the fact that 80% of our sales come from people that are in house.

And one should conclude that the velocity of sales growth will in fact continue to grow as we get into the subsequent quarters for the first quarter.

Yes.

<unk> just been on the on the occupancy.

And so you're right just take fourth quarter, and North America occupancy, which I think was in the <unk>.

60% 68, North and North and North America was seven right. So if occupancies get back to the 90 plus percent rate, we normally run and what we're saying is what's on the books debt today is showing that trajectory right, we still need to see how it recovers your occupancy on.

The percentage basis is going up.

Call. It 40% if you will right that that's what's going to drive your contract sales on a relative basis, it's not the the eight points of just telling you where youre at today versus where you were at the same time and 19, but the bigger story is that recover of the occupancy from where we're at today right to something in that 90 plus percent range.

Which is what we would abroad and in 2019.

I Gotcha makes sense. That's helpful. And then just a quick clarification on the 200 million and synergies can you give us maybe broad strokes or I don't know how much granularity you have but basically what would be of that 200 would be incremental to 2019, because I think you've been working on this for a couple of years now so just trying to figure out what was maybe and.

And 2019 versus what would be incremental to the reported 19 EBITDA number of thanks.

Yes, I mean in 19 and I'm looking at Neal here I want to say, we had $40 million to $50 million of in the year savings of that $200 million. We can get you the actual number.

And so it would be that to the 200 right apples to apples when you get a full year run rate of the 200, and it would be something and that $150 million plus or minus I think of incremental as you think about 19 actuals.

Great and then a ballpark side I appreciate it that's all for me.

The hub.

Our next question comes from Brandt <unk> with Jpmorgan. Please proceed with your question.

Hi, Brian Good morning, everyone and thanks, Hey, how are you thanks for taking my questions.

Can you just thinking about the sequential lift and the <unk> of the sequential progression of the <unk> versus the <unk>.

Just wanted to understand if that is coming from one or two markets, one or two large markets that are improving or if it's more.

Rod based what did you sort of assume and that guidance.

It's clearly a more broad based.

As you will recall, we sell the portfolio of products.

So that each one of our sales center is selling the same kind of the same St products that we are elsewhere, and we are seeing the build and demand.

To be across the across the waterfront and its not does not focused on any one particular area.

But no.

It's across the across the system I guess, the one area that is a little bit of of interesting for us will be to see how quickly Europe and Asia Pacific respond.

Europe there are still.

The cross border restrictions that are in place.

And we'll see how long of that takes the sort itself out and largely everything and Asia Pacific is within the country. So theres not much international travel between countries and Asia Pacific's, but again.

As you well know the vast majority of our sales are a function of what goes on here in North America, and we see that to be building very nicely.

Okay. That's great. Thanks for that and then on the consumer loan book and John and I think you sort of wrap this up by giving us the recent delinquency rate, but just wanted to maybe close the loop. It sounds like there is no sort of incremental reserves that would need to be taken unless something really bad happens and I guess the question is what would you.

Have to see.

And this year so far for <unk>.

Situation for us.

More excess reserves.

Yes, I mean, clearly I think you'd have to see something more broadly from a economic impact.

Remember.

We took that reserve back in May and.

And of April right with our first quarter with very limited visibility. We told you at the time that the reserve actually was based on not only what we saw but what the standard business saw which we didn't known at the time right. So we didn't know all of their marketing practices and what they were doing but back coming out of the financial crisis obviously.

Not the best comparison, but it was the best we had right and we looked at what defaults did back then and and obviously the portfolio is different our portfolio was different coming into COVID-19 than what was coming out of the financial crisis. So there were variables in there.

And we took our best estimate as we've looked at it.

And we think this is what we need delinquencies as we mentioned we're basically at the end of the year back to pre COVID-19 delinquency levels and and even over the last call. It 30 to 45 days, we've seen delinquencies by brand come down another 30 40 basis points, so and a lot of cases.

Below right back, where we were pre COVID-19 last year and the other.

For the final point I'd make on that is which.

And is on a declining notes receivable balance meaning.

That's a headwind as you originate new notes and Youre growing the balance of your delinquencies apples to apples because you have more newer nodes generally would trend down right. We're on a declining and we continue to trend down so I think it all frames up.

And it's what we think we need here going forward, but.

Yeah, and we feel we feel like we got a little bit better sense as to how the notes of performed over the last eight or nine months, obviously with the impact of Covid.

Makes sense, thanks, a lot guys.

Thank you.

Our next question comes from Jared Shaw of Hannon with Wolfe Research. Please proceed with your question.

Welcome back.

Thanks for taking my follow up.

So you talked about the excess inventory you have on and the $580 million and that you expect significant free cash flow over the next few years can you help us frame of way to think about that in terms of maybe of historical conversion rate versus a new conversion rate over the next couple of years or maybe it's an absolute number on free cash flow should be.

X million dollars greater than the normal like how should we think about that excess inventory, resulting in additional above normal free cash flow.

Sure I mean, historically Jared I would say that if you think about our adjusted EBITDA on a more normalized cash flow, we've been converting roughly and that call it 55% plus or minus and what I mean by normalized free cash flow right that would that would assume that from an inventory perspective.

And yes, you are replacing.

Youre selling off the shelf from an inventory expense so kind of a net neutral rate as you think about free cash flow.

And if you look at the conversion rate the pieces of that.

Interest expense.

And somewhat fixed rate, so EBITDA needs to come back to.

And kind of where you were of 19 to get that kind of same conversion. If you will on interest expense taxes right are going to be tied more to your EBITDA more variable. So youll have some flexibility in terms of how you think about cash taxes as a percentage of EBITDA and then the other one that's in there historically, we spend call. It 80 to 100.

Million of corporate Capex that.

Of that 80 to 100, obviously as the business is recovering or we're going to manage lower.

And then as the business comes back and we'll get back to probably a more normalized levels. So.

It's really those are those of the different levers as you think about it the opportunity. We're talking about is as your EBITDA comes back and you get on a call. It a 19 EBITDA more of a 55 plus or minus conversion rate that additional 580 million rate is going to help take that all else being equal that's going to help.

Take that up over time now the only thing I will tell you is we'll continue to buy back inventory very favorably on the secondary market and do some of the things we do so it will be of multiyear recovery, but.

That potential of the $5 80 is what's kind of above we're going to help your conversion ratio.

Got it okay. Thank you for that and then I wanted to ask about the comment you made about one of the interval customers choose not chose not to.

Renew and I know thats, largely immaterial of Bottomline impact, which you were saying, but can you help us understand and think about the risk of other customers choosing not to renew and I guess what gives you confidence that this is kind of an isolated event rather than <unk>.

The new trend.

Yes.

First of all we're not aware of any other significant affiliate of <unk>.

Intervals, not choosing to renew or looking to do something Alternatively, I think the other thing I'd point out typically speaking in the exchange business as you know, it's kind of a two horse race, it's interval and its RCI.

And so usually.

And usually it's a share game one of.

If and affiliate was and RCI member comes or interval or vice versa. It's just moving back and forth and this particular case. This this this affiliate chose not to be involved with any external exchange company. They have decided that they believe that the strength of their individual portfolio is strong enough to support the.

<unk> of.

What their owners are looking for in terms of being able to find alternative vacation experiences.

I think that will remain to be seen now with that said.

You may recall that back in 2010, when we went to points, we put our own captive internal exchange system in place for people to be able to.

And if they wanted to go from one Marriott branded resort to another they didn't have to go through interval in order to get there.

So this may be a page out of that same book that this other other developers choosing and go to.

And we'll wait and see.

Always maintained our our affiliation with interval only because there are locations and the world, where we don't have products or vacation the experiences that people want to go too.

Which I think is one of the strengths of either of the two exchange companies I happen to think that intervals of us.

Higher quality exchange company, but be that as of May. This is the decision they've made but we're again, we're not aware of anybody else is contemplating of similar move.

Great. Thank you so much for all the time.

Thank you I share.

We have reached the end of the question and answer session. At this time I would like to turn the call back over to Stephen Weiss for closing comments.

Thank you everyone for joining our call today 2020 was certainly a difficult year for the hospitality industry, but also proved how strong our business model really is.

People like the vacation and when they own their vacations, they try to find a way to use it you really don't need to look much for for those.

The quarter results as he just how resilient our business really is.

Our North America resort Occupancies average nearly 70% during the fourth quarter and the midst of of pandemic <unk>.

Total contract sales increased 27% sequentially.

Interval exchange transactions grew 17% on the year over year basis.

Adjusted EBIT margin improved nearly 650 basis points sequentially from the third quarter.

And our run rate cost savings grew to roughly $135 million in 2020, nearly double where we were at the end of 2019, and taking us even closer to our goal of at least $200 million and savings.

Looking forward our tour pipeline is now more than 165000 packages sold with more than 50000 of those customers already booked for this year and reservations on the books for the second half of this year or 8% higher than at the same time and 2019 illustrating the pent up demand, we think we'll start to manage for.

S itself later this year.

And as always thank you for your interest and Marriott vacations worldwide take care of yourselves and finally to everyone on the call and your families stay safe and enjoy your next vacation.

Thank you. This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.

Q4 2020 Marriott Vacations Worldwide Corp Earnings Call

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