Q1 2021 Travel + Leisure Co Earnings Call
The checking your participants for today's program in your program will begin shortly.
[music].
Continue to standby.
[music].
Yeah.
Good morning, and welcome to the first quarter 2021 earnings conference call for travel and leisure co suddenly Wyndham destinations.
The Speakers' remarks, there'll be a question and answer period.
To ask the question during this time simply press. The Star then one on your telephone keypad. If you would like to withdraw your question. Please press the pound key on your telephone keypad.
The reminder, ladies and gentlemen, this conference call is being recorded if you do not agree with these terms. Please disconnect at this time. Thank you have the now like the turn the call over to Chris Agnew. Please go ahead.
Thank you very much good morning, and welcome the <unk>.
We begin we'd like to remind you that our discussions. This morning will include forward looking statements.
Actual results could differ materially from those indicated in the forward looking statements on the forward looking statements made today are effective only as of today, we undertake no obligation to publicly update or revise these statements the.
The factors that could cause actual results to differ discussed in our SEC filings and you can find the reconciliation of the non-GAAP financial measures discussed on today's call in our earnings press release available on our website at Investor Day travel on leisure code on call.
This morning, Michael Brown, our President and Chief Executive Officer will provide an overview of our first quarter of results and Mike Hug, Our Chief Financial Officer will then provide greater detail on the quarter for our balance sheet and liquidity position.
Following these remarks, we will be back.
However, the microbiome.
Thank you Chris Good morning, everyone and thank you for joining us today.
One year ago, we recognize the uncertainty of head and in response, we took swift action, we made significant tactical and long term strategic decisions, which allowed us to manage our short term cash flow and has powered our return to normalized profitability setting us up to execute on our recovery.
As the world gets back on vacation.
2021 is off to a great start earlier. This morning, we reported first quarter adjusted EBITDA of $129 million and adjusted EPS of <unk> 39 cents opt.
The operating performance strengthened significantly in March with sequential.
The improvement in our key operating metrics.
Increased consumer confidence reduced domestic travel restrictions and the faster than anticipated vaccine rollout have all helped to accelerate leisure travel demand.
As we reflect on our March results and booking trends the data clearly we're flat to an inflection in travel sentiment, which we believe will lead to a strong summer travel recovery.
Let me share some data points that give us confidence in the recovery in leisure travel for the remainder of the year.
First mortgage vacation ownership bookings for 2021 of the eyeballs finished up 15% compared to 2019.
And bookings for RCI, North America were up 21%.
This is of more changed from January February where bookings were down double digits for both.
The positive trends that we'll realize it in March have continued in April.
Second we are seeing booking lead times lengthening for the summer and fall the <unk>.
Inflection on lead times is a healthy leading indicator of increasing consumer confidence.
Another positive indicator is the improvement in demand for key leisure destinations, Nevada, California, and Hawaii, all experienced large positive swings in momentum for the from the beginning of the year and based on the April net confirmations Las Vegas is back to being a top three destination with the order.
Lando, leading the way.
Last we are seeing increased demand to fly to destinations, indicating not only increased demand for travel but increased confidence to travel.
Let me now transition to provide an overview of the first quarter.
Our vacation ownership and travel and membership businesses. Both finished the quarter on an upswing.
Vacation ownership had gross VOI sales of $236 million ahead of our guidance range of $210 million to $220 million.
This reflects strong sequential improvement throughout the quarter let.
Let me share a few highlights.
Close rates improved meaningfully in the first quarter and were 150 basis points better than 2019.
A sign of both pent up demand and a strong consumer.
New owner sales transactions were above expectations at 32% of total transactions due to a higher mix of new owner tours.
And blue thread, our strategic partnership with Wyndham hotels, and the Wyndham rewards loyalty program accounted for 9% of new owner sales transactions.
Transitioning to our travel of membership segment first quarter results were strong with transactions up 28% year over year.
Our North American exchange business led the improvement with a robust March the salt transactions at their highest monthly level in two years.
This was an impressive turnaround from the first two months of the quarter, where they were down 15%.
Also during the quarter RCI announced a new affiliation agreement with capital Vacations Club capital vacations managers, nearly 70 associations, including over 45 vacation club locations in the U S and the Caribbean.
This relationship brings 32000 additional members into our membership base.
For the company overall travel and leisure adjusted EBITDA margin of 25% was higher than anticipated driven by the favorable revenue trends as well as the combinations of combination of actions taken early last year. These.
These actions include a focus on higher credit quality tours and cost savings that will result in $60 million of permanent G&A savings.
The strong first quarter margin was achieved despite a 22 million net interest income of headwind due to our reduced consumer finance portfolio.
If we equalize the 2021 portfolio of size to 2019, adjusted EBITDA margin would've been approximately 23% compared to the 22% margin in the first quarter of 2019 and 25 per cent this year.
On the strategic front. The first quarter was notable as we started the year with the acquisition of the travel and leisure brand and its two travel clubs.
In February we renamed our company travel on leisure and launched booked P&L dot com and online vacation booking platform.
The team has been working on the integration and transition of the business and is planning to launch a new travel and leisure subscription club this summer.
We are also developing licensing opportunities to allow the travel and consumer product companies to leverage the travel and leisure brand.
As it relates to our outlook, we will eventually return to full year guidance, but for now we will provide guidance for the second quarter only for the second quarter, we expect tours of 118 to 123000.
<unk> around $2800 and gross VOI sales of approximately $355 million to $365 million.
Second quarter VOI sales represents a 50% to 55% sequential increase from the first quarter.
Overall, we anticipate adjusted EBITDA in the range of $160 million to $170 million in the second quarter.
With that I would like to hand, the call over to our Chief Financial Officer, Mike Hug Mike.
Thanks, Michael Good morning to everyone and thank you for joining us today.
I will discuss our first quarter results and provide you with more color on our balance sheet liquidity position and cash flow my comments will be primarily focused on our adjusted results.
We reported total company first quarter, adjusted EBITDA of $129 million and adjusted earnings per share of 39 cents compared to negative adjusted EBITDA of $44 million and adjusted loss per share of <unk> 98 cents one year ago.
In the first quarter the vacation ownership segment reported revenue of $449 million.
Sales of $236 million and adjusted EBITDA of $66 million.
The P. G of $2847 was 18% higher than the first quarter of 2019 benefiting from owner mix and improved credit quality.
Tours for 60% lower than 2019, driven by weaker leisure travel trends in January and February and our decision to focus our new owner marketing efforts on the only the best quality tours.
These efforts resulted in a new owner of <unk> increase in the first quarter of 2021 compared to 2019 and were contributing factors to our strong first quarter margin.
Our underlying portfolio continues to perform well with delinquencies lower year over year, driven by a more mature portfolio from a distribution of nations and improved quality of new originations the.
Provision for loan loss as a percentage of gross VOI sales was 18, 1% in the first quarter and we expect to stay below 19% for the remainder of the year.
We are comfortable with the overall allowance on our receivables portfolio considering the continued uncertainty around the pandemic and if the economic impact the.
The allowance as a percentage of gross vacation ownership contract receivable was 21% of at the end of the quarter compared to the 25% at the end of the first quarter of last year.
Revenue of our travel of membership segment, which includes panorama as well as the travel on leisure group was $193 million from the first quarter compared to $159 million in the prior year.
Travel on membership first quarter adjusted EBITDA was $75 million, an increase of 70 per cent compared to last year's $44 million.
As previewed last quarter travel on membership update its key operational drivers for it.
The expanded focus on servicing the broader travel club market. These.
These new drivers transaction and revenue per transaction provide a more inclusive view of our business by encompassing our exchange business as well as our expanded focus on new travel of subscription markets.
Travel on membership net of transaction in the first quarter for 513000 up 28 per cent compared to the same period last year with transaction growth clearly benefiting from pent up travel demand.
RCI transactions in North America were up 66% above the same period last year.
Driven by demand for domestic.
Domestic locations.
Increased bookings for near term of rivals around Easter and spring break and lower cancellations.
Based on the seasonality within the quarter. It is clear that the big rebound in March we covered transactions that would normally have been booked in January and February.
Non exchange transactions, which consists of our N and travel on leisure group represented 31% of the segments transactions in the first quarter of this year.
Strength of domestic demand for both the RCI N E R M.
More than offset continued challenges in our international markets due to the cross border travel restrictions.
Turning to our balance sheet in the first quarter, we used cash on hand of fully pay down our revolving credit facility and $250 million of secured notes.
Our corporate net debt at the end of March was $3 1 billion.
And our leverage rate at the end of March was five four times cash.
Probably below our seven five times covenant.
The first quarter of leverage rate is expected to be our highest and then decline for the rest of the year.
We continue to struggle average between two in the quarter and three times over the long term.
During the March we executed our first ABS term transaction of the year tremendous demand allows the upside of the transaction the $500 million and still get of 98% advance rate and of one 6% interest rate dispute.
This coupon is the lowest we've ever achieved in over 20 years in the ABS market.
We were also able to call the notes issued in the private ABS transaction that we closed in April of 2020 and include that collateral on this transaction, resulting in the interest rate going from what would have been 5% starting on April of this year to the one 6% we achieved in the March 2021 transaction.
As a result of the upsizing of this most recent transaction, we will likely execute on only one more ABS transaction this year.
We remain committed to returning capital to our shareholders, we paid our first quarter of dividend of <unk> <unk>.
Per share on March 31st and will recommend of second quarter dividend of <unk> 30 cents per share for approval by our board of directors in May.
As Michael noted, we are not providing full year guidance at this time. However, we do want to update on thoughts on the outlook for full year free cash flow.
We still expect 2021 free cash flow to be below our historical free cash flow conversion range of 50 to 60 per cent of adjusted EBITDA. The temporary reduction is due to reduced net interest income from consumer financing higher corporate interest expense as a percentage of EBITDA and the timing of working capital. We expect 2022 of fresh free cash flow conversion.
To move closer to our historical levels.
With respect to the timing of this year's free cash flow, we expect the upsizing of the first quarter ABS transaction to result in the use of cash in the second quarter.
In summary, we are pleased with our first quarter results and look forward to the continued recovery of leisure travel throughout 2021 with the.
Ashley can you. Please open up the call to take questions.
Certainly and at this time as a reminder of that Istar and one for your question.
And we will take the first question from Stephen Grambling with Goldman Sachs. Please go ahead. Your line is open.
Hey, good morning, Thanks for taking the questions.
May have missed this in some of the opening remarks, but on the travel and membership side I guess, we still get questions from investors on how to think about the long term opportunity from from that segment and perhaps you'll you'll have more to say in the future of but I guess can you just talk a little bit more about how your view on that opportunity.
<unk> has evolved as you've been integrating the business and then also any color you can provide on the seasonality of revenues and margin structure of that segment.
Absolutely Stephen Good morning, this is Michael.
Let me first talk about the.
The opportunity in travel the membership and then I'll hand, it to Mike to talk about margins the seasonality.
We love of the core business of vacation exchange, our traditional RCI business.
We continue to see.
The nature of that business be successful, which is a high recurring revenue with very low capital investment and the high generation of free cash flow.
We've always seen that growth rate to be zero to two per cent and we would expect that to remain however, our opportunity in travel of membership is the addition of two new business lines that are meant to be incremental not replacing the exchange business and we view those as additive and the and approaching.
The new addressable market that's out there today and what those two markets really are are under the panorama umbrella the.
The b to B.
Travel service, providing under what we've been calling the panorama of travel solutions, we announced the launch of that business last fall were providing white label travel services to both timeshare companies of non timeshare companies and have signed our first few deals. The most recent one.
Being this week, so we view that as an expansion of our ability to provide travel benefits and services to the <unk>.
Broader <unk> market, the second business line, which I had mentioned in the remarks were around a travel subscription business. We view the U S market that we do not currently addressed today to be roughly 90 million households.
Debt, obviously go on vacation and we believe through a travel on leisure subscription based service that we can offer as well travel benefits to grow our adjustable market do it in a free cash flow generation basis, with very low capital intensity. So.
The goal in this travel the membership spaces to add to our great business RCI with travel and benefits of travel services and benefits to outside of the timeshare market. Both on a beat of beat and the BTC basis.
Okay.
And then as the follow up any any color you can provide on seasonality and should we be anticipating in that segment and should we be anticipating any kind of ramp in.
The advertising or other investments to accelerate the growth there.
Good morning, Stephen This is Mike hug.
As it relates to seasonality in margins historically, the first quarter. It has been one of the biggest quarters for the.
Panorama of business and so we would expect that to continue this year. Therefore, when we think about the remainder of the year and margins. We wouldn't expect the margins to stay at Q1 levels, but would probably mirror closer to its 2019 levels debt that that segment ran.
Great. Thanks, I'll jump back in the queue.
Thanks, David.
And we'll take our next question from Joe Greff with Jpmorgan. Please go ahead. Your line is open.
Hey, good morning, everyone. This is actually for him on tour on for Joe.
In the vacation ownership segment and business true.
Growth guidance for the two to it around sort of 50% of 2019 levels.
As you continue to build that back how should we think about cadence beyond tier two so is it achievable to get us to say for to get back to sort of 70% of 19 levels in <unk> or lets say, 80% of the <unk> and with the goal I guess, obviously of getting to a 100% run rate next year, how should we think about that.
And when you say, 70% to 80% of could you just clarify were you referring to exactly what.
Brian Yes, sure as a percentage of 19 tour flow levels in the back half of this year. So the way we're looking at tour flow levels, you have to really bifurcated between owners of new owners with what we're seeing generally on arrivals for the second half of this year, they're starting to approach 2009.
<unk> levels and as such although there is some modifications we can get into.
Arrival levels back to 2019 should result in tour flow.
Coming back on the owner side close to 2019 as well. So the continued momentum that we're seeing in bookings and ultimately of rivals is very important for driving our older tour flow in the second half of this year as it relates to new owners.
Slightly different perspective, we're looking at roughly.
Just over 50% reduced tour flow as it relates to new owners in the second half of this year and Thats really a matter of the strategic decision that we made during COVID-19 debt. We wanted to do two things first of all is to drive higher credit quality.
Purchases of of our ownership and I think you've seen that already play through both in our portfolio and ultimately we believe that's going to drive us back to margins.
At historic levels faster than if we were to pursue.
Credit quality.
At the pre COVID-19 levels. The second reason that we expect the new owner tours to ramp back slower is we made as well decisions to close down marketing channels that were debt required scale in order to drive the profitability.
And in order to build those back we're gonna need scale to return to the markets that we operate the open market channels in the Great News is.
<unk> like Las Vegas, California, and even Hawaii or ramping back faster than we anticipated. So we will be more proactive to grow back on new owner tour at the summer and into the fall, but again.
One of our new owner looking very differently as we as we head into the second half of the year.
Okay. That's helpful. Thanks for that and then.
Follow on to that but also Stephen's question earlier high level thinking about the two major segments and the EBITDA you've put up in the <unk>, obviously sort of skews more towards skewed more toward the travel and membership versus no more normalized levels in let's say 19, which was heavily skewed the other way to vape.
<unk> clubs, so I guess going forward, what's the way to think about.
You mentioned travel membership margins might fall back a little bit and then you're obviously building back tourists.
What is the way to think about do we think that that skews going to continue into the Q2 or is that going to dissipate throughout the year.
Good morning, Brent This is micah.
When we looked at the second quarter you are right about the first quarter were travel of membership made up of a larger percentage of the EBITDA and thats not unusual on the first quarter. When you think about that being the largest quarter for travel membership and historically the smallest quarter for vacation of our ship when we look at.
Q2, and we think it will move back to historical trends, where vacation ownership represents about two thirds of the EBITDA and travel on membership represents about one third.
Great. That's super helpful. Thanks, guys sure.
We will take our next question from Ben Chaiken with Credit Suisse. Please go ahead. Your line is open.
Hey, How's it going on.
You provided some hey, you provided some very strong booking comments, which sounded like the continued into April.
Just high level when travel of show up on property early on what is their propensity to buy do they want a tour of.
Or stay inside the unique environment. We're in just any color there would be helpful. Thanks.
Absolutely there is.
I shared it before but I'll go a little deeper on this call is on.
Our biggest concern coming out of the reopening phase last summer and into the last fall is how would the consumers change their behavior and one of our.
The pleasant surprises was that really buying behavior didn't change, but what we've seen in the last quarter with for the first time and I think you've heard it on many other calls is that second week of March you really saw.
It's almost as if.
A light went on and people were ready to travel again.
We've seen that also play out of the sales table as I mentioned in my remarks, our closing rate was up 150 basis points and we we've been at this a while and closing rates are very difficult to move and I think it's a real credit to our sales and marketing operation and our people debt.
<unk> been very focused.
Really following protocols on health and safety, that's giving people comfort and combine that with what I would say is a really excited consumer base to get back on travel and also improving consumers' balance sheets debt the.
The fact that close rates have moved up a 100 day 150 basis points is a real good sign of.
Consumer behavior and ended the endorsement of the product.
Got you that's helpful. And then do you think is there any maybe tough to say, but do you think the higher close rate as a function of consumers just wanted to get back to travel.
Making purchases what do you think it's a function of maybe some of the.
Sales the sales men and women who are currently operating.
I think it's both of those for sure I would also say.
One of the most challenging elements of this business in the industry is as new owner marketing, especially two of non affinity based and our teams have delivered historic highs of BTG on new owners and Thats the credit to the people, it's a credit to I think consumer strength.
And their pent up demand and the strength of their balance sheet, but I also think it's a knock on to the change that we decided to make last year on COVID-19.
To narrow our focus and really look at our marketing qualifications.
You put all of that together.
And.
What you end up with is historic highs on PPG really driven by close rates.
Cool. Thank you very much I appreciate it.
Thank you.
And we will take our next question from Ian Zaffino with Oppenheimer. Please go ahead. Your line is open.
Alright, great. Thank you very much.
Can you kind of maybe give us maybe a general.
Comment on kind of what's going on with the stimulus and the unemployment benefits et cetera.
You know maybe how is it helping you know stimulus how is it helping.
The.
The other sales number one and then how does that kind of factor into like loan loss provisions and then finally, how would that impact hiring your ability to get people wages et cetera, you know I know, there's kind of a lot.
Packed in there, but if you could kind of just touch on it that the that'd be helpful on that on a follow up thanks.
Hey, Ian this is Mike. Thanks for the question I'll talk a little bit about the consumer and how that's impacting.
Our business. The then I'll, let Mike talk about a little bit about the.
Employment and how that's impacting our business, but as it relates to the concern of obviously, they're very strong when you look at savings rates.
When you look at all of the metrics related to.
Then there is no doubt that there's a benefit coming to us as it relates to both of the close rate and the portfolio. We're very happy with the way the portfolio has performed.
Even on the new originations, you'll see that 18, 1% and it's important to point out to the debt 81% as a.
True provision associated with new originations, we did not take any benefit this quarter from the COVID-19 reserve, we put up for the portfolio. So we do see of consumer that is very strong in what we believe will happen over time as these consumers will continue to buy more of the product.
If you think about how they want travel now they love the space and so once they experience the space. We're confident that that will continue to lead it to future upgrades. So we're very happy with the strength of the consumer and we think thats athletes to the good things going forward, especially when you see the new on our close rates that the great pipeline that will provide upgrades in the future. So.
All signs of positive down.
We expect that to continue.
And Ian I'll, just I'll, just add to that on the sort of stimulus inflation unemployment side of the equation, let's just start on what the the hot topic is now on inflation is I actually think debt.
A net positive for us when you look at the nature of our product people are locking in their future of vacations at today's prices and.
And again as I as I mentioned in my answer with Ben.
Savings rates are up and I think when you get the consumer in front of you that can see that theyre going to lock in their future vacations with today's prices and have a good personal balance sheet.
Good sign for our sales tables going forward as it relates to employment I don't think we're too different from most of the service industries.
To say that most people are having to work extra hard to bring in our frontline associates and <unk>.
Things like housekeeping and marketing associates in front of it from desktop. They are the they are the frontline of the hospitality industry I think it's somewhat mitigated in our industry because of the length of stay.
The lack of sort of full service restaurants, and things of that nature. So so I do anticipate employment to be of challenge through the summer time, not an obstacle, but just it's we're going to have to work a little bit harder, but I think there are some elements of our business that mitigate the risk for us.
As we get through the busy summer period as there is a change potentially on unemployment benefits at that point.
There could be an inflection in September where where the labor market eases that to a certain degree.
Perfect and then just a quick question as far as capital allocation dividend share repurchases what are we thinking here.
As it relates to returning cash to shareholders. Thanks.
Sure. So on capital allocation, obviously, we demonstrate our commitment of returning capital to shareholders through the continued payment of the debt.
EBITDA, even through the pandemic and as the company growth consistent with what we were doing pre COVID-19, we'll look to grow that dividend on share repurchases.
Phil over the 404 times Levered. So the first thing when you do and we're very happy with our leverage rate being over six we expect it to come down from here, but until we get under for on a quarter, we can't opt out from under our amended covenant that we have and or do share repurchases. So.
When we think about share repurchases to get out from under the amendment had a clear line of sight to kind of the little bit below three times Levered and then start to think about share repurchases, which means share.
Share repurchase of probably wont occur before the end of this year.
Perfect. Thank you very much true thanks Ian.
It will take on that question from David Katz from Jefferies. Please go ahead. Your line is open.
Hi.
A lot of ground I. Appreciate you taking my question, but I just wanted to ask if there's any insight you can give us around.
The demand in and helping us parse it out between.
The demand that was latent throughout COVID-19 and reactivated vs. Some incremental new demand that's happened.
Recently, I realize that's sort of a broad general question, but.
It's important.
David.
Thanks, Scott, Let me, let me start with a little bit of detail and then I'll get to the more general question because non.
Not all of demand has been has returned equitably and these first three months. So so let me share how we're looking at it markets like Florida, South Carolina, Tennessee, Arizona.
We were up from 2019 of January in those markets as far as demand and Thats the only accelerated in March and in April.
And then there is a second set of markets and I am sort of defining them as the reopening trade that were significantly down in January of California down 44% now its up 27% in April Nevada down 27% in January and February now its up 16.
Percent, Hawaii down, 40% now up 33% and to me the nature of of.
Of those big swings in the momentum, meaning is meaning people are not only confident the travel, but theyre starting to get on planes and they are confident enough to be booking and for those of you travel I think we've all seen for planes.
So so I think detail wise there is.
Our cadence to how consumers are starting to travel again as it relates to <unk>.
Incremental demand.
We are starting we are seeing that on the rental side of our business. We knew the owners would come back.
They've come back very quickly the last time, we were on a call at the end of for our Q4 call.
We were a little unsure as to how quick it was a week later and our owners returned but the rental side of our business has shown an incredible amount of demand. So I do think that we are pulling incremental.
The incremental leisure travel into our system not only through timeshare, but also through our rental platforms. Both on the timeshare side and our new book <unk> Dot com.
It's a little hard to quantify how much is incremental but just the across the board.
Momentum gain makes me think that there's some extra demand that's coming in there that we would not have normally seen.
Okay Alright.
That's helpful on fair to classify it as you know the incremental is noticeable on material in some way.
It is and where the balance that we will have for the remainder of this year.
Is your occupancy was down versus <unk> 19 in March it's flat in April and our objective for the second half of this year is for owner occupancy to be above 19 levels and hopefully significantly because that's our core business. So we might lose out a little bit on the rental but the benefit is much clearer when we get our owners.
On vacation.
Understood. Thanks, very much thanks.
Thanks, David.
And well take our next question from Patrick shows with true Securities. Please go ahead. Your line is open.
Hi, good morning, good morning.
Patrick.
Good morning.
Couple of questions on the.
Channel acquisition.
What's your latest expectations on when you will be able to start selling the vacation packages to the P&L of meters.
So.
Just our timeline there is.
Our first objective was to transition the 50000 plus.
GNL subscription numbers over to our platform.
We're almost complete with that.
Secondly, we wanted to launch our online booking platform, which we did in February.
Really growing the organic search they are and then the third.
Sure.
The point of the timeline is to launch a subscription business. This summer.
That includes.
Approaching the travel.
Travel magazine, the travel and leisure magazine holders for marketing at that point, so the summertime, we'll be launching our first new subscription.
Offering and that it will include the marketing to that database that we've referred to it in the past.
Okay. Thank you and what's your latest expectation.
For 2021 EBITDA contribution from this acquisition.
It's going to be pretty minimal as we've talked about on our last call, we acquired $4 million to $5 million on EBITDA, but we are investing in the business. This year, whether it's creating the packages.
Developing relationships with the providers of the fulfillment of our excursions the things like that so when we think about the travel on leisure group. This year I wouldn't expect the EBITDA contribution to be anything material.
Okay. Thank.
Thank you very much.
Thank you Patrick.
And once again as a reminder, debt as stellar of one to ask a question star one in the world.
Take our next question from Chris for longer with Deutsche Bank. Please go ahead.
Hey, good morning, guys on Chris.
Chris.
Good morning, I know you probably won't want to get too specific on on numbers, just yet, but when we kind of think about that vacation club subscription service longer term.
As you grow the various membership basis is there any way to kind of Directionally think about of revenue per member metric or anything like that anything we can compare it to the that you already.
You know that you already operate just trying to get on a real broad sense for the the opportunity there longer term.
So Chris I mean, you are right that we we don't want to get into those metrics today, but let me just frame up how we're thinking about that subscription business. We think there and I'll give you. Some numbers. We think there is a clear market for.
Travel <unk>.
Prescription service that is lower entry and.
Shorter duration as we spoken about in the past we think our initial offering will be something in the range of $10 of mind you can look at some some competitors out there that are also launching net debt is around that range as far as total annual cost.
Our hope is that the benefit will be let's just start with $10 per month per per membership.
Along with revenue that comes with the individual transactions. Once they are part of the membership because ultimately we want that subscription club to be unique in the travel on leisure brand. If you think of the most iconic travel brand out there it's.
It's been an advocate for leisure travel for decades, the travel and leisure name brings the exclusive content. It brings unique perspectives on how the travel and also what we want to provide in addition to that is a lot of value in your your.
Your travel subscription so I would say $10 per month plus.
Transactions, what we don't have history today on is the level of transactions that we would expect from a member of per year.
Okay that is helpful and I appreciate that.
The detail.
My second question is kind of on the.
On the urban strategy you guys got more active they're kind of in the in the last five years before COVID-19.
And I am curious as to whether that's something you might look back to and whether maybe it's just different markets right.
Maybe in Austin, and Nashville, Charleston, Instead of a New York, San Francisco or you know if.
If you have.
A opportunity to source inventory and some of those more traditional urban markets what would you do that.
So at this stage.
Pleased with the the deals that we did in the urban markets.
We did Austin Nashville, Portland, the Occupancies of those resorts are returning there are lagging a little bit obviously from the sunbelt destinations. We're super excited about the new resort, we have coming up in Atlanta, Georgia, but.
But the reality is is when.
When COVID-19 hit and our sales declined it it made the inventory that we have on our balance sheet.
That much more.
It gave us a few another year of basically of inventory and therefore as part of of our cash strategy.
And allocating our capital Theres, not really a need for us to be proactive in the development of projects. It doesn't mean, we won't do any but we've definitely constrained our capital spend which has no constraint whatsoever on our business. It just it's just a better use of our capital toward other means in some of.
Of those other means of are going on.
The whether it's dividend or potential M&A or investment back in the new owner side of the equation. We think those are a better use of of our cash today than going out and doing more projects that will ultimately sit on the balance sheet for.
The year and a half day, two and a half years.
Okay very helpful. Appreciate all the color thanks, guys.
Thanks, Chris.
Thank you and that concludes our question and answer period I would now like to turn the call back over to Michael Brown for closing remarks.
Thank you Ashley.
We're excited about our future as travel on leisure.
And as we begin to look forward to the rollout of new travel services later this year.
It's safe to say the last 12 months had its challenges, but our team rose to the occasion, we took swift actions early on to protect and ultimately strengthen our business and we have already seen some of the benefits as the world gets back on vacation, we're squarely focused on being on the leading edge of the recovery.
As always I have our team to thank for their service to our owners members and guests as we embark on what is turning out to be a very busy spring season. Thank you, everyone and have a great day.
Thank you and that concludes the travel and leisure is first quarter 2021 earnings Conference call. You May now disconnect. Your line at this time and have a wonderful day.
Yeah.
[music].
Yes.
Okay.
[music].
Yes.
Okay.
Yes.
[music].
Okay.