Q1 2021 Hilton Grand Vacations Inc Earnings Call
[music].
Good morning, and welcome to the Hilton Grand Vacations, and first quarter 2021 earnings Conference call.
A telephone replay will be available for seven days following the call. The dial in number is 84451 to two nine to one and enter pin 1371 and 4033 at this time all participants have been placed in a listen only mode and the floor will be opened for your questions.
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Yeah.
If you should require operator assistance. Please press star zero, if using a speaker phone. Please lift your handset to allow the signal to reach our equipment. Please limit yourself to one question and one follow up to allow the opportunity for everyone to ask questions. You May then reenter the queue to ask additional questions I would now like to turn the call over to Mark Mallon and.
Vice President of Investor Relations. Please go ahead Sir.
Thank you operator, and welcome to the Hilton Grand Vacations, and first quarter 2021 earnings call before we get started please note that we've prepared slides that are available to download from a link on our webcast and also on the main page of our website and investors that HCV Dot com. We may refer to these slides during the course of our call or question and answer.
Session.
Minder our discussions. This morning will include forward looking statements actual results could differ materially from those indicated by these forward looking statements and these statements are effective only as of today and.
We undertake no obligation to publicly update or revise these statements for.
And for a discussion on some of the factors that could cause actual results to differ please see the risk factors section of our 10-Q, which we expect to file after the conclusion of this call and in <unk>.
Any other applicable SEC filings, we'll also be referring to certain non-GAAP financial measures you can find definitions on components of such non-GAAP numbers as well as reconciliations of non-GAAP and GAAP financial measures discussed today, and our earnings press release and on our website at investors <unk> com.
As a reminder, our reported results for both periods in 2021, and 2020 reflect accounting rules under ASC 606, which we adopted in 2018 under ASC 606, we're required to defer certain revenues and expenses related to sales made in the period. When a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed.
To help you make more meaningful period to period comparisons you can find details of our current and historical deferrals and recognitions and table key one of our earnings release for.
And for ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA on our real estate results will refer to results. Excluding the net impact of construction related deferrals and recognitions for all reporting periods and finally, unless otherwise noted results today refer to first quarter 2021, and all comparisons on a quarterly against first quarter of 2000.
20.
And a moment Mark Wang our President and Chief Executive Officer will report highlights from the quarter and addition to an update of our current operations and company strategy. After Mark's comments, our Chief Financial Officer, Dan Mathews will go through the financial details for the quarter, Mark and Dan will then make themselves available for your questions with that let me turn the call over to our President and CEO Mark Wang.
Good morning, everyone I'm happy to share with you our first quarter results, which showed sequential improvements for the third straight quarter.
We've seen a lot of progress over the past few months on vaccine rollouts, which as broad a steady recovery of domestic leisure travel trends, including and some of our largest markets.
We saw sequential improvements and our key operating metrics each month of this quarter, leading into a strong March and that trend continues into this month.
Positive trend leaves us optimistic about our core business and even more excited about what the future holds regarding our recently announced transaction with Diamond resorts, which I'll touch on more and in a moment.
Let me first get into some of our results for the quarter and.
And open markets, our total contract sales for the quarter were up 6% sequentially to 138 million.
We saw strong pace of improvement through the quarter with system wide occupancy of nearly 70% for the months of March and a tour flow pace debt more than doubled over the course of the quarter.
And our reservation activity showed strong improvement with net bookings per day, and the first quarter more than doubling from what we saw in Q4 and to nearly the same pace we had in 2019.
<unk> and our open markets remained strong and helped us to capitalize on improved tour flow.
Those rates were again and the driver here at just over 20 per sad.
I think that's a testament not only to see and increased demand for travel and our high quality HCV products, but also to the process and execution improvements that our teams have made over the past year.
The high flow through of our V. P. G strength, coupled with our cost savings program and enabled us to drive significant margin expansion for the quarter to a level on par with those and the first quarter of 2019.
As we move through the year, we will face some difficult V. P. G growth comparisons, but our process improvements should allow us to sustain PPG levels. This year above where we were in 2019.
Turning to our markets as you can see on the slides are regional markets rebounded strongly with contract sales for the quarter nearly 15% higher than 2019 levels, our largest markets Orlando and Las Vegas have continued to make steady progress Orlando grew 16% sequentially on a <unk>.
Serge and bookings and activity and solid execution and law.
Las Vegas, despite the market is 50% capacity restrictions are properties recover to nearly 40% of their 2019 contract sales levels for the quarter with a strong acceleration in March.
And with the recent announcement that the city of Las Vegas will lift capacity restrictions on June 1st we're optimistic that we'll see further improvements and trends.
And Japan, our first quarter contract sales came in at 70% of 2019 so levels.
As we discussed last quarter, our tour flow and Japan has been impacted by a recent series of Lockdowns and extensions of travel restrictions are.
Our teams did a great job of adapting to the environment. They focus on driving targeted tours through our network of local sales centers, which coupled with the strong reception of our recently launched project and Okinawa produced strong V. P. G with exceptional close rates we.
We believe that the restriction and environment is likely to remain in place through the Olympics this coming summer.
But having and new local resort option and Okinawa should allow us to maintain our sales momentum.
Turning to Hawaii, we've continued to ramp after reopening and our properties at the end of the year like a loss on improvements in each month of the quarter and March recovered more than 50% of 2019 sales levels with 70% occupancy rates on a strong improvement and domestic traffic.
The wahoo sales of ramp more slowly due to the travel restrictions I just mentioned along with reduced air capacity limiting the arrivals of Japanese visitors to the islands.
We've been working to fill some of that business with U S guest and as those restrictions are lifted and airlift returns, we expect to see improvements and occupancy and tour flow.
Finally, we've been pleased with the traction that we've had increased sales for our upcoming Maui project and expect to open that property and sales center for occupancy later this year.
So to summarize our drive to markets with no restrictions are showing strong great momentum and are back above peak sales levels.
And we're very encouraged and our largest markets, which are making steady progress and are set to benefit from further loosening of capacity restrictions and Hawaii is expected to continue ramping and show sequential improvement with increased domestic travel, but we won't fully recover and that market until Japanese visitations resume.
And we expect we'll have our urban and resorts and New York and Chicago back in full operation and the second half of this year.
Turning to our customer segmentation, we're really pleased with behavior, we're seeing out of both our owners and new buyers.
From a recovery standpoint owners are coming back more quickly.
Flow levels have jumped higher each quarter since reopening.
And we've continued to closed nearly one out and every three owners with tour with us driving strong contract sales.
New buyers of return and at a slower pace that theres been some very positive signs in the quarter, our new by our close rates improved again from the fourth quarter to the highest level, we've seen since the global financial crisis.
We also saw another strong quarter of marketing package sales conversion rates and we've seen improved activation of those packages as well.
Up over 60% since the start of the year, indicating that more people are committing to travel and the near term.
Those activations drove the mix of books packages to approach historical levels. This quarter, which is a substantial improvement from the trends we've seen since the beginning of COVID-19.
Our resort and club business also improved in the quarter as incremental activity drove growth and our revenue per member for the first time since the end of 2019.
And the cost controls helped to drive growth and segment profit on a year over year basis with strong margin expansion.
Looking ahead, we expect better owner arrivals will reach 2019 levels and the second half of the year supporting further improvements and activity levels revenue and segment profit.
Our dog reflects four quarters of COVID-19 impacted results since our member base has grown each quarter since the initial falloff in Q2 of 2020, we expect to return to positive NOG in the quarters ahead, as we lap that falloff.
And finally, and our rental and ancillary business increased leisure activities drove strong sequential improvement and revenue and a return to positive segmented profitability.
And as we look further out we remain optimistic about our rental trends with our rentals on the books and the back half of the year at nearly 150% of what we saw at the same point and the year during 2019.
So overall trends are moving in the right direction, we expect to continue seeing favorable buyer behavior and vaccine Rollouts should drive further improvements and our forward booking activity.
We expect this will drive improvements and our tour flow and support higher close rates driving our contract sales.
And as Japan restrictions ease and we believe that a wahoo will recover and set us up for a strong second half of the year.
And most of all the positive trends that we're seeing make us very optimistic about our combination with diamond resorts.
With respect to the timing and other proposed transaction with Diamond and things are proceeding as planned we filed our initial antitrust regulatory submission and the U S and internationally as well as our preliminary proxy a few weeks ago.
We're currently and the process of arranging our permanent financing further transaction and we expect to complete that process, along with our regulatory requirements and shareholder vote and time for targeted closing this summer.
And the weeks since our announcement I've had the opportunity to speak with many of our owners shareholders and team members and have been struck by the level of enthusiasm around the transaction.
And I can tell you that we share that same level of enthusiasm.
This transformational combination will bring us significant scale and product diversity with a complementary footprint that strengthens our regional presence and enables us to drive meaningful revenue and cost synergies and ensuring that we're well positioned to be the leader and the timeshare industry for years to come.
We look forward to welcoming diamond owners and team members to the HCV family and introducing our brand culture processes and level of service to the entire Diamond organization.
While I can't say much about their results I can say they've continued to demonstrate very strong recovery trends.
And we think that the timing of this transaction coupled with the recovery path that we're both seeing should leave HCV very well positioned going forward to capitalize on the return of travel.
So to conclude.
We're encouraged about the trends, we're seeing and have a lot of momentum exiting the quarter.
The U S has made steady progress with the vaccination.
And many jurisdictions have solidified their plans to transition to a full reopening if they haven't done so already.
While we are completely out of the woods, yet we feel confident.
That as we move through the year as things will continue to improve and set us up for a strong exit to this year.
At the same time, we're making progress toward closing the diamond acquisition.
And our teams have been working diligently to prepare to hit the ground running once we close the transaction and begin the integration process and earn us.
So it's been an extremely busy time for us here.
But it's also been and extremely exciting time and I look forward to what's to come.
Before I turn it over to Dan I'd like to give a special thanks to all of our corporate and operational teams, who have been sprinting flat out for the past several months on executing the diamond transaction, while simultaneously navigating this difficult environment.
With that.
Dan will walk you through our financial details Dan.
Dan.
Thank you Mark and good morning, everyone as Melnyk mentioned in his introduction to our call and our results for the quarter included $32 million and sales deferrals impacting reported revenue and net deferrals of $18 million impacting both adjusted EBITDA and net income.
All references to consolidated net income adjusted EBITDA and real estate segment results on this call for current and prior periods will exclude the impact of deferrals and recognitions.
A complete accounting of our historical deferral and recognition activity can be found in excel format on the financial reported section of our Investor Relations website.
Let's review the results for the quarter.
Total first quarter revenue was $267 million up 15% sequentially from the fourth quarter, we saw sequential improvements and our real estate club and resort management and rental and ancillary segment revenues, partially offset by lower financing revenue due to a smaller receivables portfolio balance.
Q1 reported adjusted EBITDA was $60 million, reflecting sequential top line improvement and a material improvement and EBITDA margins from our cost saving efforts.
And as we noted in our press release. However, there are there was also a $4 million COVID-19 benefit and the quarter related to employee retention credits granted under government assistance programs and the U S and Japan that were included in adjusted EBITDA.
We're moving this benefit would put our comparable adjusted EBITDA for the quarter at $56 million net.
Net income for the quarter was $11 million.
Within real estate Q1 contract sales were $139 million or 57% of the prior year and tour flow was 42% of the prior year.
<unk> was up 33% year over year and improved sequentially by 8%.
Close rates drove the <unk> improvement and was very consistent with Q4.
Our expectations remain that BTG will decelerate over the coming quarters, as our own and mix normalizes, particularly as we lap very difficult comparisons from the strong btg's produced in 2020.
Owners continue to show signs of faster recoveries, and new buyers and our mix of contract sales to owners remained similar to the fourth quarter at roughly two thirds of the total.
Our fee for service mix for the quarter was 40%.
On the consumer lending side on our provision for bad debt was $16 million and our overall allowance on the balance sheet was $207 million or 18% of the gross financing receivables.
Real estate, SMG, and a $63 million per the quarter and our real estate segment profit was $21 million.
And our financing business first quarter segment profit was $24 million with margins of 65% versus a profit of $31 million and margins of 71% last year.
Profit was lower based on declining receivable balance versus last year and limiting portfolio income.
Gross receivables balance was $1 1 billion.
Our average cash down payment and year to date is nine 3% and our portfolio average interest rate increased to 12, 6% from 12, 5% last year.
Over the past three months, we have seen continued sequential improvement and our delinquency rate to two 7% for receivables portfolio versus 3.0% at the end of 2020 and is only slightly ahead of the two 5% at the end of 2019.
Our annualized default rate was six 6% versus six 3% at the end of 2020, we still believe we are adequately reserved at this time and we will continue to monitor our portfolio trends closely.
Turning to our resort and club business, our member Count was up sequentially again to nearly 328000 members. Although non was down 10 basis points as we annualized four full quarters of COVID-19 impacted trends.
Revenue of $45 million was up 2% from the prior year as we saw improvement and our revenue per member during the quarter.
Segment profit was $37 million with margins of 82% versus profit of $32 million and margins of 73% last year.
Rental and ancillary revenues were $32 million up 60% from Q4, due to an improvement and travel activity, including a sharp uptick and March trends that have continued into April.
Looking ahead as Mark mentioned, our current on the book arrivals for the remainder of the year on nearly 50% above what we saw at the same point in 2019.
We've also seen a strong uptick and the pace of booking activity with our first quarter daily bookings more than doubling from the rate, we sell and the fourth quarter.
Rental and ancillary expenses were $31 million and the quarter and our expense control controls allowed us to return to positive segment income during the quarter, Despite the increase and expenses related to unsold and terminals.
These developer maintenance fees will remain elevated and the near term from a combination of recently and soon to open projects and will weigh on on margins, but we believe we will be solidly profitable for the year.
Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, corporate G&A was $16 million down $3 million or 16% versus the prior year license.
License fees were $14 million and JV income was $3 million.
Our adjusted free cash flow and the quarter was a positive $3 million, which included inventory spending of $23 million.
As of March 31, our liquidity position consisted of $400 million of unrestricted cash of $139 million of availability under our revolving credit facility and $450 million and capacity on our warehouse. We currently have $118 million and timeshare receivables available for for Collateralization.
On the debt front, we had corporate debt at $1 2 billion and nonrecourse debt of $698 million.
Turning to our credit metrics at the end of Q1, our first lien net leverage for covenant compliant compliance purposes stood at 275 times, our interest coverage ratio for covenant compliance purposes at the end of the quarter was $3 five eight times.
And we will now turn the call over to the operator and look forward to your questions operator.
Thank you we will now be conducting a question and answer session. Once again, if you would 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 if you'd like to have your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys one moment. Please.
And we poll for your questions.
Our first question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone and thanks for taking my questions.
Number one you know congrats on the quarter I wanted to just just look at all of the positive data points that you've discussed and frankly, you know we've been hearing broadly.
And you know I'd I'd like your help and and just making sure as we model the back half of the year or the remainder of the year that we don't get too carried away.
And you know just help us balance the puts and takes around you know tour flow and V. P G et cetera and.
And and you know be thoughtful and circumspect and and not you know model you too high and frankly, because I think it's easy to see how positive all of this really stacks up.
Yes, David this is mark and good morning.
Yeah. So first I think you've heard from our prepared remarks, we are.
And we're really pleased.
With a quarter of that.
And really for the first time and a long time.
You're welcome.
We can sit here and tell you that we're seeing a material recovery for me, but that being said.
We do have some.
We do have some high comparisons on the BTG side, and we're going to be ramping up our new buyers but.
And I think the inflection point for us really.
Happened and coincided with the vaccine rollout and happened and.
In February.
Forward looking bookings are very very strong and low cancellation. So all of this is making us feel like this is much more permanent and and.
You touched on this.
Domestic travel and focus of our business and that's.
Going to bode well for us we do have some reliance on international inbound from Japan.
That being said the back half of the year looks.
Good from a booking standpoint, but we're still not certain when the government of Japan is doing.
And relax their quarantine.
Requirements on the on.
Coming back so clearly and we're going to have to watch that.
But recent trends.
And our largest market and Las Vegas, and Orlando have been very very solid and particular Vegas.
Like somebody turned the light switch on and suddenly Vegas.
Was booming again, so we're pleased with that.
And our drive to markets have already fully recovered.
We do have some risk and Hawaii and the back half of the year and we're going to be ramping new buyers and we saw a big surge and activations from our pipeline and went up 60% from Q4 to the end of Q1, so new buyers are starting to come back which is really.
Good for us, but that will carry lower <unk> and higher cost as we bring them back into this just going on but important for the long term.
Health of our business.
So and then we've got the urban markets, where we have about a 10% exposure.
With New York, and Chicago, and while we expect those open.
On the back half of the year.
Again, they will be a ladder for us so all and all I think I'm very optimistic about what's happening we need a few more light switches to go on I don't know Dan. If you had anything else you on the cover on that Yeah, No I think so and David Thanks for the question and as Mark alluded to.
Definitely a very volatile environment.
Things ebb and flow pretty.
Pretty rapidly.
As Mark mentioned, we did have a quite a ramp in March and when I look at the balance of the year, what I would take into consideration and Q1, we had.
Something is really working our way clearly cost control has been a disciplined we've implemented for.
Forever and excessively I would say since COVID-19.
Impacted us and you saw that in Q1.
<unk>.
Diligently decide when to bring labor back so labor and Q1.
[noise] was depressed.
And we're starting to bring more people back. So we did get a benefit on the margin side from that Mark already alluded to the CPG.
Benefit.
<unk> provides really solid flow through but as we bring the new buyers back get packages, David and the back half of the year. What we do expect is that CPG to scale down materially down.
From where they are now because we view those levels to be elevated so from a margin perspective, I would not play debt.
The balance of the year as it and expansion.
It's probably more in line with where it is today. We also had some benefit on the flow through side from onetime items such as debt.
We highlighted in our prepared remarks and benefit from the cares Act both in the U S and there is a similar benefit and Japan.
And for real estate and was about three all and it was about $4 million and.
And then we also had favorable cost of products is based on the mix that we are selling and that mix is most likely going to shift back to a more normalized mix of your profit product will be closer to 27% rather than the 20% and we were able to print this quarter.
And so.
All in when we look at 2021 from a cadence perspective, we would look at from from a bottom from a bottom line from <unk> perspective, we would expect Q2 to be modestly better than Q1, because we did get the trend that we saw on March has continued in April. So that's that's good. So we believe we will.
A modestly better Q2.
And then you will start to ramp and Q3 and sharper and Q4 by the end of Q4, we would not quite feedback we don't anticipate being back to 2019 levels, but about to hit that runway right. So when you think of when we think about how things are playing out there's a lot of positives, but it's still very much back.
And loaded and we're looking at 2021 being a true recovery half year, and 2022 is where we really start hitting the ground and getting back to those 2019 levels hopefully that's helpful.
That is supremely helpful. Thanks very much.
Yeah.
Thank you. Our next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.
Hey, good morning, I guess, one follow up on on those comments is there any rule of thumb to think about for how point of conversion may correspond to.
On a basis points of margin improvement or impact to EBITDA.
Yeah No that's that's.
Good question I don't know that.
And I'm not sure that we could probably articulate debt right now I can tell you I mean, if you if you.
You look at.
And our PPG and our close rate.
<unk> was up a $1000 from 19th Q1 level.
So if you think about just the flow through and we got from that we had 20 around 28000 tours.
For the first quarter, and and we generated 28 million more and contract sales with the same amount of tours and right. So there's considerable flow through from that.
But we'd be happy to follow up with you and give you a more accurate.
A number on that Stephen but just don't have unless Dan you've got it and.
Now, let's circle back with you and the issue here is I don't want to give you a blanket rule of thumb just given the current environment because there are a lot of variables going and multiple directions, and we talked about the environment being a bit volatile.
And our prepared remarks, Marc discussed, Japan, right restrictions kick in and that Hasnt impact, California is also a great example, and the month of January and California, We had one tour.
And then in March it was 80% of the highest scores.
Debt, we've ever experienced that kind of volatility will offset the flow through from our dbg lift, especially as we start to bring labor back in and more normalized level.
Okay. That's helpful and then.
And the proxy you filed on the transaction and there was kind of a five year revenue and EBITDA outlook, you kind of gave some of the assumptions it sounds like and in response to Davids question I guess as we look a little bit further out.
And what else should we be thinking about and those estimates it looks like and particular as we get a little bit further down the line there could be a pretty big step up in.
Free cash flow and EBITDA. So is there anything else that we should be thinking through as it relates to the inventory progression.
A longer term and and how and maybe even and that that longer term outlook could be pulled forward or what might what might alter the cadence of it.
Yes, no great question so.
The proxy disclosure for ourselves I assume you're talking about the HCV standalone numbers.
Correct correct. So.
The answer that you responded and David on very consistent right 2021 recovery year 2022, getting back to 2019 levels. Then you have more normalized growth and the out years.
The big sensitivity to that is obviously, how this recovery plays out I mean, obviously things are looking very positive right now and if you look at the rentals that we have on the books for the balance of the year those are very strong.
Packages are coming back there's a lot of positive notes on that front.
But that's a huge sensitivity the other one is really inventory spend.
I think we've discussed this before this year, we have contractual inventory amount to $225 million, so all and will be.
Most likely north of $250 million on inventories spend the contractual amount and it's got cut in half.
And next year, where they were closer to $110 million and then they drop.
Further the year is out.
And those.
Proxy materials the inventory spend assumption is consistent with what we've said on previous calls it on a more normalized rate will be between $250 $300 million, probably closer to $300 million on a on an average spend so that's what's built into those numbers, but that's clearly a sensitivity to we've talked about coffee.
And on many occasions.
But.
There is an opportunity to potentially pause inventory and assuming the.
Transaction closed Kaheaku being the Best example, because it's in Waikiki and Diamond and happens to have the modern which is also on Waikiki. So did we actually need do we actually need to build that.
And the timeframe that the proxy suggest you can see on the combined figures that it moves.
But.
The acquisition gives us an excellent opportunity to reassess our.
Inventory.
And strategy.
Fair enough and and one last one just on on the acquisition.
And I can't remember if you mentioned this on the last call about the acquisition itself, but diamond had a lot of open marketing that they were pursuing historically you don't really go through that channel.
And any updated thoughts as you get further along in the process in terms of.
Yeah, how you think about altering the.
And our marketing channels and anything else, maybe you've learned as you've looked under the hood a little bit more here.
Yes.
So.
We're excited about what we're seeing and.
<unk>.
And our Diamond is doing some really great work when you think about the performance that <unk> been achieving with without a brand and <unk>.
And some of the open and marketing that they are doing we are doing ourselves and in select markets right. So there are some select markets where they.
And they're performing very well and I think one of the biggest opportunities for us is our ability once we put the brand across the legacy Diamond brand and rebrand under Hilton vacation club, we should be able to improve.
The performance both from a closing and a <unk> standpoint, so and we think there's some real opportunity.
There and and we also talked about some of the great work they're doing.
And with their innovative events of a lifetime marketing that should create some really good lift internally for hev's business. So all in all we think are combining these two businesses is going to go on and it creates some so not only some great synergies, but some great opportunities for revenue growth.
Awesome. Thanks, so much.
Thank you. Our next question comes from the line of Patrick Schultz with Truth Securities. Please proceed with your question.
Hi, good morning, everyone.
Good morning.
When I look at your the.
And the preliminary proxy statement for day Diamond deal.
Certainly some large assumed EBITDA growth rates for the Standalone company.
For next year and 2023.
And think about what locations or states or specific projects are really contributing to that outsized.
Growth rate. Thank you.
Yeah.
That's the that's an interesting question I think Patrick.
Patrick when I think what what Youre, probably looking at is we have a we've.
We've got some ramp and Maui, and Cabo and and diamond happens to be and both of those markets and and.
And are doing fairly well and those markets and they are much more mature. We've just opened there. So there's some real opportunity to accelerate what we had originally thought we are going to be able to do on those two markets but.
You know I think.
What else.
Youre seeing there is just some of the things I just mentioned around just the the synergy opportunities and our ability and our number one.
And a much larger distribution network, which is going to allow us to leverage the Hilton.
On a platform better and.
And reach more customers and re.
Customers that we haven't been able to reach before.
With our footprint.
And.
And on top of that also.
By providing a.
And more.
Reasonable entry level pricing structure.
And this should also provide some opportunity for lift.
Across both of our customer sets today.
Yeah, and Patrick I think the only thing I'd add to that is yes. When you look at the proxy materials and.
And how they evolve from 'twenty, one to 'twenty two both the HEV standalone as well as the HCV adjusted Diamond financial forecast and it's the same mindset right 2020 one as a recovery year 2022, you get back to your 2019 levels.
Slightly better and then you have more normalized growth and the out years. Once you do see is from a recovery to 19 in 2020 one.
Sure.
$305 million versus the $4 53, we did and 19, so roughly just south of 70% Diamond on the other hand is at $2 53 versus their 304 of 2019 levels, which is closer to you know.
85%. So we do expect them to continue to outperform and recover slightly faster than we do in 2020, one and it becomes more normalized as we get into 2022.
And I think debt.
A good part of that is the I think that footprint to the regional drive two day have a higher percentage of regional drive to markets.
Okay. Thank you and then just a.
A question on clarification on Mark and the prepared remarks, you talked about.
Significant growth and rentals I believe for the rest of the year.
Is that the same as for net reservations and if not how are your net reservations are tracking for the rest of the year and into.
2022 versus 2019 levels. Thank you.
Yes, actually the rental sits within the net reservations and and.
And we are tracking almost on par.
And with what we did and 19 I can tell you on rental has.
Our rental teams have done a great job.
No one wanted to one of the things that.
And that our teams have done and they do a really good dry job driving yield off of our inventories. So while marketing and is still recovering rentals and accelerated because we've been able to add more supply into the rental.
<unk>.
Component from a supply standpoint, and we continue to benefit from.
Our relationship with Hilton and being able to monetize those rooms off at Hilton Dot com.
But on that that being said, we're really pleased with the way our marketing packages are picking up right now, but oh and all our rental activity has been very very strong and.
As our owner activities also come back to the back half of the years has come back to 2019 to levels and we're seeing this acceleration and our marketing activations. So very pleased with what we're seeing going forward and Patrick just to add a little color to that when you look at those net reservations by month just to highlight the up.
<unk>, we've seen January net reservations compared to 2019 levels were actually down we saw that turn positive in February and.
Even more positive in March and the trend has continued through April.
And it's mid single digits type figures, but to see that turn on corners.
Very encouraging the one thing that we will see from a headwind perspective, and our rental business.
As we start to open more profit properties this year.
And Maui etcetera etcetera.
And there's going to be and increase and develop our maintenance fees, which.
It's going to compress margins, where they have been historically.
And the rental segment.
And until sales obviously pick up.
Okay.
Okay, well, thank you very much for the color.
Thank you. Our next question comes from the line of Brent <unk> with J P. Morgan. Please proceed with your question.
Hey, good morning, everyone and thanks for taking my questions.
Hoping to follow up on Patricks first question on.
On the 22 2022, Standalone Standalone HGV adjust.
Adjusted EBITDA.
Number 469 in the proxy I was just and then your comments on well well well understood. The overall sort of the overall absolute.
Profit recovery looking.
And looking like 19, I guess the question is how much of that is coming from properties that opened in 2020, one and try and get to the answer I was trying to understand how much of the core business is expected to have fully recovered.
Hi, Dan.
Thanks Brent.
With regards to the.
The core business.
Recovery, I think youre going to see and.
And 2022, it's going to take a little bit of time, I'll start and outside of real estate real quick and I'll take it a little bit of time for the portfolio too.
Rebalance itself so to speak as you've seen since COVID-19 started our portfolio of balance went from a little bit north of $1 3 billion to now its right about one thing and so you're financing segment will continue to trail historic.
And 2022.
From a.
Destination perspective, what is doing well et cetera.
We have historically seen.
Bumps when we opened new properties. So we do believe there is a halo effect with Maui Soco is doing really well now carbo is doing well all of those.
Destinations those properties are actually outpacing our expectations currently.
And we believe we're going to have.
That that will continue and then locations such as New York, We think are still going to be and the recovery mode and 2022.
We've seen a nice recovery and the destination locations, such as Vegas, and Orlando in particular, we saw them perform.
<unk> performed better and Q1 and they have during COVID-19.
The core business that I think is still and the full recovery not fully recovered and are still on the recovery mode is going to be those urban markets, most notably New York until a lesser degree Chicago and D C.
I don't know Martin if there's anything you want to add to that and I think our I think you've covered it well.
Thank you and net debt was that was exactly what I was and I was looking for so and <unk>.
Follow up question is just on Diamond and.
And Mark I think you referenced are you you mentioned the exciting opportunity on the revenue synergy side.
Just wanted to understand how you think about the way that might show up and financials right since diamond Cpg's, we're already very strong and so I assume revenue synergies revenue synergies you'd have to show up in that number and youre going to youre and improved close rates as well as.
And as well as the overall <unk>, but I think there's also maybe some shift away from existing owners.
Our sales force new owner sales. So just any thoughts on what's going to go on and that and that and the way that's presented and actually.
Yeah look I think.
When.
And you think about this opportunity.
We have a.
And we've stated that 125 plus million dollars and and cost synergies, but what really I think is the key driver for us on this this opportunity it's going to create tremendous amount of value is going to be the revenue synergies and so.
Again, the biggest opportunity here is the rebranding.
And to Hilton vacation club of Diamond's legacy business.
And that in itself is going to create and new level of.
I would say trust and credibility that's hard to gain when you're on a non branded and the.
And non branded world and so and we continue to make really good progress with that a brand name working very closely with Hilton on.
Finalizing the standards and our expectations is we'll begin converting some of those properties later this year and we're really prioritizing the conversions around properties that are closest to meeting the standards day, but most importantly.
Those properties that are driving the majority of the contract sales and <unk>.
And with that we're gonna be rebranding and all those sales centers and redesigning those and our expectations is that we're going to be able to start our <unk>.
Selling and new product as we begin 2022, so again.
The real opportunity comes from across <unk>.
Improved owner sales would be ability to cross sell across the b, the two product forms and and and additionally on.
Top of that we're working on a new membership concept, that's going to allow us to connect set programs together.
Which is going to provide access to new markets new features.
And help us expand the value proposition with new tearing and.
So there's a lot of things that are going to really allow us to ratchet up our revenue from both on owner and a new buyer standpoint. So.
I know, that's probably a bit of a broad answer for you but.
I can't provide any of the.
Details are components that really.
Make up to build here.
Got it alright, thanks for your thoughts and I appreciate it.
Thank you. Our next question comes from the line of Ben Chaiken with Credit Suisse. Please proceed with your question.
Hey, How's it going I'm, just just two from me on the transaction.
Can you remind us what percent and I think this is probably default the same way and are thinking as you were just discussing but can you remind us what percentage of the diamond customers, you think fit into and income our FICO score that would make sense to buy existing HCV product.
And if possible and then number two and you think about maybe the mid scale on.
And maybe even economy brands at Hilton.
Do you know what percentage that would represent of the Hilton loyalty base member pipeline that you draw from to feed your new owner growth.
I'm asking is it seems clearly relevant and tough plugging into diamond and if that didn't make sense I can try and a different way but.
Sure. So let me take a shot at this and and Dan If you have any.
So on fall from a FICO score standpoint.
Diamond is especially over the last five years under.
Paula Apollo's sponsorship has really improved their credit.
Our underwriting and so their FICO scores or just a bit below our current FICO scores. So there the quality of their customers.
It's a good.
Quality customer to a customer that's page so in fact.
I think they are at 726, and where we sit around 740 750, so not too far off.
And below where we're at from an income standpoint, the income is a bit lower we tend to trend closer to 150 day tend to trend closer to 100000.
On a household income standpoint so.
Oh, and all I get customer and as far as the mid scale and what the database looks like for Hilton.
Not at Liberty to be able to provide any color on the makeup of.
Their database because they own it and we will we have a license that allows us to use it which we're very happy with and we want to make sure we keep debt.
That relationship strong debt I think if you look at it this way bad and just kind of look at how Hilton has grown over the last decade.
And you look at their portfolio expansion and it really has been and the select service space right and it ranges from.
All the way from mid scale too.
To upscale and so so you can only imagine that as their base of honors members has grown and <unk>.
Attracted new customers to these new brands that.
Our sense is that the.
Percentages of customers that are moving into their loyalty base, probably mirrors a lot what their new brands.
Have.
Have grown too.
Hopefully that's helpful.
Yes, Barry Thank you very much.
Thank you we have reached the end of our question and answer session I would like to turn the call back over to Mr. Wang for any closing remarks.
Well, thanks, everyone for joining us this morning, and thanks again.
All of our team members for their hard work and dedication to providing to our guests and <unk>.
Providing a safe and memorable experiences when traveling with US we look forward to speaking with you over the coming weeks and updating you on our next call.
Have a great day.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time and thank you for your participation and have a wonderful day.
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