Q3 2021 Travel + Leisure Co Earnings Call
And please continue to standby.
[music].
Right.
Good morning, and welcome to the third quarter 2021 earnings conference call for travelling leisure co formerly Wyndham destinations.
After the Speakers' remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press. The Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press the pound key on your telephone keypad as a 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 and I would now like to turn the call over to Chris Agnew. Please go ahead.
Thank you Ashley good morning.
Before we begin wed like to remind you that our discussions today will include forward looking statements actual results could differ materially from those indicated in the forward looking statements and the forward looking statements made today are effective only as of today, we undertake no obligation to publicly update or.
Revise these statements.
Factors that could cause actual results to differ discussed in our SEC filings and you can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our website at Investor <unk> travel and leisure.
Dot com.
This morning, Michael Brown, our President and Chief Executive Officer, who will provide an overview of our third quarter results and Mike Hug, our Chief Financial Officer.
He will then provide greater detail on the quarter, our balance sheet and liquidity position.
Following these remarks, we will then be available to respond to your questions.
With that I'm pleased to turn the call over to Michael Brown.
Thank you, Chris Good morning, and welcome everyone to our third quarter earnings call.
This morning, we are pleased to announce another solid quarter as our cornerstone brands continue to demonstrate their strength.
We reported adjusted EBITDA of $228 million in the third quarter and adjusted EPS of $1 19.
This has been an eventful last 90 days.
On September 10, we held a travel and leisure Investor day, where we laid out our strategic and economic direction to deliver accelerated growth over the next four years.
That same week, we launched our first BDC travel subscription club called the travel and leisure club delivering a unique membership travel experience based on the inspiration from the travel and leisure magazine.
In the midst of the strategic events, we continue to execute within our two cornerstone brands of Wyndham destinations and RCI.
We are very pleased with the operational performance of our vacation ownership business in the third quarter.
<unk> was $3233, including very strong performance from sales to new owners, which contributed to the highest overall quarterly <unk> in our history.
Our portfolio continues to perform well and the cost reductions. We made in 2020 are now now being fully realized.
Those factors contributed to the strong adjusted EBITDA margin of 27%.
At Wyndham destinations North American gross vacation ownership sales were within the range of our expectations despite multiple headwinds in the quarter.
When we provided our guidance at the end of the second quarter, we did not anticipate the severity of the Delta variant search nor did we anticipate the impact hurricane either would have on our operations in Texas, and Louisiana, along with the wildfires that impacted several of our California resorts.
Despite these headwinds we were still within our VOI sales guidance range for North America.
Only international vacation ownership sales, which are less than 5% of total sales were outside of their range due to the significant ongoing travel restrictions and the south Pacific.
The travel and membership segment exceeded our expectations with strong revenue per transaction for both the exchange and non exchange businesses.
Exchange revenue per transaction increased 13% year over year, and non exchange increased 36% <unk>.
Travel and membership adjusted EBITDA was $68 million in the quarter.
For the company as a whole the adjusted EBITDA margin of 27% was 300 basis points above the third quarter of 2019, we were able to achieve this margin. Despite a $30 million net interest income headwind due to due to a reduction in our consumer finance portfolio.
To put in perspective, the strength of our third quarter margin. If we equalize the 2021 portfolio size to 2019 and exclude the $13 million EBIT impact from the Covid reserve release.
Adjusted EBITDA margin would have been approximately 28, 6% 448 basis points higher than the third quarter of 2019.
And the final two weeks of the third quarter, we saw clear indications that the impacts of the Delta variant were abating spin.
Specifically related to net vacation ownership bookings.
In August and most of September near term booking trends, we're consistently behind our 2019 pace in the last two weeks of September and through October the booking trend moved back above 2019.
Looking into the remainder of the year net bookings are 5% ahead of 2019.
RCI saw similar positive trends at the end of September.
Close in exchange booking trends finished the month of September ahead of 2019 after starting the month below.
This trend has continued into October we are also seeing some positive booking trends emerge in <unk> international regions as Covid travel restrictions are starting to ease. We are encouraged about the recovery of international travel, but recognize overall performance will trail the U S.
Beyond our business I'd like to address a few macro topics that are becoming increasingly important for companies and share some thoughts on how these topics do or do not impact our business on the topic of inflation, we should be a net beneficiary one of the core value proposition.
Of timeshare is locking in future vacation costs at today's prices.
It is easier for us to demonstrate the value of ownership when travel costs are rising.
Rising inflation will likely mean higher interest rates approximately 85% of our debt is fixed and rising rates will have a muted impact on our net interest expense.
For every 50 basis points of increase in rates, our corporate interest expense would increase $1 $5 million on an annualized basis and.
And on the consumer finance side for every 50 basis points of increase in rates, our ABS interest expense will increase $3 million.
Yes.
On supply chains, we have not seen any material impact to our operations related to supply chain disruption.
We have more than sufficient inventory for our sales needs for years to come and the two new projects being delivered next year Atlanta, and Moab are scheduled for on time and on budget deliveries.
Turning to the labor market like all service related industries recruiting has become more challenging lately.
Despite the labor market, we do not see this as a factor that will alter our road to recovery we.
We have taken a number of actions to compete effectively for talent, but in general we staff up for busy travel season every year and are accustomed to managing a high volume recruiting for these periods.
Which helps us to be effective in the current environment.
Our resort operations teams continued to deliver great vacations, and our marketing and sales teams are working harder than ever to acquire new owners or increase the ownership of existing customers.
You can hear from my commentary I'm proud of our team's efforts in the third quarter to overcome the unexpected headwinds yet deliver such strong results.
And there is a clear strengthening of sentiment forming among travelers as we see the delta various cases decline.
As a result of our strong third quarter and confidence in our business. We are increasing our full year adjusted EBITDA guidance to $740 million to $750 million more than a full pull through of our third quarter beat after we adjusted for continued travel restrictions and the south Pacific impacting the fourth quarter.
<unk>.
With our cornerstone brands delivering on all sides of the business I want to transition to our business extensions for an update from our most recent investor day.
Panorama travel solutions has great momentum as the team has closed 12 transactions year to date.
In the third quarter, we signed Mastercard in South East Europe, and the NFL Alumni Association. We are also excited about expansion in Latin America, where our leading affiliate Grupo <unk> has signed three new partners, including Hertz Mexico.
As we begin to activate these new affiliates, we will start to see transaction flow in the first quarter next year.
Travel and leisure club is also making good progress since its launch in September and the week since launch we gained traction as new members have enrolled in the subscription club as we started our marketing efforts within the travel and leisure affinity channels.
Our business development team continues to expand acquisition channels through digital marketing activation and affiliate partnerships on the content side by the end of the year, we expect to have around 40 curated itineraries available for purchase.
These itineraries are proving to be one of the most viewed features on our website and a top driver of organic search traffic.
We continue to deliver on the strategy, we laid out last month and believe our path to accelerated growth through 2025 remains clear for more details on our performance I would now like to hand, the call over to my colleague for our financial results.
Thanks, Michael Good morning to everyone and thank you for joining us today.
I will discuss our third 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 third quarter, adjusted EBITDA of $228 million and adjusted.
Diluted earnings per share of $1 19.
Compared to $139 million of adjusted EBITDA, and 83% of adjusted diluted EPS one year ago.
But before I jump into the details on a great third quarter results I want to highlight two significant transactions that closed subsequent to the end of the quarter.
First we renewed our $1 billion revolving credit facility.
Among other things extend the maturity date to October 2026.
We've set the financial covenant ratios.
Eliminate restrictions established by the first amendment regarding the use of cash for share repurchases and permitted acquisitions.
Second we closed on our second ABS transaction of the year of $350 million transaction with great terms, including an advanced rate of 98% and interest rate of one 8%.
Demonstrating the continued strong demand for our high quality paper.
Both of these transactions hide the strength and resiliency of our business and we were very pleased to close them in October.
Let me now share some operational highlights from the third quarter about our two business segments.
Vacation ownership reported segment revenue of $660 million.
Gross VOI sales of $440 million and adjusted EBITDA of $177 million.
<unk> $3233 was 39% higher than the pre pandemic third quarter of 2019.
Benefiting from owner mix and improved through quality.
As we have highlighted throughout the year very deliberate marketing decisions to drive true quality resulted in tours during the quarter being 52% lower than 2019.
But these higher quality hours drive the increase in <unk> and margins.
Our focus on quality has not only resulted in strong bpd's in margins, but.
But we expect it will continue to yield a stronger portfolio over the long term as well.
As Michael mentioned, our vacation ownership business faced several challenges in the quarter Asia Pacific gross VOI sales were impacted by around $9 million in the quarter and Hurricane Ida The California, wildfires and increase restrictions and Hawaii, all combined for an estimated $6 million headwind domestic gross VOI sales.
On top of this we overcame a more general headwind that the Delta variant add on close in bookings as case counts spiked.
Despite these challenges we are pleased with the level of vacation ownership sales and in particular with our mix of new owner sales, which represent approximately 30% of transactions in the quarter.
In addition, we were encouraged to see 70% of our newer sales were to Gen X millennials.
In the third quarter, we released $21 million of the Covid specific reserve we recorded in March 2020, due to continued strong portfolio performance.
<unk> and a $13 million benefit to adjusted EBITDA.
At the end of the quarter, our total reserve as a percentage of gross vacation ownership contract receivables was 19, 8%.
Compared to 19, 3% at the end of 2019.
Revenue in our travel and membership segment was $185 million in the third quarter compared to $145 million in the prior year.
<unk> membership third quarter, adjusted EBITDA was $68 million, an increase of 10% compared to last year's $62 million.
Travel membership transactions in the third quarter were 470000.
32% higher than the same period last year with growth in key geographies.
The largest improvements where in north American exchanges, and our non exchange business lines, which were both fueled by strong domestic bookings.
We're also seeing great trends, great traction with panoramic travel solutions travel products now available through RCI members.
These products have definitely enhanced our exchange systems value proposition.
Which gives us confidence in our growth prospects in the broader consumer travel segment.
To that point non exchange transactions in this segment accounted for 46% of total transactions in the quarter.
Turning to our balance sheet, our corporate net debt at the end of September was $3 billion.
And our leverage ratio was four two times.
We remain focused on reducing our leverage and with continued adjusted EBITDA growth, we expect to see the leverage ratio decline to around four times by the end of the year.
Comfortably below our leverage covenant ratio.
The new leverage ratio in our credit agreement is 475 times through the second quarter of 2022, and four time four to five times thereafter.
Just a reminder, that four to five times was our leverage covenant ratio prior to the first amendment.
As it relates to return of capital to shareholders, we paid our third quarter dividend of <unk> 30 per share on September 30.
We will recommend increasing in the fourth quarter dividend to <unk> 35 per share pending approval by our board of directors in November.
And with respect to our share repurchase program at the end of the quarter, we had $354 million of previously authorized availability and we expect to resume the program in the fourth quarter subject to market conditions and capital allocation priorities.
Finally on free cash flow, we continue to expect 2021, adjusted free cash flow to be just over $200 million.
Note that this includes an assumption of a 20 million tax refund late in the quarter.
We expect to be back within our historical free cash flow conversion range next year and over time, we expect to see this range moving higher to <unk>, 58% to 63% of adjusted EBITDA as we laid out at our Investor day.
In summary, we are very pleased with our performance this quarter as well as the two capital market transactions. We closed in October and we look forward to catching up with many of you over the next couple of months.
With that Ashley can you. Please open up the call to take questions.
As a reminder to ask a question that is star and one when we do ask you. Please limit yourself to one question and one follow up we will take our first question.
On the line from Joe Greff with Jpmorgan. Please go ahead.
Good morning, guys.
Good morning, Jim.
Michael I was hoping you can.
Share with us your thoughts at the current time in terms of how youre thinking about it.
A recovering the number of tours next year relative to 2019, particularly in light of what Youre doing with tour quality and some of the tour quality initiatives.
I mean can you get back to something like 80% of 2019 tours.
Next year is that a reasonable assumption or specifically how are you thinking about next year at this point.
Good morning, Joe Let me answer towards but let me, let me answer it as well in the context of a few other metrics that we're looking at for the business.
One of the questions. We get all the time is just returning to our 2019 EBIT levels and as we look into next year.
We believe that in the first half of 2022, we should be able to return to our 2019 run rate for EBITDA. If you equalize for the portfolio size. So I think every other answer falls within that context of overall EBIT growth and when you when you start to think of.
The individual metrics beneath that.
<unk> and towards our key to that and.
If I if I start with tours, we've been very pragmatic in how we return.
The growth of tours owners are obviously, returning quicker than new owners because of the margins associated with each I would expect overall towards next year to grow at this stage, 20% to 30%.
That's our choice, we absolutely believe we could grow towards faster, but we're balancing that against exactly what you've mentioned as far as the quality and.
As a result that we're seeing on <unk>, which as as we've seen we've had our highest PPG and our history. This past quarter over $3000. We think we will be able to continue to show strength and RPG. So for us as we move into next year.
We're constantly looking at the balance between that PPG growth and tour growth.
And at this stage, that's where we stand if we see an opportunity to adjust that even higher we will do so but again. Our overall objective is to get our run rate back to 2019 levels equalizing full portfolio size and do it.
With a more holistic approach, which is great margins on the VOI side, a very strong portfolio and ultimately a more solid foundation as we grow back the overall business.
Great and then for Mike Hug.
Yeah.
<unk>.
The reserve release that you took here in the <unk> how much of.
That March 2020, COVID-19 specific.
Incremental loan loss provision is left as it is.
Got to be pretty close to zero.
No we still have about $70 million left at the end of the quarter to be honest charge offs in the third quarter against that reserve were pretty minimal.
We've talked about every quarter right, we're super happy with the portfolio performance and then we always have a great proof point when we close an ABS transaction with incredible terms, because obviously that securitized by the paper so about $70 million left.
Sit down as we always do and look at it each quarter, but we just want to make sure that with the consumer all the assistance they have been receiving over the last 18 months some of that starting to fall off obviously, the restrictions on foreclosures and evictions or starting to fall off so just want to make sure that we're smart about.
Keeping a reserve in place as we see.
They help us consumer over the next three to six months.
Great. Thank you very much.
Sure. Thank you thanks, Joe.
Yeah.
And we will take our next question from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, guys. Good morning, guys.
Yes.
Good morning, Michael as we look at the travel and membership segment.
You've covered a lot of ground there in terms of what you.
What youre doing and where you want to take it but as we think about how to kind of.
Ramp that up over time is this going to be more of a.
Step function or more of a smooth.
I think we're trying to figure out how much growth is going to come next year versus in years, three and four of your of your longer term plan in that in that segment, yes.
Yes, absolutely.
Let me, let me break the two business is down and then.
Sure a few ideas on how to think about the growth is.
Specifically on Pts our Panorama travel solutions, we began that nearly a year ago.
As we went through the quarter as it was sort of ones and twos as far as.
Relationships, we were contracting and what we're seeing in the last quarter is an acceleration of the number of companies that our team has been able to contract with we've worked through a number of different deals and more companies are seeing other companies signing up for it so.
What we're excited about is the acceleration, we're now beginning to see and new partners in that space and as.
As we look into 2022 youre going to start to see those transactions flow through in the first quarter and I think you will see a continued smooth transition I don't think it'll be choppy I think it'll be relatively smooth as we sign up companies transactions will follow that.
You can imagine it takes a few months to get web sites up and running and get all the necessary technology that supports these partnerships in place, but that's that's how I would look at that business travel and travel and leisure club.
As opposed to signing up let's say.
The National Association of Realtors, which has tens of millions of members.
Travel and leisure club as a one on one BDC business and Youre going to see member growth tied to investment in our marketing and our efforts around that and we're really going to begin that in Q4 of this year.
So.
Again, I would view it as relatively smooth, but again its BDC as opposed to signing up larger organizations that have.
Either thousands.
Or millions of members as you look to next year on growth.
When you look at our overall enterprise growth I would expect the travel and membership segment to be three to 400 basis points higher than what our ultimate enterprise growth rates are going to be.
And keeping in mind, that's not just that.
The Pts and travel and leisure club. It also includes our the remainder of our existing business related to travel that membership.
So that's how I would look at next year travel and membership three years to 400 basis points above the enterprise growth rates for 2022.
Okay, that's fair.
Very helpful. And then follow up is on <unk>.
Kind of on financing for the quarter VOI Mike.
Michael you covered.
What kind of sensitivity on the cost side.
But how do you guys think about that in terms of ability to raise interest rates or consumer propensity to finance right. Now is it different because they have more cash in their pockets or would you be willing to be more aggressive on the rate you're charging if interest rates do continue to rise.
Yes. Good morning, Chris This is Mike we will definitely take a look at rates.
We always do every quarter sit down with the sales team and take a look the rates and we might move up a little bit we really don't see a lot of sensitivity by a consumer as it relates to rates now keep in mind too. Our average interest rate is around 15%. So we're already at a pretty high rate I think when we think about the portfolio.
We might actually kind of move towards trying to reduce down payments to get that portfolio growth at a greater rate. So when you think about the nice net interest income even if we kept interest rates flat, but we did things to lower the level of down payments now that had the provision impact, which we have to manage but if you think about lowering the level of down payments that get.
Portfolio growing quicker and obviously the great spread that 15% when you borrow at 2% or under is very attractive to us. So we'll definitely look at interest rates, but I think more importantly are there things we can do.
From a down payment perspective to to grow that portfolio quicker and I'm trying to get that net interesting come back up.
Okay very helpful. Thanks, guys.
Sure. Thank you.
And we will take our next question from Ian Zaffino with Oppenheimer. Please go ahead. Your line is open great. Thank you.
On the tour side I'm just trying to.
Understand.
As you look at the third quarter, maybe the fourth quarter.
Or maybe the third quarter, which were the most impacted.
Which ones have recovered the most and when you kind of think about.
Towards being I think you said up 20% to 30%.
What market is that coming from because obviously different markets have.
Definitely with restrictions et cetera, so opening closing so.
Any color you could give there would be great. Thanks.
Absolutely.
Let's just break the tour flow in the two different segments. The one thats.
Has come closest back to 2019 is our owner tour flow. The reason is very simple as we talk about bookings going forward.
Sure.
Were back above the 2019 pace. The two deltas to 2019 is first of all as we've mentioned across the board we change our marketing qualification so theres a natural delta between 'twenty.
Our current tour flow and where we are in 19, and then secondly, as we've seen.
A short term trend, which we'll see how it plays out in the future, but with with owners.
And.
Let's just say a lot of banked points, there, they're bringing more guests than historically so those two factors are actually resulting in slightly lower.
Or a little bit of headwind on the owner arrivals, but we feel confident that as we move forward.
Owner gap between 22, and 19 will will definitely narrow the biggest gap is not a market driven gap, but it's a marketing channel gap is the new owner tours.
Pre COVID-19.
We were we were driving an incredible amount of new owner tours.
That required scale in order to have margin and to have have them profitable as we've come out of Covid, we've eliminated a lot of the.
Lower FICO base marketing and as a result of that the delta between where we are today in 2019 is primarily sitting in that new owner channel and what you can expect from US as we grow back next year as we've been reopening new owner marketing channels slowly over the last.
Few months and we will continue to do that through the winter months, but the new owner channel is strength is really in that memorial to labor day, and therefore, you would expect to see if theres any step and increase it would happen around March of next year as we ramp up for the summer time, and Thats, where you would really start to see a closing of the gap.
Between.
Future tour growth in 2019.
Okay perfect. Thank you very much.
Thanks Ian.
And once again as a reminder to ask a question today that is star one.
And we will take our next question from Patrick <unk> with <unk>.
Securities. Please go ahead.
Hi, good morning, everyone.
Good morning, Patrick.
First question I'm wondering if you can help.
Clarify, perhaps a misconception out there in the marketplace and Thats.
Relates to.
What had happened to Tripadvisor trip plus program.
With.
With the hotel chains, and our rate parity I think there might be some concern there.
With your business model, not so for the exchange and rental.
Alright.
Travel and leisure.
Club program that the issues that Tripadvisor, plus what's having could happen do you folks I wonder if you could just clarify.
Why that might be different for you.
Absolutely and thanks for giving me a chance to clarify that first of all we do not see that as an issue for us it's not one of the high risk factors that we see there is there's always there's always risk out there, but we don't see that as fundamental anything that we're doing either on the <unk> side or on the BDC side because when we.
Purchased da.
And platform that platform has been operating in that space for nearly 20 years. It provides us broad access to over 600000 hotels around the globe and.
It all sits behind the paywall, which provides only access to those who have paid for that access.
First and foremost secondly is keep in mind that from the very beginning we've been clear that we believe the value in the travel and leisure club is around the curated content. The unique nature of the content and the fact that people are going to be able to travel through the eyes of the riders in the magazine.
And in that respect.
The magazine has over 150 of the.
Both travel agents and the top hotels around the world, who want to be aligned with that name with that brand and with the content in the travel and leisure magazine and as a result of that.
As an opportunity for them to offer distribution in a format that supportive of what's written in the travel and leisure magazine, So I understand the market concern as it relates to.
Another paradigm, but we view our approach and.
And history with our <unk> platform too.
To not create that even remote concern as it relates to our business.
Okay.
And then just a follow up question.
For.
Mike.
You noted that.
The credit facility, allowing it go into our ratios of 475, and then dropping to four in a quarter.
Do those numbers impact at all what your long term target leverage ratios are.
No I think we've been consistent that our long term.
Target is two and a quarter to three times Thats, what well continue to target once again getting there primarily through growing EBITDA, but we've also talked about the fact that in terms of additional return of capital to shareholders. It's not that we have to get to three times before we do that as we demonstrate with a dividend increase but really having a clear line of sight. So as we continue to grow our EBITDA.
<unk>.
Our leverage rates should go down and also our free cash flow should go up and we would expect to have a similar capital allocation policy that we had pre COVID-19, where we will grow the dividend as we grow the business look at M&A and share repurchases, but it can be more excited really be in a position today, where we're actually able to do that as opposed to being restricted.
Really the middle of 2021, I'm, sorry 2020.
Okay, great. Thank you.
Sure. Thank you.
And we'll take our next question from Stephen Grambling with Goldman Sachs. Please go ahead. Your line is open.
Hey, Thanks, and you addressed this a little bit but last quarter. You had noted some of the concrete factors that will likely weigh on EBITDA in 2022 versus 2019 things like the portfolio size.
Exchange membership et cetera, I'm, just wondering if you're wondering you could just kind of recap some of those and if anything has changed in terms of your views. There and then secondarily how does the loan loss provision kind of factor into that which I would think typically moves with the size of the portfolio as well. Thanks.
Yes sure. Thanks for the question as far as the puts and takes for next year compared to 2019 portfolio.
Portfolio headwind of $100 million to $120 million just based on the net interest income differential due to the portfolio are expected to be down about $1 billion.
Compared to end of 2019, and then about a $50 million headwind as it relates to the reduced RCI member count now the offsets to that are the $60 million in permanent savings that were recognized in today and we will continue to recognize next year and then to your point the provision which had been running north of 20%, we expect it to be below 19%.
Now on the provision.
The provision is in part driven by portfolio size, but more importantly, it's driven by the level of VOI sales and a percent of sales financed and so as we grow VOI sales.
The dollar amount of that provision should increase and then once again, depending on what we do it through quality and with down payments. It could move from the 18, a trend now to something lower higher based on what we do it through a quality, but it's really going to be driven the provision when we look at 2020 to inboard less by portfolio size and more by the level of new originations during the current year.
That's super helpful. Thanks, so much.
Sure. Thank you.
And we'll go next to David Katz with Jefferies. Please go ahead. Your line is open.
Hi, good morning, everyone.
Thanks for taking my question.
You covered a lot of ground and I'm wondering whether within the DIY business, where you've made so many operating improvements et cetera, and your capital position.
Comparatively strong whether there might be tuck ins or rollouts or whatever.
Description, we would want to use that maybe.
Incrementally beneficial to the DIY business that sort of trade up.
Trade up quality overtime.
As well.
David.
That's great follow on question to many of the questions. We've had so so far.
Leading to the M&A question with this is that.
Questions from the other folks so far have really been about.
This strengthens our VOI business is really proving itself out and as we come out of Covid, we're balancing to our quality and tour growth and what happens in the provision and what we're seeing is a lot of strength coming out and that's going to be in the next three to six months a lot of the effort as we head into <unk>.
'twenty two is make sure we adjust and get that balanced exactly right.
As the core and foundational aspect of the business, but there does remain opportunity and the overall M&A.
Arena, we've always since the day, we spun been looking at the.
M&A landscape is continued consolidation occurs in our space, we remain active in our.
R.
Our <unk>.
<unk> scanning across the landscape of timeshare potential for tuck ins.
As you know we've done a number of acquisitions and dispositions none that are directly around the VOI space per se, but we continue to be active in that space because the natural evolution of the industry has been moving towards brands I think next year branded timeshare sales will be somewhere around 80%.
90% of the industry and therefore consolidation does make sense and no different than we always have said is we will remain active in scanning the landscape of a BLA.
Hi.
I appreciate that.
Yes.
Given right.
Given that you haven't done a ton.
But there is certainly kind of a roll up perspective on the industry.
I suppose what I'm really getting at is the.
The fact that you haven't done many.
What would cause that to change.
Alright, the opportunities exist.
The capital resources.
Why what would cause you to act rather than passing as you have.
Well I always come back to what our fundamental look at it as are all M&A.
The M&A that we've done has been do think strategic and economically.
The right aspects of where we're going so you look at the two we've done so far and the one we've disposed of.
As we said in Investor day, those are going to end up being cash neutral. So we've been able to change our strategic direction Holistically on a cash neutral basis.
And that's not only a strategic.
Decision, but also an economic one and.
That perspective, Hasnt changed and when I say, we're actively scanning. It's we've we've been actively scanning will continue to actively scan, but it has to make strategic sense and financial sense and the question ultimately becomes.
Does that change the world has changed dramatically after COVID-19. So.
If things do change then we'll be more active in this space and if if deals come our way that are not economically sensible then we'll pass.
We've got a great organic story and if we can be additive to it but in a strategic and economic sense, then and only then will we do deals.
Thank you so much very helpful and congrats on the quarter.
David Thanks, I appreciate it.
Yep.
And we'll take our next question from Ben Chaiken with Credit Suisse. Please go ahead.
Hey, How's it going.
Okay.
Good morning, Hey, so revpar in the leisure space is accelerating.
Do you think that allows you to to say the least do you think that allows you to lean into price a little bit or at least to make that purchase decision for higher priced products more appetizing for consumers like do you see that as a benefit to you next year.
We're now, but possibly been but.
I come back to what I, what I said in our prepared remarks, which is.
This is the point in the cycle where.
We really show maximum value and ownership.
And we do best when travel costs are rising and with the world speaking of inflation today, we see the opportunity to.
Sure.
To translate that potentially in our execution and we've always said that <unk> lift over 3000.
Up 40%, 39% as Mike as Mike shared.
As part operational performance in part mix adjustment so as we move our mix slightly higher next year on the new owner mix.
This opportunity.
Inflation and if we held prices relatively similar to CPI.
We have the potential to see benefits on things like close rates or transaction size. So there is a few different ways. We can go about it best for the consumer is probably to hold pricing and a relatively stable manner and look for benefits coming out of close rates or transaction size.
And keep in mind on our models a little bit different when you think about us compared to hotel and the <unk>.
The hotel they don't necessarily know where that consumer is going to come back next year not in our case, if we sell them a product we know theyre going to come back next year and for many years. After that so we ended upgrade opportunity not to mention that refinancing transaction, we get the recurring interest we get the RCI membership we get the management fee. So I think when we look at it the more important thing is hey, let's let's continue to run those.
Great close rates that we see and we talked about the level of newer sales, let's get more people in the system and thats, where that pipeline for future growth. So for US yes, we can.
Take a look at pricing, but it's not one and done it's more let's get them in the system. They valued a product they buy more and we continue to benefit over the long term.
That makes sense. So it seems like one way or the other day, they're going to be on the pricing side of the volume side and your point is on the volume side you get the you get the LTV of the customer, which totally makes sense I guess I was coming out of from the perspective of just like clearly the value proposition is accelerated towards timeshare materially so.
All of that color is helpful. Thanks, I appreciate it sure. Thanks.
Thanks Ben.
Thank you and that concludes our question and answer period I would now like to turn the call over to back to Michael Brown for closing remarks.
Well first of all to everyone on the call, especially those who have asked questions. I know, it's a busy earnings season. So I know everyone's scrambling and appreciate you taking the time to be on the call more broadly you would like to thank everyone. We definitely had an exciting third quarter and the fourth quarter is off to a strong start as we continued to edge.
Acute on our strategic plan as always I have our team to thank for their service to our owners members and guests as we work to close out a strong 2021. Thank you to everyone for joining us today and have a great day.
Thank you and that concludes travel and leisure <unk> third quarter 2021 earnings Conference call. You May now disconnect. Your line at this time and have a wonderful day.
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