Q3 2022 Hilton Grand Vacations Inc Earnings Call
Good morning, and welcome to the Hilton Grand Vacations third quarter 2022 earnings Conference call.
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I would now like to turn the call over to Mark Melnyk, Vice President of Investor Relations. Please go ahead Sir.
Thank you operator, and welcome to the Hilton Grand Vacations third quarter 2022 earnings call. As a reminder, our discussion. 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, we undertake no obligation to publicly update or revise these statement.
For a discussion of some of the factors that could cause actual results to differ please see the risk factors section of our 10-Q or other applicable SEC filings, we'll also be referring to certain non-GAAP financial measures you can find definitions and components of such non-GAAP numbers as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release.
And on our website at investors start HCV Dot com our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018 under ASC 606, we are 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.
Is completed.
To help you make more meaningful period to period comparisons you can find details of our current and historical deferrals and recognitions in table one of our earnings release for ease of comparability and to simplify our discussion today our comments on adjusted EBITDA in our real estate results refer to results. Excluding the net impact of construction related deferrals and recognitions for all reporting periods are.
Accounting of our historical deferral and recognition activity can be found in excel format on the financial reporting section of our Investor Relations website in a moment Mark Wang our President and Chief Executive Officer will provide highlights from the quarter. In 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 detail.
As of 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 Mark.
Good morning, everyone and welcome to our third quarter earnings call before I get started I'd.
I'd like to take a moment to express our heartfelt sympathies tour owners and team members, who were impacted by Hurricane Irma.
We believe that all of our team members are safe and that as a company we did not suffer any material financial impact from the storm.
But we know that is not the case for many other floridians will continue to provide assistance tour affected team members as they recover along with maintaining our partnership with the Red Cross to support those communities in need.
Looking at the quarter's results we had another strong performance with contract sales ahead of 2019, driven by solid improvement in tour flow.
We produced a record $295 million of EBITDA in the quarter over 37% ahead of pro forma 2019 with strong margins and we achieved our recently increased cost synergy goal well ahead of schedule.
While our customers are not immune to the macro our exclusive focus on lease or makes us a prime beneficiary of the resilience of the travel trends across the country.
We see it in travel surveys, we see at a major airports serving markets throughout our portfolio and importantly, we're seeing it at our properties and sales centers.
So despite the tougher macro environment, we have several distinct advantages that have allowed us to outperform in this environment and maintain metrics ahead of 2019 across a number of kpis.
The prepaid nature of the product produces significant recurring revenues for our business, while also providing some installation for our members against inflation.
Additionally, our direct sales model allows us to actively engage with marketing guest in every environment, enabling us to leverage our relationship with Hilton and they're growing pool of high quality travel mind, you just felt not members.
And our compelling value proposition.
Been enhanced by HEV, Max and ultimate access, which are key differentiators that are gaining tremendous traction with both owners and new buyers.
So we feel confident in the strength of our offering and the momentum we've seen through October and that confidence in the business enabled us to raise guidance again for the year.
Yeah.
Before we get into the details let me start with an update on our strategic initiatives and integration.
We've made steady progress expanding our marketing channels to engage our owners and marketing gas.
Our virtual tour channels showed notable growth again this quarter with tour volumes close rates V. P. G and contract sales all improving against Q2 at a lower cost than our traditional channels.
And we've seen favorable response from our owners and marketing guests on our virtual programs.
With a number of guests already returning for their second virtual tour since the program's inception.
We've also continued to receive an incredible response from our members on our ultimate access experiential platform.
We're really excited about the quality of the upcoming events, we have planned for our guest and we expect that it will only get better as we continue to evolve the program.
Turning to our rebranding, we're making great progress executing against our plan.
We've completed the rebranding of our sale centers and are selling HCV Max across their network.
More than 50000 members have joined back since we launched sales in the spring.
And we continue to roll out additional features and benefits to Max throughout 'twenty, three and beyond to further enhance the compelling value proposition.
I'm impressed with how fast we were able to execute Max launch and the mix of our overall integration and we're getting great feedback from our members on the program.
Since our last call. We also rebranded eight additional resorts, bringing our total to 19 since the close.
By the end of this year well have rebranded 20 of our largest diamond properties representing over one third of the total cheese acquired.
And we remain on schedule to have nearly all diamond targeted properties rebranded by 2025.
Now, let me turn to the performance for the quarter contract sales were a record $621 million driven by strong tour flow and continued strength in V. P. G.
Our tours with the highest level since 2019 with a particularly strong September as we've continued to make steady progress in our tour flow recovered.
On our tour flow pace has surpassed 2019 and I was very pleased with our new buyer trends.
New buyer tour flow outpaced owners against the prior year and versus 2019, as our package pipeline conversion and marketing efforts have shown success.
P. P. J <unk> of just over $4200, which is nearly 28% ahead of 2019.
But as we expected we've seen some moderation as our segment mix and close rates continue to normalize versus dependent of thighs.
Turning to demand indicators, our system occupancy improved to 83% with September occupancy equal to 2019. The first month, we've reached pre pandemic levels.
We saw broad trend improvements across our network led by our southern region and destination resorts, along with a continued improvement in Hawaii.
As we look to the fourth quarter total room nights and arrivals for our owners. Our rentals are ahead of 2019 levels.
Even as we monetize our package pipeline, we continue to see robust demand for new travel packages, which is another healthy sign for our business and the travel environment in general.
We now have over 532000 packages in our pipeline and the percentage of those packages with a set travel date is the highest since 2019.
We'll continue to focus on monetizing our pipeline to support NOG and drive embedded value in the business.
As I mentioned earlier, the direct financial impact of Hurricane Ian was limited and our team members did a fantastic job of executing our protocols to minimize the storms effects.
We sustained damage at some of our sold out legacy resorts that we manage in southwest, Florida, and we're working with our insurers to get those repaired.
We don't have any sales centers in the directly affected region and we estimate that the impact of the store was immaterial to our EBITDA.
Turning to other segments NOG was three 8% with diamond, adding 1900, new members in the quarter, bringing our member base up to 515000.
Drove another quarter of revenue improvement in our resort and club business and our rental business also produced sequential revenue growth supporting our view that the leisure travel environment remains robust.
Taken together these factors produced a really strong EBITDA result in the quarter, even after excluding a one time benefit that Dan will get into.
We also produced strong cash flow, enabling us to not only invest in the business, but also to maintain our commitment to returning cash to our shareholders through repurchases, they're well in excess of our prior guidance.
So to sum up I'm happy with our progress this quarter. The travel environment remained strong with arrivals are on the books exceeding 2019 levels demand for our new Max membership continues to be robust and our value proposition stands out more and more each day.
We're seeing success in our marketing efforts with the expansion of our digital channels the excitement around ultimate access platform and our investment to monetize our package pipeline, we're generating more free cash flow than we ever have allowing us to invest in our business and still return a substantial amount of cash to share.
Holders and the momentum in our business gave us confidence to raise guidance again with that I'll turn it over to Dan to talk you through the numbers again.
Thank you Mark and good morning, everyone. Before we start please note that our reported results for this quarter included $86 million of sales recognitions that added to reported GAAP revenue due to the opening of the second phase of our Maui project. We also recorded an associated $43 million of direct expense recognitions from those sales, resulting in a net benefit of <unk>.
$43 million to our reported EBITDA for the quarter.
In my prepared remarks, only refer to metrics, excluding the impact of deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period.
Now, let's review the results for the quarter.
Total revenue in the third quarter was just over $1 billion we saw.
<unk> revenue growth during the quarter led by gains in our real estate segment building upon the strong improvement in Q2.
Q3 reported adjusted EBITDA was 295 million with margins of 29%.
It is important to point out that during the quarter, we released $16 million of reserves that had been built ahead of the recent expert exploration of several government stimulus programs I'll get into those details shortly but those would be considered a one time benefit that dropped straight through to EBITDA.
We reach cost synergy run rate of $150 million during the quarter, which met our recently increased target several quarters ahead of schedule.
I'm really proud of the teams for the efforts they've made during the integration to reach that milestone and we intend to maintain our cost discipline as we move forward.
Despite the macroeconomic noise, we saw a solid performance across Q3 with September being the strongest month of the quarter.
We think this speaks to the strength of our offering as well as the advantages of our direct sales model, which enables us to engage with existing and prospective owners in any environment.
Now, let's walk through the segment details.
Within real estate total contract sales were 621 million the strong improvement in new buyer tour flow continued this quarter with sequential and year over year tour growth again outpacing that of our own channel.
The strength of owner of <unk>. This quarter led owner contract sales mix to increase slightly to 71%, but we're very happy with the improvement that we've seen in our new biometrics as well we will continue to invest in a nearby our channel through the rest of this year and remain focused on driving toward our steady state goal of 40% in new buyer mix.
<unk> was just over 4200 for the quarter as we've discussed before is new buyer tour flow continues to recover towards 2019 levels, we've seen and expected normalization of our V. P. G from the historic high as we've seen over the past 24 months.
But we continue to expect that <unk> will stabilize roughly 10% to 15% ahead of 2019 levels due to our new product offering and efficiency initiatives.
Cost of product was 17% of net VOI sales for the quarter below our target of roughly 20%.
Real estate epidemic Spence of $233 million for the quarter was 38% of gross contract sales as we made investments in our new buyer channel to drive additional floors.
Real estate profit was $234 million for the quarter with margins of 43% as I mentioned earlier, we've been as we benefited from a lower provision for bad debt this quarter, which boosted our margins by roughly 300 basis points.
In our financing business third quarter segment profit was $43 million with margins of 63% combined gross receivables for the quarter or two and a half billion or $1 75 billion net of allowance and our interest income was $61 million.
Originated portfolio weighted average interest rate was 14, 2%, while our acquired portfolio had a weighted average interest rate of 15, 7% and includes a $7 million Contra revenue for the amortization of noncash premium associated with the portfolio of receivables that we acquired from diamond during the acquisition.
Our allowance for bad debt was $762 million on that $2 5 billion receivables balance of.
Of these amounts the acquired diamond portfolio, which use their underwriting standards was $388 million on a portfolio balance of $803 million.
Our annualized default and delinquency rates for our originated portfolios continue to outperform levels achieved in 2019 and remained lower than our expectations for normalization of credit trends as we head into 2023.
Our provision for bad debt was $32 million or 7% of owned contract sales.
Adjusting for the one time reserve release I mentioned earlier this ratio was in double digits, which is up sequentially from Q2, but still below our steady state expectation of a normalized provision in the mid to high teens.
And our resort and club business, our consolidated member Count was 515000.
Looking at HGV is legacy business NOG was three 8% at the end of the quarter Diamond also added 9800 net new members during the quarter.
Revenue was $130 million for the quarter and segment profit was $85 million with margins of 65%.
It's worth noting Q3 was the first quarter close will be fully integrated diamond into Hev's General Ledger system.
In conjunction with this we finalize the detailed mapping of Diamond chart of accounts, resulting in certain one time year to date true ups impacting our resort and club business for the quarter.
Excluding these true ups the resort and club showed operational growth both on the top line and profit basis with margins approximating historical norms of roughly 70%.
For the full year, we still anticipate rental and ancillary margins to be in the low double digits, and we still expect that rental and ancillary margins will continue to gradually improve each year as we sell through our inventory pipeline lowering our developer maintenance fees and continued to rebrand diamond properties, bringing both revenue and cost synergies at the edge of the rooms are rented out.
Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA Corporate G&A was 41 million license fees were $33 million and JV income was $5 million.
Our adjusted free cash flow in the quarter was 393 million, which included inventory spending of 23 million and excludes acquisition related costs of $34 million.
Our adjusted free cash flow conversion rate in Q3 was well over 100% in the quarter owing to the timing of cash flows from our August securitization.
In Q4, you will see the impact of higher contracted inventory spend cash tax payments and the regular seasonality of our business driving negative adjusted free cash flow in the quarter.
So while our year to date EBITDA to cash flow conversion rate is 82%, we still feel confident with being well within our guidance of 50% to 60% conversion for the year.
During the quarter the company repurchased two 3 million shares of common stock for $89 million through November 9th the company has repurchased an additional $1 1 million shares for $38 million and currently has $290 million remaining of the $500 million repurchase plan approved by the board in May of 2022.
Turning to our outlook, we are raising our guidance again for the year. This time to $1 25 to $1 45.
As of September 30th liquidity position consisted of $319 million of unrestricted cash $218 million of escrow deposits Onvia VOI sales and $1 billion of availability under our revolving credit facility.
Our debt balance at quarter end was comprised of corporate debt of $2 6 billion.
Nonrecourse debt balance of $1 2 billion.
At quarter end, we had $750 million of remaining capacity in our warehouse facility.
We had $178 million of notes available to securitize and another $324 million of mortgage notes, we anticipate being eligible following certain customary milestones such as first payment dating and recording.
Turning to our credit metrics at the end of Q3, the company's total net leverage on a pro forma TTM basis was two one times.
We will now turn the call over to the operator and look forward to your questions operator.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
As a reminder, also we ask that you keep to one question and one follow up our next question. Our first question comes from the line of Ben Chaiken with Credit Suisse. Please proceed with your question.
Hey, good morning.
So it sounds like you guys completed the rebranding of a sales center can you just talk about the receptivity of Max with the Diamond customers.
Color there would be super helpful.
Yeah sure.
Benchmark look really pleased with the reception we received with Max as it were.
<unk>. This is our first new membership program that we've rolled out in decades and our feedback.
Feedback has been very positive not only with the diamond members, but also very.
Very good feedback from our HGV members so.
Just to remind you we've added a lot of flexibility around our program a lot of new features but most importantly.
We added the destinations right and so when we Recalibrated our point levels for HCV.
We created a common currency, which allowed any Max members to go across the different portfolios to go across the HCV portfolio and the Hilton vacation club portfolio.
So we added new destinations like Lake Tahoe, Arizona, Virginia Beach, those are locations that HGV members didn't have before in our portfolio and the same for the Diamond members can now that in New York, Washington D C.
Oahu and and Hawaii, so anyway.
Good good reception, so far we've got some new benefits in there from Hilton, which have also been positively received and since the rollout.
We've achieved more than 50000 members since April and we expected to achieve nearly 70000 by year end. So all in all feel.
Feel really good about the rollout and most importantly, I'm really pleased with how fast our teams were able to get this done if you think about we closed.
In August and we were able to roll it out in April you know that was a big big hurdle that we had to achieve and the teams did a really great job with it.
That's really helpful. And then just one more quick one it sounds like you gave us some kind of commentary around the package the pipeline package.
Thinking about this correctly. So 22 was exposed to more existing owners for obvious reasons limiting your occupancy for rentals and packaged tours. So as we think about 'twenty three and occupancy opens up.
Should that create a tailwind on tour 23 versus 22 because of that package pipeline kind of like buildup.
Is that.
A fair way to frame it I think.
When do we think about our packages first of all I think it's a.
It's a great indicator of just really strong demand. So are our activations during the quarter were the highest level. We've had so when I mean by that is we have more people with actual data reservations again, we've had since 19. So activations have really picked up and we saw some really good sequential growth.
When you go back to from Q1 to Q2 to Q3.
Now, while our Activations picked up our actual pipeline actually increase too.
So so we're really capitalizing on the demand that are you know that that's out there on the leisure side and we continue to work with Hilton to generate those those tours in and we've been investing into that that segment and you know.
With staffing and just improving our tools in order to activate those packages. So from a standpoint of availability of rooms are we're in a really good place and should we get to a point, where there is more demand than we have available rooms, we we rent.
Tens of thousands of rooms from Hilton on any given year. So we have plenty of supply to meet.
The ability to monetize that pipeline. So all in all feel really good about the trajectory and the path. We're on right now just to bring back to new buyers.
Okay that makes sense that's super helpful. Thank you.
Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Good morning, everyone. Thanks for taking my question did you talk at all about our Securitizations.
You know for the rest of the year or the near term apologies if I missed it but do you expect to do more deals and any thoughts on what those could look like.
Hey, David Thanks.
I did not speak specifically the timing of the next deal.
Given where we are and available collateral and the fact that we just couldn't completed the securitization just over a month ago.
We do not plan to do another deal. This year. So it would roll into probably Q2 of next year would be where we anticipate it to fall.
Fortunately enough for us from a securitization basis, we had some great execution earlier this year and quite frankly, some great times I mean, we've done two deals are both sub 5% in the most recent one at 483% with a 96% advance rate.
There is still a lot of demand for ABS timeshare without a doubt I'm sure you've noticed some of our competitors just recently completed a deal with.
Clearly higher rates, just given where interest rates have gone, but if we wanted to get a deal done.
Or anyone in timeshare to be quite honest theyre clearly getting done so it's still very robust demand.
The interest rates have gone that clearly would lead to some compression in margin.
But we do have a little bit of wiggle room from our perspective, when we look at rates of what we charge the consumers were not going to be able to mitigate that fully it's more of a partial offset.
And we look at this.
And at least quarterly basis, but we will most likely be looking to raise rates a anomaly to our consumers in the near future as well.
Hum.
Just to follow that up any order of magnitude.
Or what those rate increases might be and then I had one other detail I was really hoping to ask about which you talked about a bit was the loan loss was benefited by a one timer.
In the quarter, but would have been.
It sounds like low double digits.
You're expecting to get back to normal just unpacking that a bit what what's in there is.
I assume the involvement of you know diamond as well right. So that's sort of a combined number.
Is there some evolution to that or some learnings to that that we can garner even though there's some noise in it this quarter.
Sure I said I realize there's a lot there yeah, yeah no problem. So the first part of your question with regards to order of magnitude for us increasing interest rates.
It's unfortunately, it's not triple basis points, it's more in the order of magnitude of 25 to 50 basis points. So again, a partial offset to what we've seen from a spread perspective with regards to the ABS markets with regards to our portfolio. The good news is its still outperforming not only last year, but 2019 levels.
We look at delinquency rates compared to 2019, we are still in excess on the diamond side. So in excess of 100 basis points better than where they were at 19 and HCV just under that.
Just around 60 basis points better on a default basis materially better diamond close to 600 basis points better on the default basis in hdds closer to a 100 basis points better than 2019 levels. So the portfolio continues to perform extremely well.
As things naturally just given the demographics.
Overtime reverts to a mean, so we do anticipate in 2023 that will slowly.
<unk> back to our mean, maybe we do a little bit better than we did historically just given.
Some of the dynamics of the acquisition and the integration et cetera.
But that remains to be seen.
But right now we're in a we're in a good spot the release of the reserve was associated with the.
Termination of certain government stimulus.
Packages that impacted.
Our mortgage portfolio, so that 16 million kind of a onetime clip that came back to us in this quarter.
At the end of the day the remnants of the reserves that we set up at the beginning of Covid that was all tied to employment levels, where the portfolio performed back in 2008 et cetera. So there's some nominal amounts it's probably still lingering in there but this is the last material chunks that I would expect you to see.
Got it so we still want to be mid teens.
Out into next year and onward.
I think ultimately.
Building up to mid teens, that's correct.
Okay. Thanks for the extra questions I appreciate it now of course.
Thank you. Our next question comes from the line of Patrick Scholes with curious Securities. Please proceed with your question.
Hi, good morning, everyone.
Good morning.
I Wonder if you could give us your latest thoughts on the return of the Japanese customer.
That's really going slower certainly slower than initially expected but.
Perhaps starting to come back to you what are your latest thoughts and observations on that.
Yes sure.
Look we expect a nice recovery from our Japan owners in recent months.
We're estimating that approximately one out of five guests traveling to Hawaii are from.
From Japan, or HGV related and that compares to one out of 10 back in.
In 2019, which.
It shows not only our continued dominance really in that market, but the desire for those who've really invested in the <unk>.
Quality product that we have in that market.
To get back to their their Hawaiian homes, and it's been you know two and a half three years now well you know demand. It is not entirely back positive move to lift all the restrictions on October 11th.
It's really had a beneficial impact.
For what we're seeing and so all of that said you know we expect the slope to full recovery will take about 12 months as we await the necessary air left return, we really need to get the air left in and that is coming and it's on its way.
We've also rolled out some initiatives to help our Japan owners' return in light of the continuing weakness in the yen, but when you look at where we're at we were you know what.
We're arrivals were about 50% of 19th in Q3, and and right now what we have on the books was 67%.
So clearly we're not back but the good news is it's all moving in the right direction are you know this was a you know with restrictions or it was an artificial.
Back on demand and demand has been there.
We've seen it over the years, even during Covid, our Japanese members for making reservations, but they were they would cancel them.
Due to restrictions.
But all in all really pleased with our you know how to change and manage it and our expectations as we get through and well into 'twenty three we'll get back to a more normal cadence there.
Okay great.
Great and then one follow up question you talked about.
Achieving the $50 million run rate cost synergies.
Is it possible that you could go above and beyond the $150 million. Thank you.
Yeah look.
And I'll I'll take I'll take part of this and maybe Dan can jump in here I, just say number one just really pleased with our ability to achieve the cost synergies that we laid out I mean, we were originally put it.
$125 million.
Out there in our first 24 months from the time, we close we raised it to 150.
We achieved that three quarters ahead of what we originally said.
And then if you recall, we on top of that we took $25 million of savings that we realized.
Early part of the pandemic, we took that out so all in all of.
We're much more efficient business now our teams are more productive and efficient than ever.
I don't know Dan if you want to add to that but yeah, no absolutely I mean.
It's very impressive to see what the teams have done without a doubt.
What is also interesting as you know well maybe not interesting, but what's important to note is when you go through something like Covid <unk> shut down all of your resorts and basically build everything up it really changes your mindset that coupled with an acquisition, where you've committed to significant cost savings the discipline and the level of discipline within the organization has just shifted right. So.
That we.
Without a doubt do not plan to lose but as you go forward the business is.
More integrated and it was it's going to be harder for me to say Hey. This is due to the acquisition. There were some benefits that we have not realized yet that will build on the $1 50, we've talked about these in the past most notably as we rebrand the resorts and they go on Hilton Dot Com, we will save expenses associated with the Otas.
Some of the bookings will clearly show the Hilton Dot com at a dramatically lower cost basis, so that will contribute to further cost synergies, but going forward, it's going to be really difficult for us to say hey. This is specifically associated with the acquisition if anything material does come to mind, where obviously a highlight that but.
At this point, it's really the most important thing to me is that increased discipline in.
Cost initiatives and just maintaining that focus as a combined organization organization going forward.
Okay.
Thank you for the clarity on that I'm all set.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of branch tour with Barclays. Please proceed with your question.
Hey, everybody. Good morning, Thanks for taking my questions. The first one would be on tour flow. It looks like you had really nice lift quarter over quarter on tour flow.
And you were talking about Japan coming back in 'twenty, three and maybe to work our way backwards when Japan comes all the way back in 23 or when Japan. All comes all the way back is tour flow going to be very similar looking to 19 in absolute numbers or is there.
Some channel churn or channel, calling that that we should sort of expect on the diamond side or anywhere else that that you aren't going to come back versus 19.
Yeah no.
Good good question I think number one I think if you kind of look at you know our tour flow and you look at the trajectory of the recovery you know out of the gate you know our primary objective was to get our owners back and they've made a long term commitment to our brand.
We took a.
We've put a lot of time and took a lot of care and to our owners during the pandemic and that has really paid off and we're now exceeding our owners are coming back are exceeding where we were in 19.
From a new buyer perspective, as you mentioned the lighter spend the Japanese gas and you know I've talked about that are on like on the previous question from Patrick So our expectations as you know that gets back to a more normal pace, but by the time, we get into the back half of 'twenty three.
No one area that you know.
We're recovering on the new buyer side is on on the Diamond side Diamond actually took out 40000 less efficient tours.
And they took that out pre acquisition during the early part of the pandemic and and as far as replacing those tours and generating incremental tour is we've now sold 50000 packages to legacy <unk>.
Diamond locations that have been rebranded Hilton Grand vacations, and we're just starting to see those tours arrive at our sales centers.
So overall I think we saw a nice increase in new buyer tour flow Ah, it's been growing it's outpacing our owner tour flow growth right now.
And despite converting our pipeline to drive new buyer tours during the quarter. We grew our pipeline. So that's a great indicator that we've got more.
We've got more opportunities out in front of us and we continue to invest in that and you know I talked about it maybe earlier on on the Stephanie staffing side, we've invested in more digital tools, we've improved our processes to to activate those packages in and so our thinking is that we're going to continue investing and working hard.
Get back our new buyers and the expectations are or will be ahead of where we were in 19 with owners and we'll be back at least to our new buyer levels in 'twenty three.
Great. That's that's great. Thanks for that and then and then Dan maybe maybe for you on V. P. G reiterated the 10% to 15%.
Level that that you're sort of looking to hold them, Hey can you remind us you know when you think about that 10% to 15% what's in there right versus 19 is it closed its close rates is it pricing is there anything else. We know what's sort of the makeup of that number and why is that number where you guys are confident you can hold.
As things normalize.
Yeah, no. Thanks for that with regards to the 10% to 15%, it's driven across several metrics right.
<unk> as a standalone some of the product that we were bringing online little higher transaction price.
Maui, Cabo Charleston, Soco club level product that combined with the revenue synergies, which would most notably transfer through the close rate with the acquisition are also supporting that 10% to 15% over 2019, Yeah I'd also add.
To that ramp.
We have a we have better insight into our customer.
Than we ever have before and you know our algorithm has gotten a lot more advance.
We know who's spending who's not spending we know who's traveling and who's not traveling it and our focus is around putting our resources around those that are traveling so.
So I think we've just gotten better during that period of time to identify and a more precise manner.
Customers that we want to go after and and then also just the value proposition of adding HCV Max and ultimate access.
You know along with what Dan.
You mentioned all in all I, just think we have a much better value proposition than we did with a much better way to identify the customer.
Okay. That's great and then and then if I could squeeze one more in here on loan loss provisions, Dan If I'm reading your words correctly, the mid to high teens assumes.
<unk> reversion of delinquency rates back.
Back to sort of prior cycle levels.
And obviously I guess you made it seem like you might not ever you might not get there. If the portfolio continues to outperform do you think the portfolio is outperforming because you guys have added so much value to the system to the product that your customers just are less likely than maybe you.
You know in prior in the prior cycle for each of these two individuals businesses and systems are less likely to want to give it up do you think that some of that so maybe you know that could be a bit of a good guy in terms of when you when you do hit a normalization point.
I definitely do what I would say to that front is look it's very important for.
I think just generally people to recognize that just because you put a brand on something does not mean someone will not default right. A lot of things have to go along with that is putting the brand on it so rebranding the diamond as Hilton vacation club, but also how do you treat the customer how does the sales process go what are you actually delivering are you living up to the promises that you sold.
The individuals and we as you know take the brand very seriously, we're big protectors of the brand and we tried to live up to very high standards. So as that rolls out and as that experience is gained by our consumer base I do see potential upside to that completely vision, but you know at the end of the day, we are only 12.
Into.
The integration so that is the reason for the air of caution of where we are this quarter, where its just under 11% provision. If you exclude the $60 million benefit to where you ultimately may go back to which is 15% 16%.
Yeah.
Okay. Thanks for thanks for everything guys good quarter.
Yes.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Wang for any final comments, alright, well thanks, everyone for joining us today I want to give a special thanks to our team members.
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