Q4 2022 Marriott Vacations Worldwide Corp Earnings Call
Greetings and welcome to the Merit vacations worldwide fourth quarter of 2022 earnings call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press start zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mister Neil Goldner, Vice President Investor Relations for married vacations worldwide. Thank you you may begin.
Thank you Melissa and welcome to the Merit vacations worldwide fourth quarter of 2022 earnings call I'm joined today by John Geller, President and Chief Executive Officer.
Terry our executive Vice President and Chief Financial Officer.
Need to remind everyone that many of our comments today are not historical facts and are considered forward looking statement under federal Securities laws.
These statements are subject to numerous ways and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.
Forward opening statements in the press release that we issued last night and the presentation that we added to our website. This morning as well as our comments on this call are effective only one made and will not be updated as actual events unfold.
Throughout the call we will make references to non-GAAP financial information you can find a reconciliation of non-GAAP financial measures referred to an hour mark schedules attached to our press release as well as the Investor Relations page of our website at I R. Dot M. B W. C Dot com.
As you saw on our earnings release last night as a result of a lining the contract towns for vacation Orange of sales across Maria Western and Sheridan brands last year, we recorded an additional $12 million of revenue in the fourth quarter.
Schedules to earn so please provide a reconciliation to show what are reported results would have been without this benefit.
Discussion and commentary today, we refer to our results after adjusting for the alignment, including the 7 million dollar benefit to adjusted EBITDA with that it's now my pleasure to turn the call over to CEO John Geller.
Thanks, Neil Good morning, and thank you for joining our fourth quarter earnings call I'm happy to welcome you for the first time as CEO the.
The past two months of Hell, a lot like when I joined the company just over 13 years ago full of potential and possibility I've stepped into this role with a strong leadership team around me in a vision of growth ahead for us.
If you've been following the travel industry. You know there is an optimistic view on leisure travel this year in a recent survey 77% of respondents said they were excited to travel this year, while nearly 50% of them have already begun researching trips.
Said leisure travel looks different than it did pre pandemic.
Recent research, we conducted revealed that 80% of people surveyed would consider working remotely from a vacation destination as a way to extend the length of their trip and this trend is expected to continue.
So what does that mean for us.
It means that more travelers and ever can visit our top destinations stay on our spacious villas and experience. The unparalleled service that are on site resort teams deliver.
With district, we've seen and leisure travel with average nearly 90% occupancy for the year illustrating the continued high demand for leisure accommodations.
We also generated over $1.8 billion, a contract sales and delivered $744 million of adjusted free cash flow and 2022.
And we added over 20000, new owners to our vacation ownership business, while growing active interval members by 21%.
This year, we expect to continue that momentum, we will build on our strategic investments and products technology people in customer experiences that propel our business forward.
We have dedicated and passionate teams around the world delivering unparalleled vacation experiences everyday to our owners guests and members and we continue to positively impact the communities in which we live and work.
I'm also proud to say that we recently published our new ESG report and our formalizing a strategy to ensure we're being good stewards to the environment in which we operate in the communities we serve.
One such example is the establishment of the Steven Wise endowment, providing scholarships to students at the Rod.
Rosen College of hospitality management at the University of Central Florida.
Since 2020, we have hired more than 175 U C F graduates and I'm very proud that our company was able to make this investment to support the development of future hospitality leaders, while honoring the legacy of our former CEO .
Now move into our results 2022 was a great year for Mary out vacations, and we ended the year on a very strong note.
<unk> was 90% for the fourth quarter with Hawaii running over 95%, while Asia Pacific Occupancies doubled compared to the prior year.
With the strong occupancy regroup tours by 18% on a year over year basis with fourth quarter tours, just below our pre pandemic levels.
As expected the PG declined year over year, but remained 17% higher than 2019.
As a result, we grew contract sales by 12% in the fourth quarter compared to the prior year and expanded our adjusted EBIT margin illustrating the resiliency of our business model and the desirability of our product offerings.
Last year, we successfully implemented our online booking engine for previews and continued to improve predictive modeling for our marketing campaigns. These.
These initiatives resulted in <unk> significantly higher consumer response rates and we ended the year with more than 200000 preview packages in our pipeline with roughly one third of those customers having already booked their vacations for 2023.
Taking a step back when we first acquired IRG in 2018. The goal was to allow owners the ability to enjoying expanded vacation opportunities and provide direct access across our Mary up Sheraton in Western vacation Club branch.
Since then.
You've been working to set up an.
Using technology to expand our offerings and fulfill this promise, which we achieved last year with the launch of a bound by Mary out vacations.
Looking forward through our multi year vacation next program, we expect to leverage our brands and digital strategy to help unlock our growth potential. We expect this will allow us to create efficiencies in how we market sell and service our products, resulting in top line growth lower customer acquisition costs and increased owner.
Satisfaction as we make more service options available online.
And our highest vacation ownership business, we continue to make great progress integrating legacy well in January we announced that beginning this summer all of our high it and legacy Welk resorts and sales galleries will be rebranded Hyatt vacation club.
Later this year, we plan to expand the vacation experiences available to hide owners with a new exchange option called beyond allowing them to use their ownership for cruises tours and hotel stays.
I'm also excited to announce that earlier this month, we acquired a fully entitled parcel of land in Charleston, South Carolina overlooking the heart of the city, we intend to develop a new Mary operandi resort by early 2025, including a new on site sales gallery, the city of Charleston continuously ranks as one of the top.
Owner destinations for its thriving culinary scene easy walkability in southern charm located steps from the historic Charleston City market. This new 50 unit resort will make a great destination for our owners.
And our exchange in third party management business integral ended the year with nearly 1.6 million members at 21% year over year improvement driven by the new affiliations, we signed in late 2021 <unk>.
Excluding the results of the Americas, which was sold last April adjusted EBITDA and our exchange in third party management business increased 11% in the quarter driven by higher average exchange fees and increase getaways as well as increased management fees at <unk>.
Before turning the call over to Tony to discuss our fourth quarter results in 2000 twenty-three guidance Ah number of investors have asked me what they should expect as I step into the CEO role.
As you know I've been in his senior leadership position for over a dozen years and had a significant amount of input into our objectives and strategies along the way. So in short I remain committed to delivering the level of operational excellence that our customers expect from US I also expect to deliver against the goals, we laid out at our last investor deck.
Long term I expect our timeshare and exchange business to remain the core of our business model, while we look to add to our growth by diversifying into adjacent leisure focus businesses, where we can leverage our core capabilities and finally I want us to find new ways to unlock the power of data through advanced analytics to improve efficiency.
<unk> and drop and drive top line growth.
The opportunities that lie ahead of the lie ahead for us are exciting and my optimism about the long term future has never been greater with that I'll turn the call over to Tony.
Thanks, John and good morning, everyone today, I'm going to review, our fourth quarter results, the strength of our balance sheet and liquidity position and as well as our 2023 outlook.
As I mentioned last quarter earlier in the year in connection with the unification of our myriad products and the launch of a bound by mirror vacations, we align the contract terms for the sale of vacation ownership interest across her Mary off brands.
And as a result contract sales for Mary up range of products are now being recognized as revenue following the expiration of the rescission period, consistent with our western and shared and brands.
This change resulted in the acceleration of an additional $12 million for vacation ownership revenue in the fourth quarter and a 7 million dollar benefit to adjusted EBITDA.
With the alignment completed we do not expect any material impact from this going forward.
Moving toward vacation ownership segment.
Leisure travel demand remains strong in the fourth quarter and the value proposition for a vacation ownership product remains compelling we capitalized on these trends in the fourth quarter driving a 12% increase in year over year contract sales with tours, ending just shy of pre pandemic levels.
And excluding the 13 million dollar impact from the Hurricanes contract sales would have grown 15% illustrating the continued demand for our core product.
With the growth in contract sales adjusted development profit grew 13% to $126 million emerging was again over 31% 500 basis points higher than 2019.
In our rental business as we expected owner occupancy increased in the quarter compared to the prior year and explorer costs rose as owners continue to use their remaining COVID-19 points before the expired at the end of last year.
In addition, preview packages were up substantially which help fuel contract sales, but negatively impacted availability for renters.
As a result transient keys rented declined 10% in the fourth quarter, partially offset by a 3% increase in revenue per available key and rental profit inner vacation ownership segment declined year over year $215 million.
The stickier parts of her vacation ownership business again performed well profit from a resort management business increased 10% year over year $270 million, while financing profit increased 5% to $50 million.
Our notes receivable portfolio also continued to perform well in the quarter with delinquencies and defaults largely in line with levels experienced in 2019.
For the fourth quarter adjusted EBITDA in our vacation ownership segment crew, 12%, excluding the 7 million dollar impact from the hurricanes with merging improving 110 basis points to nearly 35%.
And our exchange in third party management segment active enrolled members increased 21% compared to the prior year driven by the new affiliations. We signed in late 2021, well is expected average revenue per member decreased as transactions from the new accounts continued to ramp up.
<unk> business Revpar increased 40% driven by improvement in Hawaii.
Excluding the results severe I America's adjusted EBITDA enter exchange in third Party management segment increased 11% compared to the prior year and merging increased 300 basis points, 255%.
Finally, corporate G&A was largely unchanged compared to the prior year.
As a result, adjusted EBITDA increased 9% year over year, excluding the impact of the hurricanes emerging improved by 120 basis points, demonstrating the continued demand for leisure travel and the strength of our leisure focus business model.
Moving to our balance sheet.
In December we issued $575 million of 3.25% convertible notes do 2000 2007.
The offering was significantly oversubscribed, reflecting strong demand from investors.
We use the proceeds to pay down a portion of a revolver repurchase $55 million of common stock and in January redeemed are six and 8% senior secured notes do 2025.
As part of this issue as we entered into a Carl spread transaction increasingly effective economic conversion price of the notes to over $286 per share double where our stock was trading none the day, we launched the offering.
Pro forma for the note redemption, we ended the fourth quarter with $1.1 billion in liquidity, including $266 million of cash $72 million of gross notes receivable eligible for securitization and $749 million of available capacity and.
Or a revolver.
We also had $2.8 billion of corporate debt with 92% of it fixed and an average interest rate of 3.4%.
Our net debt to adjusted EBITDA ratio was 2.9 times at the end of the quarter within our targeted two and a half to three times leverage range and we have no corporate debt maturities until 2025.
We also completed our second timeshare receivable securitization of 2022 in the fourth quarter issuing $280 million of notes and an overall weighted average interest rate of just under $6 6%.
In the 98% advanced three illustrates the market's continued belief in the strength of our owners.
We also continued to return a substantial amount of cash to shareholders in the fourth quarter, we repurchased $173 million of common stock at an average price of just under $140 per share and our board of directors authorized a 16% increase in our quarterly did.
<unk>.
For the year, we returned more than $800 million to shareholders, including the repurchase of more than $700 million over common stock.
Moving onto our 2023 guidance.
2022 was a very strong growth year for our company has concerns surrounding the COVID-19 pandemic began to wane and people got back on vacation.
As we entered 2023, despite concerns about a potential recession to date, we have not seen any weakness in demand in our forward bookings and are targeting 5% to 9% contract sales growth. This year with cpg's, continuing to normalize and tour growth largely coming for.
Some in house and preview packages.
With these higher volumes continued low product costs, the benefit of our digital transformation efforts and our ability to leverage fixed marketing and sales cost we expect development margin to remain above 30% for this year.
While contract sales are expected to be the primary driver of growth in the vacation ownership segments rental profit is expected to increase more than 10%. This year, though we do expect it to be lower interview, one compared to the prior year due to higher owner and preview utilization.
Financing profit is expected to be largely unchanged for the year, excluding the alignment benefit we recorded in 2022 is higher contract sales and increased financing propensity are expected to be offset by a higher cost defense.
For the exchange and third party management segment integral members are projected to remain relatively stable and adjusted EBITDA is expected to grow 4% to 6% this year <unk>.
Longer term our strategy continues to include driving higher revenue per member, adding new affiliations and properties to the network and expanding our platform and benefits to appeal to a broader term hit market.
We expect to wrap up our Iot integration work this year, which will enable us to allocate more resources to focus on our highest business as well as our initiatives to leverage data and advanced analytics and improve our customers So service capabilities.
These initiatives combined with higher labor costs could result in a 10% to 15% year over year increase in corporate G&A cost.
As a result, we expect to January $950 million to $1 billion and adjusted EBITDA. This year, implying 6.5% year over year growth at the midpoint of our guidance, excluding the 51 million dollar alignment benefit we recorded in 2022.
Moving to cash flow.
We generated $744 million of adjusted free cash flow in 2022 and ended the year with $500 million of excess inventory.
We currently have no material new inventory commitments for 2023, though we do plan to continue repurchasing low cost reacquired inventory as it benefits the system and lowers our product costs.
We will also continue to look for opportunities to add resorts, preferably, where we can leverage a new sales center and we will continue to do this in a capital efficient manner where possible.
We expect our adjusted free cash flow to be between 600 $670 million this year and for our adjusted EBITDA to free cash flow conversion ratio to be approximately 65%.
We will continue to use our free cash flow for organic growth for for strategic acquisitions in the absence of compelling acquisitions are best use of excess free cash flow remains returning it to shareholders.
In summary, the fourth quarter was a strong close to the year and as we look forward to.
The uncertainty gnomic outlook I believe we're in a great position to continue to benefit from the growth and leisure travel in 2023 with our products in high demand and our investments and brands and digital initiatives supporting that growth.
As always we appreciate your interest Amir vacations worldwide and with that we will be happy to answer your questions Melissa.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line of into question.
You May press start too if you think you remove your question.
Participants you think speaker equipment and may be necessary to pick up your handset.
Starkey.
Our first question comes from the line.
Barclays. Please proceed with your question.
Hey, everybody good morning, and thanks for taking my question.
So just first on on your contract sales guidance and the growth implied in contract sales just was hoping that you could.
Break that down a little bit between tours and D. P G and what I'm getting at is the fourth quarter. The P. G was like you said 17 per cent above 19, and I just want you to answer the question in relation to that that number should we can <unk> consider that.
P. G can can lift up a little bit from that level or is that maybe the new normal because that's gonna obviously have application on the tour growth that you need to <unk> that overall contract sales growth number if that all makes sense.
Yeah, Hey, Hey, Brian Thanks for the question.
Alright, I'll give you a couple of data points that you talk about fourth quarter VP G.
We did see BTG taught us stabilized in in the fourth quarter from some of the declines we had seen a little bit earlier, we would expect.
That's V P. G for the first quarter to start trending back up slightly and then as you go through the year.
We do expect.
Necessarily a straight line, but we'll we'll continue to have better be PGA now with that all said.
Because of the first half of 21 last year right. We are so strong with <unk> and the pent up demand on a year over year basis, I think we're probably going to be slightly lower RVP G. Meaning your tour growth is really what's going to drive your contract sales year over year with with slightly lower Btg's hour power thinking of.
<unk> right now, but obviously a tough cop when you look at the first half of <unk> last year for the full year, but we do expect it to trend up from what we saw in the fourth quarter.
Okay, great. Thanks.
And John what were Tony.
We look at.
Really strong free cash flow that you're generating and we look at your leverage.
Which sort of continues to go down year over year and it looks like it's gonna go down even further depending on on the the share buyback cadence maybe if you could just touch on that M&A point, a little bit deeper is there opportunity out there are you sitting here looking into.
Next year.
Thinking you are a little bit more warmer on the idea of going out and maybe using that cash for for M&A versus how you felt about the market 12 months ago any more color on that John would be great.
Yeah.
Abuse happened change, we're going to continue to look at opportunities that once again and go back to his right strategic fit right and if it's on vacation Ownerships side.
Is it.
Unbranded, something where we can leverage our brands offer upscale and as we've talked about those opportunities from an acquisition perspective are are not big in size and not big in the number of those so but we'll continue to look at that opportunity I think we've learned a lot first with the I L G and <unk>.
Now as we work through wealth that you can really create value by bringing in the owners and adding flags to the map and driving efficiencies in creating.
More opportunities for your owners to go on vacation. So we're going to continue to look at that and then he'd been on the exchange side of the business will look at opportunities there to expand our travel platform we've talked about.
Adjacent travel type businesses, and we're going to continue to see if there's something there. We're not we're not going to do something that's Ah Ah me too from it offer and we're going to look for stuff that really either we can run and grow and build into scale leveraging our core capabilities.
Potentially enhance the offerings were making today, whether that's on the exchange side of the business or the V O side of the business. So.
Will be opportunistic there if we see the right things, but short of that liquid said will will return excess capital back to shareholders.
Excellent. Thank you so much.
Mmm.
Thank you. Our next question comes from the line I've been taken with credit since please proceed with your question.
Hey, good morning.
That's been one.
One just quick near term and one longer term. So I think if I heard you correctly I think you mentioned in the prepared remarks Ah one Q rentals headwind from higher owner occupancy <unk>.
My understanding was that the <unk> my understanding is that that that was an issue not an issue, but that was a dynamic in N Y 22, as well, but those rollover points would expire in January so can we open that up slightly like why why is the headwind persisting into one 223 and.
Did you <unk> did you quantify that at all Sir thanks.
Yeah. So.
If you go back it's really more of.
Q1 hundred 21, right. So you had omicron and coming in the recovery.
You had less owner occupancy in general in the first quarter of 21 and with that less owner occupancy allowed us to drive.
Better rentals, right and now now you're back to more normalised owner occupancy.
It has nothing to do with the point exploration was just really the opportunity.
<unk> last first quarter, but also just at the time just.
Owner Occupancies in general hadn't gotten back to normalize first quarter levels. So.
First quarter last year gave you a little bit better outcome. Their first quarter. This year you are just back to more normalized owner occupancy and yeah, we talked about our our package pipeline. We've got much higher packages were using a rental inventory in the first quarter to drive packages and contract sales. So.
Will normalize right. We have a we have an easier path for rentals in the second half of the year as last year as we talked about we did have all of those Toby points and we were arguably making.
Inventory, we could otherwise rent available for owners because that was related to prior year usage with the COVID-19 points. So second year, our second half of the year much easier cough, and that's where I think that we're not going to guide quarter to quarter for the full year, Tony talked about rental profits being off 10% 10%.
And on that you know I, just said that we do confirm that those COVID-19 stood expires. The end of last year as John mentioned in the other dynamic you have happening in the second half of the year is that people use those COVID-19 coins also to use our explorer collection.
And now as we get into this year.
The owners last year were using those points towards the second half of the year a little more so we had a little more rental availability in the first half like John mentioned, but that means if they're using the explore or I'm sorry, the COVID-19 points in the second half of the year, a little bit more there was a little bit higher costs on the explorer costs as well because not only did they.
<unk> also traded for explore as well.
I got it that that makes a lotta sense. Thanks for thanks for all the color and I guess, if we if we just step back a little bit how do you guys feel a bunch of 2025 investor day goals on either EBITDA contract sales to feel like get the stretch or is it right on target and I asked that in the context of contract sales. For example, so if you use the mid.
Point of.
Twenty-three guide as you mentioned that seven per cent contract sales and I think that would suggest a little bit of an acceleration in 24 and 25 to reach the mid point for those investors <unk>. So I'm just kind of curious about how you guys are thinking about the cadence over the next couple of years from here. Thanks.
Yeah.
We feel great about the goals, we laid out nothing's changed.
Obviously, when you lay out any plan and you're given kind of three years, it's never necessarily a straight line right that your growth each year, it's been some years might be able but a little bit last for example, this year because we didn't necessarily have interest rates on the financing side, but classroom going as high right. So naughty.
As much growth or really no growth when you look at our financing business. This year, but we expect that will turn around over the time and we'll we'll get substantial growth as we go through there. So that's an example, but on the contract sales side same thing.
We continue and Tony talked about our G&A being a little bit higher we're continuing to invest right in technologies that we're gonna, we're gonna help us drive contract sales growth higher V Fiji's efficiencies marketing.
And as we've talked about in the past.
Partnered with Salesforce and so the difference being a little bit because I know people ask about the higher G&A costs.
The difference being is historically on the side, we were more of a build shop, meaning we built the I T right and.
Therefore under GAAP, you capitalized and depreciated it right. So that that came out of your free cash flow in in Capex. If you will as we've transformed the business over the last couple of years and you think about where we want to go we want a partner.
And use more software as a service like Salesforce the difference from an accounting perspective is <unk>.
Less of those costs from an it perspective don't qualify for capitalization under GAAP. So.
Because of that right you have slightly higher expense, but even if you go back to the Investor day, what I point out is if you. If you look at our Capex spend it's $90 billion to $110 billion a year over the four year period, and this year right and it's going to be lower I mean, we're guiding 80 to 90 right. So it's really.
Right.
Left hand, right hand type thing in terms of it doesn't impact your cash flow per se, but the nuances of where it might run through her a little bit different but.
With that in leveraging that type of technology, that's gonna unlock the growth and create more opportunities going forward to get more efficient on the marketing and sales side and and better target customers and.
And drive those contract sale so.
We're excited to move forward here and I guess to go back just answer the first part of your question. Yeah. We feel very good about the Investor day numbers that we laid out back in June .
And then one thing I'd tack onto what John said is that we did mentioned that we expect cpg's normalize a little bit of 2023.
That doesn't mean for the whole period through 2025, then we do that so we do expect that to start growing again after the current year. So that's something that we look at as well driving development merchant.
That's very helpful. Thank you.
Mmm.
Thank you ladies and gentlemen, just as a reminder, we think can't ask you to keep to one question and one style up so that we allow for as many questions as possible.
Our next question comes from the line of Chris.
Please proceed with your question.
A good morning gods morning, so good.
Good morning. So first question, John you mentioned that prepared comments.
Only in parcel in Charleston for development I know, it's a small thing and obviously the great market is that should we read anything into that in terms of.
You're you're more willing or wanting to do a little bit more development going forward or you think you need inventory or just you know is there anything we should extrapolate from that.
No I missed that we're we're looking out over the future with contract sales growth and as Tony hit all we do have excess inventories still that's down to about $500 million a book value. So yep development takes time right. So as we talked about yeah.
That's in 2025, we probably would have loved to do a bigger.
Charleston development, but there's there's local limitations in terms of how big and kind of that 50 unit cap. There. So it's gonna be a great property I would expect you're going to hear more opportunities and things as we go forward. This year now like.
Like I said some of that stuff.
If it's ground up development is going to take a few years to get to.
And I would expect if they're bigger projects Charleston at 50 units isn't gonna be that much capex here over the next couple of years in terms of inventory Capex, but yeah. We'll all look like to do what we have done historically as do some capital efficient deals work with partners on development.
So we've got a good pipeline things, we're looking at a new destinations that'll bring those new sales center, so, but we gotta be thinking about delivering inventory as we get out in 25, 26, 27, because that 500 million while it sounds like a lot when you're burning three $400 million off your balance sheet each year, alright, if you'll burn through that pretty quick.
And that's for two of the 50 units. That's you know a month and a half of sales of fast. So that's a smaller project will come with a little bit of distribution, which we like we do some business in that market already to revenge and whatnot, but we do look to add more distributions along with new projects.
Which will help us on our contract sales growth going forward as well.
Great. Thanks, and then just as a follow up Tony I think you mentioned.
Flat finance profits year over year is the expectation have.
Have you seen any change in people, putting more or less down as as a as a down payment to try to offset higher rates kind of keep the payment. The same or is there anything you guys are doing to incur.
Encourage that to make sure that the financing pretends to be stays stays level.
Yeah, I haven't seen anything different with the down payment out there and we do have a program in place to encourage people to finance with us and to keep the financing with us for 18 months that program has been in place, but as you're well aware pre COVID-19, we were at closer to the low sixties as a per cent of financing.
Through last year were probably in the 50 354 per cent range. So we haven't gotten quite back to where we wanna be we wanna be in that low sixties again, because it's a profitable endeavor for us. So we wanted to make sure we keep that going forward.
But as of right now we are doing everything we can through sales training and also through the financing prevent city program to get people to sign up for a paper.
Okay. Great. Thanks, guys have been keeping I'm, sorry, we haven't keeping our interest rates pretty pretty steady, we've upped them a little bit last year, but they don't go point for point increased with what you are seeing in the market in general and that helps too.
For people to take our fans.
And soon as well.
Great. Thanks, Thanks, Chris Thank you.
Thank you. Our next question comes from the line of Patrick.
Please proceed with your question.
Hi, good morning, everyone.
They found Patrick.
<unk> charter Tony wondering if you could give a little more granularity about the growth rates in the.
Poor packages for this year you know how much are you up.
Year over year, which sounds like you are percentage wise by whatever period that you can share.
You're talking about a tour package pipeline.
Yeah.
In the past you've given statistics on how how much that is up versus the comparable period I'm wondering if you can share anything.
<unk>.
Yeah I can tell you. This is Toni I can tell you that our tour package pipeline. We ended the year, maybe 15% or so higher than we did the previous year for a package pipeline.
We're in a place. So if you look at it you know, it's always a balance between inventory.
And the first thing I Wanna do is make sure that our owners get on vacation. Then you wanted to put packages into the inventory that we do get through our different options at the owners can do including bond void trade explore inner develop around inventory so.
So we wanted to make sure that we put that inventory side for premium packages and then rent the excess right.
And that's what we always inventory so it starts to become this balanced game and ultimately we believe we could sell more packages. If we had more inventory to put those packages in so we've actually started optimizing our package pipeline and really.
Stratifying the customers that were marketing too and going after the I guess, the most profitable customers and it's really helped us in our marketing costs within that package pipeline production costs.
Okay, and then a little bit follow up on that let's say as of December 31st you're up in your core package pipeline what would the typical lead or booking time b for somebody you know in the package Pipeliner I'm trying to think.
Think about yeah.
Kind of both ability.
Yeah his.
Historically, and I mean that more pre COVID-19 it was probably more.
912 months, maybe even a little bit longer for some I don't have current status, but I would expect because of some of the pent up demand and people.
Not happy cause remember, what we used to talk about on that Patrick right as we tell somebody package well life's people buy a packages they have their next vacation or maybe they're next to vacations on the books right. So they're they're looking out a little bit farther I think.
What's probably happened during Covid is people didn't have multiple vacations right plan coming out and they're buying these packages and they're probably activating them and getting all vacation a little bit sooner, but I would expect on a more normalized basis that Carter nine to 12 months, maybe a little bit longer maybe a little bit less but that's <unk>.
Probably have to think about that activation and get and get people on vacation and I think the packages. We sell are generally in the 18 months range. So people do have time to activate those if they want to and we're trying to make them more automated going forward.
Okay I appreciate the call. Thank you.
Thanks, Patrick Thank you.
Thank you, ladies and gentlemen, if you'd like to join the question can you. Please press star one on your telephone keypad.
Our next question comes from the line Sean Kelly.
With Bank of America. Please proceed with your question.
Hi, Good morning, everyone and thank you for taking my question just wanted to ask because we kind of drilling on the VOI sales, what's your sort of expectation or assumption behind.
Existing members versus new member mix and kind of what's the broader impact of that this year, maybe the next few years as it relates to just kind of bpd versus towards left thanks.
Yeah great.
Great question shot so.
So for last year for the full year, we were about 70% owners, 30% first time buyers strategically as we've always talked about when we do these packages and all those stores are wrapping up a typically are more first time buyers, which has got a health what I'd say for 23 is.
With the launch of the bound program and more on the highest side later this year with some of the changes were making there the the <unk>.
Consequences of that are.
Owners want to come in and talk about the new products right understand well what is this about what does it mean for my ownership when they're on vacation. So I would expect that.
Our tour growth or what we'd like to call to our capture rate of owners that are staying to be higher than it was last year I drive more towards that way and typically when owners tour or they have a much higher V. P. G and so that's going to be Gotta help us here right and as we talked about.
The package side.
We're selling the packages, we're going to continue to drive first time buyer, but I'm not sure that 70 30 is gonna move much as we think about 2023, but over the next couple of years. The goal is going to continue to be to kind of push that more.
The mid died thirties, but it's gonna it's gonna take some time.
Okay Claire Thanks, and then just.
As my follow up and sort of clarification was I I believe you said in the prepared remarks.
Tony section that.
Margins are the development margins would be would be up year on year that it did I catch that correctly and is that also.
Reflective are impacted by by this next remaining stable.
I think we said that would be above 30% on the development emerging side, which is a pretty strong developed and emerging we've been running I think closer to above 31%. This year. So.
So in general we said above 30% that means our marketing sales jobs are going to be staying in line for the most part.
We'll look to leverage our fixed costs and higher contract sales that we got it and there are no product costs as a percentage will remain pretty.
Pretty good shape when you look year over year. So we do have a lot of that low cost we acquired inventory coming through and we don't see that stopping for the short term I think Cha when you think about it if you go back pre COVID-19.
We're running twenty-three ish development margin. So you know.
The key here is that.
At 30 or above right were notwithstanding as I mentioned earlier, given the the top cop on <unk> they'll most likely be a little software you over here and we're driving the growth to do Torre flow. So remember too is we add tours and our tour growth last year was up 30%, yes deep.
P. G for the full year first 21 was fairly flat right. So.
When you think about that when you're adding the towards your you're adding tours as you grow those more likely and less efficient V. P. G channels right. So that's the balance that we've been able to drive tour flow and what do you expect to drive it again this year, but minimize the impact on V. P. G by getting and continue to get smarter on.
Our marketing and and the packages and the things that we're offering so that you get some offset there and if we're able to do all that more efficiencies on the marketing and sales side getting leveraging some of our fixed costs on marketing and sales with the growth and then maintaining our product costs. We feel good about keeping that development margin up there for the foreseeable future.
Great. Thank you very much.
Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn off my back to Michigan for any plan of confidence.
Thank you Melissa and thank you everyone for joining our call today 2022 was a great year for our company, we generated more than $1.8 billion in contracts sales added more than 20002 owners in our vacation on a ship business grew interval membership by 21% <unk>.
<unk> margins it across the board and returned more than $800 million to shareholders. We also launched the are bound by Mary out vacations, and recently announced that beginning this summer all of our Hyatt and legacy wealth resorts will alive under the highest vacation club brand.
As we enter the new year the outlook for our company has never been brighter demand for leisure travel remains robust occupancies are strong V. P. G remains well above pre pandemic levels and we expect to grow contract sales by 7%. This year at the midpoint of the range. We also expect to generate between 600 and 670.
Million dollars of adjusted free cash flow, which we will you've used to reinvest in our business or returned to shareholders to.
To close on behalf of all of our associates owners exchange in third party members I Wanna. Thank you for your interest in our company, we hope to see you on vacation soon thank you.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
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