Q3 2023 Marriott Vacations Worldwide Corp Earnings Call
Greetings and welcome to the Merit vacations worldwide third quarter of 2023 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 star is zero and your telephone keypad.
A reminder, this conference is being recorded I would now like to turn the conference over to your host Mister Neal Goldner, Vice President Investor Relations for married vacations worldwide thinking you may begin.
Thank you Melissa and welcome to the in Mary applications worldwide third quarter of 2023 earnings Conference call.
I'm joined today by John Geller, President and Chief Executive Officer, and chasing Marino, our executive Vice President and Chief Financial Officer.
To remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal Securities laws.
These statements are subject to numerous risks and uncertainties as described in or I C. C filings, which could cause future results are different my choice some notice expressed in or implied very uncommon.
Forward looking statements in the press release, we issued last night as well as our comments on this call are effective only one made and will not be updated as actual events unfold.
So while the call will make reference of non-GAAP financial information you can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedule is attached to our press release.
Well as to the Investor away since page on our website and I are dot M. B W. C Dot com.
But for a turn up call over to John as you saw on our earnings release last night with for vacation ownership resorts in West Maui, The wildfires had a negative impact on our results in the third quarter, despite having no physical damage to our properties.
Facilitate our conversation this morning about our business, excluding the O'malley wildfires impact our discussion and commentary. This morning about our consolidated results with a quota walks glued the impact of the fires, except where noted.
We added a table to originally so last night to illustrate the impact the wildfires by wind up business to facilitate your analysis.
In addition, during last year's third quarter with the launch of a bound by married vacations worldwide Smith.
We aligned contract terms or vacation honest with sales or cause I'm Marianne Western and Sheridan brands. We also aligned and combined our accounting methodology is for the reserve on vacation ownership notes receivable forties, France.
These changes, which we refer to as the young Y men, resulting in non-recurring benefit of $44 million to last year's third quarter adjusted EBITDA to the acceleration of revenue from the sale of Marietta branded vacation ownership interest.
Schedule. So we provide it last night and earnings at least illustrate what a result.
Would have been hurt your quarter and year to date period without this benefit.
During our call today, all of our discussion and commentary about your for your changes exclude last year's alignment benefits.
With that it's now my pleasure to turn the call over to John Geller.
Thanks, Neil Good morning, everyone and thank you for joining our third quarter earnings call I wanted to start to call today by reflecting on one of the most significant happenings in the third quarter, the wildfires that battered west Maui, while we did not have any physical damage to our resorts. The wildfires had a profound impact on our.
Yeah, it's and their families with several hundred of them, losing their homes.
For all of our associates in Maui, our thoughts and prayers continue to be with them as they work with each other and their community to rebuild thanks.
Thanks to the hard work and dedication of our associates, we have reopened or resorts in west Maui, Although occupancy in October was well below normal.
We are seeing reservations billed for the balance of the year, though we expect it'll take until early next year until occupancy returns to more normal levels.
At the same time, our focus has been on educating our owners members and gas on respectful travel as the community rebuilds and encouraging any visitors to explore the island and enjoy local businesses that need the support of tourism.
Moving to our third quarter results. It was only a year ago, when we first announced about.
Thursday I was at the time to provide owners and first time buyers direct access to a much broader portfolio of resorts using a common currency putting up in higher.
Since then thousands of owners and other customers have been introduced to a bound and we continue to see elevated interest that are resorts with people wanting to learn more about a bound and its benefits.
Despite the near term impacts of the transition there's no doubt in my mind that is it is fundamentally a better product for legacy Maryanne owners. They are now able to book directly into any of our share 10 in western resorts using their points and for legacy share to them Western owners, who had previously had access to a more limited sit.
Some old resorts. They can now book directly into any of the more than 90, Mary operand. It vacation ownership resorts around the world using a common currency.
In addition legacy Sheraton in Western owners now have a much more robust selection of vacation options to choose from with excuse me the new access to thousands of other vacation alternatives using their points from hotel stays in cruises to sporting events Broadway plays and more.
Over the past year, we've been working hard educating consumers about the benefits of about in our salespeople are getting more experience selling it.
We have also seen three times the number of legacy just stay on the owners elect to use the a bound program. This this year compared to last which will allow more owners to experience the benefits firsthand.
This was evident in our in our results this quarter, where V. P. G for sites I transitioned increase more than 15% sequentially from the second quarter.
And in our legacy wealth business. The changes we've made helped drive a 5% sequential V. P G improvement.
As a result total company V. P. G improved 2% sequentially from the second quarter, despite the impact of the Maui fires.
We also formally lodged the highest vacation clubland, Brad during the third quarter, bringing or twenty-two former Hyatt residents club and legacy wealth resort properties under a single brand.
And with the launch of the new beyond program highest vacation club owners now have access to more travel offerings, including cruises and vacation experiences, which will help drive higher owner satisfaction and incremental tours.
Or international business continues to provide strong growth with contract sales across Europe, and Asia Pacific growing 42% year over year, but with more U S. Consumers traveling abroad. This year. This is negatively impacted our North America results. We continue to focus on driving sales of new owners with first time buyers.
Presenting half of our tours in the quarter and a third of our contract sales, which is good for the long term health of the system.
On the development Fry, we acquired a property in Savannah, Georgia, which we intend to convert into a 773 unit Western vacation club.
Hannah consistently ranks as a top tourism destination by our owners. This resort will also add new sale centers in the market when it opens in a few years.
And our exchange in third party management segment are integral business performed in line with expectations this quarter.
Active members were down slightly year over year, while revenue per member increased.
Looking forward traveled demand continues to revert to historical patterns and economic conditions are mixed with consumer starting to feel the impact of higher interest rates and inflation.
At the same time the changes we've made in our Mary up random vacation ownership business with the launch of a bound as well as those who are legacy wealth business are encouraging V. P. G has improved 2% from the second quarter and we're up 17% above 2019, Q3 levels, even with the Maui fires impacting our results reflect.
Acting the benefits of our team sard work taken the longer view, our business is fundamentally sound with long term growth opportunities. We have some of the best brands and the vacation ownership industry.
Each with its own expansion potential.
We were making smart investments and digital technology technologies to enable more self service by our owners and members we're leveraging data to make the right offers to the right people at the right time, while streamlining processes to lower costs across our organization.
We also have a substantial amount of high margin recurring revenue streams that reduce our exposure to economic cycles of times like this and we generate substantial free cashflow, you're in you're out and at our current stock price I can't think of a better use of that cash except to return it to shareholders with that I'll turn it over to Jason's to discuss the results.
Thanks, John today, I'm going to review, our third quarter results the strength of our balance sheet and liquidity are updated 20 twenty-three guidance and some early thoughts about 2024.
In addition, as Neil mentioned to facilitate a conversation. This morning about our business all of my comments will exclude the estimated impact of the mallee wildfires, except where noted.
Starting with our vacation ownership segment.
[noise] track sales declined 4%, excluding the estimated 28 million dollar impact of the Maui fires at over $4100 V. P. G was only down five per cent you over a year in the third quarter versus a 14% decline in the second corner illustrating the benefits of our sales training and sharing of best practices across the organization as well.
The continued owner education about the benefits of a bound another.
Another encouraging sign is that our package pipeline continues to be robust and grew 10% compared to a year ago, which is a key driver of future sales.
As you saw in a release last night, we recorded an additional 59 million dollar loan loss charged in the corner on our $2.8 billion gross notes receivable portfolio.
As we discussed last quarter, we saw delinquency trends improved from earlier in the year, but they still ran them remain above the prior year and our expectations. They.
Just on this and the mixed macroeconomic data we have observed in 2023, we expect this to continue in the near to medium term and we adjusted our estimate for the loan loss provision taking these factors into account.
What this adjustment we believe our consumer loan portfolio is adequately reserved.
After the partial offset of approximately $10 million in cost of vacation ownership the impact to adjusted EBITDA was $49 million, which we have not added back in our calculation of adjusted EBITDA.
[noise] rental profit declined 13 million on a year over year basis, primarily due to lower Rev pack in Orlando, and our mountain locations as well as higher inventory holding cost.
Finally financing profit increased 3% year over year and resort management profit group, 8%, reflecting the recurring nature of these high margin revenue streams as a result, adjusted EBITDA in a vacation Ownerships segment would have decreased 24% year over year to $195 million in the third quarter, excluding the estimated impact them.
Howie.
Moving to our exchange and a third party management business adjusted EBITDA declined 8 million compared to the prior year driven by fewer exchange transactions that interval international and lower rent foreign Aqua asked an operating margin was just over 50% for the quarter.
As a result total company adjusted EBITDA would have declined to $174 million in the corner.
Moving to the balance sheet, we ended the corner with approximately $1 billion in liquidity in a net debt to adjusted EBITDA ratio of 3.5 times.
A balance sheet remains in good shape with no corporate debt maturities until Q3 2025, when our variable rate term long be matures and after our $300 million.
[noise] straight hedges mature on April our corporate debt will still be 70 per cent sex with an interest rate of only 4.2% at today's underlying rates.
We repurchased $86 million of common stock in the corner, bringing our year to date total repurchases to almost $250 million with $476 million remaining in our repurchase authorization.
Moving onto our twenties twenty-three guidance as you saw in a release last night, we now expect our adjusted EBITDA to be between $745 million and $765 million, including an estimated $50 million to $55 million impact from the Maui fires and the 49 million net decrease from the increased loan loss provision.
For the fourth quarter, we expect adjusted EBITDA to be between 170 and $190 million, including an estimated 26 to 31 million dollar impact fundamentally why you file a flight wildfires.
We now expect a four year contract sales to be between 1.75 and $1.77 billion. This year. After an estimated 60 to 65 million dollar impact of the Maui fires and for development margin to be around 27%. After the 300 basis point impact of the extra loan loss provision.
For the fourth corner, we expect contract schnauzer be between 425 and $445 million after an estimated $32 million to $37 million impact that O'malley fires.
We expect resort management profit to increase more than $5 million a year over year in the fourth quarter and for financing profit to be down slightly due to continued higher interest rates and the a b S market.
In addition, we expect rental profit declined slightly year over year, I did a lower revpar and higher operating cost is one approximately $5 million estimated impact of the Maui wildfires.
And are exchanging third party management business, we expect profit declined roughly $5 million in the fourth quarter due primarily to lower transaction of interval international and lower Rep Paranagua Austin.
As a reminder, we reported a 7 million dollar alignment benefit to adjusted EBITDA in last year's fourth corner that will not recur this year.
Moving to cash flow, we ended the corner with approximately $430 million of excess inventory enough to support more than $2 billion in future sales. However, with the lower expected adjusted EBITDA. This year, we now expect our adjusted free cash flow to be between 430 and $460 million of this year.
Finally, while we are still working on our twenties twenty-four plans, we wanted to provide a little color for next year, we expect revenues and contracts asked to grow despite having to rebuild the portion of our marketing and sales team in Maui. However, there are two parts of my vacation ownership business, where we expect profit to decline year over year I'd do the cost pressures.
We expect maintenance fees to owners to increase in the mid teens next year due to inflationary pressures and labor and materials and insurance costs. This will result in higher inventory costs in a rental business, which we do not expect to be offset by increased revenue.
And then our finance business, we expect continued higher interest rates and the a b S market to negatively impact our financing profit.
In addition, the return of variable compensation expenses will negatively impact G&A expense next year.
We'll be able to give you more clarity when we report earnings in February when we will also have more information about the recovery in Maui.
As always we appreciate your interest in Marietta vacations worldwide, and we'll be happy to answer any questions you have now Melissa.
If you'd like to ask a question. Please press star one on your telephone keypad.
[noise] formation tumble indicate your line of in the question.
You May press start too if you'd like to remove your question for.
Participants were going speaker equipment.
Sorry to pick up your handset before pressing the stocks.
Our first question comes from the line of Patrick schools with truth.
Personally with your question.
Hi, good morning, everyone.
A number of questions here first one can you help bridge.
Your full year guidance cut by 140 million at the midpoint, what we know is Maui roughly 50 <unk>.
The loan loss provision, another 50 million, but theirs.
<unk> about 40 billion what.
And I was thinking about that correctly and if so roughly what is that $40 million. Thank you.
Sure.
It's really two pieces, primarily we did.
Take contracts saddles down excluding Bali Ah just given where we were in terms of mostly tour flow was all has been off a little bit in the third quarter versus our expectations still continues. He you know if you exclude now for the third quarter tour flow is up about three and a half for sad, but we were expecting something more.
The call at five per cent increase in same thing on the V. P. G. On the margin, where you know doing well in terms of sequential improvement, but we did expect V. P. G to be a little bit higher so based on that you know kind of missing the third quarter. We ran that through so that was a I'll call. It roughly 50 million. If you look at contract sales what we previously God I did excluding valley.
We kinda based on you know a little bit lower than our expectations here in the third quarter Ah and running that through from kind of the trends in the in the fourth quarter [noise] that that gives you probably about half of the 40 million you're talking about in terms of the impact on development profit.
And then the other piece as we've talked about in the past or a rental business continues to do well, but relative to last year, just some of the trends and some of our markets, particularly Orlando some of our our mountain resorts. We have seen you know slightly softer a D r's.
As well as slightly lower occupancy so yeah. It was it was really the those do you think she got it you got it you know a couple of things plus or minus in G. In a couple of million in there plus or minus but it truly around the rentals in the development profit.
Okay Uhm on that first part with some of that related to.
Weakness.
Including the bounds into the cells program.
Let's say there wasn't a little bit, but if you look at a bow that was very positive yeah from a second to the third quarter at the transition sales centers. Yeah. We saw about a 15% increase in V. P. G. We're overall V. P. G. In the quarter was up about 2% sequentially right. So we we made really good progress.
And I think we'll continue to make good progress here going forward. We haven't you know kind of close the gap on the pre Ah Ah bound V. P. G's, yet and then on the highest side same thing you started to see improvement about 5% sequentially from the you know call. It the the wealth sale centers.
And changes we've made there and with the launch of our beyond program and enhancements to that offering we expect to get more traction going forward. So yeah, just more generally like I said it. It you know it's a couple of points of tours more broadly throughout the system and you know yeah V. P. G b at a point or two below.
What we expected for the quarter.
Okay, let's move on now to the <unk>.
Topic of taking the loan loss provision.
Yes.
It seems to me that.
From one or the.
Possibly a combination of.
Just.
Forecasters.
Alright or has there been any material actual downturn in your customers ability to pay.
<unk>.
I mean, I I've seen any.
Challenges with pain loans or just something.
It didn't go right in the the forecast when you sit down and do these forecasts.
Sure Yeah, a little bit of background and we you know we project future loan loss reserves based on historical loan loss reserves right. So we have static pools that looked at the the history of how loans defaulted in the past based on fight fight those scores and timing when they defaulted and the curb.
And based on that that static pool projects, what your loan loss reserves should be going forward. So in any given quarter, you're always gonna have some pluses and minuses right as we talked about last quarter and even in the first quarter little bit we were seeing at a you know kind of historical basis.
Verse, though static pools and in verse last year higher delinquency sprite and we did take some true ups in the first couple of quarters of the year related to that.
We talked about last quarter, though that those delinquencies sequentially continue to trend down, but they still remained above kind of the expectations and the static pool and prior yeah, right and so as we as we had a couple of quarters of that we said look you know based on these trends, let's look out and say.
[noise] you know assuming some higher defaults here going forward we.
We need to adjust the reserves. So we took a charge, which we think now adequately reserves US yeah. I remember, we got a 2.5 2.6 billion dollar loan portfolio. So you're talking about a couple of points here of higher reserves on that book, we think we're adequately reserved on that loan portfolio and.
Going forward are low loss reserves should be similar to what we've experienced prior to this quarter, which yeah. If you look at at a high level. If you look at contract sales you know net of of Resales [noise], it's probably gonna be in that 9.5%, you know plus or minus of that.
That that neck contract sales number not as soon as you know kind of a roughly 63% to 65% financing for Penn City, which is what we've been writing historically here. So we think this puts us in a good spot going forward based on all the information we have and based on our best estimates today.
Okay. Okay. You said just one related follow up question I'm really just kind of sit down there.
You know is there.
A problem with the consumer here and you do have a pretty.
Hi Network Democrat.
150000, or above average household income 1.5 million, Yeah network sort of put your solidly upper middle class here isn't.
Is it just.
Something.
<unk> consumer cause I'm not really.
Other places.
I'm relieved that has there been any changes in your writing standards.
Standards here over the line now.
You're too.
No no nothing's changed in terms of how we underwrite are loans over the last you know five plus years I you know I would say I I mean, I don't know about you I mean, you know put the income aside I think you know given higher inflation higher interest rates yeah on the margin there's gotta be impact we're seeing from a.
Consumer I think on the bright side, you know there are plenty of consumers out there that are continuing to spend on travel right and so [noise]. There's nothing we've seen that says well. It's this consumer of that consumer, but we you know we are seeing yeah generally I yeah.
I think the consumer is a little bit more stress now than they were a year ago that that's my general consensus on Ah Ah you know from what I can see and just observe in in the marketplace, but and and that's kind of what you're saying, you're saying like I said called a you know a couple of points. If you will in terms of the the additional charge we took here [noise].
I feel a bit on the margin right in terms of it it doesn't feel like it's a broader pervasive issue by any means.
[laughter] sorry, one one last question what did you say.
Where you're seeing that weakness.
[laughter] across sort of a cycle score spectrum or is it.
Uh-huh.
Closer you know in the high 600 or is it an 800 or just.
I mean, we we see you know if I go as we all know there's there's you know the fight those scores great you know at some level for predicting defaults, but it doesn't take into account your balance sheet right. It's just how you manager Brian Schumer desk, we haven't seen you know one band or another we've seen generally ain't.
Creases across the band so it's not like it's specific to a lower fight those score ban versus a higher FICA score bad I think yeah, Jason if if you want to add any color there, but I haven't I haven't seen anything where it's like you know specific to one band or another now Patrick I would just add that it is more pronounced at the lower FICO.
Bands caught the you know the sub seven Hunter, it's Ah versus the above 700, it's they're they're all up a little bit, but the sub seven hundreds or up but you Gotta remember sub 700 for US is you know what per cent of our loan pool 60 per cent of our loan pool. All today is is above 700 FICO.
Thank you.
Next question comes from the branch.
[laughter].
Uh-huh.
Yeah.
Ah Ah Ah Brant, we kept area.
You can you hear me can.
Can you hear me now yeah, that's better than it was all crap.
Oh, sorry about that [laughter]. They don't want them to just just just one question for me or one or two questions for me, but.
Following up on on on the loan loss provision and and I and we we sort of dug in and I. Appreciate all the commentary [laughter] when we when we sit here today and you think you're well reserved for everything you can sort of see in the consumer behavior today.
Help us understand sort of what that assumes for the sequential behavior of the consumer from here. So if nothing changes then we go back to sort of night and a half percent.
Loan loss provision next quarter.
If the consumer gets sequentially worse, even if it's marginal you would have to look at taking another charge correct. I mean, just trying to figure out if there's a little bit of a cushion in there for what you think could happen from for the consumer from here.
Yeah, and we we've we've tried to factor in the.
You know what we expect given some of the broader macro so yeah, I I I would say yeah. It's an estimate it's our best estimate today and it doesn't at least in the near term doesn't.
Expect any great increase in terms of what we've kind of been seeing here over the last couple of quarters, So, but yeah going forward I guess depending on.
If it if we just materially worse changed and how big that was yeah. I mean, we have in fact with that and I guess if that's your question, we haven't assume like a big deterioration in the broader macro environment.
That would drive you know a higher defaults, but at least in the near to medium term here, we haven't necessarily assume that you're gonna have you know a.
Great increase in some of the stuff we've been saying.
Okay. That's helpful and then back to some of the commentary you gave up around the 40 million sort of I would sort of called core or sorta non non Maui non L. P. Full your guide down you know you gave a lot of color I mean rental softer adr's hits after Ark, and then and then and then softer tour flow.
A little bit of softer V. P. G X abound, good to hear that abounds getting a little better if I'm sort of like you know, adding all of those are rolling all those comments, but I think it is it fair to say that the macro is having an impact.
Across your business on a sequential days. They know people are still travelling analysts told him at but sequentially things have gotten a little bit worse. At is is have you seen the consumer pull back a little bit.
In terms of leisure travel.
Well I think that's a great question I think sequentially right. We we've kind of seen with the improvements in a bound you know we like we talked about V. P. G was up a couple of points sequentially right. You know that the Ah Ah bound was up about 15% high it was up about five I think the non transitioned if you will sail centers.
We're generally up one 2%.
So yeah.
It feels like it's it's kind of stabilized clearly versus last year like we've talked about and we we now realize.
How good last year was you know like we talked about from a V. P. G, but more importantly from a rental side, especially in a lot of our higher end markets. We talked about this on the last call. Obviously, you have the Maui impact of the fires here in the third quarter, but even excluding that what we've been seeing in and we thought we'd see some firming of that you know and it.
Yep stabilized if you will a bit from the second quarter is you know a D r's or down year over year in a lot of our markets in Hawaii and Occupancies off a couple of points right. Some of that in the higher end markets here in the U S. As well so it's still better than 19 tough comp to last year, given you know some of the.
Change in travel patterns, we do expect you know a lot of that U S. Higher end traveler that went abroad, we'll probably maybe you know cut me I'll stay in the U S. This year and some of the higher end market. So but that that you know wasn't something we factored in in terms of as we thought about our rentals for the full year Ah. So there's.
Still on a historical basis doing very well just year over year, that's where yeah. We realized today, yeah, how strong last year was but the teams working on rec rooms, pushing rates and and getting occupancies up. So we feel like it's you know generally stabilized if you will in that part of the business as well just a.
Little bit lower than we expected.
Thank you.
Uh-huh.
Mhm.
Brooklyn.
Sean Kelly.
With bank of America, and especially with your question.
Morning show I. Thank you everyone.
Thank you for taking my question.
I'm just trying to think through a couple of the building blocks. He gave for 2024 I mean, we just start with the provision piece if it you know.
Excluding obviously, but one time, you know kind of the the.
The one time for a component we just run right.
Modestly higher level of provisions.
Any guy pays for how long do you think about what's going on a year on year headwind either you know the provision dollars or I think more importantly than you know just broad based company EBITDA margins.
And it results. They just kind of accruing more for that going forward is that is that something you can help us with.
Yeah. Shaun this is Jason I think as John mentioned, we think we're in a good place for the overall portfolio I think as you look forward into a queue for and then you know in the next year will have a tiny headwind that would cause maybe 50 basis points as a percentage of of contracts al something in that neighborhood. So I don't think it's a big change to <unk>.
Expect you know for next year going forward, but John mentioned that nine and a half 10% area for a loan loss provision on a normalized basis, you know assuming the low sixties propensity I think that's a good place to think about it.
Great.
Yeah, just just listen answering piece. They think we're all trying to grapple with a broader range. Barney you did kind of call. This out I think one of your competitors kind of gave us a little bit of a ballpark will give it you know.
Relative to the size of your program.
[noise] creates early and you'll probably still running through some of these numbers for budget purposes, but.
Can you help any any kind of guide tennis or broad radio you can give us to think about.
Headwind again, I believe that TNA will talk about roughly 30 million what I believe it's a bit of a larger they'll give you both of them.
Yeah Shaun.
Sean depends on where you think rates are gonna go next year, we did our D. L N.
Earlier, this year and we did a printed around 5.5% where in the market here pre marketing right now and we'll be doing a D. L. Here potentially in the short term, so we'll see more where where that lands, where you see when a T and L. D. L priced caught a month or so ago, obviously rates have moved both in the.
Underlying as well and the spread so I think that's kind of ballpark in terms of the movement that you can expect and then it just depends on what happens next year. So.
Yup your Crystal ball.
Is probably as good as ours in terms of the right environment.
Okay. Thank you very much.
Mhm.
[noise] thinking our next question comes from David.
Please proceed with your cross.
Hi, good morning, everyone, Thanks for calling and Dave wanted amateur.
Good morning, I wanted to just focus on a bound a little bit from a higher level. It's good to see that it's that it's showing some signs of improvement, but I wanted to just double back on.
You know why why now.
You know, what we know about about going into it that you know or what did we think we know that that that didn't quite.
You know have them the way we anticipated.
Obviously worth some surprises.
You know with it so I just wanted to go back on the strategy of it. Please sure Yep. So David you know the the thing we knew going in was that.
As we talked about it's a better product right. The overall offering and we always knew because we've transitioned to different products before that there can be some impact so part.
Part of it is you know.
Educating yeah, specifically your you know because the the sites that were transitioning where are your legacy vis stay on a site. So thank weston and share 10, we've transition most of the west and now the Sheraton. It you know cause we still have inventory in the Sheraton flex product is still.
Selling the old product. It gets you into a bound it's just not selling the new Marriott vacation a bound products. So we.
We knew there would be some ported part of the transition in there could you know be bumpiness part of it is there's really two things that need to happen one [laughter] those owners, who you know bought the west and flax or the legacy west and wheat products. That's what they bought they bought for a certain reason and that was that product fit their traveling needs now we're in.
Producing to them, a new product right that they can enhance their traveling needs but might be.
What we think is a better product might not be a better product or they need to experience. So we can we can try and educate them. We send them a lot of information online and information, but really the best chances when people come in and they Wanna take a tour and understand it so that part part of the education process. The second piece is people actually using the product and that's.
I talked about in my comments, you know by the time, we launched it this year very few people you know people that elected to use their vacation you know like they always had for twenty-three now you know you are seeing about three three and a half times more people. This year for twenty-four elect into the a bound program from the legacy Weston and Sheraton so use the <unk>.
<unk> you you know better educate yourselves on that and then the other piece right like we've always talked about it is it is a different sales pitch pets right. They were sold the western product a certain way based on what that product was in the offering it now that sales team and and we do all the training and then we retrain and you know, but there is a bit of Gary.
The sales team experience and confidence I wanted the new products. So.
We we attempted to do all the things that we could less than you know what that you know disruption could be in terms of you know lower V. P. G things like that and you know it was probably a little bit more than we expected now the good news like I talked about as you're starting to see the rebound here and the third in the third quarter.
And yeah, while we're not all the way back to pre about launch on V. P. Geez, we're getting pretty close right on an overall basis. So it looks good you know our V. P. G. Sarah in October we're basically flat to last year, which was you know probably argue with a little tougher compton than we've seen year over year right.
So the the trends today, all look look very positive and I you know, but it's it's gonna continue to help to get those legacy standup owners actually use the abound program and that happens with a little bit of time.
Perfect. Thank you very much.
Uh-huh.
As a reminder.
Please press star one on your turf.
Our next question comes to mind.
Please proceed with your question.
Hi, Thanks for taking my question I, just wanted to get kind of your view on the attractiveness of Maui longer term do you still find it to be an attractive market I know, it's got to be kind of different dynamics with the labor market and and the majority of the economy being driven by tourism and you know you have lahaina that was significantly.
Impacted so it's a lot different than what you might see in a kind of a Florida hurricanes scenario. So just wondering you know how you think about that market longer term and if your opening of.
Waikiki property next year has any sort of effect on that thank you.
Yep No. We're we're still very bullish longterm on Maui, obviously, what happened and lineup very tragic tragic, but you know it's your point in terms of the overall island versus a hurricane for example that could come through and and really do a lot more damage more broadly to an.
The island's infrastructure like we see with some of the hurricanes in the Caribbean. It is a bit bit isolated you know as I talked about yeah. We've seen our occupancies come back you know for October we probably ran in our in our five resorts there in west Maui on the vacation ownership side, you know called about a 60% occupancy, which you know given that.
They just kind of reopened so you're seeing the owner demand we expect that to build going forward you know our resort operations as you know.
A couple a couple of percentage points down on being fully staff right now, but we're we're working through some of that.
I think for US I I do think you're gonna see Occupancies, you know like I like I talked about my remarks early next year, Yeah, I remember, we typically at B O resorts in Maui run in 90 596 per cent occupancy. So I do expect as we get through this year and early next we're probably gonna see that where.
And and Jason touched on it in his comments you know we got a look at our marketing and sales staff. We have we have seen some people there potentially you know leave the island I'm not sure if they'll come back as we ramp back up sales yourself, we gotta rebuild the marketing and sales seem a little bit here about you know, we we got a little bit of time in the team's working hard to.
Do that so that's the impact I think we'll get back to all the previous numbers and then then some going forward I I haven't heard or seen anything that gives me any pause at that now he won't go back and you know if you know Waikiki I'm in Hawaii in General you know we are this year a little bit here since the Maui not.
Surprisingly, you're you're seeing some pick up and the other islands, just because people have traded out to go into Maui, maybe to go to some of the islands here in the fourth quarter. So we're excited about that launch it's our first Ah Ah sales center in Waikiki, and and obviously it gives us a flag on the map in Waikiki, which we don't have we were out in choline up.
Ottawa, who they are so we're we're super excited for that property open up and and really believe long term and the and the demand for people to travel to Hawaii overall.
Great. Thank you and and just wondering on on your kind of forecast for impact and the four Q, if if that kind of builds in any sort of unknown unknowns or if you if you feel fairly comfortable and forecasting the impact there. Thanks.
When you say unknown unknown I'm not sure exactly what that means but.
It's it's you know based on what we know today, obviously Bali Ah Yeah. We we've talked here about sales reserves and and you know the fact that this reserve. We took here we feel gets us adequate for the reserved going forward based on you know everything we're saying in the numbers today, yeah, and as I talked about I mean, we're off to a <unk>.
Start here at October terms of Contra.
Contract sales you know if if you just for the Maui impact in October would be up your over here right. So the the trends continue pretty good but yeah, we're hoping to continue to make progress on the rental side, which has been a bit of thrown in those side. This year in terms of just our expectations on right in occupied C. So [noise].
You know the setup heroes, we go into November and December you know people Wanna travel I, just you know I I I don't Wanna, you know notwithstanding you know some of the broader macro we we are seeing great demand you know what's on our books for the first half of the year for a resort Occupancies is higher than this time last year.
Right. So that that's the key 85 per cent of ourselves come from you know people stand out our property. So all that bodes well and you know we do see improvements you know went to a small extent you know our exchange business. You know yeah. We're seeing good sequential terms of you know tightening in exchange transactions and we.
Spect that hopefully as we go you know not as you go through the fourth quarter into next year continue to build and get growth going forward on our exchange business. So we were optimistic about the outlook here you know notwithstanding some of the broader macro.
Thank you may remember him and that concludes our question and answer session I'll turn off my back.
Yeah.
Thank you everyone for joining our call today despite.
Despite the mixed accurate economic environment, we ran 90% resort occupancy in the third quarter, Excluding valley and we have more reservations on our books for the first half of next year.
Then we had at the same time, a year ago illustrating our customers desire to go on vacation, we're making good progress educating consumers about the benefits of a bound Wow salespeople are getting more experience selling it that was evident this quarter, where b P. G. At a shell centers I'd have transitioned increase more than 15 per.
<unk> sequentially and the enhancements we've made to our core product offerings will provide growth for years to come or international business continues to be a bright spot.
Sales growing more than 40% year over year, we expect to generate around $450 million and adjusted free cash flow. This year and have already returned nearly 330 million to shareholders, we've announced to new development projects. This year Savannah, Georgia in Charleston, South Carolina, each of which.
Will provide us with a new sales center went open.
And we're looking forward to opening our new walkie-talkie resort late next year, which will also come with a new sales center.
On behalf of our associates owners members and customers around the World I Wanna. Thank you for your continued interest in our company and hope to see you soon on vacation.
Thank you.
Thank you both can Christmas conference call email.
Thank you for your participation.