Q4 2024 Travel + Leisure Co Earnings Call
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Speaker Change: Greetings and welcome to the TNL fourth quarter 2024 earnings call.
Speaker Change: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Hug, the CFO. Thank you. You may begin.
Speaker Change: Thank you, Shamali, and good morning to everyone. Before we begin, we would like to remind you that our discussion today will include four looking statements.
Speaker Change: Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements.
Speaker Change: The factors that could cause actual results to differ are discussed in our SEC filings and in our earnings press release accompanying this earnings call.
Speaker Change: And you can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our website at TravelandLeisureco.com slash investors.
Speaker Change: This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our fourth quarter and full year results and outlook. And I will then provide greater detail on the quarter, our balance sheet and outlook for 2025.
Speaker Change: Following our prepared remarks, we will open up the call for questions.
Speaker Change: With that, I'm pleased to turn the call over to Michael Brown.
Michael Brown: For 2024, we delivered $929 million of adjusted EBITDA. Our vacation ownership business fueled our 2024 success, led by tour growth of 8%.
Speaker Change: We also saw growth return to travel and membership with adjusted EBITDA up 2%.
Speaker Change: Our integration of a core vacation club from a people, process, and performance standard all exceeded our year one expectations.
Speaker Change: For 2024, the foundation of our Vacation Ownership Plan was to deliver tour growth to achieve top-line sales.
Speaker Change: Our Vacation Club sales for 2024 were within the expected range.
Speaker Change: TOR has led the way with 8% growth, offsetting an expected mixed-driven BPG reduction of 1%.
Speaker Change: The overall result was 7% growth in enterprise-wide gross vacation ownership sales.
Speaker Change: The continued VPG performance drives strong, adjusted, even margins and reflects a product offering with a solid value proposition backed by a world-class sales and marketing organization.
Speaker Change: Aligned with our plans, new order transactions increased in 2024 to 35%, a 185 basis point increase from 2023.
Speaker Change: We expect our new owner transaction mix to be in the range of 35 to 37 percent in 2025.
Speaker Change: As we focus on VOI new owner sales growth, we're excited about our partnership pipeline.
Speaker Change: We signed several national and regional partnerships in 2024, which included Allegiant Airlines and Life Nation.
Speaker Change: We will be focused on ensuring those partnerships come to life as we progress throughout the year. We will continue to push on our existing Blue Thread marketing channels as they begin to mature, while also looking to find incremental Blue Thread opportunities.
Speaker Change: We saw consistent demand at our resorts from owners, guests, and rentals. Overall occupancy remained strong, and owner satisfaction rates stayed consistent in 2024 from prior year.
Speaker Change: Late in 2024, we launched the new Club Window Map, making it far easier for our owners to search and book their next vacation.
Speaker Change: Thus far in 2025, there have been approximately 40,000 downloads and we are seeing more than 80% positive reviews highlighting a strong user experience.
Speaker Change: Early indicators show increased user engagement with a 30% higher booking conversion rate than that of the owner website.
Speaker Change: This year, we will completely revamp the Worldmark by Wyndham website and launch a new Worldmark app.
Speaker Change: This is one of our greatest opportunities to further increase the satisfaction of our second largest club member base, which has consistently had the highest satisfaction rates in our system.
Speaker Change: All in all, our core Wyndham Vacation Ownership business remains strong, with a clear path for growth in 2025 and beyond.
Speaker Change: Turning to Accor Vacation Club, AVC contributed six million dollars adjusted EBITDA on an expectation of three to five million dollars. This is a great start to the relationship with Accor Hotels and a reflection of the hard work by the team to integrate and strengthen the business post-closing.
Speaker Change: The success of 2024 allows us to be increasingly confident in our ability to capture the opportunities for continued financial growth, along with an increase in new sales locations.
Speaker Change: As an update on Sports Illustrated, we continue to make progress with the physical launching of this brand. There remains great interest for additional locations, and we anticipate several announcements this year and plan to begin sales for Sports Illustrated in 2025.
Speaker Change: Turning to travel and membership, I'm very proud of our travel and membership team and the progress they have made this past year. We achieved growth within our adjusted EBITDA range of flat to 2%.
Speaker Change: Specific to the exchange business, the structural headwinds did not abate. Further consolidation continued, and the migration from external to internal exchanges put continued pressure on the exchange business.
Speaker Change: Those headwinds were offset with the growth in our travel club business and a very tight management of cost. Again, our team at Traveler Membership was very aligned and decisive in achieving this target.
Speaker Change: Capital Allocation was once again a highlight in 2024. We paid a $2 per share dividend for the year and repurchased 7% of outstanding shares.
Speaker Change: As of December 31st, 2024, we had repurchased 38% of our shares outstanding at the spin.
Speaker Change: We also remain disciplined in our allocation of free cash flow toward inventory spend and capital investments. Our inventory spend remained at less than half of annual pre-COVID levels, and our capital investments remained stable at approximately $100 million per year.
Speaker Change: Let me now share our strategic direction for the upcoming year.
Speaker Change: We will continue to execute against our core timeshare and travel and membership business plans, which we expect to deliver mid single digit adjusted EBITDA growth and allow us to generate significant adjusted free cash flow.
Speaker Change: We will continue to execute against our disciplined capital allocation strategy and expect to return capital to shareholders through share repurchases and an increased dividend while continuing to evaluate potential strategic transactions.
Speaker Change: We will capitalize on our 2024 ACORE Vacation Club successes and expect to continue to grow sales and adjust it even for that business.
We also plan to launch Sports Illustrated sales this year.
Speaker Change: I will hand it over to Mike to further elaborate on both 2024 results and 2025 Outlook. Mike.
Thanks, Michael.
Speaker Change: As well as discussing our fourth quarter results, I will provide more color on our balance sheet, cash flow, and outlook for 2025.
Speaker Change: All of my comments will refer to comparisons to the same period of the prior year, unless specifically stated.
Speaker Change: We reported fourth quarter adjusted EBITDA of $252 million, an increase of 5%, and adjusted diluted earnings per share of $1.72.
Speaker Change: For the full year, adjusted EBITDA was $929 million and adjusted EPS was $5.75.
Speaker Change: Our full year EBITDA performance was solid despite significantly higher interest rate and variable compensation headwinds of $37 million in total.
Speaker Change: During 2024, we continue to drive strong adjusted EBITDA margins across our businesses with full year adjusted EBITDA margin at 24%.
Speaker Change: Looking at the fourth quarter performance of our two business units.
Speaker Change: Vacation ownership reports segment revenue of 813 million dollars with adjusted EBITDA increasing 7% to 222 million dollars.
Speaker Change: We delivered 175,000 tours in the fourth quarter, growth of 2%, and VPG was $3,284, above the high end of expectations.
Speaker Change: In regard to the portfolio, as we talked about at the end of the second quarter of 2024, we saw delinquencies higher at the end of Q1 and Q2 as compared to historical levels.
Speaker Change: Throughout the second half of the year, we saw the gap to SPROCO levels tighten slightly, and our provision for the full year ended right at our second quarter full year guidance of 20 percent.
For 2025, we're expecting the provision to remain around 20%.
Speaker Change: Revenue in our travel membership segment was $157 million in the quarter compared to $158 million in the fourth quarter of the prior year.
Speaker Change: Adjusted EBITDA was $52 million, flat compared to the fourth quarter of 2023.
Speaker Change: As expected, exchange transactions were down 5%, reflecting the continued mixed shift of clubs whose members have a lower propensity to exchange.
Speaker Change: But this was offset by Travel Club transactions, which increased 9%, and also saw an increase of 6% in revenue per transaction.
Speaker Change: Moving to our balance sheet, our financial position remains strong. And in the fourth quarter, we continue to return capital to shareholders through sharing purchases and our quarterly dividends at 50 cents per share.
Speaker Change: For the full year, we repurchased $235 million of stock and paid dividends totaling $142 million for total capital return to shareholders of $377 million.
Speaker Change: We also invested approximately $50 million, inclusive of inventory, for the acquisition of the Accord Vacation Club.
Speaker Change: As you saw in the press release, we completed two important transactions in the fourth quarter. We closed our third timeshare receivable financing of the year. A $325 million term securitization in October with a 98% advance rate.
Speaker Change: Also, in December, we executed an $875 million secured loan facility, which was primarily used to refinance the $282 million term loan due in May 2025 and reprice our 2029 term loan.
Speaker Change: The combination of which we expect to save approximately $5 million in annual interest expense.
Speaker Change: Adjusted pre-cash flow was $446 million for the year, resulting in a 48% adjusted EBITDA to pre-cash flow conversion.
Speaker Change: And we ended 2024 with our net corporate leverage ratio for covenant purposes at 3.3 times.
Speaker Change: Remember, our goal is to end the year below 3.4 times leveraged.
Speaker Change: Overall, our capital allocation for the year was right in line with what we anticipated when looking at our share repurchases, quarterly dividends, business acquisitions, and year-end leverage.
Speaker Change: Now let me provide some more detail about our expectations for the full year and first quarter of 2025.
Speaker Change: For the full year, we are providing a guidance range of $955 to $985 million for adjusted EBITDA.
Speaker Change: We expect gross VOI sales in the range of $2.4 to $2.5 billion, with DPGs in the range of $3,050 to $3,150.
Speaker Change: For travel membership, we expect Adjusted EBITDA to be flat to up 2% in 2025.
Speaker Change: For the full year, we expect an effective income tax rate of 28 to 30 percent.
Speaker Change: The rate is above what you might have otherwise been expecting due to the impact of Pillar 2.
Speaker Change: Adjusted pre-cash flow conversion for 2025 is expected to be in excess of 50%.
Speaker Change: It's also possible that during 2025 you will hear us discuss the impact of foreign exchange and our results more than you have in the past due to potential volatility in the dollar.
Speaker Change: During the first quarter, we expected adjusted EBITDA in the range of $195 to $205 million, with first quarter VOI sales of $495 to $515 million.
Speaker Change: VPGs of $3,150 to $3,250 and a tax rate ranging from 29% to 31%.
Speaker Change: As we continue to deliver on our strong and consistent return of capital to shareholders, we intend to recommend to our board a first quarter 2025 dividend of 56 cents per share, a 12% increase over our fourth quarter dividend.
Speaker Change: In closing, 2024 was another year of strong and consistent performance by the team at Travel and Leisure. We take great pride in our performance, and our 2025 guidance reflects the continued confidence we have in our business.
Speaker Change: With that, Shamali, can you please open up the call to take questions?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.
Speaker Change: For participants using secure equipment, it may be necessary to pick up the handset before pressing the star key.
One moment, please, while we poll for questions.
Speaker Change: And our first question comes from the line of Danny Assad with Bank of America. Please proceed with your question.
Danny Assad: Thank you. Good morning, everybody. It seems like VPG in the quarter came in ahead of your outlook and tours were a little bit below. So we just unpack, you know, what drove that and, and can kind of throw some some numbers around around explaining that the difference.
Danny Assad: Good morning, Danny. This is Mike Brown. Let me just try to cover 24 and 25 together while hitting Q4.
Danny Assad: Super proud of the team on 8% growth for 2024 for the full year.
Danny Assad: We really benefited in the first half of the year from the investments we had been making over the prior years on new owner torch generation.
Danny Assad: As we got to the mid-year point, I think we called out on our Q3 call we had some softness in the Las Vegas market.
Danny Assad: We did start to look at lower performing marketing channels and call some of them out.
Danny Assad: That had an impact late in Q4, as well as what we'd expect in the first part of this year. But the culling of low-performing channels, plus the addition that we called out on our partner marketing efforts,
Danny Assad: and the regeneration of regional marketing efforts for the summertime means the cadence this year will be
Danny Assad: Lower in the first half of the year against tougher comps the first half of last year and then you'll see a very steady ramp up as the year progresses on a year-on-year growth basis.
Danny Assad: All in all, just come back to where we stand for 2025. We have a lot of confidence in that mid-single-digit tour growth level for the full year.
Speaker Change: Maybe this question is for Mike, but the VPG, okay, so understood there was, you know, a little bit of culling going on.
Danny Assad: would VPG have still been up? Like we're trying to quantify of that, you know, like relative to your expectations, how much of that was from culling and how much of that is underlying strength and either pricing or closed rates or whatnot.
Danny Assad: So 3284 in the fourth quarter was a great quarter. Were we aided by some mixed adjustment, meaning heavier toward owner BPG?
Absolutely.
Danny Assad: But when you were to strip that out, you'd still be above $3,000. And we have consistently been above that $3,000 mark.
Danny Assad: Over the last four years and that is a level that is really powerful for our business model
Danny Assad: So, yes, it was one of the advantages of us getting, you know, sort of 37-38% new owner mix earlier in the year. It allows you to be more strategic in the fourth quarter to, A,
Danny Assad: address lower performing channels and to maximize your EBITDA and margins as you head into the next year. So.
It was a great quarter
Danny Assad: Aided by mixed adjustment, but even if you equalize there, you're still going to have a really strong VPG for Q4. Most of that VPG was price related or transaction related as opposed to close rates, which remain pretty consistent year on year.
Understood. Thank you very much.
Thanks, Danny.
Thank you.
Speaker Change: Our next question comes from the line of Chris Waronka with Deutsche Bank, please proceed with your question.
Hey, good morning guys. Congratulations on a very solid year.
Speaker Change: Was hoping maybe we could talk about propensity to finance and if you're seeing any kind of change in trend there, especially as you mentioned that you're getting a slightly higher mix of new first-time owners. So is there anything to any kind of trends we are seeing on the financing side? Thanks.
Mike Hug: Good morning, Chris. This is Mike Hug. Thanks for the question.
Speaker Change: We really haven't seen any changes as far as the propensity to finance other than
Mike Hug: when we make a decision to, you know, encourage more or less financing. So in terms of the consumer, we're seeing
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Mike Hug: at the table to close the sale. I think the consumers we're seeing remain strong, you see it in BPG, and I would say you see it in terms of, you know, our ability to generate good quality tour flow and have a really nice buy show on the loans we do originate.
Speaker Change: Okay, thanks. Thanks, Mike. And just as a follow up, and might be for Michael. So travel clubs and memberships, you know, you've done exactly what you said there in terms of, you've run that thing for cash. You know, you've taken you've been very disciplined on costs. So I guess looking forward is, you know,
Speaker Change: How much? Is there any thought to doing something transformative there? Or do you think, hey, there's enough, there's enough small things in the pipeline to make a difference and just kind of keep growing that at a modest clip?
Speaker Change: Holistically, when you look at how we are currently transforming this business.
We recognize the structural headwinds on the exchange business.
Speaker Change: continue to evolve the way that businesses run effectively. And at the same time, over the last three years, we've launched a new travel club business, which is a business outside of timeshare.
Speaker Change: This evolution, although initially didn't go to the quantum that we expected, has been a consistent grower for us over these last few years. And the way we're looking at it, Chris, is...
This travel and membership group is now
Speaker Change: holistically growing its transactions, albeit those transactions come at different margins. So something very important happened in the fourth quarter.
Speaker Change: We actually grew year on year for that total travel membership business transaction wise.
Speaker Change: And we expect that to accelerate in 2025. So our first priority, getting to your question with that background, is we want to continue to grow this business organically because we believe it has the ability to grow organically.
Although with the evolution I just mentioned.
But like with everything else.
Decation Ownership and Traveling Membership.
Speaker Change: We won't do that with blinders on. We'll always look at opportunities if they're out there, but we're very happy with our VO business. We're very happy with the direction of our travel and membership business, but that won't prevent us from always looking at better ways to return capital and to grow our business at a faster rate.
Okay, very good. Thanks, Michael.
Thank you, Chris.
Speaker Change: Thank you. Our next question comes from the line of David Katz with Jeffries. Please proceed with your question.
David Katz: Morning everybody. Thanks for taking my question. Congrats on your quarter.
Speaker Change: What I wanted to do was in a sort of higher level, just get your perspectives on, you know, consumer receptivity and strength.
Speaker Change: Right, there's just so much inconsistency across like all of our coverage and the consumer landscape in the economy You know in the past and and frankly the outlooks going forward. I'd love to have your perspective on it and what you're seeing
Speaker Change: And there's really been four data points that I've consistently communicated. On a macro level, we always look at the consumer sentiment study that comes out of the University of Michigan, which has remained.
Speaker Change: Consistent here in the first part of the year, which is just a macro view in general. Then we get into our business and the leading indicator for us that we get to measure every day is that volume per guest.
Speaker Change: And that volume per guest has been incredibly consistent for us over the past few years.
Speaker Change: elevated from what we originally anticipated. And that's an affirmation every single day of people not only appreciating that the product offering is showing value in this inflationary environment.
but also that their usage of it remains.
Speaker Change: Their vacation choice and and I know we consistently share this
For our product value, consumer acceptance and usability remains.
Speaker Change: super high at the moment. We also talk about forward bookings. There's a lot of consistency year on year. We are just a tad behind where we were at the same time last year on forward bookings.
Speaker Change: But yeah, we're only 45 days into the year. So for me that doesn't indicate very much other than
Speaker Change: You know, we've got a little bit of ground to make up to be flat to last year, given that our owner base has been relatively consistent as well. So those, those first three, the macro sentiment, our BPG, which is super strong.
Speaker Change: Our forward bookings remain very consistent, and then the last measure we consistently discuss is delinquencies, and I'll hand that over to Mike related to the portfolio.
Mike: Good morning, David. And as it relates to the portfolio, really two things. And I'll refer back to the question that Chris asked. At the sales table, we aren't seeing our consumers need more financing than they historically have in order to close the sales transaction.
Speaker Change: That's a good sign to me in terms of still seeing a good quality consumer that has the capacity to purchase at the same level that they always have. And then when you look at actual delinquencies, as I mentioned in my comments,
Speaker Change: We saw the highest gap between historical delinquencies and 2,000.4 delinquencies in the second quarter.
Speaker Change: We saw that gap close a little bit in Q3 and a little bit in Q4, so when we look at kind of how the portfolio has progressed, while delinquencies are still elevated,
Michael Brown: compared to historical levels are actually in better shape at the end of the year than they were at the end of Q2. So overall, you know, the portfolio continues to perform well, which, as Michael mentioned, is one of the things that we look at as an indicator of the strength of the consumer that is at the sales level and that owns our product.
Speaker Change: Super helpful and if I can just follow up quickly on the loan loss provision. I know we probably spend it it's a it's a metric that gets more than its fair share of time.
Speaker Change: But, you know, you've given kind of an updated guide of inside of
Speaker Change: Inside of 20, inside of 19. And I just want to get a sense for, you know, do you have kind of an aspirational level one day that you'd like to dial it into? Or do you think this is approximately the, you know, that we've arrived at the aspirational level?
Speaker Change: Well, I think longer term, we would like to be in the 18 to 19% provision range. Keep in mind, while people, when they look at the provision, they usually think about as far as the level of defaults and delinquencies and things like that.
Speaker Change: for every incremental dollar that we finance, there's an incremental provision impact, right. So
Speaker Change: You know, we love the earnings we get off the portfolio. It's a great portfolio. So
Speaker Change: You know, when we do that, see that provision start to come down in the future, once again, guidance for 2025 is 20%. But in the future, when we see it start to come down, you know, we might make the conscious decision to ask for less cash at the table.
Speaker Change: to get that portfolio, you know, growing at a greater rate, and to get the higher net interest income. So I think in my mind,
Speaker Change: While it's important to look at as a percentage of revenues, it's just as important to look at.
Speaker Change: What's driving that? And it could be just once again, decisions we make to increase the financing. So we get that great spread. But look, long term, 18 to 19%. And we'll start to see it come down when we see the
Delinquencies get back closer to historical levels.
Perfect, thanks very much. Sure, thank you. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Patrick Scholes with Trulia Securities. Please proceed with your question.
Good morning, everyone. Thank you.
Good morning. Good morning.
Speaker Change: Good morning. A question for Mike. Mike, given where your most recent securitization was priced and where you see rates today and your expectations going forward,
Speaker Change: Where do you see the current interest rate environment being either headwind, tailwind, or neutral or thereabouts for this year? Thank you.
Speaker Change: Yeah, so look, it's a great question. That's probably one of the things since the election that has changed in a way that potentially negatively impacts the business. You know, you look at the benchmarks actually up 20 bits since October 31st. So
Speaker Change: I would say when we talked back in October on the third quarter call, we expected that by the end of 2025, the interest expense on the
Speaker Change: ABS transaction from a rate perspective would start to be a positive. It looks like now, probably closer to flat for the year, maybe a little bit of a headwind. I think that the bigger impact is really when we look at 2026 and forward.
Speaker Change: When the assumption for maybe a little more aggressive as far as what interest rates were going to do so, you know, a minor impact in 25 probably doesn't become a tailwind at the end of the year, like we thought, probably closer to a flat for the full year, maybe a slight headwind, but we'll see what happens over the next eight or nine months and really how that impacts the longer term plan in 26 and forward.
Speaker Change: Okay, sorry, for me, to quantify that maybe, is it fair to think maybe a one or one, maybe two point headwind to at least that.
Speaker Change: Yeah, you're probably talking, I mean, you're probably talking, you know, six, six million in interest expense for the year.
And a question for Michael.
You're cutting out on us, Patrick.
Speaker Change: Patrick, if you're asking your question, we can't hear it at the moment. Thank you.
Speaker Change: Patrick, we didn't hear the question. Could you repeat it please?
Patrick, could you repeat the question, please?
I'm sorry, I think my phone is breaking up.
Yeah.
Hold this.
Can you hear me? We can go ahead. Okay.
Speaker Change: Michael, is it realistic to think, regarding Sports Illustrated, we might hear announcements this year of its...
So, just to recap, we heard
Speaker Change: We only heard Sports Illustrated announcements this year, so I'm going to assume what the question was is, our pipeline for additional Sports Illustrated remains robust. We do expect to make...
Speaker Change: Announcements this year and just to provide a bit more insight is is given the real estate markets these days we we have been pursuing more closely conversion opportunities which
Speaker Change: gives us probably a shorter path toward starting sales. And it gives us that's what gives us the confidence that between our existing location and opportunities that we anticipate announcing that we can get into sales in 2025.
Okay, thank you.
Thank you, Patrick.
Thank you.
Speaker Change: Our next question comes in the line of Lizzie Dove with Goldman Sachs Asset Management. Please proceed with your question.
Lizzie Dove: Hi there, thanks for taking the question. I just wanted to go back to VPG. I think your guidance implies that 1Q is the high point and then reasonable deceleration.
Speaker Change: Q1 tends to be our highest owner quarter, which is going to naturally drive a higher VPG on the total basis.
Speaker Change: As we move through the year, and it's important, I think, to come back to Danny's question on our cadence throughout the year on tour flow, we do expect our tour flow to accelerate as we move throughout the year.
Speaker Change: Both of those are going to drive a primarily a mixed adjusted D cell in the middle of the year to get to our full year guided so
Speaker Change: We do like the setup, but that's the cadence that we we anticipate the year that the summer will
Speaker Change: benefit from additional new owner channels coming into play along with the normal seasonal guidance to bring our our VPG down from what we'd anticipate in Q1.
Speaker Change: Got it. That makes sense. Super helpful. And then just going back to Sports Illustrated again, understand that we should expect some announcements that you said you're going to start sales in 2025. Any kind of color of how meaningful that can be for this year? I think you've given some numbers in the past around kind of the size of that business eventually. Any other kind of details that you can share there?
Speaker Change: I would equate Sports Illustrated to a core last year. The first year that we're in operation, it's about getting a sense for what can you learn in year one. The numbers will not be meaningful to this year, and they'll start to be.
Speaker Change: noticeable next year, but I'm not even sure I would say meaningful next year. This is about getting the product right. This is about
Speaker Change: Making sure that there's good customer acceptance to it and then doing any minor modifications to the physical product or the usage.
Speaker Change: Model. And that's why getting into sales is important. You just for any new brand, you get a sense of what the market wants and and then adjust off of it from your future projects.
Speaker Change: So that's our objective this year, is to get into sales and start to get consumer acceptance in the individual markets we'll be in.
I appreciate it. Thanks. Thanks, Lizzie.
Thank you.
Speaker Change: Our next question comes from the line of Stephen Grambling with Morgan Stanley. Please proceed with your question.
Stephen Grambling: Hey, thank you. I may have missed this on the intro comments, but I was curious where net owner growth kind of ended for the year and and how you're thinking about owner growth.
Speaker Change: In the year ahead, as we think about, you know, both balancing new and selling to existing, but where that ultimately shake out.
Speaker Change: So, in total, our owner growth, or we had minimal owner growth in 2024. Most of that came from our core vacation club acquisition.
We are, there's two aspects of the, the Wyndham businesses.
We are consistently trading.
Speaker Change: two types of owners, highly satisfied owners that have been with us for 30, 40, 50 years, but for whatever reason, are time to exit their ownership. What we're
Speaker Change: What we're focused on is replacing those owners in that 35 to 40 percent of our transaction mix with new owners.
Speaker Change: And there's a reason we want that 35 to 40% to be our sweet spot, because
Those new owners were bringing into the equation.
Speaker Change: have a greater lifetime value, obviously, than an owner who's enjoyed vacations over...
you know.
Speaker Change: a decade, two, maybe even three, that we want them to stay, but just naturally, there's a time and a place to exit their ownership.
Speaker Change: So, we are in a replacement mode at the moment, but it's one of the reasons that we are consistently talking about getting above 35% on a transaction mix, which we've done, for me, about a year ahead of our schedule coming out of the pandemic, and we will continue to have our foot on the pedal.
Speaker Change: for growing our new owner base above 35% for this simple reason of we want to get back to net owner growth holistically and with that a greater revenue per owner of the owner base that we do have.
And I guess a related follow-up on this is
Speaker Change: Maybe an evolving question, but how are the new owners that you're getting in comparing to
Michael Brown, Unknown Executive
Speaker Change: There was a point where we hadn't looked at the upgrade.
Speaker Change: cadence in some time, we were consistently speaking about for every dollar purchase, you get $2 and 60.
VO purchase over the first 10 years.
Speaker Change: We went back and took a look, took a look at that recently and it's been super consistent.
Speaker Change: I think that just speaks to the consistency of our vacation ownership model.
Speaker Change: And it's really allowing us to focus on how do we activate the consumer experience more, how to get more people on vacation, and things that are going to drive an already high satisfaction even higher.
Speaker Change: Simple answer your question. It's it's remained incredibly consistent over the past five years
Great, thank you.
Speaker Change: Thank you. Our next question comes from the line of Ben Chaikin with Yuzu Oak Securities. Please proceed with your question.
Speaker Change: Hey, good morning. Thanks for taking my question. Within Veo, just curious on your cost of product.
Speaker Change: in the quarter was particularly low. Just curious if there's anything notable you're seeing in the inventory balance, or just just it's just normal quarter to quarter fluctuation and then one quick follow up. Thanks.
Speaker Change: Yeah, so it's just normal quarter-to-quarter fluctuation as you know with the way we sell the product is kind of off first in first out basis, so really nothing unusual there as far as You know any particular thing driving it you can just have the fluctuations
Speaker Change: Within the quarter as it relates to what inventories being sold. So nothing significant there
Got it. And then switching to travel and membership.
Speaker Change: I think this was referenced earlier in the call, but basically this is your first revenue growth in about 18 months, if what I'm looking at is correct, driven by non-exchange.
Speaker Change: Maybe we can just touch upon what you're seeing. Is it simply easier comparisons or trends inflected a little bit? And then is the growth that you're seeing, again, on the non exchange side, simple? Is it mining the existing customer base?
Speaker Change: a little better? And then how do you think about sourcing and adding incremental customers to that B2B business? Thanks.
Speaker Change: With the size of that business, I do want to remind everyone, you know, 1% movement and even as 2.5 million. So, you know, flat to 2% is a pretty tight range for that business.
On the revenue side, we took a step back and
Speaker Change: put a lot more energy into our existing travel clubs to make sure that we are maximizing the clubs that had already shown commitment to us in the form of using it and then growing that.
level of revenue per affiliate.
Speaker Change: pragmatically grow the clubs, not 10 at a time or 20 at a time, but two to three at a time to make sure that every new club we're bringing in is efficiently growing and intelligently growing so that
Speaker Change: It is a it is a consistent direction is we're in the process of growing the entire traveler membership transaction number. We think we will grow it in the full year of 2025. And from that,
Speaker Change: It's watching the margins, watching our costs and trying to triangulate.
Speaker Change: the headwinds in exchange against the growth and travel of membership and aligning our cost structure. It's a delicate balance and that's why in the prepared remarks I called out just really
Speaker Change: a disciplined form of management in 2024, and it's going to require it again in 2025. But we've got the right team, we've got the right outlook, and we'll be working hard to balance exchange, travel, clubs, and cost management in 2025.
Speaker Change: Got it helpful and then just squeezing one more in very quickly. Just a clarification. Did you already convert?
Speaker Change: The within SI, did you already convert the hotel or real estate into the SI trust, or were you saying, or are you suggesting that's what we should expect the announcement regarding? You should expect that the next real estate transaction we announce is going to be a
Speaker Change: property conversion as opposed to a ground-up development. The next announcements.
Got it. Thank you. Thanks, Ben.
Speaker Change: Thank you. Our next question comes in the line of Grant Montour with Barclays. Please proceed with your question.
Grant Montour: Good morning, everybody. Thanks for taking my question. So, Michael, you made a comment about...
Grant Montour: Board bookings this year being a tad behind last year. I'm just curious if you could if you care to flesh that out a little bit across perhaps the regions different brand levels by consumer cohort or by you know segmentation and then and then
Grant Montour: If it's owners versus package tours and non-owner tours, if that's the way you look at it, or if that was just an owner comment.
Well, first of all, it was simply an owner comment.
Grant Montour: Pretty much the same as it was last year. We just like to look at forward bookings because owner arrivals is important for many reasons. The first and foremost is
I remember the
Speaker Change: Former, when I first joined the company, the former CFO of Wyndham Hotel said,
Grant Montour: Your model is very simple. When customers use their use their product, they love it and they buy more. And we want to drive owner arrivals because
Grant Montour: They love going on vacation and they buy more. So it's a very important metric to us to focus on on our arrivals.
Grant Montour: and our team here is between the launch of the Club Window Map, between outbound campaigns over the phone, and between a significant capital investment this year in our WorldMark.
Club.
Grant Montour: It's all about that customer focus and getting them on vacation.
Grant Montour: be dedicating a lot to that club because Once we improve their website in their app. I think we're going to get even more bookings from from that satisfied owner base
Grant Montour: So that's that's really how we look at it again. It's the middle of February. So it's
Grant Montour: We monitor these things that are very important. We communicate where we stand at any point in time to you all. But make no mistake, we have a lot of efforts to get that number flat year on year, if not up on a year on year basis.
Speaker Change: Great, thanks for that. And then maybe for Mike, on loan loss provision, you know, we did spend some time on this already, but the loan loss provision increase year over year, you know, you can look at as percentage of contract sales, you can look at or VOI, you can look at it just sort of on an absolute growth, which was
Group that grew, you know faster than
Speaker Change: Yeah, the majority of it's just going to be the increase we saw in delinquencies in the first half of the year. So I would say it's
Speaker Change: credit, not in terms of what we originate, obviously, our originations are as strong as they've ever been at 744. But you've got a $3 billion portfolio, we're looking at delinquencies every month, and the kick up in delinquencies that we saw in the first half of the year is really what, you know, caused this.
Speaker Change: On our second court call to move the guidance up to 20%. So I would say it's a portfolio performance as measured by delinquencies compared to historical levels.
Okay, great. Thanks, everybody.
Sure, thank you.
Speaker Change: Thank you. We have reached the end of the question and answer session. Now I'd like to turn the floor back to CEO Michael Brown for closing remarks.
Michael Brown: Well, thank you once again for joining us today. Before we conclude, I'd like to take a moment and recognize our field team members.
Michael Brown: This past year has been especially challenging with hurricanes that devastated the East Coast, wildfires out West, a tragedy in New Orleans,
Michael Brown: which is just to name a few. In each case, I'm appreciative of the responsiveness and care our associates have shown to our owners and their fellow associates.
Michael Brown: They continue to reflect the best of who we are. Thank you to our field teams.
Mike Hug: With that, both Mike and I look forward to seeing you in upcoming conferences and eventually on the Q1 call. Have a good day.
Speaker Change: And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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