Q2 2025 Travel + Leisure Co Earnings Call
Operator: Quarter 2025 Earnings Conference Call-In Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue. If anyone should require operator assistance, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.
Greetings and welcome to the traveler Leisure second quarter 2025 earnings conference. Call webcast. At this time, all participants are listening only mode.
A question and answer session will follow the formal presentation. You may be placed into question Queue at any time by pressing star 1 on your telephone keypad. We ask you to, please ask 1 question and 1 follow-up and return to the queue.
Kevin: It's now my pleasure to introduce your host, Erik Hoag, Chief Financial Officer. Please go ahead, sir. Thank you, Kevin.
If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Eric Hulk, Chief Financial Officer, please go ahead sir.
Erik Hoag: Good morning to everyone. Before we begin, we would like to remind you that our discussion today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements. And the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings and in our press release accompanying the earnings call.
Eric Hulk: Thank you. Kevin. Good morning to everyone.
Eric Hulk: Before we begin, we would like to remind you that our discussions today will include forward-looking statements.
Eric Hulk: 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,
Eric Hulk: we undertake no obligation to publicly update, or revise these statements
Erik Hoag: You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on the Investor Relations website.
Eric Hulk: The factors that could cause actual results to differ are discussed in our SEC filings and in our press release accompanying the earnings call.
Michael Brown: This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of the second quarter results and our longer-term growth strategy.
You can find a Reconciliation of the non-gaap financial measures discussed in. Today's call in the earnings press release of available on the investor relations website.
Erik Hoag: And then I'll provide greater detail on the quarter, our balance sheet, and outlook for the rest of the year.
Erik Hoag: Following our prepared remarks, we'll open up the call for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated.
This morning, Michael Brown, our president, and chief executive officer will provide an overview of the second quarter results and our longer term growth strategy. And then I'll provide greater detail on the quarter. Our balance sheet and outlook for the rest of the year.
Eric Hulk: Following our prepared, remarks will open up the call for questions.
Michael Brown: With that, I'm pleased to turn the call over to Michael Brown. Good morning, and thanks for joining us. Travel and Leisure delivered another solid quarter of revenue and adjusted even at growth. Our strong adjusted EBITDA, or free cash flow, allowed us to return $107 million of capital to shareholders in the quarter. This performance underscores the strength of our brands, the resilience of Leisure Travel and our owner base, and the disciplined execution of our strategy. Against the dynamic macroeconomic backdrop, our teams remain focused on driving growth, managing costs, and delivering exceptional experiences to our owners, members, and guests.
Eric Hulk: Or to the same period of the prior year unless specifically stated.
Eric Hulk: With that, I'm pleased to turn the call over to Michael Brown.
Michael Brown: Good morning and thanks for joining us.
Michael Brown: Travel and Leisure delivered, another solid quarter of Revenue and adjusted Eva to growth.
Michael Brown: Our strong adjusted Eva or free cash flow allowed us to return 107 million of capital to shareholders in the quarter.
Michael Brown: This performance, underscores, the strength of Our Brands, the resilience of leisure travel, and our owner base, and the disciplined execution of our strategy.
Michael Brown: In the quarter, we generated over $1 billion in revenue, $250 million in adjusted EBITDA, and $1.65 in adjusted earnings per share, all up year over year. Our results were driven by continued strength in our vacation ownership business, which more than offset softer performance and travel and membership. We saw healthy year-over-year growth in VOI sales with gains in both tour flow and volume per guest. Notably, volume per guest of $3,251 was above the high end of our guidance range, and adjusted EBITDA margin remained consistent with the prior year at 25%. These results support the core foundation of our business.
Michael Brown: Against the dynamic macroeconomic backdrop. Our teams remain focused on driving growth managing costs and delivering exceptional experiences to our owners members and guests.
Michael Brown: In the quarter we generated over 1 billion dollars in Revenue, 250 million in adjusted Ava and 1 dollar 65 cents and adjusted earnings per share all up year-over-year.
Since we're driven by continued strength in our Vacation Ownership business which more than offset softer performance and travel a membership.
Michael Brown: We saw a healthy year-over-year growth in V sales with gains in both tour flow and volume per guest.
Michael Brown: Notably volume per guest of 3,251 was above the high end of our guidance range and adjusted IBA margin remained consistent with the prior year at 25%.
Michael Brown: a resilient customer base built around leisure travel, a compelling value proposition, and consistent returns to our shareholders. Demand remains strong across our core timeshare business. We see encouraging engagement from consumers as tour growth improved sequentially from the first quarter and 3% compared to 2024. The resilience of our platform is directly related to the quality of our customers. There's been plenty of noise around the economy, but from where we sit, our consumers are healthy and prioritizing travel. Spending on leisure travel is expected to grow mid-single digits per year over the next five years. Our business is built on recurring behavior and less so on short-term trends, making us less sensitive to the macroeconomy as we benefit from a highly visible recurring revenue base.
These results, support the core Foundation of our business.
Michael Brown: A resilient customer base, built around leisure travel and compelling value proposition, and consistent returns to our shareholders.
Michael Brown: Demand remains strong across our core time, share business.
Michael Brown: We see encouraging engagement from consumers, as tour growth. Improved sequentially from the first quarter and 3% compared to 2024
Michael Brown: The resilience of our platform is directly related to the quality of our customers.
Michael Brown: There's been plenty of noise around the economy.
Michael Brown: But from where we said, our consumers are healthy and prioritizing travel.
Michael Brown: Spending on Leisure Travel, is expected to grow, mid single digits per year, over the next 5 years.
Michael Brown: More than 75% of our revenue is tied to predictable sources like owner upgrades, financing, and management fees, which leads to a nearly $20 billion pipeline of future potential revenue over 10 years. We see our strategy play out through our bookings, sales tours, and owner engagement metrics. Our owners are traveling, supporting what we've long believed, that vacations are not discretionary, they're essential. We have seen no significant change in buyer behavior related to booking pace, BPG, and portfolio performance. Booking pace is relatively consistent to the prior year and with a 109 day average booking window, we have clear visibility into the remainder of the year.
Michael Brown: Our business is built on, recurring behavior and less. So on short-term Trends, making us less sensitive to the macroeconomy, as we benefit from a highly visible recurring Revenue base.
Michael Brown: More than 75% of our revenue is tied to predictable sources. Like owner upgrades financing and management fees which leads to a nearly 20 billion pipeline of future potential Revenue. Over 10 years.
Michael Brown: We see our strategy play out through our bookings sales, tours, and owner engagement metrics.
Michael Brown: Our owners are traveling supporting what? We've long believed that vacations are not discretionary, they're essential.
Michael Brown: We have seen no significant change in buyer, Behavior related to booking pace vpg and portfolio performance.
Michael Brown: BPG performance continues to be strong, and our portfolio remains stable. Our owners know what they are getting, they've already planned for it, and 80% of them have fully paid for their ownership. Today we serve more than 800,000 older families with an average tenure of 17 years.
Michael Brown: Booking pace is relatively consistent to the prior year and with a 109 day vote, average booking window. We have clear visibility into the remainder of the year.
Vpg performance continues to be strong and our portfolio remains stable.
Michael Brown: Our owners know what they are getting, they've already planned for it and 80% of them have fully paid for their ownership.
Michael Brown: Here are some key characteristics of our owner base. The average household income for our owners is approximately $118,000. The average FICO score of our $3 billion portfolio is above 720. Since 2020, we have seen sub-640 FICO loans decline four points as a percentage of the overall portfolio. The average FICO score of new originations is 746. This is an over 20 point increase since we updated our credit quality standard. Our owners take an average of 4 to 5 vacations annually, with more than 50% of their vacation time being utilized through their ownership. We are seeing consistent interest from younger generations, with over 65% of new buyers coming from Gen X, Millennial, and Gen Z households.
Michael Brown: Today, we serve more than 800,000 owner families with an average tenure of 17 years.
Michael Brown: Here are some key characteristics of our owner base.
Michael Brown: The average household income for our owners is approximately 118,000.
The average FICO score of our 3 billion dollar portfolio is above 700 and 720.
Michael Brown: Since 2020, we have seen sub 645 go loans declined 4 Points, as a percentage of the overall portfolio.
Michael Brown: The average FICO score of new originations is 746.
Michael Brown: This is an over 20 point increase since we updated, our credit quality standards.
Michael Brown: Our owners, take an average of 4 to 5 vacation annually, with more than 50% of their vacation time, being utilized through their ownership.
Michael Brown: Our product delivers exactly what these new owners want, flexibility, convenience, and personalized experience. During the quarter, we continue to invest in technology, marketing and product innovation to enhance the customer journey and extend our reach. Our Club Wyndham app, which offers frictionless engagement, now has 162,000 downloads and accounts for 19% of bookings. Additionally, we are preparing for the launch of our WorldMark app in Q4. We are progressing with investments in AI on our web and app channels, driving recommendations for personalized experiences and seamless booking process. During the quarter, we announced an exclusive marketing partnership with Hornblower focused on creating memorable experiences for our owners, as well as new owner to our generation.
We are seeing consistent interest from younger generations, with over 65% of new buyers, coming from Gen X, Millennial, and gen Z households.
Michael Brown: During the quarter, we continue to invest in technology marketing and product Innovation to enhance the customer journey and extend our reach.
Michael Brown: Our club Windom app, which offers frictionless engagement now has 162,000 downloads and accounts for 19% of bookings.
Michael Brown: Additionally, we are preparing for the launch of our world Mark app in Q4,
Michael Brown: We are progressing with investments in AI on our web and app channels, driving recommendations for personalized experiences and seamless booking process.
Michael Brown: Hornblower Group is an experience-based tourism leader across 22 destinations in the United States, Canada, and the UK.
Michael Brown: During the quarter, we announced an exclusive marketing partnership with Hornblower focused on creating memorable experiences for our owners as well as new owner toward generation.
Michael Brown: Hornblower group is an experience-based tourism leader. Across 22 destinations in the United States Canada and the UK.
Michael Brown: Looking ahead, we are focused on growing the core vacation ownership business, leveraging data and technology to enhance the customer experience across all platforms. We are taking targeted revenue and cost actions to mitigate the headwinds in our travel and membership segment, leaving us well-positioned to deliver sustainable growth and consistent return. Now turning to execution on our multi-brand strategy. This strategy is not just about scale, it's about customer segment. It's about both customer segment and geographic expansion. Our Club Wyndham and Worldmark Brands will continue to be the cornerstone of our vacation ownership business, along with our Blue Thread partnership with Wyndham Hotels.
Looking ahead, we are focused on growing the core Vacation Ownership business leveraging data and Technology to enhance the customer experience across all platforms.
Michael Brown: We are taking targeted revenue and cost actions to mitigate the headwinds in our traveling membership. Segment leaving us. Well, positioned to deliver sustainable growth and consistent returns.
Michael Brown: Now turning to execution on our multi-brand strategy, this strategy is not just about scale, it's about customer segments, it's about both customer segments and Geographic expansion.
Michael Brown: In June, we expanded our Margaritaville footprint with a new sales location in Nashville on Broadway and a new marketing channel on the Margaritaville cruise ship. We launched and expanded the Accor Vacation Club with the formation of a new Asia-based club. The first resort is the Novotel Nusa Dua in Indonesia. And last, and last week, we announced our newest Sports Illustrated Resort's location in Nashville, Tennessee. Located on Music Row in the heart of Midtown, just one mile from downtown, the planned resort will feature 185 units and is expected to open in the spring of 2026. These new brands will help us expand into key markets, reach new audiences, and offer experiences suited to their lifestyles.
Michael Brown: Our club Windom and Walmart brands will continue to be the Cornerstone of our Vacation Ownership business along with our blue thread partnership with Windham Hotels.
Michael Brown: In June, we expanded our Margaritaville footprint with a new sales location in Nashville on Broadway and a new marketing channel on the Margaritaville cruise ship.
Michael Brown: We launched an expanded, the aor vacation club. With the formation of a new asia-based club. The first Resort is the Novotel naduah and Indonesia.
And last and last week we announced our newest Sports Illustrated Resorts location in Nashville, Tennessee.
Michael Brown: Located on Music Row in the heart of Midtown, just 1 mile from downtown. The plan of Resort will feature 185 units and is expected to open in the spring of 2026.
Michael Brown: These new brands will help us expand into key markets, reach, new audiences and offer experiences suited to their lifestyles.
Michael Brown: Our strong free cash flow allows us to invest in the right place. Brandt, Digital, and Targeted Inventory. We are confident these investments will continue to drive value. Alongside these investments, we continue to consistently return capital to our shareholders through our Dividend and Share Repurchase Program. Since then, we have returned $2.7 billion to shareholders.
Michael Brown: Our strong free cash, flow flow allows us to invest in the right places brand, digital and targeted inventory.
Michael Brown: We are confident these investments will continue to drive value.
Michael Brown: Alongside these Investments, we continue to consistently return Capital to our shareholders, through our dividend and share repurchase program.
Michael Brown: Since spend, we have returned 2.7 billion dollars to shareholders.
Michael Brown: Before I hand it over, I'd like to take a moment to welcome Erik Hoag, our new Chief Financial Officer. Erik brings a strong background in strategy, operational finance, and capital allocation. Erik has hit the ground running since he joined the company. In his first two months, he has attended five conferences and met with 49 investors over 27 meetings. I'm confident his leadership will help us continue delivering disciplined execution and long-term value for our shareholders.
Speaker Change: Before I hand it over, I'd like to take a moment to welcome Eric hog, our new Chief Financial Officer.
Speaker Change: Eric brings a strong background and strategy, operational finance and capital allocation.
Speaker Change: Eric has hit the ground running since he joined the company.
Speaker Change: In his first 2 months is attended 5, conferences and met with 49 investors over 27 meetings.
Erik Hoag: With that, I'll hand it over to Erik to walk through our financial performance and capital allocation in more detail. Thanks, Michael, and good morning. Let me start by saying how excited I am to be part of Travel & Leisure. This is a company with a strong leadership team, a highly recognizable brand portfolio, and a resilient business model that delivers dependable cash flow and long-term value creation. In my first few months, I've been especially impressed by the financial discipline and operational focus embedded across the organization. This came through clearly in our second quarter results with strong revenue and adjusted EBIT of growth alongside robust adjusted free cash flow.
Speaker Change: I'm confident his leadership will help us, continue delivering disciplined execution, and long-term value for our shareholders with that. I'll hand it over to Eric to walk through our financial performance and capital allocation in more detail. Eric
Eric Hulk: Thanks Michael and good morning.
Speaker Change: Let me start by saying how excited I am to be part of travel and Leisure.
Speaker Change: This is a company with a strong leadership team, a highly recognizable, brand portfolio and a resilient business model that delivers Dependable, cash flow, and long-term value creation.
In my first few months, I've been especially impressed by the financial discipline and operational focused embedded across the organization.
Speaker Change: This came through clearly in our second quarter results with strong revenue and adjusted ebit to growth.
Erik Hoag: I'll walk through the quarter's key drivers and highlight how we're deploying capital to drive shareholder value. Revenue for the quarter was $1.02 billion, up 3% year-over-year, driven by strong VOI volume and VPGs that exceeded our expectation. Adjusted EBITDA was $250 million, up 2% over the prior year, and at the midpoint of our guidance range. This translates to a 4% adjusted EBITDA growth for the first half of the year. Adjusted earnings per share grew 9% in the quarter, driven by strong performance in vacation ownership and the benefit from ongoing share repurchase. Turning to the vacation ownership segment, our core growth engine.
Speaker Change: Alongside robust adjusted free, cash flow.
Speaker Change: A walk through the quarter's key drivers and highlight how we're deploying Capital to drive shareholder value.
Speaker Change: Revenue for the quarter was 1.02 billion dollars up, 3% year-over-year.
Speaker Change: By strong, voi volume and vpg that exceeded our expectation.
Adjusted ibida was 250 million up 2% over the prior year and at the midpoint of our guidance range,
Speaker Change: First half of the year.
Speaker Change: Adjusted earnings per share, grew 9% in the quarter.
Speaker Change: Driven by strong performance and Vacation Ownership and the benefit from ongoing share repurchases.
Erik Hoag: The business delivered accelerating revenue, rising tour flow, historically high VPGs. and double-digit growth in average transaction size. Revenue grew 6% to $853 million for the quarter, driven by a 3% increase in tours and VPG of $3,251, up 7% from last year. The increase in average transaction size reflects strong consumer demand, effective upsell strategies, and continued Salesforce productivity across our resorts. Adjusted EBITDA grew 6% with margin performance remaining steady, underscoring the health and the consistency of the platform. We are also making disciplined progress with our inventory pipeline, with several key resort projects underway to support future growth, while maintaining our capital light mix.
Speaker Change: Turning to the Vacation Ownership segment, our core growth engine.
Speaker Change: the business delivered accelerating Revenue, Rising tour flow historically High vpg
Speaker Change: And double-digit growth in average transaction size.
Speaker Change: Revenue grew 6% to 80053 million for the quarter driven by a 3% increase in tours and vpg of 3,251 dollars up 7% from last year.
Speaker Change: The increase in average, transaction size reflects, strong consumer demand.
Speaker Change: Effective upsell strategies and continued sales force productivity across our resorts.
Speaker Change: Adjusted Eva to grew 6% with margin performance, remaining steady underscoring. The health in the consistency of the platform
Speaker Change: We are also making disciplined progress with our inventory Pipeline with several Key Resort projects underway to support, future growth.
While maintaining our Capital light, mix.
Erik Hoag: Our loan loss provision and delinquencies were in line with expectations, and we remain on track to deliver a full year provision of 21%. credit quality remains strong in the quarter, with new origination FICO scores above 740, which reflects our consistent and disciplined underwriting approach. Our second quarter delinquency trends moderated after the uptick we noted last quarter. With no signs of material deterioration, we're confident in the portfolio's strength. Our provision has historically ranged from the high teens to the low 20s as a percentage of DUI sales, and we see potential for this to trend below 20% over time, enhancing capital efficiency and supporting durable free cash flow.
Speaker Change: Our loan loss provision and delinquencies were in line with expectations and we remain on track to deliver a full year provision of 21%.
Speaker Change: Credit quality remains strong in the quarter, with new origination FICO scores above 740, which reflects our consistent and disciplined underwriting approach.
Our second quarter delinquency Trends. Moderated after the uptick we noted last quarter
Speaker Change: With no signs of material and material deterioration. We're confident in the portfolio's strengths.
Speaker Change: Our provision has historically ranged from The High, Teens to the low 20s, as a percentage of the UI sales.
And we see potential for this to Trend below 20%. Over time, enhancing Capital efficiency and supporting durable free cash flow.
Erik Hoag: In our Travel and Membership segment, revenue was $166 million for the quarter, down 6% year over year, and adjusted EBITDA declined 11% to $55 million. The exchange business continues to face industry consolidation headwinds. Additionally, recent M&A activity disrupted transaction volumes from certain affiliates. and was not anticipated in our original guidance. While not the sole driver of the underperformance, the impact was meaningful, and we remain focused on maximizing cash flow and operational flexibility, with an emphasis on long-term shareholder value.
Speaker Change: In our travel and membership segment Revenue was 166 million for the quarter down 6% year-over-year and adjusted Eva declined. 11% to 55 million.
The Exchange business continues to face industry, consolidation, headwinds.
Speaker Change: Additionally recent m&a, activity disrupted, transaction volumes from certain affiliates.
And was not anticipated in our original guidance.
Speaker Change: While not the sole driver of the underperformance, the impact was meaningful.
Speaker Change: And we remain focused on maximizing cash flow and operational flexibility with an emphasis on long-term shareholder value.
Erik Hoag: Turning to cash generation and capital deployment. We generated $123 million in adjusted free cash flow and $353 million in operating cash flow in the first six months of the year. supported by strong sales efficiency, capital efficient sales execution, and the ongoing contribution of our consumer finance portfolio. These factors, alongside both our highly-recurring revenue mix and capital-like development strategy, drive consistent and dependable cash generation, even in a complex macroeconomic and political environment. During the quarter, we returned $107 million of our adjusted free cash flow to shareholders. $37 million through dividends and $70 million in share repurchases, retiring more than 2% of our shares outstanding in the quarter.
Speaker Change: Turning to cash generation and capital deployment.
Speaker Change: We generated 123 million in adjusted free, cash flow and 353 million in operating cash flow in the first 6 months of the year,
Speaker Change: Supported by strong sales, efficiency, Capital efficient, sales execution.
The ongoing contribution of our Consumer Finance portfolio.
Speaker Change: These factors alongside both, our highly, recurring Revenue, mix and capital light development strategy, Drive consistent and dependable cash generation.
Speaker Change: Even in a complex, macroeconomic, and political environment.
During the quarter, we returned 107 million dollars of our adjusted free cash flow to shareholders.
Speaker Change: 37 million through dividends and 70 million, in share repurchases retiring more than 2% of our shares outstanding in the quarter.
Erik Hoag: Our capital allocation strategy remains unchanged. reinvest in high return growth. maintain a resilient balance sheet, and return excess cash to shareholders, all while preserving financial flexibility. We continue to evaluate reinvestment returns vigorously, prioritizing initiatives where we see strong IRRs, capital efficiency, and clear pathways to shareholder value. Our liquidity position remains strong. We ended the quarter with over $800 million, including $212 million of cash and cash equivalents and $596 million available on our revolver. We ended the quarter at 3.4 times levered. And with normal seasonality, we expect our leverage rate to slightly increase in the third quarter and then end the year below 3.4 times.
Speaker Change: Our Capital allocation strategy remains unchanged.
Speaker Change: Reinvest in high return growth.
Speaker Change: Maintain a resilient balance sheet, and return excess cash to shareholders all while, preserve preserving Financial flexibility.
Speaker Change: We continue to evaluate reinvestment returns vigorously.
Speaker Change: Prioritizing initiatives where we see strong irrs Capital efficiency and clear Pathways to shareholder value.
Speaker Change: Our liquidity position remains strong.
Speaker Change: We ended the quarter with over 800 million dollars, including 212 million of cash and cash equivalents and 596 million available on our revolver.
We ended the quarter at 3.4 times levered.
Speaker Change: And with normal seasonality, we expect our leverage rate to slightly increase in the third quarter. And then end the year below 3.4 times.
Erik Hoag: During the quarter, we amended our $1 billion revolving credit facility with improved terms. And yesterday, we completed our second ABS transaction of the year, raising $300 million at a 98% advance rate and a 5.1% coupon, the lowest we've seen since 2022. We continue to actively manage maturities and expect to refinance the $350 million note coming due in the fourth quarter. Looking ahead, we continue to expect full-year adjusted EBITDA to be in line with our prior guidance. supported by the strength of our vacation ownership business. We expect Travel and Membership to remain challenged through the year-end.
Speaker Change: during the quarter, we amended our 1 billion dollar revolving credit facility with improved terms
Speaker Change: and yesterday, we completed our second ABS, transaction of the Year, raising dollars at a 98% Advance rate and a 5.1% coupon.
Speaker Change: The lowest we've seen since 2022.
Speaker Change: Manage maturities and expect a refinance, the 350 million Note coming due in the fourth quarter.
Speaker Change: Looking ahead, we continue to expect full year, adjusted Eva to be in line with our prior guidance.
Speaker Change: Supported by the strength of our Vacation Ownership business.
Erik Hoag: That said, we're committed to executing on our core business, launching new brands, delivering strong free cash flow, and allocating capital in ways that enhance shareholder value. For the third quarter, we expect Travel & Leisure adjusted EBITDA to be in the range of $250 to $260 million. Vacation Ownership Gross VOI sales are expected to be in the range of $650 to $680 million, with VPGs in the range of $3,200 to $3,250. For the full year, we continue to expect adjusted EBITDA to be in the range of $955 to $985 million. Gross VOI sales between $2.4 billion to $2.5 billion, and VPGs in the range of $3,200 to $3,250, an increase from our prior range of $3,050 to $3,150.
Speaker Change: We expect travel and membership to remain challenged through year end.
That said we're committed to executing on our Core. Business launching new brands, delivering strong, free cash flow and allocating capital in ways that enhance shareholder value.
Speaker Change: For the third quarter, we expect travel and Leisure adjusted IBA to be in the range of 250 to 260 million.
Speaker Change: Vacation Ownership gross, voi sales are expected to be in the range of 650 to 680 million with vpg in the range of 3,200 to 3,250.
Speaker Change: For the full year, we continue to expect adjusted ibida to be in the range of 955 to 985 million.
Speaker Change: Gross voi sales, between 2.4 billion to 2.5 billion.
and vpg is in the range of 3,200 to 3,250 an increase from our prior range of 3,050 to 3,150
Erik Hoag: Please refer to our earnings material for full details and underlying assumptions by segment.
Speaker Change: Please refer to our earnings material for full details and underlying assumptions by segment.
Erik Hoag: Thank you for your time and continued interest in Travel & Leisure.
Erik Hoag: I look forward to connecting with many of you in the weeks ahead.
Speaker Change: Thank you for your time and continued interest in travel and Leisure.
Kevin: Kevin, we can now open the line for questions. Certainly. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And as a reminder, please ask one question and one follow-up, then return to the...
Speaker Change: I look forward to connecting with many of you in the weeks ahead.
Speaker Change: Kevin we can now open the line for questions.
Chris Woronka: Our first question is coming from Chris Woronka from Deutsche Bank. Your line is now live. Hey, thanks. Good morning, everyone. Erik, welcome. We're looking forward to working with you.
Speaker Change: Certainly, we'll now be conducting a question and answer session. If you'd like, to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And as a reminder, please ask 1 question and 1 follow-up then return to the queue.
Our first question is coming from Chris w***** from Deutsche Bank. Your line is now live
Chris: Hey uh thanks. Good morning, everyone. Eric, welcome. Uh we're looking forward to working with you.
Michael Brown: So I guess, you know, Michael, maybe start with the kind of the more obvious question this corner on the travel and membership side. I know you mentioned that, you know, there's some M&A impact with partnerships, but, you know, do you feel like visibility in that segment is declining? It used to be very stable and predictable within a million bucks or so. And, you know, if so, how confident are you that you can turn this around? Or, you know, are you in some ways possibly considering something more strategic with that segment?
Speaker Change: um,
Speaker Change: So I guess you know Michael maybe start with the kind of the more obvious question this corner on the travel and membership side. I know you mentioned that you know there are some m&a impact.
With with Partnerships but you know, do you feel like visibility on that?
Speaker Change: Segment is is declining. It used to be very stable and predictable within a million bucks or so. And you know, if so, you know how confident are you that you can turn this around or you know, or you in some ways possibly, considering something more more.
Music with that with that segment thanks.
Michael Brown: Good morning Chris. Let me recap Q1, or the first half of the year, so we recognize the two components of the travel membership decline. In the organic side of the business, yes, we saw a decline as it relates to exchange transactions, a conversation we've been having on this call for several years now. That side of the business remains challenged through consolidation and the fact that the way bigger clubs are doing business has changed, and we've done a pretty significant job over the last few years stemming the tide of that. In fact, if you remember last year, we actually had growth in this segment.
Speaker Change: Uh, good, good morning, Chris. Uh, well, let me let me recap q1 or the first half of the year, so we we recognize the 2 components of the travel membership decline. Um,
Michael Brown: Over 50% of the decline in the first half of the year was based off this component of the business. The other piece, which Erik mentioned, was there was consolidation in the space, and that impacted those related to affiliates of ours, and that obviously was an unforecasted impact to the first half of this year. As we digest that and look at new alternatives on how to address and mitigate the impact of, A, that transaction, but, B, just the general trend of what's happening on external exchange transactions, there's a number of measures we continue to take. We want to grow the travel club business, which grew 7% in Q2 as far as transactions.
Speaker Change: In the organic side of the business. Yes, we we saw a decline as it relates to exchange transactions. A conversation we've been having on this call for several years now, um, that that side of the business remains challenged through consolidation and the fact that, uh, the way bigger clubs are doing business has changed, and we've done a pretty significant job over the last few years, uh, stemming the tide of that. In fact, if you remember last year, we actually had growth in this segment, um, over 50% of the decline in the first half of the year was, was based off this component of the business. The other piece, which, which Eric mentioned was, there was consolidation in the space, um,
Speaker Change: and that impacted those related to Affiliates of ours. And that obviously was an unforced impact to the first half of this year. Um,
Speaker Change: As we digest that and uh look at new alternatives on how to uh address and and and mitigate the impact of of the of a that transaction. But B Just the general trend of what's happening on Exchange.
Michael Brown: We continue to look at innovative ways to deploy our inventory and to grow revenue on that side of the equation, and then obviously we manage costs associated with where our top line goes. I think we've been very clear that we understand the structural challenges of the space, but we've been very proactive over the past few years, and we will continue to look at smart, strategic investments or alternatives to make sure that we're doing the right thing for this business and creating the objectives to get back to a growth trajectory over time.
Speaker Change: External exchange transactions. We there's a number of measures. We continue to take uh we want to grow the travel Club business which grew 7% in Q2 as far as transactions.
Speaker Change: Creating uh, you know, objective to get back to a growth trajectory over time here.
Chris Woronka: Okay, thanks. Thanks, Michael.
Michael Brown: Just as a follow-up, you know, I think you mentioned a double-digit increase in the average size of transactions in the quarter. The question on that is kind of in the context of financing and, you know, how does that play into what we think about transactions getting bigger, propensity to finance in the context of a lot of wealth effect that's being generated with the stock market and maybe other forms of real estate? Does that change the calculus at all for your, I guess, your average customer in terms of that propensity to finance or, you know, what's driving that larger transaction size?
Speaker Change: Okay, thanks, thanks, Michael. It, just as a follow-up, you know, I think you mentioned a double-digit increase in in average size of transaction, in the quarter. Um, question on that is kind of in the context.
Speaker Change: You know, how does that play into it when we think about?
Michael Brown: Well, we haven't really seen any change to our propensity to finance. Those statistics are very consistent. I think what you've seen in the first or the second quarter, and the reference was really a combination of two components. First is we continue to take measured price increases over and that results in some component of the average transaction price increasing. The other piece is, and we mentioned it a number of times in our prepared remarks related to experiences and greater owner engagement, we're starting to see, we believe, some of those elements come into play in the fact that people continue to buy more.
Speaker Change: Uh, transactions getting bigger, uh, propensity to finance in the context of a lot of wealth effect that's being generated with the, with stock market and maybe other forms of real estate. Does that change the the calculus at all for your? I guess your average customer in terms of that propensity to finance or you know, what's driving that larger? Uh, transaction size. Thanks. Well, we, we haven't really seen any change to our, uh, propensity to finance. Those statistics are very consistent. I think what you've seen in the first uh, or the second quarter and the reference was really uh, combination of 2 components. First is
um we've continued to take measured price increases over time and that that results in some component of
Michael Brown: Four to five vacations a year through their ownership with us, about 50% of their vacation time being dedicated to us at Wyndham. That means people are buying more and that's only because they're satisfied and they're enjoying their ownership. So I think it's a combination. It is a combination of price increases and people just continuing to be loyal and committed to this type of leisure travel.
The average transaction price increasing um the other piece is and and we mentioned it, a number of time and are prepared in March, related to experiences and and greater owner engagement. We're starting to see. We believe some of the those elements come into play in the fact that people continue to buy more. Um,
Speaker Change: 4 to 5 vac a year through their ownership with us about 50% of their vacation time being dedicated to us at windows. That means people are buying more and that's only because they're satisfied and, uh, they're enjoying their ownership. So, I think it's a combination. It is a combination of, uh, price increases and uh people just continuing to be loyal and committed to this type of leisure travel.
Chris Woronka: Okay, very good. Thanks, Michael.
Michael Brown: Okay. Very good. Uh, thanks Michael.
Lizzie Dove: Your next question today is coming from Lizzie Dove from Goldman Sachs, her line is now live. Hi there, thanks for taking the question. First one just on, you know, you raised the VPG guidance the year, obviously a really strong number in 2Q, but you didn't take up the gross VOI sales number. Is the assumption that maybe tour growth is a little lower or something? You know, I know telesales is a little lower in 2Q than expected. Just curious kind of what factored into that. Really, the factor is we wanted to recognize the very strong PPG performance in the first half of the year, and that led to our raise for the full year.
Speaker Change: Thank you. Next question today is coming from Lizzy dub from Goldman Sachs, your line is now live.
Lizzy Dub: Hi there, thanks for taking the question. Um, first 1 just on, you know, you meant you raised. Uh, the vpg guidance the year obviously, a really strong number in 2q, but you didn't take up the, you know, big the growth. Um, voi sales number is the assumption that maybe tour growth is a little low or something. You know, I know, tell a sales was a little lower and 2q than expected. Uh, just curious kind of what factored into that.
Lizzie Dove: I think what that really says, Lizzie, is that we have greater confidence that our gross VOI is going to be at the mid to maybe the top end of that range. So, at this point, being halfway through the year, knowing that we're entering July being one of the biggest months of the year, and same with August with summer travel, we thought we were better off to simply be more confident in the top half of the range at this point. I think we'll see where we are at Q3, but at the end of Q3, but what I would say is both tours being up 3% in Q2, 2% for the first half, that's showing sequential acceleration.
Um really, really the factor is is we wanted to recognize this very strong PPG performance in the first half of the year, um, in that that led to our raise, uh, for the full year. I think what that really says Lizzie is that we have greater confidence that our gross. Voi is um going to be at the mid to maybe the top end of that range. So,
Lizzy Dub: Uh, at this point being halfway through the year knowing that we're entering July being 1 of the biggest months of the year and same with August with Summer travel, we thought we were better off to simply be more confident in the top half of the range at this point. We'll see where we are at Q3 but at the end of Q3 but what I would say is both tours being up 3%,
Lizzie Dove: We were quite pleased with our Q2 tour performance, and we think that tour increase will continue in the second half. Obviously, our PPG raise of guidance reflects what we're already seeing in that we don't see the consumer weakening in the second half of the year.
Lizzy Dub: Uh, in Q2, um, 2%, for the first half. That's showing sequential acceleration. We were quite pleased with our Q2 tour performance and we think that tour increase will continue in the second half and, and obviously, our vpg
Lizzie Dove: Got it. And then on the delinquency side, I think last quarter, you'd said, you know, March ticked up a little bit, but then you saw an improvement in April. Curious how that's been tracking over the last few months and into July. And, you know, you mentioned there's maybe some opportunity for the provision to kind of trend below 20% over time. Just curious, those kind of steps to get there, timing, be helpful to know.
Lizzy Dub: Rays of guidance reflects what we're already seeing and that we don't see um the consumer weakening uh in the second half of the year.
Lizzy Dub: and then, on the billing Quinn,
Lizzie Dove: Thanks.
Erik Hoag: Yeah, hey, Lizzie, it's Erik Hoag. You are right. So early in the year, we saw elevated delinquencies in the first quarter. However, they did moderate near the end of the first quarter. And we saw that moderation persist through the second quarter. And frankly, we've seen that moderation persist through the first half of July as well.
Seaside, I think last quarter you'd said, you know, March ticked up a little bit, but then you saw an improvement in April curious how that's been tracking over the last few months and into July and you know you mentioned there's maybe some opportunity for the provision to kind of Trimble low 20% over time just curious this kind of steps to get their timing um be helpful to know. Thanks. Yeah. Hey Lizzy it's ER code. Um you are right. Uh so early in the year we saw elevated delinquencies in the first quarter. However they did moderate near the end of the first quarter and uh we saw that moderation persist through the second quarter.
Erik Hoag: So we have got a full year provision of 21%. We feel like we are in a good spot with that 21% provision.
Lizzy Dub: Uh and frankly we've seen that moderation persist through the first half of July as well. Um, so we have got a full year provision of 21%. We feel like we are in a good spot.
Erik Hoag: In terms of the longer range comments associated with getting back into the teens from a provision perspective, there's a couple things that I would say about that. First, we've got disciplined underwriting quality with FICO scores above 740. And we consistently have seen improvement associated with the credit quality that's coming through the front door. And then the second piece is the adoption of our app. As we continue to focus on the usability of our products, the adoption increase that we're seeing from our customers, making it easier for customers to actually get on to vacation.
Lizzy Dub: Uh, with that 21% provision.
Lizzy Dub: There's a couple things that I would say about that. First uh we've got discipline underwriting quality with FICO scores above 740.
Lizzy Dub: Uh, and we consistently have seen Improvement associated with the um credit quality. That's coming through the front door.
Lizzy Dub: And then the second piece uh is the adoption of our app.
Erik Hoag: And maybe one other comment associated with the provision, 60 Days In, you know, one of the meaningful ahas that I've had, Lizzie, coming into the seat is that, and Mike mentioned that I've had roughly 50 investor conferences or touchpoints in the last two months. We've got a really robust, efficient, and effective inventory recovery process. So as delinquencies occur, we have a way to get the inventory back. We're able to reprice the inventory. We reprice the inventory at favorable rates. with a cost-to-sales rate that's under 10%. Very effective way for us to get that back.
Lizzy Dub: Uh, as we continue to focus on the usability of our products, uh, the adoption increase that we're seeing that we're seeing from our customers, making it easier for customers to actually get onto vacation.
And maybe 1 other comment associated with the provision, um, 60 days in, you know, 1 of the meaningful ahas that I've had, uh, Lizzie coming into the seat, is that and Mike mentioned, I've I've had roughly uh 50 investor conferences or touch points in the last 2 months. We've got a really robust efficient and effective inventory, recovery process.
Lizzy Dub: So, as delinquency as our, we have a way to get the inventory back, we're able to repriced the inventory at favorable rates.
Lizzy Dub: Uh, with a cost of sales rate that's under 10%, very effective way for us to get that back. Um,
Lizzie Dove: Great. Thank you.
Lizzy Dub: Great. Thank you.
Patrick Scholes: Your next question is coming from Patrick Scholes from Chuba Securities. Your line is now live. Hi, good morning. Thank you. Welcome, Erik. Hey, Patrick. Great.
Speaker Change: Thank you. Next question is coming from Patrick scholes from True security. Your line is now live.
Speaker Change: Hi uh, good morning. Thank you. Um welcome Eric.
Michael Brown: Michael, I'll start out with a question for you. You touched briefly about the health of your consumer. I wonder if you can dig down a little bit more. You talked about average household income of about $120,000, but I'm sure within the average, you probably have some, say $80,000 and some $150,000 and above.
Hey, Patrick.
Michael Brown: Talk about at the various ends of the spectrum, what are the behaviors and propensities, strengths and weaknesses, any noticeable differences between the lower end and the upper end within your customer network and potential customer network. Thank you. Absolutely. Good morning, Patrick. I'll hit this a few different ways. And I think most simply, we get a good read on performance of our household incomes via FICOs and through our default curves. And it's one of the reasons that as we came out of COVID we thought the most efficient way to re-establish our foundation was by raising our FICOs to 640.
Speaker Change: Great. Um, Michael, um, started out with a question for you. Um, you know, you talked briefly about, uh, the health of your consumer. I wonder if you can dig down a little bit more. Um, you talked about, you know, average household income about 1 120, but I'm sure within the average, you probably have some, you know, say 80,000 and some 150,000, uh, and above, um, talk about sort of, uh, at the various ends of the spectrum. Uh, you know, what are the, the behaviors and propensities strengths and weaknesses, any, uh, noticeable differences between the lower end and the upper end within uh, your customer Network and potential customer Network. Thank you.
Speaker Change: Absolutely, and good morning, Patrick. Um, I'll I'll hit this, a few different ways. Um, and I and I think most simply we get a good read on performance of our
Michael Brown: That move as you heard has brought our average FICOs up to 746. And there's clear stratification with higher performance at the higher household incomes and clearly higher delinquencies on the lower end. I think interestingly enough there's an odd phenomenon there, one maybe not so odd, is that the higher the income the more likely there is for prepayment of the loans. So there's always this sort of balance of you love the higher FICO sales and you definitely want people to pay off and get using their ownership. But you do have a drop-off with the higher FICOs in the first year of ownership.
Speaker Change: Uh, household incomes via FiOS and through our default curves. And it's 1 of the reasons that as we came out of Co, we thought the most efficient way to reestablish our foundation was by raising our fico's, uh, to 640 that move. As you heard has brought, our average bike, goes up to 746. Um, and and there's clear stratification with higher performance uh at the higher household incomes and uh and clearly higher delinquencies on the lower end. I think interestingly enough there's an odd phenomenon there. Well, maybe not so odd. Is that the higher the income, the more likely there is for prepayment uh of the loans. Um so there there's always this sort of uh balance of you love the higher uh FICO sales and you definitely want people.
Michael Brown: Let me hit it the second way of really how I look at it is the bifurcation between owners and new owners. In an economy like this with uncertainty and if the economy accelerates or decelerates, the first place you tend to see that is on the new owner side. As we talked about in our prepared remarks, the first half of the year was super strong for our owner base, high engagement, value what they own, continue to buy more at at very high rates. Our new owner business continues to be strong as well. We were very pleased with our floor flow.
Speaker Change: To pay off and and get using, uh, their ownership. But you, you do have a drop off uh, with the higher fee, goes in the first year of ownership. Let let me let me hit at the this this the second way of really how I look at it is the bifurcation between owners and new owners. Um, you know, when an economy like this with uncertainty, and if if the economy accelerates or decelerates the first place, you tend to see that is on the new owner side as we talked about in, in our prepared to
Michael Brown: But I think specifically related to your question, when we look back to pre-COVID-19, our close rates, our VPGs, and our transaction size all related to new owners are meaningfully up from pre-COVID. And that's really a reflection to your question about the performance of all strata of household incomes and looking at a different perspective of new owners and owners. Because I think most people are looking for a weakness to show up in our new owner segment as a sign that the economy is weakening. And we could say after the first six months that that's not the case.
Speaker Change: Remarks. The first half of the year was super strong um for our owner base uh High engagement value. What they own continue to buy more at at very high rates. Our new owner business, uh, continues to be strong as well. We were very pleased with our tour flow, but I think specifically related to your question. When we look back to pre-covid, 2019,
Speaker Change: Once that that's not the case.
Patrick Scholes: Great. Thank you.
Erik Hoag: And then I do have a follow-up question for Erik. Erik, with the BPG expectation going up, what are your expectations for the buyer mix in that expectations for closing rates versus your prior guidance for BPG? And I think on last earnings call, you had expected the new owner mix or Mike Hug had expected new owner mix still to be around or to be around 35 percent.
Speaker Change: Great, thank you. And then I do have a follow-up question for Eric, um, Eric with the vpg expectation going up. Um, you know, what are your expectations for the buyer mix, uh, in that expectations for, uh, closing rates versus your prior guidance for vpg, and I think on last earnings call. Um, you had expected the new owner mix, uh, or uh, Mike. Hug had expected new owner mix um, still, uh, to be around or or, uh,
Erik Hoag: Thank you. So we do, we do expect in our financial forecast to see acceleration of the new owner mix, not so the long range target remains 35% from a new owner mix perspective, we sat at 30% here in the second quarter, our forecast does expect some improvement in that in the back half of the year.
Speaker Change: To to be around 35%. Thank you. So we do we do expect in our financial forecast to see acceleration of the new owner. Mix not uh so the long range Target remains 35% from the new owner mix perspective. We sat at 30% here in the second quarter. Our forecast does expect some improvement in that in the back half of the year.
Patrick Scholes: Okay, thank you.
Speaker Change: Okay, thank you.
Patrick Scholes: Thank you.
Stephen Grambling: Next question today is coming from Stephen Grambling from Morgan Stanley. Your line is now live. Hey, thanks for taking the question.
Stephen Graling: Okay, the next question today is coming from Stephen graling from Morgan Stanley. Your line is now live
Stephen Grambling: Just to follow up on the new owner mix improvement, I guess, are there anything that you're doing and that you're thinking about to help drive some of the incremental new owners or anything that you're thinking about in terms of trying to improve the conversion rate on new owners as we think about initiatives going into the back half of this year or even into the next year? Yeah, so, so just to add on to what Erik was saying was, we've always communicated this percentage. And I just want to make sure everyone's got the context of it.
Hey thanks uh for taking the question just to follow up on the new owner mix Improvement I guess are there any things that you're you're doing and that you're thinking about to help Drive some of the the incremental new owners or anything that you're thinking about in terms of trying to improve the conversion rate on new owners as we think about initiatives going into the back half of this year, even into next year.
Michael Brown: We had an incredible first half of the year on our owner side of the business, which is naturally going to push down our percentage of new owner percentage. We had a we had a really good first half of the year as it relates to newer business. It just happens when you're performed so well on the owner side. Sports Illustrated, launching new sales later in the year. All of these are going to be bringing new owners to our overall ecosystem. And lastly, just in addition to all of that, you know, we have six regions and each single one of them is out doing smaller partnerships in their region that are more pertinent to their region.
Speaker Change: Yeah, um so so just uh, uh, add on to what Eric was saying was, um, we we've always communicated this percentage and I just want to make sure everyone's got the contacts of it. We had an incredible first half of the year on our older side of the business which is naturally going to push down our percentage of new owner percentage. Uh, we had a, we had a really good first half of the year as it relates, to newer business. It just happens when you're performing so well in the owner's side. Uh, you know, our Target of 35% naturally. It, it's further away from 35 than we're going to, we're going to continue to, to get to our long.
Speaker Change: Long-term Target our short-term Target is 35%. Um, and if if quarter by quarter we have strength in 1 segment it it'll fluctuate. Remember I I believe I believe it was first quarter last year. Maybe it was second that we were at 38% 37% and that was just a quarter so related to some things we're doing as it relates to driving new owners.
There's a lot feathered throughout the script related to that but I really want to focus on number 1. Uh we continue to focus on getting the right Partners. Uh, we were pleased with the announcement in Q2 of, of 1 such partner and Hornblower, um, we also believe that the addition of these new brands, uh, Margaritaville which were reinvigorating up, double digits in sales, year-on-year, the addition of a core up double digits in sales year on year.
Michael Brown: And all that put together, I do just want to. put a stamp on, I think you've mentioned. something about performance in new owners. I think our close rates are up roughly 11 percentage points from pre-COVID level. So our teams are performing well above where they were pre-COVID. And I think it's a combination of having a great team, very focused on execution and raising our marketing standard. That's great.
Speaker Change: Uh, Sports Illustrated launching new sales, later in the year, all of these are going to be bringing new owners to our overall ecosystem. And lastly, just in addition to all of that, um, you know, we have 6 regions in each single 1 of them is out doing smaller Partnerships in their region that are more pertinent to their region.
Speaker Change: And all that put together. I I do just want to
Speaker Change: put a a stamp on I I think you mentioned
something about performance in new owners.
Speaker Change: I think our our clothes rates are up roughly 11% points from preco level. Um, so our teams are performing well above where they were preco and I think it's a common
Speaker Change: Of having a great team, very focused on execution and raising our marketing standards.
Kevin: I'll leave it there. Thank you. Thanks, Stephen. Thank you. As a reminder, that star 1 to be placed in the question...
Speaker Change: That's great. We'll leave it there. Thank you. Thanks Stephen. Thank you.
David Katz: Our next question is coming from David Katz from Jeopardy! Your line is now live. Hi, good morning, everybody. Thanks for all the commentary so far.
Thank you as a reminder that star 1 to be placed into question Q. Our next question, is coming from David Katz from Jeffrey. Tin is now live
Michael Brown: You know, I noticed that, you know, the Accor brand seems to be more of an international play, and I wonder if you could give us some updated thoughts on what you think the international opportunity or TAM, you know, really is, and, you know, what point does it become, you know, an increasingly meaningful driver of the enterprise in total? Well, there's two sides to that story. First of all, Accor is, if my stats are right, the largest international operator of hospitality, you know, outside the United States. The brand's powerful, it's impactful, it's got a multitude of brands, and it's TAM is on par with the best hospitality companies and the largest hospitality companies in the world.
David Katz: Hi morning everybody. Um thanks for all the commentary so far. Um you know I I noticed that, you know, the aqua brand seems to be more of an international play and I wonder if you could give us some updated thoughts on what you think the international opportunity or Tam, you know, really is. And you know, what point does it become
Enterprise in total.
David Katz: Well, uh, there's, there's 2 sides to that story. First of all a core is, uh,
David Katz: it's it's my stats are right. The largest International operator of hospitality, you know.
Michael Brown: That's all the positive, and the second, if I could add a second positive, is the integration with their teams in the Asia Pacific region and considerations in other regions has been superb, super supportive to help us grow, and that's meaningful in the assistance of growth, which has led us to first resort since having the brand about 14 months after the acquisition.
Michael Brown: The flip side of that coin is... Timeshare is by far globally strongest in the United States. We've got an accepted product in After 30 years of operation, the industry's evolved to be primarily hospitality-branded companies. People are highly loyal to Wyndham, to Hilton, to Marriott, to Disney, to Holiday Inn, just to name a few, at our Margaritaville brand, and the industry is over 80% hospitality-branded. The regulatory environment protects consumers and gives them avenues for their ownership and comfort that their purchase is protected. We remain super bullish about the U.S. market. We remain super bullish about our Wyndham brand.
David Katz: Outside the United States. Uh, the Brand's powerful, it's impactful. It's got a multitude of brands in its Tam is is on par with the the the best hospitality companies in the largest hospitality companies in the world. Um, that's all the positive and uh, the second if I could add a second positive is the integration with their teams in the asia-pacific region. Um, and considerations in other regions uh has been superb, super supportive uh to help us grow and and and that's meaningful in in the assistance of growth which is led us to announcing our first Resort since having the brand uh about 14 months after the acquisition.
David Katz: the the flip side of that coin is
time, share is by far.
David Katz: Globally strongest in the United States.
David Katz: we've got, um, an accepted product uh, in
Michael Brown: We have incremental opportunity outside the U.S. with Accor, and we view most of these new brands, whether it's Accor, Sports Illustrated, and you go down the line to be sort of $200 to $400 million of sales brands, but you stack four or five of those together and you can start to look at a growth trajectory over five to seven years that allows for us to maintain our current growth rate over time. Understood. And just to follow that up, right, when we think about, you know, international sales, maybe $1 of sales or $100 of sales, should we think about the economic intensity in terms of what you earn, you know, being similar, better, worse than, you know, what you have here in the I would expect it to be similar as far as profitability margins.
Um after 30 years of operation, the industry's evolved to be primarily Hospitality branded companies. People are highly loyal to Windom, to Hilton to Marriott to Disney to Holiday, Inn, just to name a few at at our Margaritaville brand and the industry is over. 80% Hospitality branded the regulatory environment protects consumers, and gives them Avenues uh, to for their ownership and comfort that their purchases protected. So we remain. Super bullish about the US markets. We remain super bullish about our Windham brand. Um, we have incremental opportunity, uh,
Outside the US with.
David Katz: The core um and we view most of these new brands, whether it's a core Sports Illustrated and you go down the line to be sort of 2 to 400 million dollars of sales Brands. Um but you stack 4 or 5 those together. And you can start to look at a growth trajectory over 5 to 7 years that allows for us to maintain um our current growth rate over time
David Katz: Understood and just to follow that up, right? When we think about, you know, uh um, International sales, maybe a dollar of sales or 100, a hundred dollars of sales. Should we think about the economic intensity in terms of what you earn? Um, you know, being similar better worse than you know what? You have here in the US
David Katz: I would also expect it to be similar three years from now what it is today as far as a mix. We do about 90% of our revenue in the U.S. and about 10% internationally. So, I wouldn't expect any significant trajectory or incremental risk for currency fluctuation as a result of our expansion. You know, our objective, back to Stephen's question and tying in yours, is we want to look for new customers geographically, database-wise, and Accor provides us both those avenues. Thank you very much.
David Katz: I would expect uh it to be similar as far as uh profitability margins. I would also expect it to be similar uh 3 years from now what it is today as far as a mix. Uh we
Speaker Change: do about 90% of our
David Katz: us and about 10% internationally.
David Katz: Um, so I I wouldn't expect any significant trajectory or incremental risk for currency fluctuation. As a result of our expansion, you know, our objective back to Steven's question and tying in yours. Is we want to look for new customers, geographically, database wise, and of course provides us. Both those Avenues
David Katz: Thanks, David. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thanks David.
Ben Chaiken: Next question today is coming from Ben Chaiken from Mizzou. Hold your line. It's not live.
Thank you. Next question today is coming from Ben chicken from the zoo. Hold, your line is that live
Ben Chaiken: Hey, good morning. Thanks for taking my questions. Good morning, Erik. Maybe just to start off, as you think about the remainder of the year, can you help remind us the different variables influencing the back half? If I'm not mistaken, I believe you begin selling SI in 3Q or 4Q. Maybe help us with the timing and magnitude of that and any other considerations. I guess the premise of the question is, I think prior to today, there was an implied acceleration in contract sales in the back half, and I just want to maybe dive into what those considerations are.
Erik Hoag: Thanks. And then one follow-up. Of course, Ben, and the implication that you're reading through is correct. The anticipation on the back half of the year is that we would be lapping tough comps in the first half of the year on tour flow. So year-on-year tour flow increases in the latter half of this year. You combine that acceleration to an increase of BPG guidance. Diving back into Lindsey's question there is that you start to see a lot more confidence on the high end of the VOI range, which in turn gives us confidence that continued softness on the Travel and Membership segment can be covered, ultimately leading us to confirmation of our guidance range on the Justin Evita.
Speaker Change: Hey good morning, thanks for taking my questions. Good morning, Eric. Um, maybe just maybe just to start off. As you as you think about the remainder of the year, can you help remind us the different variables influencing the back half. Um, if I'm not mistaken, I believe you begin. Selling si in the recur for Q. Maybe help us with the timing and magnitude of that and any other considerations I guess, I guess that. The premise of the question is I think prior to today there was an implied acceleration in contract sales, um, in the back half and I just want to maybe dive into what those considerations are thanks and then 1 follow up.
Uh, of course, been uh, and and the implication that you're, uh, that you're reading through is, is correct. Uh, the anticipation on the back half of the year is that we would be lapping, uh, tough comps in the first half of the year on tour flow. So year, on year tour flow increases in the latter half of this year. Um, you combine that acceleration uh to an increase of vpg guidance.
You start to see a lot more.
Erik Hoag: So you should expect to see continued strength on the VOI side, covering off any weakness we see on the Travel and Membership side. And albeit only three weeks into July, I think it's safe to say that the trends that we've seen in Q2 on consumer resilience, key KPIs that led to a good Q2, portfolio performance, BPG, booking patterns, trends we saw in Travel and Membership, all of those have remained consistent in the first three weeks of July. A reminder, our largest month of the year, those trends are consistent that we saw in Q2. Got it.
Confidence on the high end of the voi range. Um, which in turn gives us confidence. That um, continued softness on the traveler membership, segments can be covered. Uh, ultimately leading us to confirmation of our guidance range on adjusted evidence. So you should, you should expect to see continued strength on the voi side. Uh, covering off any weakness we see on the Travel of membership side and all be it only 3 weeks into July I think it's safe to say that the trends that we've seen in Q2 on consumer resilience, tkpi that led to a good Q2
Speaker Change: Portfolio performance vpg booking patterns. Um Trends we saw in travel membership, all of those have remained consistent in the first 3 weeks of July a reminder, our largest month of the year, um, those Trends are consistent that we saw in Q2.
Erik Hoag: And then anything from, just to touch on SI, doesn't that start to hit in 2025 as well, helping you out in the back half? Yes and no. Yes. We will open in the spring of 2026. We expect to start sales at the end of 2025, so we can, pun intended, put our first points on the not at all. You know, continuing to grow Accor this year, continuing to grow Margaritaville and continue excellent execution of Club Wyndham will be the determinant of how we end the year and where in our guidance range we'll finish. Understood.
Speaker Change: Got it and then and then anything from uh just just to touch on SI. It doesn't that doesn't that start to hit in 25 as well?
Speaker Change: Helping you out in the back half.
Uh,
Speaker Change: I,
Speaker Change: Yes and no. Yes. Um we we
Michael Brown: And then for my follow-up, maybe just stepping back a little bit on some of these new projects, maybe you could help us understand the importance and why you're excited about the new Margaritaville in Orlando opening in 27, as well as the SI in Nashville, whether it's strategically or geographically, why it's important to the network. Thanks. Ultimately, I zoom way out and just look at how hospitality is transitioning, where people are attaching their individual lifestyle to the way they want to spend their leisure time. I don't know exactly the year. I probably should, but Margaritaville was a song and a drink a decade ago, and today it's a hospitality company with dozens of hotels.
Speaker Change: We will open in the spring of 2026. We expect to start sales at the end of 2025, so we can pun intended, put our first points on the board. Uh, and uh, but as far as meaningful bottom line, not at all. Um, you know, uh continuing to grow a core. Uh this year continuing to grow Margaritaville and continued. Excellent, execution of Club window will be the determinant of how we end the year and where, in our guidance range will will finish.
Speaker Change: Understood and then, and then for my follow-up, maybe just stepping back a little bit on some of these new projects. Maybe you could help us understand the importance and why you're excited about the new Margaritaville in Orlando opening in 27, um, as well as the SI in Nashville, whether it's strategically or geographically, why it's important to the network. Thanks,
Speaker Change: Yeah. Ultimately I I I zoom way out and just look at how hospitality is transitioning. Where people are attaching their individual lifestyle to the way they want to spend their Leisure Time. Uh,
I,
Michael Brown: Why? Because people love to listen to music and have a drink in their hand on the beach. Leisure travels become an expression of that lifestyle, and you transition that across to Sports Illustrated and the affiliation, excitement, and passion people have for college sports. We're simply meeting consumers where they are today. Most importantly for our business, especially being direct marketing, is we need to constantly be finding incremental databases, incremental addressable markets that we can't reach otherwise. That's why we have aspirations on each of these not to become the behemoth that Wyndham is today, which will continue to grow.
I don't know exactly the year I probably should, but Margaritaville was a song in a, in a, in a drink, you know, a decade ago and today it's it's a hospitality company. With, with, with dozens of hotels, you know why? Because people love to listen to music and have a, have a drink in their hand, on the beach and, and Leisure travels become an expression of that lifestyle and you transition that across to to sport
Speaker Change: Illustrated in the
Speaker Change: Uh, the affiliation excitement and passion people have for college sports. And we're simply meeting consumers, where they are today. And I, and most importantly, for our business, especially being direct marketing is, we need to constantly be finding incremental databases incremental, uh, addressable markets that we can't reach otherwise and that's why uh, we have
Ben Chaiken: That's where our strength is, but adding $200 million to $400 million of sales with an individual brand that has a unique database that we otherwise wouldn't reach, that's why I'm excited. A year ago, we shared with you our aspirations. It's a year later. Those are all going to have to have outsized growth to our total VOI sales projections that we have today. Got it. Appreciate it. Thanks, Ben.
Speaker Change: Uh, aspirations on each of these, not to become the Behemoth that Windham is today, which will continue to grow. Uh, we're you know, that's where that's where our strength is, but
Speaker Change: You know, adding 2 to 400 million dollars of sales with an individual brand, that has a unique database that we otherwise wouldn't reach. Um that's what that's why I'm excited. And you know a year ago we would we shared with you our aspirations. It's a year later.
Speaker Change: We I I mentioned it in 1 of my last answers. We're double digit growth in Margaritaville. We're double digit.
And with Sports Illustrated coming.
Um, you know that those are all going to have to have outside growth to our total voi sales projections that we have today.
Got it, appreciate it.
Speaker Change: Thanks Ben.
Brandt Montour: Your next question is coming from Brandt Montour from Barclays, Rwanda is now live. Hey, good morning, everybody. Thanks for taking my question. So, just a more nuanced version of a question you heard earlier about the 2Q and the new owner sales. I think when we went back, you know, if we go back to March, April, when you were exiting the first quarter, you highlighted slightly softening, I don't want to put words in your mouth, new owner sales trend. It sounds like it came out pretty well for you and those sort of held up in the 2Q.
Speaker Change: Okay, the next question is coming from Brant, Montour from barklay, your line is now live.
Michael Brown: But with the sort of lowering in the mix in the 2Q, you know, I wonder, and the question is, you know, you guys have levers, right, in terms of what kind of tour flow you want, new owner versus repeat. Did you sort of tactically move toward repeat in the 2Q? And, you know, that kind of helps keep a higher quality new owner tour coming in and keeping those metrics high? That makes sense.
Brant Montour: You guys have levers, right? In terms of what kind of tour flow you want new owner versus repeat.
Brant Montour: Did you sort of tactically move toward repeat in the 2q? Uh, and, and, you know, that kind of helps keep a, a higher quality, new owner tour, coming in and, and keeping those metrics High.
Michael Brown: So let me let me go back to my commentary at the end of Q1. You know, we've just gone through Liberation Day. I think everyone was super nervous around the uncertainty in the macro economy. We've now gone three months through the quarter and. There's not really been a change. We've not changed what we're trying to do. We're not trying to force any issue. I'm not going to ask my team to force the 35%. We're going to do we're going to execute against our business. If we didn't bring up 35% to you all, we wouldn't even discuss it.
Brant Montour: That makes sense. Um,
Brant Montour: area at the
Brant Montour: end. We've just gone through Liberation day. I think everyone.
Brant Montour: Was super nervous around the uncertainty in the macroeconomy. We've now gone 3 months through the quarter, uh, and
Michael Brown: Because You know, the industry says there are companies in 30%, there's companies at 40%.
There's not really been a change. Um we've not changed what we're trying to do. We're not trying to force any issue. I'm not going to ask my team to force the 35%. We're going to do. We're going to execute against our business. If we didn't bring up 35% to you all, we wouldn't even discuss it. Uh, because
Michael Brown: And in that range, you can run a highly successful timeshare business, so we're going to stay consistent the way we generate new owners and if there's fluctuation down to 30 up to 40 we are North Star for this business long term and the second half of this year will be 35% but it'll be no sweat if we hit 32, 33 and I'm not going to get overly excited at 37, 38. The marketing, taking it away, refining the business means we will we will end up over time at 35% and keeping a highly executing sales and marketing team without.
Brant Montour: you know, the industry sits there are companies and 30%, there's companies that 40%
Brant Montour: And in that range, you can run a highly successful.
Brant Montour: Um time share business. So we're going to stay consistent to the way we generate new owners. And if there's fluctuation down to 30 up to 40, we are Northstar for this business long term and the second half of this year, will be 35% but it'll be no sweat. If we hit 32 33 and I'm not going to get overly excited at 3738, the normal Cadence of adding marketing taking it away refining. The business means we we will end up over time at 35% and
Brandt Montour: dropping in changes in the middle of quarters inorganically or unnaturally doesn't help the overall enterprise. So this is our percentage in Q2 was natural. We didn't do anything unique to drive or decelerate the number, and the performance, specifically in new owner, the KPIs, as I mentioned in Stephen's question, are really strong and set up well for the long term. Okay, that's super helpful and crystal clear.
Brant Montour: keeping a highly executed, um, sales and marketing team without
Speaker Change: dropping in changes in the middle of quarters in organically or unnaturally doesn't help. The overall Enterprise. So this is our percentage in Q2 was natural. Uh, we didn't do anything unique to drive or decelerate the number and the performance specifically in new owner, the kpis, as I mentioned in, Steven's question,
Speaker Change: Um are are are are really strong and set up well for the long term.
Michael Brown: And this is, I guess, then a follow-up to that and maybe more of a mathematical question that is, and I know that there's no hard target on the back half for new owners, but if you are looking for a sequential improvement, you know, what gives you confidence you can get a sequential improvement while also keeping VPGs in line sequentially while tour flow grows, right? I would think like the logic or the math would tell me that, you know, you'd have, if you did improve a new owner mix throughout the back half, you would see sequential pressure on VPGs, but maybe I'm missing something.
Michael Brown: Yeah, so again, let me just come back to, I'm gonna worry less about the percentage and I'm gonna spend more energy and our team spend more energy of, are we growing our tour mix? Are we lapping our harder comps? Are we executing against our new partnerships? And are we opening on time the new channels and the new in-house opportunities that we have? What we're seeing is, you know, that The first three weeks of July is our marketing teams on the new owner side are executing extremely well. They're executing against new partnerships. They're activating in the regions in a high new owner period being in July.
Speaker Change: Okay, that's super helpful and Crystal Clear. Um, and this is, I guess then a follow-up to that, and maybe more of a mathematical question, then is, um, and I know that there's no Hard Target on the back half for new owners, but if you are looking for a sequential Improvement, um, you know, what gives you confidence? You can get a sequential Improvement. Uh, while also keeping vpg in line sequentially. While tour flow grows, right? I I would think convert like the logic or the math would tell me that. Um, you know you'd have if you if you did improve a new owner mix throughout the back half you you you would see sequential pressure on vpg. So maybe I'm missing something. Yeah. So so again let me just come back to
Speaker Change: I I I'm going to worry less about the percentage and I'm going to spend more energy in our team, spend more energy of all week. Growing, our tour mix. Are we laughing? Our harder comps, are we executing against our new Partnerships? And are we opening on time? The new channels and the new in house opportunities that we have.
Speaker Change: What we're seeing is you know that it's first 3 weeks of July is our marketing teams on the new owner side are executing extremely well. Um they're executing against new Partnerships.
Speaker Change: their, um,
Michael Brown: So percentage aside, the new owner channel is growing the way we want it to. And yes, there needs to be acceleration in Q3 from the 3% and Q2 growth. 2% first half of the year, year-on-year growth. So yeah, we expect acceleration. Early indications are we're gonna get that acceleration. And the key now is, you know, we raised our full-year BPG guidance, but the big win in the second half of the year is if we accelerate tour flow and maintain BPGs where they were in Q2. But, you know, it is a balance. And, you know, right now our team's balance is extremely high.
Speaker Change: They're activating um, in the regions in a high new owner period being in July. So percentage aside the new owner channel is growing the way we wanted to and yes, there needs to be acceleration in Q3 from
The 3% and Q2 um, growth and the, you know, 2% first, half of the Year year-on-year growth. So yeah, we we expect the acceleration early indications are we're going to get that acceleration. And the key now is, um,
Speaker Change: You know, we we raised our full year vpg guidance but the the big win in the second half of the year is if we accelerate tour flow and maintain vgs uh where they were in Q2 but you know it it is a balanced. Uh and
Speaker Change: Uh, you know, right now our team's balance in is extremely well.
Brandt Montour: Excellent. Great. Thanks for the thoughts, Michael. Thanks, Brent.
Speaker Change: Excellent. Great. Thanks for the thoughts, Michael.
Patrick Scholes: Thank you. Next question is a follow-up from Patrick Scholes from Truist Security. Your line is now live. Great. Just a quick follow-up question on the Sports Illustrated brand. Just give us an update on when you expect Alabama to open. It sounds like Nashville will be next year, but where do you stand with Alabama? And then specifically on Nashville, how is that being financed? Is that asset light or is that something that you're putting perhaps partially or fully on balance sheet? Thank you.
Speaker Change: Your next question is a follow-up from Patrick Schultz from truer security. Your line is now live.
Michael Brown: Okay, so let me hit each of the markets one by one. So Nashville is a conversion property. It'll be just-in-time inventory to match revenue to sales. 185 units opening in the spring of 2026, and expectation is to start sales at some point in Q4 this year. Tuscaloosa is a purpose-built project, which we've gone through the permitting process, which put us about a quarter behind from our original expectations. So it's going to be early 27 for delivery.
Um, great, uh, just a quick follow-up question, on the Sports Illustrated, uh, brand, uh, just give us an update on, um, when you expect, uh, Alabama to open. Uh, it sounds like, uh, Nashville will be next year. But where do where do you stand with Alabama and then specifically on, uh, Nashville. You know, how would that be financed? Is that, uh, asset light or is that something that uh, you know, you're putting perhaps partially or fully on balance sheet? Thank you. Okay, so let me let me hit each of the markets uh 1 by 1. Um so Nashville is a conversion property.
Speaker Change: It'll be just in time inventory.
Speaker Change: Uh, to match Revenue to to sales, 185 units, opening in the spring of 2026 and and expectation is to start sales at some point in Q4 this year, uh, Tuscaloosa is a purpose-built project, um, which uh, We've we've gone through the permitting process, which put us about a quarter behind from our original expectation. So it's going to be early 27th.
Michael Brown: I would expect the-to sort of split those two goalposts is that we will do another announcement this year on a third Sports Illustrated resort. More than likely to be conversion, but more to come on that. We told you on the last call we'd announce by this call we did. I'd expect that we'd do one more announcement this year for our third location, which again, I'd expect to be just-in-time and I'd expect to be conversion as well.
Speaker Change: For delivery. Um I would expect the the sort of split. Those 2 goalposts is that we will do another announcement this year on a third Sports Illustrated Resort.
Speaker Change: more than likely to be conversion, but more to come on that, uh, we told you on the last call, we'd announced by this call, we did
I'd expect that we do 1 more announcement this year for our third location which again,
Speaker Change: Expect to be just in time. And I'd expect to be
Uh, conversion as well.
Patrick Scholes: Thank you for the color on that, I'm all set. All right, that's it. Thank you.
Okay. Uh, thank you for the caller on that. I'm all set.
Michael Brown: We've reached the end of our question and answer session. I'd like to turn the call back over for any further closing Thanks, Kevin. And thanks again for joining us today. We're proud of what our team has accomplished so far this year and are excited about what's ahead. We remain focused on executing our strategy, driving long-term value, and navigating the market with discipline and agility. As we look forward, we're confident in the strength of our business, the resilience of our model, and our future opportunities. We appreciate your time today and look forward to keeping you updated on our progress in the quarters to Thanks.
Thank you. We reached the end of our question and answer session. I'd like to turn the call back over for any further. Closing comments.
Thank you, Kevin and thanks again for joining us today.
Kevin: Have a great day. Thank you.
Speaker Change: We're proud of what our team is accomplished so far this year and our excited about what's ahead. We remain focused on executing our strategy, driving long-term value, and navigating the market with discipline and Agility. As we look forward, we're confident in the strength of our business, the resilience of our model, and our future opportunities. We appreciate your time today, and look forward to keeping you updated on our progress, in the quarters to come
Speaker Change: Thanks. Have a great day.
Operator: That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.
Thank you that does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.