Q3 2025 Marriott Vacations Worldwide Corp Earnings Call

Speaker #3: Good morning , ladies and gentlemen , and thank you for standing by . Welcome to the Marriott Vacations Worldwide . Third quarter 2020 Earnings Call .

Speaker #3: At this time , all participants are ready . Listen only mode . Question and answer session will follow the formal presentation . Should you require operator assistance during the conference , please press star zero to signal an operator .

Speaker #3: Please note this conference is being recorded . I will now turn the conference over to your host Neal Goldner Vice President , Investor Relations for Marriott .

Speaker #3: Thank you . You may begin .

Speaker #4: Thank you . And welcome to the MARRIOTT VACATIONS WORLDWIDE Corp third quarter earnings call . I am joined today by John Geller , our President and Chief Executive Officer .

Speaker #4: And John and Jason Marino , our executive Vice President and Chief Financial Officer . I need to to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal securities laws .

Speaker #4: These statements are subject to numerous risks and uncertainties which could cause future results to differ materially from those expressed in , or implied by our comments .

Speaker #4: Forward looking statements under the press release , as well as comments on this call , are effective only when made and will not be updated as actual events unfold .

Speaker #4: Throughout the call , we will make references to non-GAAP Financial information . You can find a reconciliation of non-GAAP financial measures in the schedules attached to our press release , and on our website .

Speaker #4: With that , it's now my pleasure to turn the call over to John Geller .

Speaker #5: Thanks , Neil . Good morning , everyone , and thank you for joining our third quarter earnings call . As you saw in our release last night , third quarter contract sales declined 4% year over year , a couple of points below our expectations .

Speaker #5: The shortfall relative to our expectations was driven by weakness in Orlando and Maui . Two of our largest markets . Excluding those two markets , system wide contract sales were approximately flat year over year .

Speaker #5: We're not satisfied with these results and have recently implemented meaningful changes that we believe will drive return to growth . First , we've adjusted our sales and marketing incentive plans to better align with our long term objectives .

Speaker #5: Second , we're working to curb third party commercial rental activity by a small subset of owners , which has depressed owner arrivals at some of our most attractive destinations in recent years .

Speaker #5: By curbing this practice , we expect to make more inventory available for occupancy by our owners , which should drive higher owner satisfaction and incremental arrivals at our most productive sales centers , benefiting tours and vpg .

Speaker #5: Third , we have implemented Fico scoring data for marketing purposes , which should result in higher vpgs and improved credit metrics . With respect to our modernization program , we continue to make strong progress towards the 150 to $200 million in run rate EBITDA benefit by the end of 2026 .

Speaker #5: One of the most impactful steps we've taken thus far occurred in August , when we reorganized a portion of our HR and finance and accounting functions and transition work to third party providers .

Speaker #5: This change will save us $20 million in annual costs that will fall to the bottom line . Going forward . In addition to these three operational changes , I've already outlined , we're rolling out additional initiatives .

Speaker #5: We expect to improve vpg as part of the modernization program . For example , we implemented initiatives to drive owner arrivals , offering owners Bonvoy points to arrive at select resorts within a two month window .

Speaker #5: This will help us drive incremental owner tours at an above average Vpg . Our new owner experience initiative , which helps reduce rescissions and boost our tour pipeline , is creating excitement at the sales table by giving buyers a pre-planned vacation to look forward to after their presentation .

Speaker #5: And with over 270,000 packages in our pipeline at the end of Q3 , the impacts of these changes will be realized over the course of the coming year .

Speaker #5: In the quarter . We also expanded our presence in Asia-Pacific with the opening of a new Marriott Vacation Club Resort in Cadillac , Thailand .

Speaker #5: And we have other resorts and sales centers in development that we expect to contribute more than $80 million of annual contract sales within a few years after opening .

Speaker #5: We have updated our full year expectations based on our third quarter results . October Vpgs were down less than they were in Q3 , and we expect occupancy to remain strong .

Speaker #5: Keys on the books for the balance of the year are consistent with the same time a year ago , and we expect to drive tour capture rates for owners as we continue to roll out initiatives to drive future owner arrivals .

Speaker #5: We also have 270,000 packages in our pipeline , which is a good forward indicator and loan delinquencies are down meaningfully year over year .

Speaker #5: In conclusion , despite our disappointing results this year , I still believe in the long term growth potential of this business . And with the recent operational changes we've made and our continued modernization work , we have tremendous confidence in the future profitability growth .

Speaker #5: We will be hosting an Investor Day the morning of December 17th at the New York Stock Exchange , and I hope to see many of you there .

Speaker #5: It will also be webcast for those who won't be able to make it in person . With that , I'll turn the call over to Jason to discuss our results in more detail .

Speaker #6: Thanks , John . Today I'm going to review our third quarter results . Our balance sheet and liquidity position , and our outlook for the year .

Speaker #6: Contract sales were down 4% year over year in the quarter , driven by 5% lower vpg and a 1% decline in tours . First time buyer sales decreased 2% , while owner sales declined 5% .

Speaker #6: Delinquencies declined 100 basis points year over year and are now slightly below 2023 levels . Financing propensity increased 90 basis points from last year , which is good for the long term growth given the strong margins we get from our lending business due to the higher than expected financing propensity in the quarter .

Speaker #6: Our sales reserve was 13% of contract sales , and we expect it to be 12.5 to 13% in the fourth quarter , development profit declined $33 million compared to the prior year , reflecting lower contract sales and higher marketing and sales expense .

Speaker #6: Total company rental profit declined $17 million to $21 million , primarily driven by higher unsold maintenance fees and getaways at interval , our recurring revenue businesses performed well .

Speaker #6: Management and exchange profit increased 12% to $96 million in financing . Profit increased 5% to $52 million . Finally , corporate G&A decreased $8 million as a result , adjusted EBITDA decreased 15% year over year to $170 million .

Speaker #6: Moving to the balance sheet . During the quarter , we issued $575 million of 6.5% senior notes , which we will use to repay our 0% convertible debt when it matures .

Speaker #6: In January . We ended the quarter with leverage of 4.1 times and $1.4 billion in liquidity in anticipation of repaying those notes . We also terminated our delayed draw term loan after January .

Speaker #6: Our next corporate debt maturity isn't until December 2027 , so our balance sheet is in good shape from a maturity perspective . Looking forward , we are updating our full year guidance to reflect our results year to date and our expectations for the fourth quarter .

Speaker #6: We now expect contract sales to decline 2 to 3% this year , with tours flat to up slightly and vpg down . We still expect product costs as a percent of contract sales to be in line with last year .

Speaker #6: We now expect rental profit to decline around $30 million this year , which is slightly lower than our previous guidance due to lower red bar expectations .

Speaker #6: We expect management exchange profit to be in the $380 million range , and for financing profit to be around $210 million in corporate and A to be flat to down slightly .

Speaker #6: This year . We continue to make good progress in our modernization program and still expect to deliver 150 to $200 million in run rate benefit by the end of next year .

Speaker #6: For modeling purposes , we still expect to generate an incremental 60 to $80 million of benefit to flow to the bottom line in 2026 , but the full run rate in 2027 as a result , we now expect adjusted EBITDA to be in the 740 to $755 million range this year .

Speaker #6: Moving to cash flow , we expect our adjusted free cash flow to be 235 to $270 million this year . This lower guidance is driven by lower adjusted EBITDA , higher 2026 unsold maintenance fees due in Q4 , and the timing of tax refunds , which we now expect to receive next year .

Speaker #6: Our guidance also excludes roughly $100 million of one time cash costs related to our modernization initiatives , which is consistent with our previous thinking .

Speaker #6: We are making good progress on our non-core asset and excess inventory dispositions , and hope to dispose one asset this year and a couple next year .

Speaker #6: While we don't include proceeds from non-core asset sales in our adjusted free cash flow , any dispositions will provide cash we can use to either reduce debt or buy back shares .

Speaker #6: We ended the quarter with $1 billion of inventory on the balance sheet . As we discussed last quarter , we plan to restrict our new inventory spending to capital efficient arrangements where our cash outlay coincides with the start of sales , as well as low cost re-acquired inventory .

Speaker #6: Our long term goal remains to get close to one and a half to two years of inventory . On the balance sheet over the next few years , which will free up cash over time .

Speaker #6: With that , we'll be happy to answer your questions . Operator .

Speaker #3: Thank you . At this time , we will be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Speaker #3: The confirmation tone will indicate your line is in the question queue . If at any time you wish to remove your question from the queue , please press star two .

Speaker #3: For participants using speaker equipment , it may be necessary to pick up your . Excuse me . It may be necessary to pick up your handset before pressing the star keys .

Speaker #3: One moment please . While we pull for questions . Our first question is from Ben Chaikin with Mizuho Securities .

Speaker #7: Hey , thanks . Good morning . Either John or whoever wants to take this . You you kind of threw a lot at us , right at right off the bat in the beginning of the call .

Speaker #7: Maybe you could talk to us about the strategy to reinvigorate the top line, whether that's on VPG or on tours. And then what?

Speaker #7: Levers are at your disposal ? Or is this just kind of like a broader deceleration in the business ? Thanks

Speaker #5: Yeah . No , we're obviously focused on growth . I think , you

Speaker #5: I hit on two of our larger markets , Orlando and Maui , we're down significantly . year over year . About $20 million of contract sales in total .

Speaker #5: In the case of Orlando , you had owner arrivals down , which we've talked about this year . More broadly , as has been a bit of a headwind .

Speaker #5: But we've offset a lot of that with higher capture rates on the tour side to kind of offset what we're seeing that and I think that , you know , when you think about Orlando in that market , we've got two Sheraton sales centers .

Speaker #5: So those those sales centers average , you know , relative to our broader Marriott , you know , tend to have a lower income consumer .

Speaker #5: So we saw some softer vpgs in Orlando , a lot of the changes that I talked about making , you know , as we've looked at , especially in markets like Orlando , what what the compensation for sales and marketing execs and bringing those and making sure we're , we're competitive to to drive .

Speaker #5: Not only retaining our top folks , but also recruiting and getting high performers as well . So we're focused on that . We did see some higher turnover in Orlando on the sales side , so you know , when you bring in a new sales exec , you know , off the bat , they typically have a lower vpg .

Speaker #5: You know , and it takes a while to ramp that up . So retaining the best and bringing in new good talent is going to be key .

Speaker #5: There . You know , we talked about the commercial rental activity as I talked about we've talked about this earlier in the year .

Speaker #5: You know , as we've continued to focus on lower owner arrivals , a lot of that or some of it , I should say , as we've dug into a lot of the details , we've seen kind of an uptick in commercial rental activity .

Speaker #5: It's a small subset of the ownership base , but , you know , it does impact owners trying to get to where they want to go .

Speaker #5: And we want to get there satisfaction higher . We've got good owner satisfaction , so it can only help there . And then , you know , the flow through is more owners at at the sites , you know better .

Speaker #5: Vpgs better tours . So that that's another big initiative . And you know , we've ramped up sales training across the board at all our sites .

Speaker #5: We're starting to see some benefits there . In fact , in October , our vpgs were flattish . So that that's a good trend to start .

Speaker #5: The fourth quarter . But we still got to do more to continue to drive growth going forward .

Speaker #7: Okay . Okay . And then stepping back , I guess just going back to the beginning of the call when you fired off a number of kind of new initiatives looking out to 26 , you know , because I don't know if we've all digested kind of the moving parts that you guys are , are laying out here .

Speaker #7: Are there any curveballs we need to be aware of in any of the segments that stick out to you ? I guess I guess rentals comes to mind just because that's a little bit more of a black box for us typically .

Speaker #7: So again , I don't know if you have any visibility there or any other areas that some of these initiatives might impact . Thanks .

Speaker #5: Yeah . Are you talking rentals next year or just in the fourth quarter ?

Speaker #7: I'm talking next year . I'm saying that there seems like there's a number of changes you're implementing today to drive top line . And I'm just trying to get ahead and see .

Speaker #7: Are there any implications to the penal in 26 from those changes ? And the one that jumps out to me because it's somewhat of a black box for us , is rentals .

Speaker #7: Thanks .

Speaker #5: Yeah , yeah . You know , obviously we're we're we're still working on our , you know , budget and long range plan which will provide more detail in December .

Speaker #5: I think specifically , you know , specific to rentals . You know , Jason hit on we do have some higher unsold maintenance fees .

Speaker #5: We have more inventory . We expect on our books going into 26 . Then then we had this year . And you know , that's you know , that's inventory that we've taken back as well as Waikiki and some of the purchases we've made .

Speaker #5: So we will have higher unsold maintenance costs . The key is how do we offset that on the rental side and drive rev par .

Speaker #5: And so those those are the details . We're still working through . But baseline we expect to have some higher costs . And the goal is to try and mitigate that as much as possible .

Speaker #5: On the revenue side .

Speaker #7: Okay . Thanks .

Speaker #3: Our next question is from Patrick Scholes with Truist Securities .

Speaker #8: Good morning . Thank you . I have three questions to start with , and I have some more . I will jump back in the queue .

Speaker #8: Later on first , very high level question . When do you consider all strategic alternatives for the company given the consistent underperformance ? Arguably miss execution and certainly share price underperformance , any reason it shouldn't be now ?

Speaker #5: Sure . Yeah . No , we you know , we're constantly looking at all things and work with the board on that . So we're going to do everything we can to increase shareholder value .

Speaker #8: Okay . Number two , let's just talk about expectations for for Q we saw that guidance was really only reduced by the amount of the three Q miss , you know , what gives you confidence that the issues in three Q won't persist into four ?

Speaker #8: Q . Well .

Speaker #5: Yeah . As I mentioned , at least early trends in October , you know , our our vpgs , which were the big headwind in the third quarter , our are trending more positive .

Speaker #5: So still early days , but some of the initiatives I've talked about things to drive owner arrivals in the near term . And as we look out and what packages and and owner keys on the books and things like that , you know , we still got to drive tour flow as well as Vpg , but you know what we've given you in the guidance is , is kind of based on what we're seeing , based on what we achieved in October .

Speaker #5: And what we see on the books and the trends for November and December .

Speaker #8: Okay . And then third question is about the comment that was included in the earnings release around curbing third party commercial rental activity to drive higher owner arrivals and satisfaction .

Speaker #8: Was there an issue with rental bookings that hurt owner arrivals and vpg in three Q .

Speaker #5: Yeah , I mean , you know , it's a great question . I'm not sure you can quantify it other than we know we've seen some higher owner rentals , and let's be clear , our owners can rent the product .

Speaker #5: That is an option for the typical owner . What we're seeing is a small group of owners that are appear to be running commercial businesses .

Speaker #5: Right . And they're obviously going after the better inventory , the better weeks . And a lot of the higher end markets to to try and rent those and make money .

Speaker #5: That's the commercial rental activity . So anything we can do to make sure they're adhering to the rules are , are , you know , points programs don't allow commercial rental activity .

Speaker #5: And we've employed some , some technology to track that . And we're working on how we're going to enforce those rules here . Going forward .

Speaker #5: So that'll take a little bit of time to to ramp up here . But we're focused on that . And if we can get more owners there , the the read through rate is that should help owners satisfaction of getting on more vacations , you know , to their top choices .

Speaker #5: And when owners are happy and they're there , that should help us drive tours and better vpgs . .

Speaker #8: Okay . Thank you . I'm going to hop back in the queue .

Speaker #5: Okay .

Speaker #3: Our next question is from Brent Montour with Barclays .

Speaker #9: Thanks . So on that point , John , I'm sorry . So can you can you just go over that one more time ?

Speaker #9: The commercial third parties . This is something we haven't really heard about . At least on these calls . You know what sort of , percentage of your inventory is being used by that ?

Speaker #9: How long has this been a problem ? Is it a bigger problem than than the past ? Maybe give us a little more context .

Speaker #5: Sure . Yeah . No . You know , like I said , Brent owners can in the normal course rent their time . That's not prohibited .

Speaker #5: What ? You can't do for documents , you know , with our points , trust and all that is run commercial businesses run a rental .

Speaker #5: You know , and you see , if you go to red week , for example , you see a disproportionate amount of our weeks on there .

Speaker #5: Not saying , you know , those are all commercial businesses , but as we've really dug into the data , you know , over the last year or so , you know , we have seen an increase in what we call our guest of owners .

Speaker #5: And so as we've delved deeper into that , you know , with technology , we're able to kind of see where we've got .

Speaker #5: And once again , it's a pretty small subset of the overall ownership group . But the reservations they're booking are disproportionate . Right to to what you would normally see .

Speaker #5: So you know , we're going to we're going to put all the procedures in place and and if we can reduce that , that makes more inventory available , more generally for owners to use to go on vacation .

Speaker #9: Okay . All right . And then and then , you know , taking a maybe a bigger step back . But on a similar topic , you know , when we look at some of your peers reports , it wasn't any sort of surprise that new owner sales has been a bit weaker .

Speaker #9: And repeat has been stronger , which is something that I think kind of happens when you have a a bit of a softer leisure macro backdrop .

Speaker #9: But , you know , I think we're under the impression that that the levers that you can pull to sell to owners are sort of there for you .

Speaker #9: Is it is it are you trying to tell us essentially that you didn't have the inventory available to make that pivot throughout this , this sort of maybe tougher than expected year ?

Speaker #9: And when you and then , you know , when you talk about what you can do to change and you've said a few things , how much of those are super short term , how much of those take longer time ?

Speaker #9: I mean , you mentioned retain talent and things like that . Where where you don't actually get the flexibility and maneuverability until 26 .

Speaker #5: Yeah , a lot in there . I'm not sure I got got all the question you're looking for . Let me try here .

Speaker #5: Yeah . As you know , we run a 90% year round occupancy at our system wide resort . So we run a high occupancy .

Speaker #5: You know , we talked about the commercial rental activity . You know , that's just a a swap out of getting more owners versus renters and getting , getting owners happier there .

Speaker #5: The near-term levers , which we started to do more in the second quarter and we really ramped it up in the third quarter , are incentives .

Speaker #5: The Marriott Bonvoy program points to incent owners , you know , for short term bookings where I think places like Orlando or other bigger markets where we do have some near-term availability to get owners to arrive within two months .

Speaker #5: And those end up being above average vpgs for the owners that were able to tour there . So that's a that's one of the near-term initiatives that we've been focused on here to improve .

Speaker #5: I think when you talk about the commercial rental activity , that that will help more over time that you know , that that's going to take some time to to ramp up here over the next couple of quarters .

Speaker #9: Okay .

Speaker #3: Next question is from David Katz with Jefferies .

Speaker #10: Hi . Good morning everyone . Pardon the background noise sort of is what it is . What I wanted to get at is , you know , my I think our understanding is that this is a sales force driven business , right .

Speaker #10: That's at the heart of it . Can you , can you just talk about sort of how the sales force is sort of being , you know , run today , you know , where was it 6 to 12 months ago ?

Speaker #10: And how should we think about it ? 6 to 12 months from now ? It unless I'm wrong and I invite you to correct me that that seems to be kind of a critical piece of of all of this .

Speaker #10: And where the performance ultimately lands . Thanks .

Speaker #5: Yeah , yeah . In terms of managing our on site sales force , I think the , you know , the bigger changes and some of the things we've talked about is we've , we've leaned in on training more recently to , to train , especially our newer sales folks .

Speaker #5: You know , some of the things I mentioned earlier , you know , in certain highly competitive timeshare markets , you know , you do see that seem to have , you know , more turnover , people moving around .

Speaker #5: And that's where , as we talked about adjusting our our comp programs to focus on not only retaining , but also getting really good new talent that that's been a focus here .

Speaker #5: And , you know , I think I've talked about earlier , when you do have turnover and you bring in , you know , maybe a non experienced timeshare exec , there's a bit of a ramp up on getting their vpgs up .

Speaker #5: So everything we can do to retain the best talent and , and recruit in the best talent , that's the focus . And so there's no , you know , wholesale change overall other than really focusing on the talent .

Speaker #5: But you're right . It you know , the sales force , you know , you got somebody who can do a 6 or $7000 vpg on average versus a 4000 .

Speaker #5: That's that's a big difference . This higher . Vpgs flow through to the bottom line . And as we really focus in on this , it should help drive higher .

Speaker #5: Vpgs going forward .

Speaker #10: So if I may follow that up and if it was in there and I missed it , I apologize . But have there been some sort of departures in leadership or management within the sales force of the recent past , or any changes worth noting ?

Speaker #5: Well , not not , you know , there's always normal turnover , David , I think in certain markets when you get down to the front line , sales execs , you know , the highly competitive markets , like I said , I think Orlando , you know , maybe to some extent Vegas , those types of things .

Speaker #5: There's a you know , a lot of people looking for talent on the sales side . And that's where a few of the markets we have seen some some higher turnover more recently of our better sales folks .

Speaker #5: .

Speaker #6: And , David , when you think about the comments that John made in the script about Maui , some of this is sales related .

Speaker #6: So we are still recovering from from the wildfires . And as you think about sales execs that had to move an hour and a half or two hours away because they lost their home and there was no housing , they did the commute for a while .

Speaker #6: And then , you know , call it more recently , over the last six months or so , have found other opportunities closer to home .

Speaker #6: It's a it's a tough commute to make that drive every day . And so that did impact us a little bit in Maui .

Speaker #6: That's not necessarily fixable overnight , but that is something that is related . But you know , a specific to Maui .

Speaker #10: Understood . Thank you .

Speaker #3: Our next question is from Sean Kelley with Bank of America .

Speaker #11: Hi . Good afternoon , and thanks for taking my question . A lot of ground has been covered , but I did want to go back to the to the commercial piece that you've been talking about throughout .

Speaker #11: And I just want to make sure I understand what's happening here . But just to be clear , so are people basically arbitraging the , you know , the point system to some degree and either kind of rent or rerunning that on third party websites .

Speaker #11: Is that what's really going on ? And then what's your ability today as we sit here to kind of track and control that , like what systems do you use or how like familiar familiar are you with this ?

Speaker #11: Because it would seem like you should be pretty aware of this . But again , I think for many of us this is either the first or , you know , maybe second time we've ever heard of this .

Speaker #11: Thanks .

Speaker #5: Yeah . No , I think the way you described it , yes . You know , and a lot of our resorts , given the markets they're in , you can rent those weeks for more than caught your annual maintenance fees .

Speaker #5: Right . If that's what you're talking about . Arbitrage . But yes , you can you can make money if you will , just on your annual fees .

Speaker #5: And as I mentioned , owners in the normal course are allowed to to do , you know , rental activity . It's really where and this is where .

Speaker #5: Yes . We're tracking in the systems . We're identifying unusual high bookings by a smaller number and then doing the work to make sure that this is commercial and and shutting those down .

Speaker #5: So it's a it's a constant , you know , just because you shut one down . Then there could be others , you know .

Speaker #5: So we're going to continue to look at it and do the best we can to , to make people adhere to the rules and stop the commercial rental activity .

Speaker #11: Got it . Thanks . And then just sort of one super high level question would be going back to the core business , just on the Voi sales .

Speaker #11: Just just big picture . Obviously the trend lines a little different than what we're hearing from other operators in this space . So in your own estimation , how much of this is is macro and how much of this is idiosyncratic to to your portfolio , be it , you know , some of the just continued headwinds in Maui or , you know , the Salesforce thing , I think we're all , you know , still struggling a little bit with trying to kind of balance , you know , what's been a bifurcated consumer environment and that underlying trend line with what's kind of happening in VAX business .

Speaker #5: Yeah .

Speaker #10: Yeah .

Speaker #5: You know , I think if you want to start at the macro level , like I mentioned a little bit earlier , I do think in Orlando and you know , and some of our resorts where , you know , the mix of , of income is trends towards the lower end versus our , our higher end resorts , things like that .

Speaker #5: We've probably seen some impact at , at that lower end of our household income . So we do see a little bit of that .

Speaker #5: But you know , I think some of the the bigger things that we've talked about , you know , which we talked about earlier in the year , which is owner arrivals , that in some of the commercial rental activity is probably a little bit with us .

Speaker #5: We'll solve that and move that forward . You know , owner arrivals this year versus last year . And we talked about this earlier last year benefited from more plus points .

Speaker #5: And things that were burning off . So the goal is to continue to drive owner and to offset that this year , like we talked about , notwithstanding own arrivals being down , we've done a much better job of what we call capture rate .

Speaker #5: Getting those owners that do show up , touring them at a higher percentage to to really drive that . And we've got programs to continue doing that going forward .

Speaker #5: Yes , Maui , you know pre fires was 10% of our contract sales . We're the largest I think in in West Maui by far .

Speaker #5: It's a big part of our business versus our competitors . And and the recovery has been choppy over the last couple of years .

Speaker #5: You know Jason talked a little bit on the sales side , but you know , and I think we've talked about this before .

Speaker #5: You know , we do a lot of packages into Maui . So when the fires hit we stopped selling packages . Right . It just didn't make sense .

Speaker #5: And people weren't going to buy them . And so that pipeline started to get depleted . People that had packages started to come back over time .

Speaker #5: And then we started to sell packages again . So we have seen lower package arrivals just because of that . But those are starting to ramp back up .

Speaker #5: And then owners , they started to come back to Maui , but they're being respectful as well to the messaging that's come out of Maui over the last couple of years .

Speaker #5: So that one is , you know , probably specific to us . You know , I think high level is you look at our competitors to there , they're in a different spot .

Speaker #5: Obviously , you know , with acquisitions on the HGTV's side and how they're upgrading owners and selling into those products and launch new brands and new resorts .

Speaker #5: So they're at a different life cycle a little bit here in the near term . And I think that's offsetting , you know , for them , any headwinds they've got , they've got some good things that they're they're selling at the table .

Speaker #11: Thank you so much .

Speaker #12: Okay . .

Speaker #3: Our next question is a follow up from Patrick Scholes with Jewish Securities .

Speaker #8: Thank you for taking my follow up questions . I have some questions . Just specifically for Jason . Jason , any costs or expenses for next year that you'd like to point out .

Speaker #8: So when we're modeling that , we initially should be aware of , thank you .

Speaker #6: Yeah . John talked a little bit about unsold maintenance fees and response to one of the earlier questions . I think the other item that we've talked about in the past , and just to make sure everyone's on the same page as , you know , higher product costs as we go forward , you do .

Speaker #6: You did see an increase as we expected from Q2 to Q3 due to the mix of inventory , and we think that'll go up again next year .

Speaker #6: We've talked about that in the past . We have the higher product costs coming from lock inventory in Asia that we're going to sell through next year , as well as the mix of inventory we expect to sell next year domestically .

Speaker #6: So I would point to really those two , obviously , we're working hard on the modernization we did , you know , take some costs out of the organization .

Speaker #6: And August , which are going to , you know , we are about 20 million in total on an annual run rate basis , spread throughout the PNL .

Speaker #6: So some of it will be in Ghana , some of it will be in other as we were . That was done in in August .

Speaker #6: So , you know , we'll get more guidance out , you know , later . But as we work through everything . But I would those would be the ones that I would call out , okay .

Speaker #8: And then Jason , just specifically on the rental business , certainly we saw the profit down this year . And I think earlier in this call , it was noted higher costs for next year .

Speaker #8: Is it the expectation that profit next year for the rental business will grow ?

Speaker #6: Yeah , Patrick , we're still working through that . As we talked about we we we have a good sense of the unsold maintenance fees going up generally .

Speaker #6: And depending on the markets in which that inventory exists , we don't always cover our unsold maintenance fees . As John talked about , some of the markets where we we we would but in markets like Orlando and the desert , where we do have a significant amount of inventory , the 80s don't cover that .

Speaker #6: And that's largely due to the reserves . That's common in the timeshare business . So there could be some headwinds related to that .

Speaker #6: Higher unsold maintenance fees . And that's what we're working through here as we kind of finalize the year and the budget you did see in Q3 , a pretty significant decline in the rental business from Q2 , a lot of that is seasonality with lower ADR in that market .

Speaker #6: Those markets have continued to struggle a little bit . We do expect that to pick up in Q4 , but that would be what I would highlight .

Speaker #8: Okay . Thank you and look forward to the Investor Day . And if you'd be so kind just at the investor talk a little bit more granularity about that last topic of expectations for rental business .

Speaker #8: I'm all set . Thank you .

Speaker #12: Thank .

Speaker #3: Ladies and gentlemen , we have reached the end of the question and answer session . I like to turn the call back to John for closing remarks .

Speaker #5: Thank you , everyone for joining our call today . As I said at the outset , we acknowledge that this has been a challenging year .

Speaker #5: We believe recent targeted changes address some of root causes of our sales softness in recent periods , particularly in Orlando . These changes , combined with continued progress on the 150 to $200 million in adjusted EBITDA benefit through our modernization program by the end of 2026 , will position us to return to consistent , profitable growth on behalf of all of our associates , owners , members , and guests around the world , I want to thank you for your continued interest in our company and hope to see you on vacation soon .

Speaker #5: Thank you .