WEBVTT - Travel + Leisure CEO Mike Brown Talks Travel Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news Well, shares of Travel

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<v Speaker 1>and Leisure reached an inter day record, rising fifteen percent.

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<v Speaker 1>That was back on October twenty second. This was the

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<v Speaker 1>day the company lifted the low end of its adjusted

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<v Speaker 1>EBITDA forecast for the full year. Shares the four point

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<v Speaker 1>one billion dollar market cap company are up around twenty

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<v Speaker 1>nine percent so far this year.

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<v Speaker 2>Yeah, that's quite a run. We want to bring in

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<v Speaker 2>our next guest, Mike Brown, President and CEO of the company,

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<v Speaker 2>which has close to twenty resort, travel, club and lifestyle

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<v Speaker 2>brands including Margaritaville, Vacation Club, Club Windham and more. He

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<v Speaker 2>does us from I believe a Chili Orlando on this Tuesday.

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<v Speaker 2>It's a little chili up here as well.

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<v Speaker 3>Mike.

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<v Speaker 2>Great to have you back with us. You operate in

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<v Speaker 2>a specific segment time share, So talk a little bit

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<v Speaker 2>more about who exactly is your customer.

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<v Speaker 4>Remind our audience, Well, ultimately we're one hundred percent leisure

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<v Speaker 4>travel company and our demographic is around one hundred and

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<v Speaker 4>ten thousand dollars of average income, average FICO over seven

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<v Speaker 4>hundred and thirty average FICO score, age group upper forties,

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<v Speaker 4>low fifties, and really what when you start to think

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<v Speaker 4>about who likes to travel with us, no matter the brand,

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<v Speaker 4>they want bigger accommodations, they want consistency of brands, and

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<v Speaker 4>they want good value for their money. And that's really

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<v Speaker 4>the space that we operate in. And if you think

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<v Speaker 4>about these last five years, where inflation is running high

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<v Speaker 4>and you've already locked in your vacation dollars, the value

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<v Speaker 4>component has been really strong.

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<v Speaker 3>It has propelled our growth here in the last five years.

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<v Speaker 1>How much of your business is sales of new memberships

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<v Speaker 1>versus people actually just using what they bought maybe years.

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<v Speaker 4>Ago, right, It's actually one of the best endorsements of

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<v Speaker 4>people's love of the product is that every year about

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<v Speaker 4>sixty five percent of our income mental purchases are from

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<v Speaker 4>people who already own with us and want either more

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<v Speaker 4>space or more vacation time. The rest are from our

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<v Speaker 4>new owner base who are dipping their toe in the

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<v Speaker 4>water and seeing what this.

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<v Speaker 3>Type of vacation travel is all about.

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<v Speaker 4>So not only are we getting two thirds of our

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<v Speaker 4>sale roughly from people who already own with us, what

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<v Speaker 4>we also see is the people who've paid for their

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<v Speaker 4>ownership already. There's a ninety eight percent retention rate, so

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<v Speaker 4>two massive validations that once people own they really love

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<v Speaker 4>the product and keep buying more.

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<v Speaker 1>So, you know, time shares they get a bad rap.

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<v Speaker 1>I mean they have a bad rap. I mean, if

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<v Speaker 1>you like, just Google, get out of timeshare. There are

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<v Speaker 1>legal companies that specialize in getting you out of time shares.

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<v Speaker 1>Is yeah, I mean you know this. You know the industry.

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<v Speaker 1>Is your product different than what people know as time shares?

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<v Speaker 1>And why that?

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<v Speaker 3>Yeah?

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<v Speaker 4>Wrap, Look, it's interesting because I can even feel the

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<v Speaker 4>a little bit uncomfortableness of asking the question because it

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<v Speaker 4>has a history that predates the Great Financial Crisis. But

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<v Speaker 4>I think the untold story here and why I love

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<v Speaker 4>coming on shows like yours, beyond it being a great show,

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<v Speaker 4>is that the industry has dramatically changed. Eighty five percent

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<v Speaker 4>of the sales today are by companies that you might

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<v Speaker 4>book your business day, whether it's Merritt, Hilton, Wyndham, Margueriteville,

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<v Speaker 4>Holiday and Disney. All of these are the brands that

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<v Speaker 4>have come to the forefront in the last ten years.

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<v Speaker 4>And the value proposition, the way of vacationing with a

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<v Speaker 4>brand you trust, is not the reputation that it gained

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<v Speaker 4>great financial crisis where it was independent real estate developers,

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<v Speaker 4>And I would just encourage everyone to do your own

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<v Speaker 4>research about these type of advertisements. There's a lot of

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<v Speaker 4>press out there that's shown some really negative stories about them.

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<v Speaker 4>That's for your people to do that our own research.

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<v Speaker 4>But what I will tell you is that our retention rate,

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<v Speaker 4>as I mentioned, ninety eight percent, two thirds buy more.

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<v Speaker 4>And this is now a massively branded industry that it

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<v Speaker 4>wasn't when it gained that reputation you're referring to.

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<v Speaker 2>So what's like the trickiest component of your business? Is

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<v Speaker 2>it properties? Management, labor? I'm just curious.

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<v Speaker 3>Yeah, it's a complicated business.

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<v Speaker 4>We run a sales and marketing business, we run a

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<v Speaker 4>management business. We operate the club so that we can

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<v Speaker 4>get people from one of our two hundred and eighty

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<v Speaker 4>resorts to another, and we access the ABS market three

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<v Speaker 4>times a year to.

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<v Speaker 3>Sell our notes and gain cash flow. I think it's.

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<v Speaker 4>The management of all of that together. When you look

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<v Speaker 4>at our company's performance, the satisfaction of our customer base,

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<v Speaker 4>and the growth of our brands. We've been highly successful

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<v Speaker 4>and shown growth and showed a way to grow, and

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<v Speaker 4>it's shown through in our equity, But it's the experienced

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<v Speaker 4>leadership to combine several very complicated businesses together to make

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<v Speaker 4>sure that it's seamless for the consumer and that we're

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<v Speaker 4>also ultimately fulfilling our mission, which is getting people on

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<v Speaker 4>great vacations. So I would say it's the complexity of

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<v Speaker 4>the management as opposed to an individual component that's really

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<v Speaker 4>hard to operate. I would just add that one component

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<v Speaker 4>that has become more complex is the development of real

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<v Speaker 4>estate has become a lot more expensive ground up, so

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<v Speaker 4>we've moved to a conversion strategy and a lot of

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<v Speaker 4>our new resorts.

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<v Speaker 1>So I want to talk a little bit more about

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<v Speaker 1>the demographics here of your clientele, and certainly, you know

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<v Speaker 1>with twenty different brands, it depends on what actual brand

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<v Speaker 1>we're talking about. You did give us some age demographics

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<v Speaker 1>and where people are generationally, but in terms of space

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<v Speaker 1>and what are they spending, what do you know about

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<v Speaker 1>where you know in terms of their other demographics like

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<v Speaker 1>household net worth and what part of the economy you're

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<v Speaker 1>able to get.

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<v Speaker 4>Right, Well, what we find in our product is the

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<v Speaker 4>vast majority, irrespective of the brands, are going to want

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<v Speaker 4>to be in a situation where they want to know

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<v Speaker 4>what they can expect from their vacation, and a Margaritaville

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<v Speaker 4>guest is going to want a sand, a drink in

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<v Speaker 4>your hand, that type of lifestyle.

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<v Speaker 3>Whereas our newest.

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<v Speaker 4>Brand, Eddie Bauer, these are people that want to hike

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<v Speaker 4>in Zion National Parker or get to the great outdoors

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<v Speaker 4>and enjoy a family reunion.

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<v Speaker 3>Either way.

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<v Speaker 4>Our financial demographics or what I explained earlier, but what

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<v Speaker 4>we see as the travel trend is people want experiences

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<v Speaker 4>that match their personal lifestyle as opposed to four walls,

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<v Speaker 4>and then they have to go find their experience outside

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<v Speaker 4>of the resort. So that's why we're launching Sports Illustrated

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<v Speaker 4>brand and Eddie Bauer. We have Margaritaville Club Wyndham. You mentioned.

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<v Speaker 4>We see an opportunity to customize your experience inside the

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<v Speaker 4>resort and outside as opposed to over separating the financial demographics.

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<v Speaker 4>I will say one of our big focus is to

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<v Speaker 4>pull the average age down as we launch new brands

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<v Speaker 4>over the upcoming years.

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<v Speaker 2>You know, it's interesting, like I do think about like

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<v Speaker 2>how consumers relate to a specific brand. I mean that

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<v Speaker 2>really moves the needle, doesn't it whether it's Sports illustrated.

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<v Speaker 2>I'm just curious, and how do you guys think about

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<v Speaker 2>what brands you want to affiliate yourselves with?

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<v Speaker 4>Right? If you know, I have two children that are

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<v Speaker 4>children young men that are at a university.

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<v Speaker 2>Always were always to us, Right, are there always kids?

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<v Speaker 4>Yeah?

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<v Speaker 3>They really are, They really are.

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<v Speaker 4>But I'll tell you if I were to go go

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<v Speaker 4>up to ann Arbor and I have the option to

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<v Speaker 4>stay in an unbranded hotel with four walls or something

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<v Speaker 4>that affiliates itself closer to the university, there's a natural

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<v Speaker 4>pull to it. And I can apply that if you're

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<v Speaker 4>going to go to a beach destination and you have

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<v Speaker 4>a chance, and if you're a parent head and you

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<v Speaker 4>want to be in that Margaritaville environment versus a resort.

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<v Speaker 4>That's a brand that has thousands of resorts everywhere from

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<v Speaker 4>the highways to the resort destinations. You're going to go

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<v Speaker 4>to the Margaritaville location. And our club Windom has a

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<v Speaker 4>similar type of affiliation. So we just find that people

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<v Speaker 4>are moving more and more to the lifestyle that attracts them,

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<v Speaker 4>and we are therefore developing brands that allow them to

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<v Speaker 4>just do that naturally. To enjoy their lifestyle inside of

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<v Speaker 4>the resort and outside, and it's it's already been received

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<v Speaker 4>with a lot of great reception and we're excited about

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<v Speaker 4>what we can do going forward.

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<v Speaker 1>What's the brand? You have so many different brands. You

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<v Speaker 1>mentioned Margaritaville, we talked about wind, Eddie Bauers. What are

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<v Speaker 1>you missing?

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<v Speaker 3>I think there's a few things that we have to consider.

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<v Speaker 4>We don't have anything in the luxury space today, what

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<v Speaker 4>I would say pure luxury. There's a lot of opportunities

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<v Speaker 4>to tie our type of product.

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<v Speaker 3>To the crew to crewise type of companies.

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<v Speaker 4>And then, as is always the case, someone you know

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<v Speaker 4>five years ago would have said, well, Eddie Bauer is

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<v Speaker 4>not a hospitality name, but you immediately put that to

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<v Speaker 4>an outdoor, outdoor living lifestyle. And I think our challenge

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<v Speaker 4>is there's the typical hospitality verticals, which would include luxury,

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<v Speaker 4>but there's also just niche, niche lifestyle opportunities that we

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<v Speaker 4>will look for. But you know, if I could just

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<v Speaker 4>step back a second, the key to our success is

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<v Speaker 4>whatever we do, we execute against it and we deliver

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<v Speaker 4>on what we promise the street, and that success allows

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<v Speaker 4>us more and more access to more and more brand,

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<v Speaker 4>So I would expect that to allow us to move

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<v Speaker 4>into these spaces that we currently aren't in.

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<v Speaker 2>Well, I'd love to be sitting at Margaritaville Vacation, a

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<v Speaker 2>Margarita vacation club with the Margarita in my hand. But

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<v Speaker 2>having said that, before we go, Mike, any signs of stress,

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<v Speaker 2>any signs of you know, economic you know, concerns as

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<v Speaker 2>you look at your business, or maybe what it tells

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<v Speaker 2>you about the outlook here.

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<v Speaker 4>Well, I would say my personal sentiment and what I'm

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<v Speaker 4>seeing in our business is very similar to it was

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<v Speaker 4>thirty days ago, which was they're still uncertainty out there,

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<v Speaker 4>which causes us to be looking intently every day with

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<v Speaker 4>any metric internally that would that would signal the economies

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<v Speaker 4>going one way or the other. Thirty days on from

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<v Speaker 4>our earnings call, I would say that our performance and

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<v Speaker 4>our outlook on the economy looks very similar than it

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<v Speaker 4>did at the end of October when we reported our

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<v Speaker 4>leisure travel demand and is looking good for Q four.

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<v Speaker 4>With the sound that the shutdown is coming to an end,

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<v Speaker 4>I was starting to worry that we might start to

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<v Speaker 4>see changes in behavior between air and drive to traffic.

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<v Speaker 1>Are you seeing that at all, just very briefly, we have.

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<v Speaker 4>Not, And in fact, it looks like our twenty five

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<v Speaker 4>bookings here in Q four are at or slightly above

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<v Speaker 4>where they were last year. And we haven't seen a

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<v Speaker 4>dramatic change. We've seen ever so slightly that changed from

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<v Speaker 4>fly to drive to but I'm really confident that it

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<v Speaker 4>hadn't gone on another week or two into the Thanksgiving season,

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<v Speaker 4>we would have saw a noticeable shift of people in

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<v Speaker 4>New York saying, look, let me just get to a

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<v Speaker 4>drive to destination as opposed to flying to Orlando. I

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<v Speaker 4>don't want to deal with the hassle with my free time. Fortunately,

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<v Speaker 4>it looks as if we will avoid that. But at

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<v Speaker 4>this point we have not seen an indication that that

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<v Speaker 4>has caused changing leisure travel.

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<v Speaker 2>Mike Brown, President and CEO of Travel and Leisure Company,

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<v Speaker 2>joining us from Orlando