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Speaker 1: Let's keep the conversation going now with Mike Brown. He

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Speaker 1: is the CEO of Travel and Leisure, and let's start,

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Speaker 1: of course with that guide that seems to be really

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Speaker 1: weighing on shares this morning. You take a look at

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Speaker 1: third quarter adjusted IBADA between two hundred and thirty five

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Speaker 1: million dollars to two hundred and forty five million dollars.

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Speaker 1: The estimate was for about two hundred and fifty three

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Speaker 1: million dollars. Give us some context on why you guided

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Speaker 1: lower than had been expected.

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Speaker 2: Well, let me step back and look at the full

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Speaker 2: year guide.

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Speaker 3: On our earnings call, we actually raised our full year

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Speaker 3: guide from where we were in the previous quarter. And

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Speaker 3: what we pointed out on the call is the cadence

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Speaker 3: of those earnings between Q three and Q four was

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Speaker 3: just a little misaligned to the street. The great thing is,

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Speaker 3: even though our Q three guide was a little bit lower,

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Speaker 3: our full year guide not only met our previous guidance

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Speaker 3: from q Q one, but we actually raised it a

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Speaker 3: little bit. So that's more a matter of guiding between

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Speaker 3: quarters that it is our full year expectation. In the end,

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Speaker 3: our underlying business is really performing strong and reflecting a

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Speaker 3: consumer demand that's very high this summer and what we

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Speaker 3: expect for the remainder of the year.

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Speaker 1: I do want to talk about the detail that I

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Speaker 1: noticed that there was a higher than expected low loss

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Speaker 1: provision some of the sales side notes focusing on that

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Speaker 1: this morning. What does that say about your lower end customer?

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Speaker 1: Of course, we talk all the time about the weakening

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Speaker 1: consumer here, and you take a look at this higher

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Speaker 1: than expected Marco, what are you seeing there?

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Speaker 3: Well, I think there's nothing different in what you're seeing

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Speaker 3: at our company than you're seeing in the macroeconomy. Is

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Speaker 3: when you get to the lowering consumer, which is anything

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Speaker 3: we're defining is below seven hundred FCoS, those consumer finance

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Speaker 3: portfolio numbers are slightly weaker. Seventy six percent of our

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Speaker 3: portfolio is above the seven hundred ficos. So I don't

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Speaker 3: think for us there was any surprise that you would

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Speaker 3: expect to see a little bit more weakness.

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Speaker 2: It's reflective of what we're seeing.

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Speaker 3: In the macroeconomy and people are reacting to it. I

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Speaker 3: was listening before the break that there were a lot

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Speaker 3: of companies that were lowering their guidance over concern in

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Speaker 3: the consumer.

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Speaker 2: For us, we're the opposite.

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Speaker 3: We raised our guidance despite what we're seeing at a

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Speaker 3: three billion dollar consumer finance portfolio. We're simply reflecting what

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Speaker 3: others are seeing in the market while raising our full

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Speaker 3: year guidance and reflecting strong consumer demand in the last

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Speaker 3: two quarters of the year.

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Speaker 4: Mike, how do you describe what's going on in the

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Speaker 4: travel market here? If there are a lot of worries

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Speaker 4: kind of across corporate America here about middle to lower

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Speaker 4: end consumers, lower income consumers, then how do you think

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Speaker 4: about who is driving most of the spend. Is it

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Speaker 4: these big spenders going to hire end locations or is

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Speaker 4: it people who are just trying to spend a summer

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Speaker 4: break more locally.

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Speaker 3: Well, we're one hundred percent leisure company and leisure travel company,

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Speaker 3: and what we see just the nature of our business,

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Speaker 3: which is pre paid vacation.

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Speaker 2: Is when the economy titans, people will not give up

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Speaker 2: their vacation.

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Speaker 3: I think we saw that in twenty two and twenty

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Speaker 3: three as people returned as fast as they could to

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Speaker 3: getting on vacation after the pandemic. What you will see

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Speaker 3: is a change of behavior as to where their spend

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Speaker 3: will be. They may decide to come to a regional

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Speaker 3: destination that allows them to save some money on.

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Speaker 2: A drive to versus a fly to.

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Speaker 3: We're seeing our biggest demand in your traditional vacation spots

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Speaker 3: or Land or Las Vegas, Las Vegas and the beach

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Speaker 3: destinations in the summer months.

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Speaker 2: So the consumer is very wise.

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Speaker 3: They make clever decisions based on where the economy is

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Speaker 3: and with a little bit of uncertainty ahead for the

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Speaker 3: second half of the year, for our consumer, they're just

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Speaker 3: driving maybe a little bit more in choosing to spend

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Speaker 3: their money.

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Speaker 2: But what they will not do.

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Speaker 3: Is give up their vacation in our space, which is prepaidvacations.

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Speaker 4: I'm curious about your view into the second half of

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Speaker 4: the year at this point, Mike. Are you most concerned

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Speaker 4: on behalf of your customers here for high pricing that

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Speaker 4: remains even when you see inflation kind of cooling here.

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Speaker 4: Or is it the fact that people are worried about

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Speaker 4: the economy and growth slowing down, maybe even a recession.

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Speaker 3: Well, I think whether it's travel decisions or investing in

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Speaker 3: the stock market, uncertainty is always an element that gives people, Paul,

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Speaker 3: So I'm not concerned that our consumer, which eighty percent

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Speaker 3: of them have fully paid for their vacation, are not

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Speaker 3: going to go on vacation.

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Speaker 2: We actually sit very well because.

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Speaker 3: It's value driven and people can really use their money

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Speaker 3: how they choose to. But when I look more broadly

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Speaker 3: at the leisure travel sector, I think, whether it's interest rates,

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Speaker 3: an election, or the macroeconomy, taking uncertainty off the table

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Speaker 3: will be the best thing for the travel consumer in

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Speaker 3: the second half of this year.

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Speaker 5: Is I mean, you get the lion's share of your

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Speaker 5: revenue from time share sales?

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Speaker 2: Is that right?

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Speaker 5: Vacation ownership? Is that timeshare sales? And what is that consumer?

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Speaker 5: What is the profile of that consumer?

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Speaker 3: So our consumer on an average has a household income

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Speaker 3: just over one hundred thousand dollars and our average FICO

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Speaker 3: score is about seven hundred and forty for all of

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Speaker 3: our new originations, So it is a strong consumer.

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Speaker 2: And over the last three years, what we've seen.

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Speaker 3: Is that the inflation has actually been a tailwind for us,

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Speaker 3: because if you've paid for your vacation in twenty sixteen,

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Speaker 3: and your neighbor who doesn't own a timeshare is vacation

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Speaker 3: at twenty twenty three prices, you're seeing tons of value

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Speaker 3: and most of our consumers are about in that high

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Speaker 3: forties early fifties range, but we're starting to see about

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Speaker 3: out fifteen.

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Speaker 2: Percent be millennials and sorry, fifteen percent millennials, and.

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Speaker 3: We're starting to see our first Gen Z purchasers in

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Speaker 3: the past two years.

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Speaker 5: I wonder about a new segment you have, which is

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Speaker 5: a sports illustrated vacations. It sounds totally cool, right, and

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Speaker 5: I think, for example, I could go to University of

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Speaker 5: Alabama and I hope I don't get a lot of

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Speaker 5: haters writing in roletide.

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Speaker 2: But what does that.

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Speaker 5: Segment look like and how is the growth trajectory.

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Speaker 3: Well, I can pretty much assure you you'll get some

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Speaker 3: Auburn fan base, Commet or the War Eagles.

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Speaker 2: That's right.

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Speaker 3: But I think hospitalities in for a different macro trend.

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Speaker 3: People are looking for experiences that relate to their personal life,

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Speaker 3: and we already have.

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Speaker 2: The Margaritaville brand.

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Speaker 3: And when I say the word Margaritaville, you think you

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Speaker 3: know sand with.

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Speaker 2: A margarite in your hand.

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Speaker 3: And when you talk college athletics and sports illustrated, you

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Speaker 3: think of a certain clientele that wants to have a

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Speaker 3: certain experience when they go to the University of Alabama

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Speaker 3: or another one of our resorts that will be bringing

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Speaker 3: forward in the college town scenario, people are passionate. College

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Speaker 3: sports is a passion location, and I think it's fair

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Speaker 3: to say if you want to associate your sports experience

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Speaker 3: with your alumni experience, there's not many hospitality offerings out there,

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Speaker 3: so we're excited to bring the most iconic name in

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Speaker 3: sports to hospitality and to tie it into the passion

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Speaker 3: of college sports.

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Speaker 1: Well, my college didn't even have a football team, but

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Speaker 1: that's a whole different conversation. Before we let you go,

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Speaker 1: I do want to ask about some recent acquisitions you've

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Speaker 1: made the Core Vacation Club, for example, When you take

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Speaker 1: a look at your portfolio and future growth, are you

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Speaker 1: considering more acquisitions of that type.

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Speaker 3: Well, what we believe the future of the industry is

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Speaker 3: to grow the range of your consumer. We have a

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Speaker 3: very close relationship.

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Speaker 6: With Wyndham Hotels and that relationship has led us to

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Speaker 6: over two billion of vacation ownership sales that we're projecting

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Speaker 6: this year.

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Speaker 2: We think that same business model is.

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Speaker 3: Replicable at Martaritaville, at Sports Illustrated, at a Core and

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Speaker 3: what could be future other brands We want to keep

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Speaker 3: our eye on the ball, so we'll be very discerning

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Speaker 3: in any other acquisitions or partnerships we make. But we

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Speaker 3: absolutely believe the Vacation Ownership platform will be expanded by

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Speaker 3: the addition of incremental brands that are iconic, as well

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Speaker 3: as incremental databases that is supportive of our business model,

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Speaker 3: which is a direct marketing business model.

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Speaker 5: Mike, thanks so much for joining us. Really fascinating stuff.

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Speaker 5: Mike Brown, there is the CEO of Travel and Leisure