Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Travel and leisure forecasting a rebound in it's timeshare business.
Speaker 2: Not really a rebound. It's actually continues to see strong
Speaker 2: games year after year. It's done well in this sector.
Speaker 2: The company does see travel and membership revenue falling in
Speaker 2: the second half of the year. Shares are near twenty
Speaker 2: twenty two levels, so they've really that's where you've seen
Speaker 2: a rebound. Joining us now is Mike Brown, the president
Speaker 2: and CEO of the company, And Mike, you know, I'm
Speaker 2: looking at the numbers that just get better and better
Speaker 2: and better every year in terms of estimates, but travel
Speaker 2: has been a worry, especially for lower end consumers this year.
Speaker 2: How does it look to you?
Speaker 3: Well, for us, we've seen I think the two words
Speaker 3: I describe or resilience and consistency. We saw throughout the
Speaker 3: second quarter. Why there was some wobble early in the
Speaker 3: quarter from hotel groups, ours continued to stay strong and
Speaker 3: our consumers, who typically book about four months prior to
Speaker 3: the summer travel, they own their vacation already, they've planned
Speaker 3: for it, so they're going to use it. And we
Speaker 3: didn't see any wobble for us at any point in
Speaker 3: the second quarter, and then as we look already into
Speaker 3: the third quarter, travel remains consistent and steady for the
Speaker 3: next ninety days.
Speaker 1: Interesting. So you have a very unique business model, if
Speaker 1: you want to call it that. So, you know, unlike
Speaker 1: talking to some of the peers that we would consider
Speaker 1: in the travel industry, like you said, you have a
Speaker 1: much more set sort of membership base. So I mean,
Speaker 1: do you describe yourselves as selling time shares? Is that
Speaker 1: or do you phrase it differently?
Speaker 3: No, it's time share, Some people call it vacation ownership,
Speaker 3: shared ownership. Either way, the fundamentals are very straightforward. Is
Speaker 3: you prepay your vacations and in times in rising prices
Speaker 3: like we've seen the last three years, the value you
Speaker 3: get in your ownership is just super noticeable. For families
Speaker 3: who are looking to preserve the value of their vacation dollars,
Speaker 3: they're definitely going to go. And what we've seen this
Speaker 3: year is as prices have risen for hotel rates or
Speaker 3: vacation rentals, they've seen incredible value in their ownership. And
Speaker 3: for our owner base, which is over eight hundred thousand,
Speaker 3: eighty percent of them have fully paid for their ownership.
Speaker 3: So there's no reason for them not to travel. Usually
Speaker 3: the only decision they make are are they going to
Speaker 3: fly or are they going to drive? And even in
Speaker 3: those trends, we haven't seen a change. So value flexibility
Speaker 3: and they fully paid for it. So why not get
Speaker 3: on vacation this summer.
Speaker 2: That's interesting. So when these airlines, the big airlines come
Speaker 2: out with earnings lately, what they're saying is it's their
Speaker 2: higher income consumer, it's you know, premium economy, it's the
Speaker 2: business class tickets that are doing well. What's your target
Speaker 2: market at travel and leisure? Who are you selling these
Speaker 2: properties to?
Speaker 3: So as we came out of COVID, we changed our approach.
Speaker 3: We saw that our business was most efficient at a
Speaker 3: six hundred and forty FICO and above, and that's so
Speaker 3: our minimum standard. But our average FICO for new purchasers
Speaker 3: is seven hundred and forty six, average household income almost
Speaker 3: one hundred and twenty thousand dollars, and as far as
Speaker 3: Gen X millennials and Gen Z that represents nearly seventy
Speaker 3: percent of our new purchasers. So it's really appealing to well,
Speaker 3: let me flip it around. We're less exposed to that
Speaker 3: lower and consumer that you were just speaking to, and
Speaker 3: we're showing that the hiring consumer that seven forty six
Speaker 3: FICO traveler is continuing to go on vacant and we're
Speaker 3: benefiting from it. Our forward look is showing our bookings
Speaker 3: to be super consistent for the next three months, as
Speaker 3: well as our portfolio loans of people who do use
Speaker 3: finance to purchase their timeshare. There's really been no deterioration
Speaker 3: in the portfolio that we have, Mike.
Speaker 1: In the commercial break, Matt and I were taking a
Speaker 1: look at the MODL screen on the Bloomberg terminal, taking
Speaker 1: a look at the different segment revenues for travel and leisure,
Speaker 1: and you can see the vacation ownership, like Matt talked about,
Speaker 1: it's been steadily growing over the past several quarters. But
Speaker 1: then I take a look at corporate has been declining.
Speaker 1: It looks like for several periods in a row here,
Speaker 1: and I wonder how you're approaching that part of the business.
Speaker 1: Are you deemphasizing this or is there a plan to
Speaker 1: turn corporate around.
Speaker 3: Well, we basically have two primary segments and the core
Speaker 3: of our business. Seventy percent of our EBITA comes from
Speaker 3: our vacation ownership segment we've launched. Over the past three years,
Speaker 3: we've rebranded the company from Windom Destinations to Travel Leisure
Speaker 3: because we want to pursue a multi brand strategy. With
Speaker 3: that strategy, we've been able to acquire a core vacation club,
Speaker 3: a world class hospitality brand. We've been able to accelerate Margaritaville,
Speaker 3: and we'll be launching later this year Sports Illustrated Resorts,
Speaker 3: so we will be we will be emphasizing that segment
Speaker 3: of the business. The corporate which is which depending on terminology,
Speaker 3: is really a portion of our business, the smaller one
Speaker 3: that has structural headwinds that we think will become less
Speaker 3: a portion of our business going forward. But despite those headwinds,
Speaker 3: we've been able to meet our second quarter targets of
Speaker 3: two hundred and fifty million of view and reafform reaffirm
Speaker 3: our full year guidance. So we think we'll see more
Speaker 3: emphasis on the vospace and less emphasize us on the
Speaker 3: rest of the business going forward. But we think that
Speaker 3: strategy will lead to mid single digit growth and incredible
Speaker 3: return of cash to our shareholders, which is about fifty
Speaker 3: percent free cash flow to Ebita.
Speaker 2: Much has been made of a ten percent drop eleven
Speaker 2: percent drop in the US dollar from its hives. Mike,
Speaker 2: does this affect you? How do you look at this?
Speaker 2: Are are you know, Europeans with more money able to
Speaker 2: come over and spend more? Are Are are you having uh?
Speaker 2: You know, are are you having to pay a little
Speaker 2: bit more when you buy foreign destinations? What's what's what's
Speaker 2: the mean to you?
Speaker 3: Yeah? You know, all the macro news, whether it's currency inflation, tariffs,
Speaker 3: none of that has really impacted US. And it's for
Speaker 3: some simple reasons. Percent of our US consumer ninety percent
Speaker 3: of our consumers are US domisi child, which means all
Speaker 3: of our risk is inside the US, which has great regulation,
Speaker 3: it has great affinity toward brands like ours. So the
Speaker 3: international travel, the weakness of the dollar, it might affect
Speaker 3: us positively for European travel to the US, but it's
Speaker 3: really on the margin. It won't affect our full year results.
Speaker 3: It simply may modestly change our mix because of our acquisitions.
Speaker 3: For instance, a core vacation club is primarily in Asia.
Speaker 3: All of that cash recycles within the region and it
Speaker 3: doesn't create an incremental risk to US. And again, ten
Speaker 3: percent of our business is international, So what we're really
Speaker 3: watching for is how the US economy and how the
Speaker 3: US consumer is holding up. And as we saw in
Speaker 3: Q three, as we're already seeing, sorry, as we saw
Speaker 3: in Q two, and as we're already seeing in Q three,
Speaker 3: that consumer and the US economy from our perspective, is
Speaker 3: holding up extremely well.
Speaker 1: All Right, that's a good place to leave it. Mike,
Speaker 1: always great to speak with you. That is Mike Brown.
Speaker 1: He is the CEO of Travel and Leisure