Marriott Vacations Worldwide Corporation (VAC) Earnings Call Transcript & Summary

Hello. Good afternoon. My name is Anthony Powell. I'm the hotel analyst here at Barclays. Today, we have John Geller, CFO; and Neal Goldner, IR of Marriott Vacations Worldwide. Gentlemen, welcome.

Welcome. Thank you. Great to be here, Anthony.

Thanks a lot. Thanks for your time today. So we'll jump right into questions. So clearly, this has been a tough year for the travel industry given COVID. And there's been a worry that the timeshare industry could underperform in these types of environments. But when you look at your performance, it hasn't been the case, your occupancy in Florida got to 70% in September, your EBITDA positive in the third quarter. So could you go into how you and the industry were able to outperform any other types of lodging in the third quarter this year?

Sure. Yes, once again, thanks for having us today. High level, the resiliency of our model, I think is the fact that we are focused 100% on leisure travel. I think some of the knock-on timeshare coming in, at least from a historical perspective, is the potential of a recession happening or some type of downturn and what that would mean for contract sales people. Like to look back at '08 and '09, and obviously, there was a much different time and the financial crisis is different than COVID, but I think that was the overall concern. And the fact that timeshare has a knock of being more capital intensive. Clearly -- hopefully, we just proved some of those kind of miss, I would call them in that. Early on, we made some hard decisions to take out or furlough, I should say, a significant amount of our workforce as it related to our operations in our sales, reduce costs. And at the same time, remember, about half of our revenues are from a very sticky, resilient revenue streams, whether that is our management business. Our membership dues on the interval side and our own vacation ownership club dues as well as our financing profit. So -- and then what we saw very quickly as things started to reopen, is the resiliency of our owners and the willingness and desire of people that wanted to get back on vacation, even with COVID out there and very quickly, we saw our occupancies which historically run 90% on a year-round basis, come back very quickly. We're not necessarily in all areas back to our normal occupancy, but we've seen those occupancies rebound significantly. With that, with the right kind of incentives, things like that, people are buying. Our volume for guests, which is an efficiency metric for sales divided by tours, how many people are buying, it takes into account price and closing efficiency are actually up versus pre-COVID, right? So the product resonates with people. You got the stickier 50% of your revenues. And now we're seeing the sales come back relatively quickly, obviously, relative to where the world is on COVID and the fact that we don't have the vaccine yet. We're seeing higher cases of COVID in the U.S. However, we're not seeing a significant impact on our business here in the near term.

To that end, you put out some recent data in presentation this morning. Can you maybe go into what you saw in terms of sales quarter-to-date and how that impacts your near term outlook?

Yes. I mean, back coming into the fourth quarter, we put out guidance of contract sales for the quarter of call it $160 million to $185 million of Contra Act sales, the sale of our vacation ownership product. That sequentially was, call it, a 15% increase of third quarter growth and at the high end of the range, it was at 30%. So somewhere between 15% to 30% growth. We're basically kind of where we thought we would be, however, I think the big difference is you have higher COVID cases, right? And we put out that wider range because we didn't know, right, what some of that impact would be. Once again, we still have the ways to go here as we go through December. But at least through October and November, we're at $118 million of contract sales. So yes, sequentially, we saw a little bit of improvement in contract sales in -- from October to November. So once again, we've got the benefit of Hawaii coming back online, and that's been helpful here. But things continue to ramp up, maybe not as quickly now that you've had the higher COVID cases. I should mention, obviously, there is still risk that government, local state governments could put prescriptions on. We did see that out on the island of Hawaii. And Hawaii beginning today, they went back to a 14-day self-quarantine for all arrivals into that island. The good news at this point, your other islands in Hawaii have not as long as you show up with a a negative PCR test within 3 days of your arrival, you don't have that self quarantine. So -- but that's the risk here in the near term. The good news is notwithstanding all this, the model still is showing its resiliency. And the great news is we've got a vaccine coming, right? So while you can have some bumpiness here in the interim, we've got, hopefully, a light here at the end of the tunnel as we get through the first quarter into the second quarter next year based on the -- hopefully, the broader availability of a vaccine.

You talked earlier about 7 steps you took in the second quarter, to maybe fortify the business and to reduce cost. Maybe going to what those were and how much of those cost savings could be permitted into the future?

Yes. Most of the costs that we took out, whether it was furlough or reduced work weeks are going to come back with production. There's a few in there that we learned some as we've been shut down, that are probably more permanent. For us, our cost takeout is still going on related to a lot of the work that got started with the Interval acquisition back in 2018, right? So with that, we originally come out and said we expected a minimum of $75 million of synergies and cost savings because of that acquisition. We later took that up to at least $125 million and now with COVID and continued work, we do think we can get to a minimum of $200 million of hard cost take. Meaning, if you go back to 2019, if you will, we had about $55 million in '19 of those cost savings in place. If you fast forward to a more normalized year, hopefully, by 2022, if we get all these in place by the end of 2021, you've got $150 million, give or take, of potential upside of additional permanent cost takeout on arguably top line revenue, right? So they're not going to come back with the revenue side. So some of that came out of the shutdown and some of the things we learned there. But the vast majority were things that we were focused on prior to COVID, and we've continued to learn more and come up with more opportunities as we continue to integrate our acquisition of ILG.

Thanks for tha Matt. Take a step back, I mean, amongst your peers, I think you regarded as having some of the higher income customers in this space in terms of FICO scores and household income didn't come is that the case? And how is that impacting your performance this year? And how do you think it will impact your recovery in future years?

Yes. We obviously, because of our price point and the upper upscale luxury product that we offer in Timeshare, yes, we focus on household incomes of $125,000 or more on average. So -- and when you think about the person that this product because of the price point, but also the space and the size of the units and the higher end locations, our average first-time buyer continues to be around 50 years old. So with that, comes a better personal balance sheet, right, in terms of assets and things like that. More investments probably in the stock market. And as a result, right now, our owners and first-time buyers are continuing to buy the markets obviously doing fairly well right now. But it's a broader resilient customer demographics at a higher end that typically is able to withstand more of the economic turmoil. And so that bodes well, I think, in a recovery.

Just coming to some of your markets. You have a lot of exposure to Orlando and Hawaii. I mean Florida opened for different reasons. Can you maybe go into recent trends in both markets, you talked a little bit about Hawaii, but maybe more broadly, and how do you expect Hawaii to really evolve over the next several quarters as the market reopens?

Yes. I mean, coming in for the quarter, we were -- I'll start with Hawaii and I mean we were seeing opened up, if you will, or they went away from the 14-day self-quarantined on October 15, right? So it had just kind of opened up as the quarter was beginning. And we saw good growth in occupancies up above 50% here for the month of November versus high 30s for the last couple of weeks of October. And the trends were continuing pretty well. Obviously, with the Hawaii shutting down -- not shutting down, but putting the self-quarantine back in place for 14 days. We will end up probably closing resorts' sales centers there. On a relative basis, it's about 1/3 of our Hawaii rooms. That being said, let's not obviously forget are people going to cancel coming to Hawaii? Or we've got capacity at our other resorts on Maui, at Wahu, the big island. So you could see a shift, if you will, some of that occupancy, still a little bit early to tell. But notwithstanding that, I would -- hopefully, as long as the other islands don't change their restrictions, my sense is we still should see sequential improvement, maybe not as much as we were expecting before the Hawaii restrictions went back into place. But generally continue to get better. Orlando and other big markets. So we said contract sales historically, about 25% come out of our Hawaii sales centers on an annual basis and about 18% come out of Orlando. So in total, 42%, plus or minus, of your existing or your historical sales come out of those sales centers, if you will. So good news Hawaii is coming back and might have some ups here depending on restrictions. But Orlando continued, which has been a little bit slower to recover. We saw sequential improvement from high 30s to mid-40s in occupancy in Orlando in November. Thanksgiving week, we were up in the mid-60s, not surprising. And as you look forward to December, right now on the books, we've got occupancies in Orlando in the Christmas week timeframe in the mid-80s right now, right? Now is there a risk that there -- people decide not to vacation because of higher COVID cases? Sure, I mean, that's always some risk. But for us, as we've always talked about, occupancy comes back, you get the in-house and packages, things like that, people staying at the resort, that's going to drive your contract sales. So things continue to maybe not as quickly, but continue to trend in the right direction.

Got it. You mentioned sales centers. I mean, are they all reopen now? Or if not, when will you expect to fully reopen across the next few months?

Yes. Right now, the -- almost all of them are. We do have a couple, for example, that are either like San Francisco that hasn't reopened out our resort there. New York is technically reopened from a sales center perspective, but our resort hasn't reopened in New York City, obviously, just given restrictions up there. So when you look at either the resorts that the sales center hasn't reopened or is open, but maybe in a very limited way, on a historical basis for '19, that was probably roughly 5%, 6% of our annual sales. So that just kind of gives in -- and most of them are open, obviously not operating at capacity, given occupancies in different locations. But we've got most of them back up and running at this point. And I would expect with the vaccine, San Francisco and more broadly, our resort in New York, which are the bigger to that are being impacted right now should start to reopen as we move through the first quarter.

Got it. And in terms of just overall inventory in new markets, how do you source your new inventory to sell for your contract sales? And how is that inventory sourcing plan changed given COVID and a lower slower sales you had this year?

Yes. It's a great question. We obviously use an asset-light model, meaning we don't have anything under development on our balance sheet right now. All our future inventory, new inventory, our contractual commitments with third parties to take them down at a specified period. So we do have, call it, roughly $140 million, $150 million of commitments of inventory here in 2021, which would typically be, call it, about 1/3 to 1/2 maybe of new inventory we would need to get. And then we've always said, we take inventory back on the secondary market in terms of deep battery repurchases based on availability there. And we always get that less than replacement cost, if you will, if you just think about it from a product cost perspective. So the mix of those 2, I think in the near term, once we get by the commitments in 2021, we have very limited after that, right? And with the slowdown in sales, we had a little bit more inventory than we would typically need. Yes, I think there'll be the opportunity to change the mix to take more inventory back on the secondary market, some of the COVID impact, not a lot, but I think that could shift our mix here in the near term. And the benefits of that, if you will, are twofold. One, that will give you some benefit of lower product costs potentially over the next couple of years because your mix will shift between repurchases of existing inventory at a better product cost than new inventory but also the opportunity on the cash flow side, right? Because we're not going to be buying as much inventory as we burn down inventory, excess inventory, if you will, on our balance sheet, just given where we're at. So that -- those are the 2 potential opportunities you have. But we'll get back to more of that 2/3, 1/3 over time as our inventory needs to be replenished for future sales in terms of how we think about new inventory and inventory on the secondary markets. And at the end of the day, that will also help drive our top line sales because we'll get new resorts, new sales centers as we buy and start new resource.

Yes, a follow-up to that. So I'm assuming those third parties were building the inventory that you're committed to buying, they didn't delay given they had a contract for you to buy, right? They continue to bid that.

Yes, correct. The inventory in all these locations is either completed or in the case of Costa Rica and Bali, yes, they're going to get delivered here. Their construction continued on through, albeit delayed. In the case of Bali, the new units stay there because of COVID, right? It impacted the construction time line somewhat. But no, I mean, in fact, Bali is a good example. We've got 88 -- 2-bedroom units there. It's being brand new construction, co-located with a renaissance hotel. And so they're at the same time, the developers continuing to build the hotel, right? And that will open up around the same time or slightly after our units are delivered. So yes. No, all that. We haven't seen -- notwithstanding our units continue to be constructive, but even our partners that were building a hotel or something co located, that continued on in that case too.

Got it. So I'm guessing, long term, like any construction real estate will be probably a bit of a dip in the industry as we kind of go through this current time period and get to the recovery. Is that fair?

Yes, that's fair.

Okay. Got it. Okay. Just moving on to the ILG acquisition that you highlighted earlier, you bought ILG in late 2018. Could you remind us what the rationale was for that deal? And you talked about the cost synergies, but maybe highlight some of the revenue synergies and opportunities you have from that transaction?

Sure. Yes. We talked about the cost. I think big picture, the strategy, if you think about it, at the time, we have the Marriott Vacation Club. And what this provided to us, which kind of, call it, when you look at the market, an opportunity to expand our brands. We had the Marriott Ritz Bart to get Westin, the Sheraton and St. Regis brands as well as Hyatt, which gave us a platform outside, if you will, the Marriott-branded platform, a much smaller platform, but obviously, more growth potential, I would say, longer term, fewer number of resorts today, more white space as we think about growth and where we want to put new resorts and grow contract sales, hopefully, faster, if you will, on a percentage basis than what you're doing on the much larger. So I think if you just look at it strategically from a vacation ownership, what we have that no one can go replicate through an acquisition, right? There's no -- there's not that level of scale at the upper upscale and luxury side, right, in terms of the number of resorts, the number of owners, right, maybe there's some one-off opportunities, but the ability to get that scale and the iconic brands and locked that up for a long period of time, with now 600,000 loyal owners, et cetera, made all the sense in the world, right? And the revenue opportunities come from the fact that if you just look at our VPG on the Marriott side was significantly higher than what Westin Sheraton were doing on average. And some of that had to do with, I would call, a superior licensing agreement that we had with Marriott that ILG didn't have when it bought the business from Starwood in terms of marketing opportunities, right? And the ability to have exclusive rights to the Marriott Bonvoy database and call transfer programs and things like that. And the opportunity on the revenue side is to better leverage at the Westin Sheraton, those tour channels, the branded channels that here before that Vistana didn't have necessarily access to because of their contractual arrangements with Starwood at the time and then Marriott. So that gives us the opportunity. That's a 20 -- if you just normalize the BPS, there was a 20% to 25% revenue upside on the standup piece, right, just for that, we're making good progress. We have closed the gap, but we still have got opportunities when COVID get. So that was part of it. The other thing which we haven't done yet, and the goal is still to get to this year in 2022, we still sell the same products that we're still prior to the acquisition, right? So we got a Marriott Vacation Club, we've got a Westin Flex product, we've got a Sheraton product. And so the idea to have a consolidated product, right, for Marriott brands, high end will always be a separate platform, separate license or but to get to 1 product form that you're selling it to all your folks at the sales table as well as the benefit of bringing all those resorts together under 1 cohesive product form, that's the opportunity. And there's a lot of technology and things that we're going through right now to get to that point. But that's still a broader opportunity that hopefully, when you sit down today, across the table from somebody, if you're at a Marriott sales center, we're just pitching you the Marriott resort, which is still a great portfolio of resorts. But in the future, we'll be able to include the Westin and the Sheraton because they're going to be part of that call it, consolidated product form in a way that will allow us to sell it a little bit differently, which should increase the value proposition, right, in terms of people's buying decisions. So that's still to come, too, in terms of additional revenue opportunities.

Yes. And to that end, the Westin and Sheraton brands are -- are much smaller than a Marriott Club in terms of the number of resorts. It can you kind of grow those brands to be the same size over time? Or are there any kind of location restrictions or anything that prevent you from doing that? And what's kind of the overall brand strategy for those 2 relative to Marriott?

Yes. Yes. To your point, clearly, once again, if you think about worst and white space on a map of where you could add new flags, yes. I mean with the Westin and Sheraton, we have additional places we don't have, right? And the Sheraton customer, the price point might be a little different than obviously, the Marriott and even the Westin and all that. So the ability to add resorts with different brands that offer a different value proposition, albeit in one system, right? But it's a points based system, that's the opportunity, right? So yes, we're going to continue to look for ways to leverage brands in places where we don't have them today. And then separately, I may mention Hyatt. I mean, it's its own separate platform, right? And we've got 16 resorts at Hyatt today, and we see that as a huge opportunity, right, over time, to really grow the Hyatt trend and so we were getting to that. We had to get a consent from Hyatt on the change of control. We had just kind of gotten through that pre-COVID and then COVID hit. So now we're excited here as we start to come out over to start getting after our Hyatt growth plans going forward. So much smaller platform today, but the ability to grow that hopefully faster over time is a huge opportunity.

You've also discussed some excess assets that you acquired in the merger, I guess it's land. Talk about what exactly that is and how we expect to dispose of those in the future?

Yes. So some were acquired. Some are our existing assets. A great example is when you buy the company, we looked at where we had flag. So for example, legacy Marriott, prior to the acquisition of ILG had no vacation ownership in Mexico. That was a -- we owned a parcel of land in the hotel district down there, Oceanfront and Cancun. And then we buy ILG, right, which has -- we get 2 resorts in Cancun with the Westin Flag. And you got Cabo and Puerto Vallarta, all came in terms of that acquisition. Now all of a sudden, we had a Mexican club with a lot of inventory, right, that we would need. And when we looked at developing the parcel in Cancun, we just -- we didn't need it, right? When we get to 1 product form, it will be much easier for our folks to move around and outside of Marriott to west in longer-term anyway. So we said, "Look, just given how long it's going to be until we might need that inventory, we're going to sell that parcel land", which we did prior to COVID, right? So that was us selling excess assets that we had on our balance sheet. But at the same time, we also got other assets in Orlando that some of it was ours. Some of it was part of the ILG acquisition when we looked at what we could develop in Orlando, we could sell a couple of these parcels. Those were some of the things you saw that we talked about in the third quarter. We sold a couple of parcels here in Orlando. So it's kind of a mix. So as of the end of the third quarter, I think we sold couple of roughly $65 million, $70 million of overall excess assets. We've got, call it, another $90 million to $130 million, $140 million. Some of these are operating hotels that came with the acquisition that we may convert some of it to timeshare, but we're not a long-term owner of operating hotels, right? So we'll find a third-party that wants to own the hotel, and they're in great locations. One is in -- on the Island of Hawaii, the other is Puerto Vallarta. So there's some operating assets in there, and then there's some, like I said, other parcels of land. So the good news was the sales we made in the third quarter we're at values that were in line with our pre-COVID expectations, right? So the market is there. People are out there, people are looking, deals are getting done, and they're not getting done at some big discount, either what we've not lapped, it might take a little bit longer, but we're still pretty confident we can get in that $90 million to, call it, $140 million of additional proceeds with what we have left.

All right. Reminder for the audience, if you have any questions that you want me to ask the management team here. Please feel free to e-mail me. My e-mail address should be on your screens and just let me know. All right. Moving on, I guess, just to maybe new customers in the overall industry. You've talked about trying to increase your sales for younger generations, about 1/3 of your sales are to millennials and Gen-x right now. Where does that need to go over time and by when? And how has the new owner growth been both in recent years or during the pandemic?

Yes. For us, notwithstanding the names, right, the Gen-X, millennial and all that, eventually, right, everybody kind of gets more into our economic demographic, right, as millennials get older, Gen-X gets older, right? And as I mentioned earlier, our average first-time buyer is still around 50, right? But part of it is the at 25 or 30, right? I was saying -- I wasn't a Gen-X or millennial at the time, I'm not sure I had a name. But I also looked at it and said, "It just wasn't how I was going to vacation". I didn't have a family yet. I didn't have 4 kids yet and didn't have some of the things that would bring you to more of timeshare product for, right? So part of it is, is where you're at in your life, right, in terms of the product, the offering, and it's not going to resonate with everybody. The good news is as the millennials and the Gen-Xers have kind of moved more into the economic demographic, what we're seeing is they buy, right? They're going to buy the product. It resonates. It might have not have resonated to them either when they were 25. But now based on their lifestyle, just like they were saying, "Millennials were never going to buy homes", right? Now millennials are older and they're buying -- people are buying homes. So everything kind of moves along. So our goal has always been to get more first-time buyers, right? We were set a goal to try and get more to up 50% with the acquisition of ILG, our tours prior to COVID, we're about 50% first-time buyers for our North America Timeshare and about 50% existing owner on the tour side. Obviously, owners have higher VPGS, right, all being equal, so your sales on a dollar perspective or more towards first-time buyers and owners. Obviously, with the slowdown here, you have seen where a lot of our first-time buyers come from our package stores as a percentage of motor space has dropped off a bit. That will come back, right? As people want to travel again, we will start to see our packages show back up. Our pipeline remains very strong relative to where we work pre-COVID. So as people feel more comfortable about traveling, those packages will show back up. And what we've seen so far is the packages that have showed up, people that do show up even in the COVID world, they're buying and VPGs are higher. And so we haven't seen anything fundamentally change. It's just lower in terms of just the lower occupancies and people not being as comfortable to travel right now.

Got it. Yes. And just stepping back, the industry got about $11 billion in sales in '07. Obviously, you had a big decline in the great recession. About the $10.5 billion by 2019 will have a decline this year. Is there a path to get back past that $11 billion sales point over time to really grow the industry, grow kind of overall consumer acceptance, especially with alternatives like Airbnb, alter DBR and whatnot?

I mean, I should point out, I think, fundamentally, the industry coming into COVID was much different, in a better way, than it was back in '08 from the financial crisis hit. So you talk about industry-wide contract sales back in '08 at the peak, right? If you look at how industry contract sales have grown coming up to the financial crisis, you got to do a bit of a hockey stick, right? Like the last 3 or 4 years between, '04, '05, '08 really grew very quickly, right? And I would say, even us as Marriott at the time. We were part of Marriott International, people weren't focused on development margin, people are focused on incremental EBITDA, right, and growth. And what gave rise to the financial crisis was some of the easy credit, people living beyond their means. Timeshare was a beneficiary of that, right? So a lot of that growth at the time, I'm not sure was sustainable, right? The financial crisis reset that. And what I mean by the extra being in a better position people have it -- at least I can speak for Marriott, we never turned on a lot of those tour -- turn back on tour channels that OPC locations, things like that, that back in '08 were marginally profitable as a tour channel that once the crisis is what that buyer wasn't buying, right? They didn't have the financial wherewithal to buy. And so we've grown back at '08, where we've been -- and obviously, in '11, we became a separate public company with a focus on development margin. And we've been able to bring back tours and roll them back. So we're not out with a lot of tour channels that I think will be -- never come back on, right? We're going to be returning on because they're high VPGs, that customer, what we're seeing today, hasn't changed. And so I do think the recovery is going to swifter, at least for us, given how we've grown the business back since the financial crisis. So it is just -- it's a very different time you can't really compare them, and you can't compare where we were at from a pre-COVID from a sales channel and poor generation versus what we were doing back in '08 when the financial crisis hit.

Understood. All right. So moving onto the exchange business. So you have the largest change of third-party management business. Can you describe what they are and how they performed in a downturn and how they can grow over time?

Yes. So about 15% of our business, our EBITDA is coming from our Interval International, which we got as part of the ILG acquisition. Strategically for us, we looked at it as -- which has helped here with the COVID impact is more recurring cash flow, very capital light. So it can broaden out our platform, right? And there's a great affinity between exchange and vacation ownership, right, in terms of their business model. So it was a great strategic fit. That business, like I said, capital-light, it doesn't build vacation ownership that provides owners of timeshare, the ability to exchange their ownership and go to other resorts that might not be part of the resort system they bought into. So in the case of Marriott, Westin, Sheraton and all that as part of being part of our point owners or REITs based owner, you're part of the interval. They were our exchange partner prior to the acquisition. But the other 50%, 60% of the members are people that are not part of a branded system, sometimes it's a shorter chain of timeshare. And as a result, it allows them access the brand in, right, based on that exchange potential. So you pay an annual dues and then you pay transaction fees when you actually deposit in exchange. So the annual dooms has been very sticky. We've seen very similar retention renewals of even through COVID of the annual, where membership has dropped off is we're not seeing as many new members but that makes sense because developers, right, aren't making as many sales as they were, no different than our sales are down, third-party developers that are part of the exchange network, where we get new members from they're not selling as much yet, right? So that will get back to an equilibrium here on an overall membership perspective. And then the other big piece of the business is the transaction side. So once you decide you want to go on vacation somewhere, you can deposit your ownership and then you book eventually to wherever you want to exchange or go to within the exchange network-based on availability. That's where we saw in COVID, but not surprising, different than people weren't booking reservations people didn't know when COVID was going to hand. They didn't know when it might be safe to travel. So that transactional revenue dropped off, right? The number of transactions, no different than people were looking on the ownership side, vacation ownership. Now what we've seen, and we talked about in our press release, actual transaction activity over last year this time pre-COVID is up 10%. And so that's telling you people are more comfortable now again, booking, right, to start the transactions are coming back. And in fact, they're higher than they were previously and part of that's pent-up demand. I mean, people were booking back in April and May, right? So it wasn't like they were never got a book, right? It's now getting pushed out now and we're starting to get the benefit of that transactional flow and ultimately, transactional revenue coming from that part of the business as people are more confident about getting back on vacation, as you go into next summer and to next year, obviously, with the idea that you're going to have an effective vaccine out there.

Right. On that topic, a question from the audience, I guess, on your 2022 targets from your Investor Day, I guess, since to happened, there's lower demand this year, but your synergies are also higher, product costs also may be lower maybe optimize your inventory. So if demand comes back, let's say, in the back half of next year, are those 2022 targets still viable or is the hole too big this year to kind of get back to those levels?

Yes. I mean it's hard to project right now that 2022 is going to look like, you tell me what 2021 recovery looks like. I think in an absolute basis, if you're looking at the assuming we didn't lose any growth, and we're back to the 2022 numbers we had in there. I don't necessarily today see a path forward given the recovery in '21, right? So now that being said, we've got some opportunity on the cost side, as I talked about, we took up our cost reductions by $75 million of EBITDA versus what was in there, right? So that's a lot of sales, right, that even if you don't get back there on some of the lines, maybe you can offset what you don't have in the top line with bottom line savings, right? So that -- a lot of moving parts right now, but we obviously fundamentally haven't seen anything change about the business as we work through COVID even with the higher cases now, people coming back, sales are happening. So we're going to continue to transform, improve the business, COVID or no COVID and feel good that over time, we'll get back to where we wanted to be.

All right, got it. And maybe the last one, almost out of time, on financing. Obviously, it's a big part of the timeshare story, and we see has been a source of risk. But from what I've seen from you and others, financing markets have been strong. Delinquencies have been low. So maybe some commentary there and what you're seeing in the market?

Yes. I mean, from a pure financing, we did a securitization deal back in July. And in terms of the economics, I think it was a full time, one of our top 5 deals we've ever done in the securitization market, meaning we got a 98% advance rate on the principal of the notes we sold at the time. We keep the 2% residual and we sell it. But that was in line with pre-COVID and the all-in cost of funds, was just over 2.5%, right? So you're basically getting other dollars back upfront. And you're the 2% residual in the excess spread, which, on average, those notes there -- the collateral bears interest at, call it, 12.5% to 13% and you're paying the debt service at 2.5. So you're getting that 1,000 basis point excess spread as part of your residual excess spread ownership in those securitizations. So very profitable. And like I said, to get that done in July when the recovery hasn't even started. I think we've got investors that have been part of our, and we've been securitizing paper 20 years now and have been with us, and they saw how we performed in '08 and '09. Pretty easy to get it done at a great result at the time.

That's a pretty strong vote of confidence. I think we're out of time here. So John, Neal, thanks a lot for your time today.

Great, Anthony.

Great to see you. Thank you.

You, too, and have a good rest of your conference. And same to the audience. Have a good rest of your conference.

Bye-bye.

Bye.