Travel + Leisure Co. (TNL) Earnings Call Transcript & Summary

Okay. Hello, everybody. I am here with Travel and Leisure Co's CFO, Mike Hug. Mike, thanks for joining us. I know Orlando, not Miami. Last company was from Miami. Company after company that is coming up here in this beautiful weather in New York to join us. So we appreciate it. So with T&L and with timeshare, I think it just makes sense to have you start out and give sort of a very brief overview of the company and the different business lines. Because what will happen is that if we don't do that, we start diving into questions, and then -- because it's a very -- it's a unique business, I think it deserves a quick overview.

Sure. Happy to do that. I appreciate you hosting us today. The day started off great with some great meetings. So looking forward to the afternoon as well. Basically, our business is made up of 2 segments. The first is the Vacation Ownership business represents about 70% of our EBITDA. That's the sales and marketing of Vacation Ownership. So we generate tours. If you can imagine, being out in the casinos in Las Vegas or being in a theme park down in Orlando, we'll offer you an incentive to come to our sales office, take a presentation and present the vacation ownership product to you. In that presentation, obviously, we hope you will purchase the product. And if you purchase 75% of our owners choose financing. So the big -- 3 big revenue streams for the Vacation Ownership business are the sales and marketing revenues associated with the VOI sale. The financing income, we landed about 15% interest rate and borrow in the ABS markets at about 5.5%, 5.2% interest rate in our last transaction. So great spreads on a $3 billion finance portfolio. And then the third piece of that segment is going to be the property management business, where for the properties we develop and sell, we are into property management contracts that are cost plus 10%. So those are the 4 primary revenue streams that drive the EBITDA, which once again is about 70% of the EBITDA of Travel and Leisure company. The other segment is our travel membership. The largest component of that is an RCI exchange company, which represents about 90% of EBITDA. And what that is, is there's 3.5 million timeshare owners from different companies that choose to participate in RCI. They pay a fee for being an RCI member. And then if you want to go to a destination that's not available to you, let's say, through Club Wyndham you decide you want to go to London, you'll take your ownership for the year, you'll contribute that to the RCI exchange and you'll go to London, that individual London will contribute theirs and go to Orlando. And basically, those 3.5 million members have an opportunity to go to 4,000 different destinations rather than just the destinations that are within their club. Once again, the 2 revenue streams there are going to be the annual membership fee. And then when you choose to transact, you pay a transaction fee. Great low capital business, transaction-based, about 33% margins. So nice fee-for-service business represents about 30% of what we do.

Okay. That's a great overview. So next, I'd like to talk about the consumer. This is, again, before we get into timeshare metrics necessarily specifically, but just thinking about big picture, the health of the consumer and sort of how you think about the consumer's health heading into '25, lower end versus higher-end geographical, we can talk about those mix differentiations as well.

Well, I'd say, throughout the year, we've seen a healthy consumer. And I know we're not talking time share metrics yet. But one of the ways we measure that is volume per guest and our VPGs are running incredibly high. They've been at the high end of our guidance every year. And so throughout '24, we've seen a strong consumer, a confident consumer. We were a little uncertain heading into the election about the level of consumer confidence. Depending on who won, we might still be sitting here today trying to figure out who won or who they claim won. So I think where we sit today heading into '25 is we have a consumer that I believe is even more confident than they were 60 days ago because they do know the answer as to who the election is, so that uncertainty is gone. And then when you look at what's happened, the reaction to the stock market, I think people are feeling pretty good as it relates to the market. So I think we're heading into 2025 with the consumer in a good spot and some uncertainty that was there 30 or 60 days ago, isn't there anymore.

Speaking of the political backdrop, Trump obviously has some pretty big policy changes that he wants to get through. Maybe we can go through some of the big, I know it's early, because we don't know exactly what he's going to do. But the big buckets and how they might affect your business specifically. So we know that tax -- extending tax cuts is a positive. We know that business -- letting the animal spirits out and the market going up and that's good for consumer confidence that's a positive. What about immigration as it affects labor markets? And then, I guess, tariffs, if that could affect you second derivative basis from your maintenance agreements and things like that?

Yes. So right now, we aren't expecting any issues as far as our labor force as a result of the potential changes in immigration. So obviously, something we're watching and talking to our property managers about because that's where we feel most the housekeeping, the maintenance, things like that at our resorts, but don't expect any significant issues there as it relates to the immigration. I think -- as it relates to tariffs, I mean, the good thing about the position we're in is we've got enough inventory on our balance sheet to last us another 3.5 to 4 years. So I don't have to worry about what happens with the cost of supplies from tariffs and things like that. I think the thing that we will be watching is, what do his policies do as it relates to interest rates, right? I think everybody is pretty confident that there will be another rate cut in December this year, but I think what's in question now is well those rate cuts that people were pretty expecting to occur pretty consistently in 2025 still occur. And so I think that's what we'll be watching now. In our case, we don't pass higher interest rates on to the consumer because we want to make sure that the -- what we present to the consumer is great vacation accommodations at great prices and great value, right? A 2-bedroom condo that's going to cost you your maintenance fee is going to be 1/3 of what 2 hotel rooms will cost you in the markets that you're going to. And we want to keep that value proposition strong. And once again, 75% of the people that buy from us choose to finance with us. And we're already collecting the 15% interest rate, and we want to keep that monthly payment on that loan in the $325 to $350 range. So when interest rates do go up as they have the last 2 years, we don't pass that on the consumer because we want them to buy because what history shows is for that first purchase they make, let's say, a $23,000, they're going to upgrade 2.6x more, right? So they're going to buy another $50,000 to $60,000 worth. So for us, it's a customer acquisition model. Where we feel the pain on the interest rate increases will be on those ABS transactions, right, where the last one we did was at 5.2%. So that's what we'll have to watch. Now we've been in that rising interest rate environment really for the last 2.5 years, and we've been able to still drive EBITDA growth. We've been able to drive margins 22%, 23%, still have 50% EBITDA to free cash flow conversion. So we managed it very well. But I think that's where I'm watching most closely as far as how his policies might impact the business, and it would really come through what happens with interest rates throughout '25.

Okay. No, that was what I was looking for. Let's take a step back and look at '24 again. And this time, let's go into more in the weeds on the timeshare metrics. What -- when you look at your performance to date, what sort of differed the most versus your expectations at the beginning of the year versus what were the good guys over the bad guys in here today?

So I would say -- and I'll talk about 3 key things: volume per guest, tour flow and the portfolio, the $3 billion consumer portfolio we have. Tour flow has just been incredibly positive for us, right? We started out the year with double-digit tour flow growth. We knew it slowed down in the second half of the year, which it has. But I would say tour flow has kind of been where we expected. Volume per guest, that's the efficiency. That's basically taking the gross VOI sales we have divided by the number of tours we see. That's how we measure efficiency. That's how our sales people get rated and things like that. That's been a pleasant surprise. It's settled in at over $3,000. When we entered the year, $3,000 was the high end of the range that we put out there for VPG. And the beautiful thing about a high VPG is every incremental dollar in VPG comes with about a 40% margin because by the time that individual shows up at our sales galleries, your marketing costs are already at some cost. So if you can sell them a $25,000 package versus a $23,000 package, on that $2,000, all you have is some commission and some cost of sales, right? So very, very high margins on that incremental VPG. And so VPG every quarter have been at the high end of the range, and we would expect that again in the fourth quarter based on what we're seeing really through the end of November. So VPGs have been a pleasant surprise. And then the portfolio. We were all worried about the consumer coming into 2024. We did see a slight deterioration in the portfolio in Q1 and Q2. We took our provision guidance up a little bit for that, basically providing for future losses. We still held our guidance. We still run 23% margin. So it wasn't so significant that caused us to change our overall guidance. And then in Q3, we saw the portfolio improve a little bit compared to historical trends. So I think that when we look at the key drivers of the business, VPGs are strong, tour flow is good. We got to make sure we get the tour flow growth in 2025. And then the concern about the consumer, I'd say, is probably alleviated a little bit based on what we're seeing now and the uncertainty of the election being gone.

Okay. And when you think about tours in '25, what are the major building blocks for tour growth?

Yes. So several things. We announced earlier this year a marketing arrangement with the Allegiant Airlines. If you think about Allegiant, 90% leisure travel going into all the leisure markets. And the way something like that works for us is we'll get the right to market to their guests. So for example, if we see an individual going in on the Allegiant website and booking a trip from Little Rock, Arkansas down to Orlando, we can contact that individual and say, hey, while you're in Orlando, for 2 tickets to SeaWorld, would you come over to Bonnet Creek and take a sales presentation, right? So it's all about being able to touch base with people coming to our markets, whether it's Las Vegas or Orlando, providing them with an incentive, theme park tickets, restaurant gift certificates or casino chips out in Las Vegas, show tickets here in New York, whatever is attractive to them in the markets to go into to drive tour flow. So leisure is going to be a great opportunity for us. We also signed an agreement with Live Nation. A lot of data there. And once again, same type of concept. If you have somebody that's lives in Orlando, Florida and is going up to Atlanta for a concert, right? You reach out to them and say, "Hey, while you're in Atlanta, we'll offer you a discount stay at our property, take a sales presentation." We'll offer you 2 tickets to the Braves game, you can go the Braves game in order to kind of take a sales presentation. So creating those marketing relationships are really what will allow us to drive that tour flow year-over-year. And then we also have a couple of sales offices that we haven't reopened coming out of COVID that will reopen. But the goal would be 5% to 6% tour growth year-over-year. You get a little bit of pricing on top of that, and you're talking about 6% to 7% top line VOI growth on an annual basis kind of as far as the long-term model.

Okay. And then going to that pricing or that VPG there's a lot of nuance under the surface in terms of mix shifts that can affect your VPG growth. So when we think about 25% in terms of do you have a mix change agenda that you need to hit in terms of new versus existing? Or how should we think about the VPG? Same question, but for VPG.

No, it's a great question. So I mentioned the upgrade model, right, where when they buy today, they're going to buy 2-point times more. So if you look at our owner base today, and there's a great slide in our investor deck that's on the website. We have about $20 billion over the next 10 years in revenue embedded in our owner base. About $12 billion of that is going to be incremental vacation ownership that they buy. $4 billion is going to be the interest on those vacation ownerships that they finance and the remaining $3 billion is going to be property management fees. And so to your point, we want to keep that $20 billion future revenue stream there and growing in the future. And the way for us to do that is to get a new owner mix coming in at about 35% of our total transactions. Pre-COVID 2019, we were 37%. During COVID that dropped because our owners were traveling more than our non-owners. This year, we moved from 33% last year, up to 36% this year. So we're kind of in that good spot, 36% to 37%. And your new owners run a lower VPG, volume per guest than your owners do because if you're an owner, you've owned the product for 3 years, you come down to the sales presentation, you know exactly what you need, right? I want to move from a 2-bedroom to 3-bedroom. So I go down and I buy more points to get me larger accommodations, go to Hawaii whatever it might be. So we have seen some pressure on VPG because our new owner mix has moved up to 35% or 36%. But to your point, now that we're at that level, we shouldn't have that headwind going into 2025. Now we might choose to go ahead and try to bump that up to 37%, 38%. But if we do, we'll manage it overall, just like we did this year, to still maintain 22%, 23% margins.

Okay. So if close rate -- okay. So if the mix is unchanged, let's say, let's say, which you didn't say per se, but let's pretend you did. And then close rates, which you can't necessarily forecast, but they're pretty consistent are the same, then VPG growth is equal to pricing growth. Is that correct?

That's correct, yes.

Okay. And so then we can look at pricing growth as maybe -- well, we can model what we think, but you're in charge of pricing growth. You decide what you...

Yes we decide. Yes, yes.

So do you usually target inflation like pricing growth? Or does it really more depend on the environment? What's -- how do you think about pricing growth?

I think -- so the key is, once again, we want to keep the product affordable, right? And if you look at what hotel rates have done coming out of COVID, right? I mean, we were talking to somebody today and he was talking about going down to Caribbean. He was like, I can't find a hotel room down there for less than $600, right? And we can sit there to a consumer, and we can say, well, hey, you can go down to our property down in Puerto Rico and for a week for 2-bedroom condo, you can pay a $1,500 maintenance fee, right? So that's what we want to keep is that value proposition incredibly strong, which is why our pricing increases have been very moderate, right, 2% or 3%, keep that monthly payment on that loan, about $325 to $350. And sometimes, even when we do price increases, you might not see a VPG lift because they might just buy less points, right? They might say, "Hey, I'm still going to spend $25,000 which means that gets me four nights versus 5 nights.

Average points purchase is another factor.

Average points purchase, the transaction size is another factor. But for us, let's keep that product affordable. Let's show the value proposition, start making money on the interest income, start making money in the RCI membership fee, make money on the property management, and then we know you're going to upgrade, right? So that's why we've been very moderate as far as price increases. Don't get aggressive there and have a great value proposition to create those recurring revenue streams.

Okay. We're going to shift gears to the consumer finance business. But before I do that, does anybody have any questions about demand, pricing, tours, VPG, anything? Okay. Great. So on consumer finance, you touched on it a little bit, but there's a little deterioration in the first quarter, second quarter. In the second half of the year, how is consumer behavior evolves around payments and delinquencies. And maybe just talk about that in terms of above 700 versus below 700 FICOs.

So first quarter, we -- primarily the deterioration was in the below 700 FICOs. The reason we took the provision up in the second quarter was we did see that deterioration across the broader portfolio, still more impactful at the lower FICOs and higher FICOs, but we did see that our delinquencies didn't improve as much as they usually do from December of last year to June of this year. We took our provision guidance up a little bit, about 1%, still maintained our overall guidance for the year. What we saw in Q3 was in -- from Q2 to Q3 delinquencies always go up. We saw them go up, but they didn't go up as much as they usually do. So they're still a little elevated compared to historical levels, but the trend reversed as far as the gap in between the 2, if you will. And then we talked about the strong confidence in the consumer that we're seeing today. So we're confident in the portfolio that 20% provision roughly for the year. And I would say less concerned about the portfolio today than I was 60 days ago. I think that kind of ties in with the VPG that I talked about where we expect the VPG to be at the high end of the range, which gives us confidence in the VOI numbers that we have out there for the revenue numbers kind of be in the range.

Okay. Great. And same topic, loan loss provisions at 19%, 20%, like you said for this year. That's kind of the same area as it was in 2018, '19. But you guys took your lendering standards way up, which we can see in the data. So why would the LLP be the same even though credit standards are higher?

So to your point, as we came out of COVID, we moved our minimum FICO from 600 up to 640. We want to focus on quality. If you look at our new originations year-to-date through September of this year, we have a 742 FICO. So good strong FICO compared to probably what was 726 back in 2019. The reason our provision is still at that rate is the other thing we did is we require less down payment from the consumer to purchase a product because we want to grow that portfolio quicker, right? We had a $4 billion portfolio at the end of 2019. Naturally, through just normal principal reductions and defaults, it decreases about $1 billion a year, which means we've got to originate $1.1 billion every year to get growth. So the portfolio declined in 2020, 2021 and the first half of 2022. And if you think about losing down to $3 billion, if you think about losing $1 billion in a portfolio, where you're getting an 8% spread, let's say, that's $80 million in EBITDA, right? That's the only reason we aren't at 2019 EBITDA levels is our portfolio is at a little bit over $3 billion now. But we want to grow that portfolio quicker to get that EBITDA back right, associated with the net interest income. So we said to our sales team, "Hey, rather than asking for a 20% down payment, why don't you just ask for a 15% down payment. And when you finance more naturally, your provisions are going to be higher even if it's a good paper, right? So that's really the dynamic there. And that probably cost us 100 to 150 bps as far as the rate. So that's really the big difference as far as why the provision is still kind of at the level it was before we made the underwriting changes.

So better consumers, but slightly worse, not worse, slightly less stringent terms on the loans they're taking?

On the down payment.

Just on the down payment. Because I guess the question...

Yes, yes, yes. Strategic decision, right? We said, hey, If you're making an 8% spread, right, why wouldn't you need -- look, your provision goes up a little bit. But the beautiful thing is -- the thing about this model and people don't appreciate this, but they always say, man, you've got a 20% default rate. How can the business operate with a 20% default rate? Well, we manage the properties, as I mentioned earlier, right, cost plus 10% for managing the properties that we develop. I'm an owner, right? About 15% of the maintenance fee that I pay in our Club Wyndham goes into a reserve account that's held by the HOAs in the clubs. And our goal is for every 5 to 6 years for every unit in the system to be refurbished, using the owner's money, the HOAs money, not Travel and Leisure's money. So when I have an asset -- so if you go down the Bonnet Creek, for example, in Orlando, where we have 6 timeshare towers. Every year, 1 tower is out of commission because we're refurbishing the units. So as the lender, Travel and Leisure as a lender, when I do have a situation where I have to go foreclose, I've got a great asset. I am managing it every day, it never looks older than 5 or 6 years. I'm going to sell for more today than I did 3 years ago because I had price increases over the last 3 years. If you think about most lenders, right, the lender on the automobile, they don't sell automobiles, right? Plus they aren't managing that all, the consumer is going to lose the automobile. They're not going to change the tires, they're not going to change oil. The banks going to foreclose on it and go sell it at auction. They're going to take a loss, right? We're providing for the loss at the point of sale when I foreclose 3 years later, there's no P&L hit to me because I provide the point of sale, and I get a great piece of inventory back that's already developed, already registered, I've managed it and I sell for more today than I did 3 years ago. And that's why this model can run with a 19%, 20% provision rate is because I am there managing the asset. And I have -- I am better than anybody or our sales team is better than anybody at reselling it when it comes back to us. So that's the reason I don't get excited. I've been in the -- I've been with the company for 25 years. And at 17%, 18%, 19% provision, we still run 23% margins, we still have EBITDA to free cash flow conversion of over 50%. It's a great model that's been proven over time, very resilient, and that's what we've been doing this year every quarter, just proving the resiliency of the business.

Okay. What has to happened to get back down to 19% LLP? Is that just going to happen when delinquencies ease off?

Yes. Once we see those delinquencies for several quarters kind of come back down to historical levels, then you take it back down, yes.

That's macro. Okay. Maybe shifting over to travel and membership. There were headwinds -- at the conference last year where you talked about the headwinds that you had in that business, modest. I mean, it's sort of been the story for multiple years now that business is a structural, a bit of a challenge structurally growing because it is just the nature of how timeshare has evolved as an industry. But talk about '24, we haven't seen as much underperformance this year, I think maybe just because expectations are lower. But has that business started to stabilize? And how do you think about it over the next sort of multiyear basis?

So when you think about the travel membership segment, I mentioned earlier into your point, RCI is about 90% EBITDA there, which is the exchange company. And Brandon, as you mentioned, what's happening is the growth in the industry is coming from companies that have big clubs. So for example, as in our Club Wyndham, I've got 200 properties that I can go to within my club, which means if I'm in a club over here that only has 10 properties, I'm probably going to have a higher need to exchange because I might want to go somewhere outside those 10, right? So the one of the 4,000 properties that RCI has. So as the growth in the industry, whether it's us or Hilton or Holiday Inn occurs in companies with clubs, even though the member count should stabilize at RCI the need to exchange goes down because you have more vacation options with your club, right? And so that's the dynamic that you were talking about, which means exchange propensity have been going down. What we've done, though, for the other side of the business that currently only represents 10%, we've created more of a travel club where we go out and we offer to companies, products to offer their employees the opportunity to take vacations for great rates to hotels. And so what you'll see in that business is growth will be flat on the bottom line, but high margins, great free cash flow allows us to grow the dividend every year, buy back shares, but the dynamic you'll see is we'll work to maintain EBITDA, maybe grow at 1% or 2%. Exchange transactions will come down, transactions on the travel side will come up. So net-net, they probably stay flat, maybe grow a little bit on the travel clubs. And so we'll work to keep the EBITDA flat over there, once again, take advantage of the great margins, great free cash flow and use that to create a very strong capital allocation policy.

Okay. The other interesting dynamic in your business is the inventory dynamic with timeshare. And you and not just you, your peers built up a lot of inventory during the pandemic. What's the status of the sort of over buildup of inventory, I guess? And then sort of how long can you get how much extra free cash flow out of that build, that build we have?

So we are sitting here today with probably 3.5 to 4 years of inventory on our books. And ideally, you're talking about 18 months. So we've got inventory to last this. Well, keep in mind, even though I would love to have no defaults because I wouldn't have to make provision point of sale. When I do have a default, I'm getting about $100 million a year in inventory back that I don't have to pay cash for because it's already paid for and it's built and it's developed. So when we look at our inventory for our Accor business, Club Wyndham, I mean that's going to last us 3, 4, 5 years. Plus, we also spend about $50 million a year buying back inventory from HOAs for owners that have gone delinquent on their maintenance fees, buy on the resale market. We have some very attractive exit programs for our owners who will take the inventory back. So on the Club Wyndham side of the business, that's going to last us a really long time. I mean, 3, 4, 5 years. We will have some incremental spend. We've got development of a new vacation ownership club, Sports Vacation Ownership Club, and that will take some development spend as we get into '26 and '27 but that should be on a just-in-time basis. So the spending should occur when we create incremental revenues. But you'll see our inventory spend go up there. But our long-term goal, just like we did back in 2018 and 2019, when we were spending more on inventory, is to get EBITDA to free cash flow conversion to 55% to 60%. We're going to be around 50% this year. And as we grow that EBITDA, we're going to continue to be able to leverage all the walk across items from EBITDA to free cash flow to move it back up to 55% to 60%. So eventually, inventory spend will go up. But as that's happening, the other line items that get us from our EBITDA or free cash flow should go down as a percentage of EBITDA.

Okay. Great. Thinking about diversification and sort of the business model in terms of growing your footprint in your business, one of the unique things about T&L is that you kind of have a flag in most markets in the U.S., right? Whereas your peers are much smaller than you. And so thinking about how to grow from here and where you can plant new flags and grow a network effect. That's not necessarily maybe as much of an opportunity. But you do have these other opportunities, whether it's a Accor, whether it's Sports Illustrated. It seems like over the last 12 months, the big change in the story has been your building -- as a company building a pipeline of either branded or sort of synergistic deals that could then boost tour growth. Can you give us a sense of what the next 3 years look like in terms of rolling things out? And then is there stuff you're working on that you can't announce yet? Maybe you want to announce it, I'm just kidding, no pressure. But how do you think about those kind of opportunity that we can't sort of model or even try to comp with them ourselves?

Yes. So the way we look at it is -- and then, for example, right now, our Blue Thread, the relationship we have with Wyndham Hotels is about $125 million in revenue. And what we think is as we go out and do these new clubs, Sports Illustrated Vacation Club via Accor acquisition, they started about $25 million to $50 million the first year and then grow to $25 million, $50 million a year until they become $250 million to $300 million.

Contract sales you're talking about?

Contract sales. Yes, VOI. So we acquired the Accor brand internationally, the vacation ownership business I had over in Australia in March of this year for about $50 million. Is going to be a great acquisition for us, going to $5 million in EBITDA this year, probably double that next year. But really, the reason that's such a great opportunity is coming out of COVID, Accor hotels, really didn't focus on their vacation ownership business very much. It was a very small business. Australia coming out of COVID was very up and down, right? They were closed for a long time. They would open up. They would get 5 cases of COVID, then they would shut down for another 3 months, right? So it really wasn't a great market for them to be able to reopen in. And so we go to Accor, just like all the other hotel companies have done Marriott, Hilton, Hyatt, Wyndham, Hadyn and we said, "Hey, why don't you let us run your vacation ownership business or sell it to us for $50 million, we'll pay you a royalty just like all the other hotel companies get a royalty." So we execute on that, like I said, about $50 million when you include inventory in March of this year that's going to grow kind of become a $25 million business and then a $50 million. And then -- so the goal would be to have 2 or 3 new brands like that, Accor, Sports Illustrated, one more TBD and make them into $300 million businesses. And if you do that, you do it with 3 or 4 of them, you've got an additional $900 million to $1 billion in VOI revenue 4 or 5 years down the road. So you grow the Accor business, Club Wyndham to make sure you're achieving your long-term growth objectives of 7% to 8% on the VOI business, you add on these other ones and you grow them up, let's say, $50 million a year, each to stack on top of each other. And that's kind of that multi-brand strategy you'll hear us talk about under the Travel and Leisure umbrella.

Questions in the audience? Last chance. Okay.

I'd be curious if you're willing to share, you're in some ski destinations, right? How do you see people returning to ski destinations, last year was horrific for so many reasons...

Weather is good. Is that the onus of the question, the weather is good...

Weather is good. So actually I went out to Park City, Utah, Christmas of 2023, yes, just last year. And in terms of -- and I'll answer your question in a minute but in terms of the value proposition, I was at the foot of the Canyons, ski in, ski out December 23 through 28. So over Christmas, right?

At your property?

At our property, yes. I'm in Club Wyndham, right? My maintenance fee for 5 nights total for 5 nights ski in, ski out was $1,800 total. You try to find a condo there, 2-bedroom condo, you're going to pay $1500 a night, right? But that's the value proposition we present to our consumers and actually I had 3 condos, I had rolled my points from 22 to 23 because I got a bunch of kids that have spouses. So there were 10 of us out there, right? So I got 3 condos, $1,800 apiece and then think about going out to dinner and Park City, Utah over Christmas week every night with 10 adults. That's going to get real expensive, right. We went out two nights. The other 3 nights we ate in the room, which we want to do anyway, you're worn out from skiing. And just think about the value proposition in terms of being able to eat meals there in the room with 10 people, few bottles of wine and everything else that goes along with a great time with your family. That's the other part of the value proposition. People think about the accommodations. But if you look at what restaurant rates run today, right, if you're in 2 hotel rooms, and you go downstairs with a family of 5 to eat that buffet, you're paying $30 a pop, and that 6-year-old kid has a strawberry and some orange juice more in the bakery you pay $30, right? We get to Park City, we call Walmart, they ship everything to us, and we go downstairs, pick it up and we're set for the week, right? So a long answer to that. That was about the value proposition. As far as -- look, in any market, Orlando is our biggest market where we probably have 1,500 units. Park City 200 units. When you've got 800,000 owners you're going to fill up Park City every year during ski season, right? So that's the beautiful thing about our footprint. You have that diverse footprint. So there's not really in one market where you're saturated. In fact, right, some markets Myrtle Beach in the summer, you could never have enough in Myrtle Beach in the summer. So 25 years I've been with the company, our annual occupancy always runs 75% to 77%. And that's just being thoughtful as far as when you go into a market, make sure you don't overbuild it.

What's the highest default rate, you can recall?

2009 and '10, we're probably at 26%, 27%.

And for anybody who's a debt guy in the crowd, I know there's a lot of us, what's the argument for maybe including or not including recourse debt when you're talking about leverage. I wonder if you have any thoughts on that.

Well, it's nonrecourse to us, which our ABS debt is nonrecourse to us. My view is when I think about leverage rate, it's like what's the risk to the bondholders or the shareholders right, if that debt -- if the corporate entity isn't able to pay that debt. On the ABS debt, which is nonrecourse to Travel and Leisure, if that goes into default, there's no obligation of Travel and Leisure to pay that debt. So your corporate bondholders don't have -- aren't taking on any risks by the issuance of the ABS debt. So that's our viewpoint is, look, it's nonrecourse to the company. So it shouldn't be included in our leverage rate. which is consistent across the industry, by the way.

But you mentioned taking upfront reserves, and I think that's interesting. I wonder if people fully appreciate the fact that reserves have already been taken -- and we'll take it offline.

So from an accounting standpoint, for book purposes, the debt is consolidated, right? The debt is on our book even though it's nonrecourse you can't say you consolidate it, which means you keep the receivables on the books which means you've got to put a reserve on those receivables for projected losses.

Anybody else? Mike, thanks for coming.

Sure. Thank you all.