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

Next up, we have travel and leisure. I'm joined by Mike Brown and Mike Hug, CEO and CFO.

I want to just jump right into things. But before we dig into the business itself. I think that in your slide deck, you have a slide that says that there's the transformation that's happening in the industry. And I think at first plus many investors still wonder of timeshare, what does transformation mean? So perhaps things off with how you think the industry has evolved and how you think it will continue to evolve going forward?

The reality is, if you ask the average person what's a timeshare most are going to say, "Well, I go to pick a location, MarcoIsland every March, I stay on the third floor, and I have a northeast view, and I stayed for 7 days. And that accurately describes timeshare in the 1980s and independent developers looking to monetize an individual piece of real estate. . And the reality today is you've seen a dramatic consolidation. The consolidation has been led by hospitality brands like Wyndham, Travel and Leisure, Margaritaville, Hilton, Marriott, Holiday Inn, Disney. And that now represents about 80% of the industry. But probably most importantly about all of that is it's brought with it a very strong balance sheet, a commitment for the long term, a hospitality experience and not last but very importantly, massive flexibility and use -- we have 280 resorts around the world. But if for some reason, 280 isn't enough, you can get to 1 of our hotels through the currency we have, you can get to a cruise, you can get to all kinds of different vacation value. And that's just very different and it's transformational from where the industry was, candidly, even in 2008 before the great financial crisis.

Right. And I guess for context on Travel and Leisure, specifically, maybe level set for us, how many resorts do you have, what the size of the owner base is? I mean, how that maybe compares and contrast to others in the industry?

So there are 3 public companies today, Travel and Leisure, us, Marriott Vacations and Hilton Grand Vacations. 3 largest companies estimated somewhere around 70% of industry sales amongst the 3 companies. For ourselves, Travel & Leisure, we have the Club Wyndham brand, WorldMark by Wyndham, Margaritaville. We've recently acquired a core Vacation Club, and we've recently announced that we're launching a Sports Illustrated Vacation Club. I mentioned we have 280 resorts around the world, that comes with an owner base that's around 825,000 owners using one of our products. Take an interesting statistic that many would not appreciate is that of the 825,000, 700,000 own nothing on their timeshare. They fully paid it off, which means when they're vacationing in 2025, those 700,000 owners are our vacation for the price of their maintenance fee more or less. Why is that important? Two reasons. There's a 98% retention rate year-on-year for those consumers. And number two is, especially in New York City, where you get these radio advertisements, if you want to get out of your timeshare, there's the perception out there that there's a line of people. I just shared with you, it's 98% retention on our paid off order base, and it's roughly 94% on those who still carry a loan. So there's a lot of satisfaction in our space.

Well, and if you're only paying the HOA and it's been years, everyone has seen what rates look like in New York and other markets right now -- so they might be bragging about that.

Well. It's funny you say that I just took a tour of some of our resorts in Australia, while we were attending the World Trade and Travel and Tourism Council speaking to an owner base and -- she said to me, she said, "All of my neighbors asked me, how do I get to go on so many vacations. And it was unprompted. We were just having a chat having a coffee together with these owners in Australia and they said, we've just owned the Wyndham product for 15 years, and we just have nothing to pay. So we just vacation. So...

That's great. So I guess how -- now let's turn to the business itself. What are kind of the biggest strategic pillars that you're thinking about over the course of this year and then also setting a stage for as we look out to next year

Well. let me first say, we'll probably get to the consumer in a second, but.

Trying to hold off

Yes, to keep everyone guessing. But strategic pillar wise, pretty straightforward with us, our core vacation ownership business with Club Wyndham, Margaritaville, WorldMark and Shell continues to perform extraordinarily well. We want to maintain that success. The key measure, like in the hotel business, it's RevPAR for us, it's volume per guest. Our volume per guest remain at levels that show that the consumer and the satisfaction of our product is high. It's been over 3,000 all year long. And going into COVID, that number was 2,200, 2,400. So the elevated volume per guest is showing continued strength in our core business. Going forward, we also want to add incremental veins of growth to -- or verticals of growth in our business. I mentioned we acquired a core Vacation Club. We're going to look to replicate all of our success in Wyndham while continuing to grow Wyndham. It's incremental to the success we've already had. We announced Sports Illustrated. So we've got an extremely strong machine, and we want to slowly layer in incremental growth opportunities on top of it. So as the years progress, and we're looking for that growth algorithm, we've got new and exciting things coming on that will support long-term growth.

That's great. One of the other things I think that's happened that maybe people -- and we'll see it doesn't seem like they've appreciated it that much is that you've increased the FICO scores of your average owner. What does that mean for the business model, both near term and long term?

Yes. So thanks for the question. And it is important to note what we have done as we came out of COVID, we moved the minimum FICO from 600 up to 640. What that means is our new originations. Average FICO is coming in at 742 as high as anybody in the industry, which I'm sure is not fully appreciated when people think about brands, right? So if you look at our originations, they're as good as they've ever been, and that's really what's given us confidence as far as our portfolio continuing to hold up well, right? There were a lot of questions about the consumer. You've got a $3 billion portfolio, how is that portfolio going to perform. I saw a little bit of pressure in the first half of the year, but then that pressure started to alleviate in the third quarter, and we're seeing that continue in the fourth quarter with good performance. So a very strategic move. Not only does it help the portfolio, but it also means that every individual that's come into our sales carries is a higher-quality individual based on FICO and income levels, which means you get that lift in the close rate in the VPGs. The VPGS we haven't talked about them yet, right, but they're run at the high end of the range all year of $3,000. And the reason for that is we're seeing a better consumer than we did at pre-COVID because of the increase in marketing standards.

No. I guess on VPGs, we're in this normalization. I think VPG's often I think people maybe think about it is just price, but it's price and conversion, other things that's into it. So if we deconstruct that, what has been ebbing and flowing and how might that set the stage for next year?

So when we came out of COVID, our owner volume was much higher than it is today as a percentage of total sales. So say, 75% of total sales were to owners. But .

To existing owners.

To existing owners. But you want to be bringing in new owners every single year at a greater rate because they're going to buy 2.5x, 2.6x more once after their initial purchase. So we've had a targeted approach of getting that number from 25% up to between 35% and 40% of owners of sales were to new owners because we just think that, that balance fuels future growth. And when that happens, conversions for first-time buyers, volume per guest is much lower than for people who are owning already, happy with their product and having much higher VPG. So as we've been increasing the level of new owner sales from right out from 2021, it's had a natural headwind to VPG, which has brought it down to just over 3,000. Still incredibly high levels historically for us. As we go into '25, because we're in that 35% to 40% range and where we want to be, that headwind doesn't exist for us. So volume per guest going forward should really be a function of price increases and any adjustments to what happens in our conversion or close rate, the number of people that buy out of 100. So we've sort of gotten our business back to where we want it for the long term in that $35 million to $40 million, which means our VPG should walk into next year as a starting point, stable to where it finishes this year, and then we'll go up or down depending on price increases and close rates.

I want to get into conversion, but before we do that, so you painted this picture of increasing the FICO score, a conscious effort to do that, which I can imagine, narrows the number of people that you would potentially be willing to look at from a tour standpoint and from a new owner standpoint. There's the -- I think you said a 2% attrition rate. So those 2 things, I can imagine we put a little bit of pressure on your total owner base. But are we at a point now where your net owner growth, if you will, should start to plateau or even grow at some point?

Yes. That's -- we've sort of worked through the defaults of COVID and changing of our business model. So yes, we should see now a stabilized owner count and maybe a trajectory that starts to move up. What I think is often missed in just the sort of straightforward new owner growth commentary is that we've been in business for 50 years, nearly 50 years. So someone who bought and has used their product for 30 years, versus someone that's bought in 2023, the revenue per owner is very different. So although we want 100% of the people to stay in our ownership, even if we're stable in our owner base, we are often trading someone who's purchasing power is much lower for someone whose purchasing power is much higher.

Well, the real estate value has gone up, and it's all tied together. So you're -- you're going to be willing to pay up for it based on where inflation is broadly gone. So I guess turning to the travel and membership part of the business. I guess, on exchange, our -- are people generally proactively coming out of the system? Because that's been a part of the business that's been, I would say, flat is slightly down, but it's a high cash generator. But what's driving the reduction in total revenue. And do we see that segment stabilize at some point as well?

So there's a few components. Let me just clarify what you're really seeing in the space. when I mentioned one of the really strong aspects of the industry is consolidation in favor of sort of hospitality branded companies. As the consolidation has occurred, every club has gotten bigger. So people are still exchanging at a very similar rate. But what you're often seeing is they're exchanging within their own club at a greater rate than they're doing what we call external exchange between companies comes with different fees and different margins. So the headwind we see is because owners quite rightly are staying within their clubs a little more frequently, and therefore, the fees are differentiated. What I would say about the revenue component of that, that's a 0% to 2% growth business. We would like a greater growth component to that business. And we have started another component that is not timeshare related, which is Travel Club. So the headwinds we've seen through because -- the consolidation set beside the growth of this new business has really sort of stabilized it at that 0%. We don't know what's going to happen in the future, but we're very committed to growing revenue at a noticeable clip on the Travel Club so that we're prepared for if there's continued deterioration on the exchange side of the business.

And on the Travel Club, what are the unit economics or how does that business model scale as you try to grow that relative to what's happening on the exchange?

Well, it's definitely much lower margin. It's high single digits, low double digits margins in that business.

Currently?

Currently. Right. and that's really closed user groups that provide extremely strong pricing, but it has to be as behind a paywall. So it's private. And we're seeing that business. We've retooled it. We had really aggressive plans, recognize that they weren't being fulfilled, and we retooled it. And now that it's been retooled, and we've really concentrated our learnings we're starting to see that transaction growth again. So I have a lot of positivity about that component of our travel membership business going forward that it's going to be a positive counterbalance to the face on the exchange side.

Great. Going back to conversion rates. How do you think about the things that you're doing to try to improve conversion rates from here? What are the major opportunities from a business standpoint?

Do you want to take that or you want me to?

Go ahead. Yes.

So one of the real benefits of raising the FICOs is we take a lot less doors, and we took a lot of questions in '21 and '22. Why is your tour count down? And the reason is we took a strategic move to lower the tour count so that we could have greater efficiency in our human resources as well as the back-end fulfillment of the finance portfolio. So we wanted to be a lot more targeted in the consumer that we were dealing with. And from the consumer side, look, the reality is the consumer preferences are changing dramatically. We are spending most of our operating capital, not incremental, but what we typically spend on an annual basis, a lot more on the digital, not only marketing path but also on the booking path. On Travel Tuesday, we launched our new website -- our new Club Wyndham app, that just allows a much more efficient booking process for our Club Wyndham owners. We also -- we've seen a lot of success in this space with the experiential travel and experience is experiences outside of the bricks and sticks of the unit. We believe those also really help people's engagement back to the brand and commitment to it. And I think lastly, which is more reflective to our strategy is in our opinion, hospitality is moving to more niche match my lifestyle accommodation. And I think we were speaking earlier is who 15 years ago would have said Margaritaville would be a hospitality brand. And here it is with hotels and retirement communities. We believe the same with Sports Illustrated and we think there's a lot of retail brands out there that can match someone's personal lifestyle to how they want a vacation.

A couple of jumping off points there. But on a sourcing and marketing standpoint, what does that mix look like now? I think that people have maybe the perception of the called transfer, but there's also e-mail, that I get a lot of e-mails, but I don't get a lot on social media. So how does that look today? How might that look 5 years from now?

Well, I think, especially on the call center operations, whether it's called transfer or anything else, the voice component of marketing is stabilizing, if not diminishing and has been for some time, which naturally pushes people are booking more hotels and booking more holidays, so they're going somewhere, and that's obviously in the digital space. And that sort of gets back to my previous answer is the investment in the marketing, the digital marketing booking path and the digital owner usage booking path is where a lot of our investment occurs. You think about 65% of our owners, 1 -- our total volume is through our owner sales. So making it simple and more frequent and utilization increasing for our owner base also turns into more sales. And then, on the new owner side, just getting a wider funnel to get more data in there to drop eventually to what could be a face-to-face marketing and direct marketing opportunity is that's where you're going to see our space go. It's not going to be a rapid change, but 5%, 10% on $2.4 billion of sales is something to sneeze at.

Is there an opportunity to use tech then also to sell right, to actually get people to transact more? I mean what percentage is done digitally at this point even from an existing owner?

We don't get someone to go from A to Z digitally. What we do see a lot more frequently now is virtual sales. Someone could be sitting in their villa and coming back to Australia. I was in the lobby and I see I see some scones going up to a room and someone was about to start a live stream, husband and wife virtually while they have tea and scones in their room, getting a presentation and while they're enjoying their vacations. So I think that's more likely than an A to Z digital presentation. .

And going back to the multi-branded nature so you've got Sports illustrated, Accor. Are there investments that are needed once those are on board before you reap benefits from it? Or what's that ramp look like?

Yes. I think. Each one is different. So when you think about a core and existing business, came up to about years worth of inventory. So no incremental inventory investment for the next few months. Having said that, when we do start to spin on a core, we'll do it just like we do all of our inventory sourcing, which is just in time. So as the core grows, needs more inventory, we'll bring the inventory on to match the revenue that's coming on the new just-in-time model, which is for that EBITDA to free cash flow conversion, 50% and growing in the future. Same thing with Sports Illustrated, not yet an existing business. But still, as we start development, we'll get a partner, they'll develop the inventory to our specifications. We'll take it down as we needed to support the tour flow that's coming into the markets that we're in. So we'll be consistent in terms of the way we source inventory really since 2009, just-in-time basis. And if you look at our free cash flow generation, that's where we're able to be confident around 50% this year, moving up to 55% in the future. So matching that inventory spend with incremental revenues.

And so there are more opportunities than to plug these into the system that are out there? Or how do you think about what -- where to look for additional brand extensions?

Well, the key is to execute on what you have. And we signed a core in January. We took over operations in late March, early April. And by the end of Q3, we had fulfilled the objectives for the full 2024. So that is sort of first check. The second check is to layer a growth aspect on it next year, open more sales operations, give the owners what they want, which is more destinations. So you have to take care of what's at home first and a core number one. Number two, Sports Illustrated. Again, think of that Margaritaville lifestyle now put our first resort, which will be in Tuscaloosa, Alabama, is the first one we signed. But there's -- we have a very robust pipeline, and it's going to give us the opportunity to be in markets that we wouldn't normally go to with another branded product. I mean you go and you start listing off the SEC schools and the towns they're in. Not easy to find hospitality in those markets, but rabid fan bases who love their university. And it's not just football either and same with the ACC, the big 10 and the Pac-12 and all these conferences. It's a niche market. It's never going to be the size of our Wyndham today, but there's something there that we can replicate from all our success at Wyndham, create incremental volume, incremental vacation experiences, which gives us incremental geographies that we aren't in today.

Speaking of geographies, maybe give us a little bit of a background on international, it doesn't seem like there's been as much in certain markets. There's more than others. But how do you think about that as an opportunity?

So we do, first of all, and just to lay the groundwork here. About 90% of our business is in the United States and 10% international. Primarily...

That's the owner base you're saying?

That's of annual sales volume and when you look at where that international volume is coming from, it's primarily Australia, New Zealand, Thailand, Indonesia a little bit in China and Japan. So going forward, where the opportunities lie are really threefold. Mexico is about 60% of the size of the U.S. market. Expansion in the Asia, South Pacific region. There's plenty of more opportunity there and the market is conducive to it. The Middle East remains a market that's attractive, but there's some regulatory completion that has occurred before the market really opens up, which sort of leads to the natural you haven't said Europe yet, and I spent about 8 years in my career there, just the regulatory environment is very fragmented and difficult to operate in. It would be a great market. I would not put that on our -- I gave you 3 markets, so it wouldn't be in our top 3 primarily due to regulatory concerns.

I think we're about 30 minutes in. I'm now going to get to the demand question, I guess, when you think about the demand backdrop for the year ahead relative to the past year, do you generally think that things should be accelerating, hold, decelerate and what influences this view?

Well, I think obviously, pre-election, I think there was a lot of uncertainty out there as far as what the consumer was feeling. They didn't know who is going to win. What was going to mean for them personally. I think now that we have clarity on the election I know we sit here today more confident our VPG stand at the high end of the range like they did throughout the year, more confident that the portfolio, we started to see a little softness, as I mentioned earlier in the first 6 months, is starting to stabilize. So I think we feel that the consumer continues in our business to perform at a high level, and we're even more confident than that even were a few months ago. And also gives us confidence as we head into 2025. So I think the clarity that the consumer has is really important, and we're seeing it come through in our business as far as the high level performance.

And you touched on that like a little bit of a choppiness in the consumer earlier in the year, which drove the provision to be -- to go up to delinquencies, then have they tracked the way that you thought? I know you brought it back down, but is it still -- it seems like it's still a little bit elevated, at least as a percentage of the gross receivables currently. So based on what you just said, does that mean that we should be assuming the provision continues to normalize here?

Well, we usually wait 2 or 3 quarters before we see a trend, which is kind of what we saw, right, late last year and then the first and second quarter this year, which is when we took the provision guidance that now held or for your EBITDA guidance because VPGs were performing very well. And then Q3, we see the portfolio improve a little bit, to your point, still not to historical levels, but better than it had been in Q1 and Q2. Q4 should be the same, which gives us confidence in the 20%. Does the 20% go down next year? You don't know, not ready to provide guidance for '25 yet. But I think longer term, right, in my mind, I'm confident that the provision is not going to stay at 20% long term. It's just a matter of with the consumer coming back now, it takes a couple of quarters to catch up on once we see that happening, then we take that provision guidance.

And That higher FICO score too should.

Higher FICO score definitely helps you.

Yes. It was -- I think it was Q2, we took the provision up 100 basis points, but we also took our full year guidance up along with it. So a lot of the commentary in the process was about the provision, but we actually took our full year guidance up and then we had the hurricanes in Q3. And I think people expected us to pull it back and we held our full year guidance. And as Mike shared, we have -- we're 2/3 of the way through Q4 and confident in the performance of our teams and a total performance of the enterprise so far.

That's great. And on the margin side, we didn't really touch on it yet, so we can dig into that a little bit more, but a high level what's the framework for thinking about margins from where we are now? Are there major either tailwinds or headwinds to think about near term?

Yes. So -- and we've got a great time in our Investor Day that shows our margins really since 2009 and except for during COVID, driving that 22%, 23%, 24% range. That's where we're running year-to-date this year, and we would expect that they stay in that range. When we think about long-term headwinds and tailwinds. Obviously, the 2 biggest -- or the 1 biggest headwind we've had the last 2 years has been interest rates, right? Where we had a $25 million headwind in 2024 because of rising interest rates on our ABS transactions.

Does the rising interest rate also impact the provision? Like should we be assuming that those go hand in hand? Or are they totally separate?

The reason they're separate is because we don't pass the increasing interest cost on the consumer. Our average interest rate is already 15% and we bought it just over 5%. So we've got great spread there. And we want to keep that monthly payment about $325 to $350 gets back to that value proposition. We want to be able to say the consumer here's your monthly payment that fits with your -- in your vacation budget. And then, as you know, once they buy, they're going to upgrade in the future by 2.6x more. So for us, for that new owner, you want to keep that value proposition we absorbed the higher interest rates on our ABS transactions, still had EBITDA growth. Now that pressure has gone away. Interest should be flat from a rate perspective in 2025 and then become a tailwind in '26. So when we think about long-term trajectory, you have your interest rate, that should become a tailwind in '26. At some point, I believe the provision comes back down to 18% to 19%. So you had that tailwind coming in. So '25 is probably a pretty normal year as far as things not moving too much on a year-over-year basis, and then you had this runway in '26 that provides us with some opportunity with some tailwinds.

And the brand extensions, is there any margin implication from that? I mean the

Individually, they'll have lower margins just because they're primarily new owners, right? I think that's -- but when you think about doing $2.2 billion of VOI sales and you adding $100 million in a year of new owners, it's not going to impact the margin significantly. And the 2 things that I talked about, the interest and the provision becoming a tailwind in '26 also gives us some protection as far as margin deterioration for the overall business.

And the last thing we're asking everyone is just really around capital allocation. I guess how are you prioritizing? And is that changing at all? .

Yes. No, we've been very consistent in our capital allocation since we spun off Wyndham Hotels back in June 2018, right? We've grown the dividend every year, except during COVID. As soon as we got out from under the restrictions of COVID, we start growing the dividend again. Our dividend, 17% growth CAGR since 2021. So first priority is continue to grow the dividend every year as we grow the business. Second is we'll look at M&A. Absent M&A, we put the excess cash to share repurchases. So pretty easy algorithm grow the dividend as we grow the business. If you're bringing share count down by 7% to 10% a year, you can grow that dividend 10% and really not have much incremental cash out the door year-over-year because your share count is down. Look at your total cash flows for the year, divide it by 4. That's been our process as far as the level of share repurchase each quarter. If we do M&A, that comes out of the share repurchase that quarter, but pretty consistent capital allocation policy as far as dividends, look at M&A, absent M&A buy back shares and our share count is down about 25% since June of '18.

Would rates coming down influence how you think about the balance sheet and how much leverage is kind of the right target?

So we're currently seeing about 3.4x levered. Our long-term goal is 2.25 to 3x. Precool we operate in the high end of that range, right at 2.9x. Our goal is to delever by growing EBITDA, because we're confident that we can even operate at 3.4x. So we're going to get back down to our target leverage rate. So as we grow EBITDA, that leverage rate comes down, and we'd rather use cash to return capital to shareholders, do share rollbacks and things like that. So don't expect that we'll be paying down debt with cash.

Makes sense. And then on inventory, I guess what's the right level to think about for inventory? I think sometimes there's a fear in this industry that there's this looming inventory investment that you've got to make and so free cash flow will be very cyclical.

Yes. No, it's -- and it goes back to your earlier question about a core and Sports Illustrated. Right now, if you look at our core business club window where we do $2-plus billion in sales, we've got enough inventory there for 3.5 to 4 years. .

And is that mainly -- does that include repurchase inventory? .

No, that's even on top of that. repurchase -- so what happened was back in 2019, we were doing $2.4 billion in sales, growing 7%, 8%. We had all these inventory commitments, right? COVID hits, sales dropped temporarily. We went ahead and honor of those inventory commitments that came in, in 2021 and '22 because they were at great prices, 2019 prices. So now we're in a great position where we've got 3.5 to 4 years of inventory before recoveries sitting on our balance sheet. Our current cost of sales is running 10%. So great protection there as it relates to cost of sales, helps with the cash flow through for closures, we'll get about $100 million a year back in inventory. -- we buy back about $50 million on the open market from owners and HOA. So 3.5 years plus $150 million coming back every year really puts us in a great spot as far as that club of inventory and protection against increasing construction costs.

And just so people maybe who are less familiar with the model are aware, when you say you buy back the inventory, what's the price of that inventory?

We get -- well, that's why I'm confident that we will continue to run a 10% cost of sales. right on the existing Club Wyndham business.

Yes, primarily the HOA, you also to incur that, too, I would imagine.

Right. 2 pieces to it. If you have an owner that's paid off their loan, right, the 80% that have paid off their loan, if they go delinquent on their maintenance fee, we just paid that $1,500 maintenance fee to the HOA and then we sell that for 25,000. So that's the simple math there. And we have about $50 million of that every year that we buy back from the HOAs. Keeps the HOAs healthy, make sure they have money to do refurbishments and things like that. So a great model and a very efficient model for both parties really.

On the great model point, the HOA business, maybe you could remind us of how that works in general. Is it just cost plus your fixed percentage and then that just flows directly through to the bottom line? Are there any cost to think about?

No, you're exactly right. There are lots of great things about this model. But one of the key ones is - the operations of the resort are completely covered by the maintenance fees that the members pay. So we get cost plus 10%. So if we have a resort that has a $10 million budget, we get $1 million fee plus reimbursement for our expenses, right, the labor, the housekeeping, the maintenance, whatever it might be. And so that provides us protection against increasing labor rates, right, which you saw really coming out of COVID, right when labor rates will go up 7%, 8%. For us, we don't want that to happen because we want the value proposition. But when it does happen, we actually get an increase in the management fee because we're getting cost plus 10%. So our goal -- if you go back, 2021 and '22 as labor rates were moving up quite a bit, we saw 7% to 8% increases in the maintenance fee of the owner. Our goal would be to keep it around 4% to 5%, which is what's happening now as labor increases have come down. You're kind of in that 4% to 5% range because we want that value proposition to the consumer to remain strong where we can present to them 2-bedroom condo for 5 nights in May and Orlando was $1,600 to tail rooms is going to cost you $6,000, right. And so that's the value proposition we want to keep strong as let's keep those maintenance fees in check, make sure we have enough money to be able to refurbish the units, use an HOA fund. So we've got a good quality asset there. They have a great experience. They get the value, they buy more.

Ave you ever lost a resort?

We've got like a 98% retention -- we've got -- I mean, we've been in business 50 years. You only have some where you've got somebody that comes in and over resort and they think they're better than us. And so somebody comes in and says, I'll manage it for 5%. You lose a few. But the reason -- a couple of reasons we have such great retention. First of all, we do the buyback with them, right, where they basically have no delinquencies because if someone goes delinquent, we're happy to buy that inventory back at a great price to keep that cost of sales low, great inventory already registered. Also, when you think about, if you're on the coast of Florida as an individual HOA, trying to buy insurance, it's not going to happen, right? You got a $400 million building sitting there in Palm Beach, you're going to have a heck of a time getting the insurance as an individual joy. We've got $8 billion in assets that we have in our insurance pool. We've been going over to Lloyd's for 35 years, great rates, great deductibles. You jump out of our insurance program, our policy is you're not coming back in for 3 years. Because one, you shouldn't leave but two, we don't want people to jump in and right? So point is great buyback program, great insurance program, and then we think about where are we doing every one of our units every 5 to 6 years, 25,000 units, 5,000 units a year. Buy new TVs, buy a new mattresses and new appliances, get great pricing to be able to reprice all that.

What's the EBITDA from that alone?

That's built in that maintenance fee. So me as an owner I pay..

No, I mean the total contribution to your business from just the management side.

A little bit over $100 million.

Little bit over $100 million. So I mean, and long-term contracts, a little bit of growth.

Long-term contracts. I mean, most of them are auto renewal. You have to have 50% of the HOA to change it. But once again, I prefer to say the reason you don't want to move is because we offer you great value when you look at the products you can buy, right, the appliances, everything else. We offer you get great insurance program. We've got great management. So they stay around because it's great value for them. .

Great. We've got maybe time for 1 question, if anybody has it in the audience. Everyone's a little bit bashful. We got one right here.

Can you speak to the value proposition to the consumer as they think about purchasing a time share relative to the cost of hotels? You alluded to earlier with the Orlando example, but maybe just speaking more broadly to that.

Sure. I'll give 1 example of the last example and then you can jump in if you want to, but last December, I went to Park City, Utah, 2-bedroom condo, foot of the Canyon, ski in ski out December 23 through 28, my maintenance fee for all 5 nights as an owner of Club Wyndham $1,800. Ski in and ski out, Christmas week at the foot of the Canyons. You try to get an Airbnb or a 2-bedroom condo or a hotel room, you got an Airbnb, you're paying $1,000 plus any for that, right?

I think about 4 years in a row, we've got to talk after this.

Yes. No, I mean it's -- that's the value proposition I'm talking about. I mean it's incredible value to the consumers, which is why they buy more, right? You go have a great trip to Park City, you go down to Orlando, have a great time at the theme parks. And the other part of it is people think about that price differential between the hotel. You've got a family of 4 or 5, you've got a 6-year-old and 8-year-old, you're staying in a hotel. You go downstairs of that buffet for breakfast. You pay $30 a person, right? You say you're paying, what, $150 for 5 people and your 6-year-old has some strawberries in the bag on glass of juice. And you just like, I just spent $30 for that. In our condos, you've got a full kitchen, right? Full refrigerated. I mean, we shut up at Park City, we send the list of Walmart. They deliver all our groceries to us. I walk down a lobby, I pick them up and I'm set for the week, right? For 1 buffet downstairs at $150 pays for my breakfast for the week for 4 people, right? So, that's the other part of the value proposition that people miss is, and we don't know how expensive food and restaurants are right now, is you can eat a lot of meals in your room. It's actually more convenient and especially if you've young kids and that's part of that value proposition that people don't appreciate.

And all in since we're out of time with ultimately, we're in the leisure business, and it is a better vacation when a family of to 4, 6, 8 is vacationing at a 1,200 square foot condo versus a 300 square foot hotel room. Your vacation is just better. And we're based in Central Florida and a lot of these families go to theme parks throughout the day. I can assure you the value we hear back a lot from our consumer goes way beyond economics. It's like it was just great to come back, the kids took a shower, they turned on their iPad or they ran down to the pool, my partner and I had a glass of wine together. And we had a great night. We didn't have to redress, go out, get in line at a restaurant, pay $200 for dinner. It's the thing -- when people buy at the table, it's usually an economic discussion. The reason we have 98% of people who fully paid for their ownership is because they love how they're vacationing with us.

Well, we are out of time. Please join me in thanking Michael and Mike from Travel and Leisure. Thanks so much.

Thank you.