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spk00: Good morning and welcome to the fourth quarter and full year 2020 earnings conference call for Travel and Leisure Co., formerly Wyndham Destination. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then 1 on your touch-tone phone. If you would like to withdraw your question, please press the pound key on your telephone keypad. And a reminder, ladies and gentlemen, this conference call is being recorded. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Chris Agnew. Please go ahead.
spk03: Thank you, Ashley. Good morning and welcome to Travel and Leisure's fourth quarter and full year 2020 earnings conference call. Before we begin, we'd like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings, and you can find a reconciliation of the non-GAAP financial measures discussed in today's call in our earnings press release available on our website at investor.travelandleisureco.com. This morning, Michael Brown... our President and Chief Executive Officer, will provide an overview of our fourth quarter and 2020 full-year results. And Mike Hugg, our Chief Financial Officer, will then provide greater detail on the quarter, our balance sheet, and liquidity position. Following these remarks, we'll be available to respond to your questions. With that, I'm pleased to turn the call over to Michael Brown. Thank you, Chris. Good morning, and welcome to our first earnings call as Travel and Leisure. Earlier this morning, we were pleased to report fourth quarter adjusted EBITDA of $148 million and adjusted EPS of 32 cents. Last year was full of unprecedented challenges for the travel industry, yet the strength of leisure travel demand combined with our resilient business model enabled us to achieve positive adjusted free cash flow for the full year. Indeed, after reopening at the end of the second quarter, we were able to deliver a strong second half of 2020 with adjusted EBITDA margins over 20%. The combination of our recurring earnings streams, the resilience of our owners, our competitive resort footprint, and the early actions we took to reduce costs and maximize cash flows all contributed to our strong performance in 2020. Let me transition to some of the highlights from last year. For the full year, we generated revenue of $2.2 billion and adjusted EBITDA of $259 million. As a reminder, adjusted EBITDA includes a $157 million negative impact for increased defaults due to COVID. The end of the first quarter and the majority of the second quarter were significantly impacted by suspended resort operations due to stay-at-home orders in 42 states. By the end of June, 85% of our U.S. resorts and 56% of our sales locations had reopened. As we looked ahead to the eventual rebound in leisure travel, we made a number of operational changes to put us in a stronger position for the recovery. In the vacation ownership business, we elevated the FICO qualification threshold from 600 to 640, improving tour quality, which results in better performance in the portfolio. We also pared back underperforming marketing locations and programs. We reimagined our check-in process, innovated the on-site experience with RFID wristbands to increase engagement with our guests, and went live with our new Club Wyndham website in May. We also launched virtual sales and virtual contract closings. Both have been well-received, and we plan to expand both programs in 2021. Cost savings helped buffer a softer top line in our travel and membership segments. This segment, which is primarily RCI, achieved 40% adjusted EBITDA margins in the second half, compared to 37% in the prior year. Revenue per member also improved in both the third and fourth quarters, down just 19% and 13% over the prior year, which were noteworthy improvements compared to the second quarter, which was down 37% over the prior year. And on a consolidated basis, we reduced our annualized 2020 operating cost base by approximately $225 million, $60 million of which will become permanent G&A savings. And we reduced inventory and operating capital expenditure by over $125 million. In a year when many global lodging and leisure companies were net users of cash, we maintained a strong balance sheet as we generated positive adjusted free cash flow of $35 million for the full year. We had 1.6 billion of liquidity at year end and finished the year with 3 billion of corporate debt. We were also able to maintain a quarterly dividend, which is currently 30 cents per share, demonstrating our confidence in the resilience of our business. The strength of our balance sheet and our business allowed us to be productive and execute several strategic initiatives toward achieving our goal to expand into the broader leisure travel market. We successfully unveiled Panorama Mid-Year, and we acquired the Travel and Leisure brand in early 2021. We are excited about both of these businesses and the momentum they will drive into 2021 and beyond. Let me share with you the rationale behind our acquisition of the Travel and Leisure brand and content and its existing businesses. First, our mission is to put the world on vacation, and by renaming our corporate entity, it allows us to demonstrate an increased breadth of marketing services we will provide going forward. The acquisition of Travel and Leisure allows us to express that direction with one of the most trusted and iconic names in the leisure travel space. Second, it reinforces our strategic direction to expand beyond the timeshare space. The overall North American leisure market is more than tenfold larger than the timeshare market. The travel and leisure acquisition, fueled by our technology platform, allows us to expand by offering new products and services to a much larger market. As part of the acquisition, we acquired two subscription travel clubs with a combined 60,000 members. We plan to grow these travel clubs as we launch new products this summer. Third, this facilitates our ability to offer timeshare services to other travel brands in addition to Wyndham. Our strength lies in sales and marketing, hospitality, and our ability to access the financial markets to support consumer lending. We believe there are strong travel brands that could operate under their name but benefit from our services. The renaming of our corporate entity will reduce the obstacle of overcoming issues of brand conflict. To recap, our company now has three business lines. Wyndham Destinations, our core timeshare business, which is committed to the Wyndham brand and growing our relationship with Wyndham Hotels and the Wyndham Rewards Program. Panorama, including the RCI exchange business and the ARN technology platform, focused on growing B2B travel solutions with partners. And the Travel and Leisure Group, which will focus on its booking platform, subscription-based travel services, and its licensing business. We look forward to sharing more with you in the coming quarters, and as an investor day, we are planning, whether in person or virtually, for September 10th in New York City. Let me now move to our outlook. We are already seeing the positive trends in 2021, providing us with optimism about a strong recovery and leisure travel. Post-pandemic, consumer travel sentiment is back to the highs last seen in October. And as daily COVID infections continue to decrease, we only see this trend improving. With that said, we remain mindful of uncertainties in the first half of the year. The state of the pandemic and the success of the vaccine rollout remain critical to consumer travel sentiment and the easing of travel restrictions. COVID daily infections were still elevated in January, and our performance in January, with California still closed, was very much like December. January is normally a seasonally slow month, so the impact will be less pronounced. February has seen some improvement, and we anticipate that momentum will continue into March. Although it is our intention to return to full-year guidance, in the short term, we will be providing quarterly guidance. For the first quarter, we expect tours to be down 50%. gross VOI sales to be approximately $210 to $220 million, and VPG to be 30% above the prior year. Overall, we anticipate adjusted EBITDA in the range of $95 million to $110 million in the first quarter. With that, I would like to hand the call over to our Chief Financial Officer, Mike Hugg. Mike.
spk08: Thanks, Michael. Good morning, everyone, and thank you for joining us today. I will discuss our fourth quarter results and provide you with more color on our balance sheet, liquidity position, and cash flow. My comments will be primarily focused on our adjusted results in year-over-year comparisons. We reported fourth quarter adjusted EBITDA of $148 million and adjusted earnings per share of $0.32 compared to adjusted EBITDA of $265 million and adjusted EPS of $1.58 one year ago. During the quarter, $20 million of COVID-related charges were added back to total company adjusted EBITDA, with the largest item being $12 million of lease-related restructuring charges. In the fourth quarter, vacation ownership reported revenue of $512 million, with gross VOI sales of $281 million and adjusted EBITDA of $115 million. Tours declined 64% in the quarter compared to the prior year, with travel restrictions in California and Hawaii a headwind to our previous expectations. New owner tours were down more sharply as these tour sources are expected to recover more slowly than existing owner tours, which were 48% lower than the prior year. BPG increased 24% to $2,938, benefiting from improved new owner close rates and a higher mix of sales to existing owners. Our underlying portfolio continues to perform well with delinquencies lower year over year, driven in part by deferral programs, a more mature portfolio from reduced originations, and improved quality of new originations due to changes we've made in our underlying standards. Requests for deferrals have continued to trend down since the second quarter, and now active permits represent just 1% of loans outstanding, down from 6% at the peak. As we have known previously, as owners come off deferral, we are seeing the majority of them return to making payments. In the fourth quarter, we released $20 million of the $225 million receivables reserve we took back in the first quarter due to continued strong performance of the portfolio, resulting in a $13 million benefit suggested EBITDA. We remain comfortable with the overall analysis on our receivables portfolio, considering the continuing uncertainty around the pandemic and its economic impact. Revenue in our travel membership segment, which includes Panorama, as well as travel leisure groups starting the first quarter of 2021, was $135 million in the fourth quarter compared to $181 million in the prior year. Travel and membership fourth quarter adjusted EBITDA was $49 million, down just 11% compared to $55 million in the prior year. Strong cost control and a sequential improvement in revenue per member trends helped margin improve to 36%, up from 30% in the prior year. Average number of members in the segment decreased 6%, and we expect that trend to continue in 2021. We do see a lot of sales for the industry, particularly in new owner channels, are not generating enough new owners to offset the normal trend of members. We expect this decline to moderate in the back half of 2021. As travel membership continues to evolve beyond its traditional focus on the timeshare industry and into servicing the broader travel club market, the exchange-focused KPIs we had previously been reporting will become less relevant to the overall business. As such, in 2021, we will disclose new transaction-based drivers. Net transactions for this segment declined 29% in the fourth quarter due to an increase in cancellations and lower gross bookings at ARNs. which has a shorter booking window than the exchange business. However, we are continuing to see positive travel trends in exchange as December's gross bookings were in line with the prior year. The different gross booking patterns in exchange and ARN are a good indicator of how our members feel about travel right now. Although they are cautious in the short term, they are looking to return to travel in the near future. Turning to our balance sheet, As of December 31st, we had $1.2 billion of cash and cash equivalents with corporate debt at $4.2 billion, which excluded $2.2 billion of non-recourse debt related to our securitized receivables. Our net leverage for covenant purposes at the end of the quarter was 5.4 times. Two turns below our 7.5 times covenant. We paid our fourth quarter dividend of $0.30 per share on December 30th, and we will recommend a first quarter dividend of $0.30 per share for approval by our Board of Directors in March as we remain committed to returning capital to shareholders. As Michael mentioned, we acquired the Travel and Leisure brand in early January. We paid $35 million in cash at closing, and the traveling payments of $65 million will be completed by June 2024. The acquisition is expected to be neutral to earnings in the first year as we invest in marketing programs to grow the business and accrete it in the second year. As noted previously, we are not providing full-year guidance at this time. However, we do want to share some thoughts on our outlook for full-year free cash flow. We expect 2021 free cash flow to be below our historic free cash flow conversion range of between 50% and 60% of adjusted ETA, reduce net interest income, Fewer unsecuritized receivables on our balance sheet as of January 31, 2021, combined with higher corporate interest expense as a percent of adjusted EBITDA, as well as the timing of some working capital items, are behind a temporary reduction. We expect 2022 pre-cash flows to move closer to our historical levels. First quarter pre-cash flow will be a significant use of cash due to the timing of inventory spending and working capital payments. as well as fewer eligible receivables for our first ABS transaction of the year than has historically been the case due to the lower level of DOI sales in the second half of 2020. In summary, we are pleased with our results for the fourth quarter and full year 2020 and look forward to the continued recovery of leisure travel throughout 2021. With that, Ashley, can you please open up the call to take questions?
spk00: certainly end at this time if you would like to ask a question that is star and one on your touch-tone phone you may withdraw your question at any time by pressing the pound key once again that is star and one we do ask you please limit yourself to one question and one follow-up and we'll take our first question from geograph with jp morgan please go ahead uh good morning guys glad to hear your voice um
spk05: The first question is on the travel and leisure acquisition. When you kind of think about the investment this year and looking at next year and beyond year two following the acquisition, Mike, how do you think about sort of the incremental revenue and EBITDA growth that T&L would contribute on a segment basis to the travel and membership segment basis?
spk03: Well, good morning, Joe. We're really, really excited about this acquisition because more than anything, it strategically opens a number of doors for us. And as Mike just mentioned, we believe it will be mutual earnings this year and accretive next year. Our plan as we move through this year is that we've already launched a book, TNL.com, our online booking platform. to really just start to leverage the brand. But secondly, and more importantly, and really the core of the acquisition was to begin to offer product to a lower entry price point and for shorter duration. With that, we bought two travel clubs with that 60,000 members, and we expect to be launching new clubs that allow us to really move up and down the demographics scale, both age and economically. those learnings and then start launching more subscription-based clubs into 2022. With that said, I know the question was specifically about revenue and segment. That's our strategy. And as that unfolds throughout this year, that's why we wanted to organize our investor day for the third quarter to really lay out in more detail the economics associated with that plan with six months of learning under our belt.
spk05: Okay, great. And then appreciate the first quarter guidance. Can you talk about, you know, you have gross VOI sales targeted at $210 to $220 million. You know, how much of that is in the bank through the first, you know, 55 days of the quarter? And when you think about gross VOI sales in the one queue, how much of that is? to existing owners versus new? And then lastly, with respect to what you have incorporated into your 1Q guidance, how much of another reserve relief is baked into that $95 to $110 million of EBITDA?
spk03: Okay. Well, let me start on the VOI sales, and then I'll hand over the provision question to Mike. Just as you traditionally look at the first quarter, what you tend to get, Joe, is that about 50% of your gross VOI sales come in the month of March. And given the fact that January was slower because California was closed, which has knock-on effects of both Hawaii and Las Vegas. January was slower than we expected. When the year started, we didn't think that the closure would last through the end of January. And as you look into the remainder of this quarter, I think we've already released our January – sorry, we released our December number, but we'd expect that – About 50% of our sales would be in the month of March of this year. Given where we're sitting on booking trends, we feel pretty good about the number as we're seeing definitely positive trends in overall bookings and arrivals to our resorts.
spk08: And, Joe, as it relates to new owner sales and the provision, we would expect the new owner sales for the first quarter to be in the low to mid-20s. And the provision, our guidance that we put out there does not include or assume any additional benefit from the provision. We're very happy with the way the portfolio is performing. As I mentioned, delinquencies are actually down year over year, so that – as a result of, you know, the great team that job has been in the servicing portfolio, as well as we've mentioned higher underwriting standards as it relates to new origination. So for the four-year, you know, we would expect the provision to be just south of that 19% range, kind of what we saw in the third quarter where we were at 18.8, but we are not assuming in our first quarter guidance any additional provision benefits.
spk03: Joe, let me just add back. I didn't answer one of your questions. About three-quarters of our sales will be to owners.
spk05: Thank you very much, guys. Yep. Thanks, Joe.
spk00: And we'll take our next question from Patrick Schultz with Truist Securities. Please go ahead.
spk02: Hi. Good morning, everyone. Good morning, Patrick. A couple questions just concerning the name change and sounds like a little bit of shift in direction here. You know, when you talk about new club products, could you give us a little more granularly what exactly would that look like? What exactly is that?
spk03: Absolutely. So let me just come back to your first comment about change of direction. This is about expansion. It's not about a shift of core strategy. We're as committed ever to the VOI business. We're committed as ever to grow the Wyndham name and the relationship with the Wyndham Hotel Group. It's been our success for years, and it'll continue to be as we stay committed to that growth. But we do see an opportunity in the leisure travel market. In North America, it represents over 100 million households, and those people go on vacation. And simply the type of products that we're offering would be a lower entry price point, a subscription-based price point, somewhere at $10 to $20 a month. with a shorter duration. You can think of many subscription models, whether they be Peloton, Netflix, Costco, just to name a few, is they want to be part of something that's exclusive and unique. And with the exclusive content that we now own related to travel and leisure, you're going to be able to take the inspiration that's created in the travel and leisure publishing side of the arm and activate that with fulfillment through your subscription club, again, for a subscription-based fee with exclusive content and unique value, better value than you might be able to get on the open market. That's the plan. We've talked many times over the years about our focus on Middle America. We remain committed to that, to our BOI brand. But this allows us to start testing other demographics, both age and economics, to supply vacations to a broader leisure market.
spk02: Okay. Thank you. Does this acquisition and those new plans, does that shift your focus at all from spending on development for timeshare? And also, are you out there still looking for perhaps some tuck-in types of acquisitions on the timeshare side?
spk03: This doesn't change at all our perspective on vacation ownership. We believe that we can continue to grow that business as we always have. We're committed to it as ever. From a development standpoint, if there's either an M&A or a resort opportunity that we see that's out there, we would absolutely pursue it. What I would say related to that is, as it relates to individual projects, as the industry and we declined our boi sales our balance sheet affords us a bit more time with our existing inventory so we will definitely be constrained on our individual project spend because we want to we want to maintain a strong balance sheet but to your tucking question absolutely we would be out there looking um i do want to take your question and just add to it uh on the the subscription business side is that Our acquisition of the technology platform of ARN nearly two years ago really laid the foundation for not only the Panorama Travel Solutions, but also these travel and leisure subscription clubs. So as it relates to incremental capital investment, there's nothing material that's required for us to go out and grow that business going forward.
spk02: Okay. Thank you very much. I have a couple other questions, but I'll hop back in queue. Thank you. Thank you, Patrick.
spk00: We can take our next question from Brian Dobson with Jeffrey. Please go ahead.
spk03: Hi, good morning. I was wondering if you could provide just a little bit more color on areas of geographic strength or weakness that you're seeing within your portfolio and how you expect those to evolve over the next, call it, year as consumers start to travel more. Absolutely, Brian. I appreciate the question. And let me start a little broader, and then I'll get into the specific geographies, because the question out there today seems to be around what are you seeing with the consumer. So let me share just a few points of information that I think everyone will find interesting. I'm going to first talk about pacing, the booking pacing at our resorts. If we were to look back at early January, the first and second week of January, our pacing rate was about 35% below what it was the same time in 2020. It's now the third week of February and our pacing is flat to what it was in 2020. And I think that's a good demonstration of the momentum we're starting to see with the Leisure Traveler in the last 60 days. Second point of reference is our on-the-books for the second half of 2021. If you look at where we are today and the number of reservations that we have on the books for the second half of 2021, that is 99%. of the position we were in in 2019 at exactly the same point. So comparing second half 2021 to second half of 2019 on the books, we're at 99% of where we were in 2021. So I think that's a really good indication that the overall leisure demand is A, has momentum, and B, is starting to look like it did in 19. What we're watching for most closely is rate of cancellation. That has been the elevated component. and that typically will decline once infections stay at a reduced rate for a longer period of time. And I'm sorry for that long wind-up to your geographic question, but I think that context is important. Where we're seeing the most geographic demand, number one, in a distant number one, is the Carolinas. Beach location, summertime, drive-to market, we're seeing a lot of demand for the Carolinas. Second is Arizona. You would argue there, again, drive-to destinations from our West Coast market, a lot of demand in Arizona. And about six months ago, we mentioned that Orlando was a laggard as far as reservations. Most people want the beach locations. Then we talked about it being moving up to the number one destinations, and now we're looking at that being up. So I would highlight the Carolinas, Arizona, and Central Florida as key demand destinations going forward. Thank you. That's very helpful. And then within Panorama, a lot of exciting stuff going on there. Do you think you could give us some examples of the type of B2B business that you're hunting down for that unit? It is an exciting time in that side of the business, and one that we've spoken about, but the new brand probably has caught everyone's attention, but the team and the panorama is huge. really working with a wide variety of businesses. I know we're in the leisure travel space, but the reality is whether there are corporations that are looking to develop programs for their employees or whether there are leisure companies that are looking to white label a travel benefit for their club, but they don't have the scale. It is ranging from one side being leisure companies all the way to corporations looking for loyalty. I would say that when you look at the development pipeline for those businesses, it's grown in a very positive way since the last time we've been on the call. So I'd expect as we roll through this year, we'll start rolling through a number of names that we've been able to contract. very encouraged by what we're seeing in the pipeline of future business for the Panorama Travel Solutions. Thank you very much. Thanks, Brian.
spk00: We're going to take our next question from Chris Warongo with Deutsche Bank. Please go ahead.
spk06: Hey, good morning, guys. Hey, Chris. Hey, good morning. If you think about how 2021 is going to unfold, there's a lot of variables with the consumer. But in addition to getting more comfortable traveling again, right, we think a lot of them in your demographic are sitting in a better financial position with stock market gains and savings. And then we potentially have stimulus. So the question is, have you guys thought about maybe how that plays out in terms of propensity to, to buy, but also perhaps less propensity to finance and kind of what some of the offsets might be there from a, from a, from a bigger picture perspective and how you're going to might change your marketing approach to that.
spk03: Sure. Let me, let me, let me take a stab at it first. And if Michael said he, he, he definitely can. So, um, We think it was a very important shift that we made to our marketing standards in the pandemic. The move to 640 FICOS, we believe, has already shown signs of strength in our portfolio. We're pleased with how that has progressed. And it's been a conversation that we've had with each of you over the last few years. So we think that is the right move. We also know that, as we discussed, tour flow being down. There is going to be a natural increase of tour flow not only for the owner base, as we continue to see momentum in the owner bookings, But the decisions are going to come as to the way the strength of the recovery occurs will determine the speed at which we reopen some of our open marketing channels. This is going to be a little bit of a transition year because Summer will be here Memorial Day, and we're going to start to need to make some of those summertime decisions in the next 60 days. So I think that's from a tactical direction, the decisions we'll make over which type of marketing programs will go with for the remainder of 2021. We want to grow back in a very margin-rich environment and with a very strong portfolio, both of which I think we're already proving out. We are generally positive about the consumer. I think if you look at savings rates with stimulus still coming, I think people's ability to to make purchases and to get back on leisure travel is definitely going to be there. We don't see the consumers especially – well, our observation is that they're very liquid. And, you know, I would pass this to Mike, but I think he would also say that generally our financing rates sit at, you know, cashdowns typically between 20% and 25%, and neither of us would predict a very material change to that, irrespective of where the consumer is.
spk08: Yeah, I think when we think about the tendency to finance, to Mike's point, we would expect on finance sales to be in that 25% cash down. I think there is the potential that, and as you noted, with higher savings rates, the actual number of contracts that do take financing could go down. So we're definitely watching that. Keep in mind, though, that also provides the opportunity for either improvement in close rates because more people buy or larger transaction size. So it's a fair point. We've definitely are excited about the strength of the consumer. We see it coming through loud and clear in terms of the current portfolio performance. And, you know, as we learn more, as we continue to increase our sales levels, we'll adjust accordingly. But definitely watching the percent of sales finance very closely.
spk06: Okay. Very helpful. And then the second question is, Mike, just heard your comments about you're really more about growth, not changing or shifting strategy. And also the last question was about potential M&A or acquisitions. But as we think about there potentially being some distressed hotel inventory out there, especially in urban markets where you guys had put a little bit more focus kind of pre-COVID, what's the appetite for potentially getting some inventory in some of these urban markets if the pricing is right? Yeah, and this is Mike.
spk08: I'll take that one. So as we've talked about, we're going to be very disciplined as it relates to our cash spend. We do expect that our inventory spending over the next several years will average less than $200 million. So as Michael noted previously in one of the balance sheet to carry us for a while along with what we have in the pipeline. So we'll be very selective. If a great opportunity comes our way, we'll take advantage of it. But I would say generating free cash flow, getting that leverage rate back down is more important than one additional dollar on the map. We're very happy with The resort locations we have, I think, you know, the results that we've driven the second half of the year point to the benefit of the geographic diversity we have. But I think right now inventory spending is pretty far down the list as it relates to, you know, how we want to spend our dollars unless there's just an incredible deal that comes our way. And there's no rush either. As we saw back in 2008, 2009, these inventory opportunities are going to be available to us for, you know, several years now. So it's not like if we don't jump on one in 2021, we won't have a chance in the future. So we'll be very disciplined. and much more focused on that leverage rate and using cash and going to get that leverage rate down.
spk06: Okay. Very helpful, guys. Thanks.
spk00: And we can go next to Stephen Grambling with Goldman Sachs. Please go ahead.
spk01: Hi, thanks. I know you want to disclose more at the analyst day, but It perhaps is a basic question on the travel and leisure acquisition and the travel and membership segment. How is that business similar or different to an online travel agent, and could it become more of an OTA long-term within some of the clubs you referenced? As a related follow-up, is there any impact to think through from the travel and leisure brand acquisition on the VOI segment long-term?
spk03: So let me hit the OTA first. It's not our intention at all to get into the OTA business. The rental of nightly inventory is a component that we've been able to do as a byproduct of our VOI business, and I would view it as a byproduct of our travel leisure acquisition. If you look at the continuum of the way people travel, you know, one side of the spectrum is the way we just mentioned, which is heavy SEO and spend to get nightly travel. And then the other end of the spectrum is vacation ownership. which is where we specialize and we will continue to specialize. We do think there's an opportunity in between to combine a few things. We think there is a macro trend around subscription, number one, and number two, we think there is the overall trend that people want to travel with the name that they can trust. that they know that when they book their vacation, they're going to know what to expect on the other end of that vacation. And when you combine the content and the relationships that Travel Leisure has through its publishing arm, that don't necessarily have to be Wyndham. Combining those with you know, with an ultimate fulfillment of vacation, we think could be very attractive. I had a discussion with the editor of Travel Leisure, and I was sharing with her that I was reading one of her articles about great U.S. national parks to visit, and I kept looking for the book, Book This Trip Now. And that's really what it is. And being the owner of Travel and Leisure, its content and having that relationship with the Meredith Group and ultimately Travel and Leisure publishing arm, it allows us to provide a product that that is not simply on price, even though we think we're going to provide tremendous value, but also making it with tremendous content and with a trusted name that people are looking to travel with today. And that sort of sits in the middle of the spectrum with that subscription-based model.
spk08: And as it relates to your question on the impact on the VOI segment, I mean, we obviously are still very high on the vacation ownership business, do expect to continue to drive growth there. I wouldn't say we did the T&L transaction in order to improve on that segment. We think we've got plenty of upside there. Down the road, there might be opportunities there. But I think, as Michael mentioned in his comments, the primary reason for it was to start to broaden our offerings to a wider group of leisure travelers.
spk01: Great. Thanks for that, Collar. Thanks, Steven.
spk00: We can take our next question from Ben Chaikin with Credit Suisse. Please go ahead.
spk04: Hey, how's it going? Thanks for taking the question. And not to belabor the topic, but I guess on the T&L booking website, BookTNL.com, yeah uh i guess is the intention for it to be a b2c travel booking website for single use meaning you know i'm flipping through the tl instagram and get a lead and book a trip that looks appealing um and i could be anyone on that instagram page in this example or is the intention to be more subscription oriented just trying to just try to close that loop number one and with the intention that the website is specifically for subscribers. And then it also looks like you can get flights on here, rent cars, hotels, et cetera, bundle and save. But you described it not as an OTA. So I'm just trying to close the loop on kind of like the intention, who exactly it's for.
spk03: Yeah, anyway, sorry. Right, so it's a great question. It is an online booking platform for primarily single users. The intention is that what we wanted to do is we wanted to get that website up and running and to begin having transactions for the single use. Ultimately, the end objective is to that's just being one source of leads into what would be an ultimate subscription business. Our intention is not to compete in the OTA space. We've got an online booking platform. We're going to work with a number of different providers, including all the ones you mentioned. But that is, again, a byproduct that will ultimately feed into a more regular and recurring revenue stream, which is the subscription business, which we'll have. more curated content, an entry price point being the subscription cost per month, and then benefit from transaction fees along the way. Very similar to the RCI model that we have today. I mean, ultimately, our objective is we've been viewed for, up until now, rightly so, as a single brand, purely timeshare company. I think the RCI component, which is recurring revenue, highly predictable streams, 30% of our EBITDA, hadn't always got the credit that it deserves as it relates to its recurring revenue nature. This is furthering that strategy of getting into asset-light recurring revenue streams. Again, not so much focused on the single transaction, but that is a lead source into our subscription businesses, which is where we want to focus. This strategy is to begin building a diversified EBITDA generation and support uh improved growth and we're not we don't need or want to come out with a big bang in 2021 with this we want to learn the right curation of the subscription model get it really well curated with great content and then and then have uh next year for it to be really start to be accretive to our overall earnings platform
spk04: Gotcha. That makes sense. I don't know. It seems like a great opportunity. There's not that many places that people go to book, you know, single-use vacations. So travel only is your brand plus your timeshare inventory. I don't know. It seems like a great opportunity. Thanks for the question.
spk00: And as a reminder, that is star and one on your touchdown song to ask a question. Once again, that is star and one. We'll pause to allow any further questions to queue. We'll go to David Katz with Jefferies. Please go ahead.
spk07: Hi, everyone. Thanks for including me. And I know, you know, we've asked a couple other questions, but I wanted to circle back on something hopefully you have not already touched on. But with respect to the loan loss, right, which, you know, came in adjusted at 17 and change, but I think you're guiding us toward, you know, a just under 19 loan. If we're hearing correctly, what happened specifically to get you to that 17? Was that a low volume, you know, COVID trend? You know, what's sort of going on between that 17, 19 level? Yeah, David, this is Mike.
spk08: I appreciate the question. I think if you look at the trend over the last couple of years, our fourth quarter has always been the lowest quarter as far as the provision. If you look at the quality of the consumer that's coming in, you know, usually a little bit higher quality consumer, a little bit less percent of sale financed and things like that. So, you know, the 17-3 would be just to follow the trends of Q3 and Q4 from 2017. and 2018 as well as far as the lower fourth quarter rate. You all know that the rate can move by quarter, which is really why when we talk about 2021, the limited guidance we're arguing as it relates to the provision, we're talking about the full year rate of just under 19, let's say, in that 18-8 range. So nothing unusual in the fourth quarter, just follows the historical trends of the demographic of the consumer that we see is a little bit higher quality, and the provision obviously is reflective of that.
spk07: So what we're effectively doing is bringing the seasonal arc, you know, call it down by about 100 basis points from, you know, what you had sort of been guiding sub-20 and bring it down over time. Is that a fair way to think about it? Yes, that's probably great. Great. Thank you very much. Sure. Thank you. Thanks, David.
spk00: We can go next to Ian Ruffino with Oppenheimer. Please go ahead.
spk05: Hi, thanks. You know, just on the T&L deal, one other question would be, is there any intention to maybe broaden that T&L brand, introduce maybe a new VO product under that brand? and maybe grow that a little bit, or no, that's going to be purely separate from the DO business?
spk03: Good morning, Ian. Our intention is to grow the T&L brand under its subscription-based business. We think our BOI business has a stance today, Wyndham only, has a great trajectory around it. We think that travel and leisure brand is a great opportunity for us to start anew and build a new business and create some diversified earning streams. What I would come back to is I do think, and it ties into the earlier question on distressed assets or other companies, we do think there are travel brands out there, outside of hospitality, that could benefit from our timeshare services. So I think uh when you look at where our opportunity lies in the voi space it would be partnering with another travel brand to try to grow a vacation club inside of their travel brand to to make more efficient uh their assets or to better utilize their assets so i i think there's a lot of opportunities we still have in the vo business um We love the core business. We think there are more opportunities, but I would say the more likely scenario is with the rebranding of the company, another travel company might come to us and say, hey, I'm interested in a VO business for our brand, and that we would be open to and think it actually could make a lot of sense.
spk05: All right, Don. Thank you very much.
spk03: Thanks, Ian.
spk00: And then we'll go next to Patrick Scholes with True Securities. Please go ahead.
spk02: Just a couple quick follow-up questions. I wonder if you can just remind us how many years of unsold inventory you have. And then second question is if you can give us an update on progress and trajectory with the Blue Thread initiatives. Thank you.
spk08: Yes, I'll take the inventory one, and then I'll let Mike update everyone as it relates to Blue Thread. On the inventory, we have over two years, once again, with the slowdown in sales in 2020 that extended our inventory a little bit further. So over two years of inventory, which is why, once again, we'll be very selective as it relates to, you know, if the opportunities come our way, execute on those. No rush. We've got plenty of inventory and, let's say, things that are of other higher priority as it relates to use of cash.
spk03: And as far as the blue thread, just a reminder, we were on our way to $100 million last year before COVID hit. That was our projection. We expect that blue thread will be one of the first items to return. Thirteen percent of our new order sales in the fourth quarter were for blue thread. So very bullish on our ability to grow blue thread back quicker than the rest of the open market channels, or we project to grow it back faster than the rest of the open market channels.
spk02: Okay. Thank you. That does it for me.
spk04: Thanks, Patrick.
spk00: And that concludes our questions and needs period. I would now like to turn the call back over to Michael Brown for any closing remarks.
spk03: Great. Thank you. And thanks for the many questions. It's very good to be able to get out and share our story on both the travel and leisure acquisition and our strong 2020. But as we look back on last year, we have a lot to be proud of, thanks to the hard work of our associates around the world. In the midst of the pandemic, we made significant progress on our efforts to begin the transformation of our company beyond timeshare, while staying laser-focused on delivering strong results in our current existing business lines. We look forward to updating you on our progress on our next call in approximately 60 days. Thank you, and have a great day.
spk00: Thank you. And that concludes today's fourth quarter and full year 2020 earnings conference call. You may now disconnect your line at this time and have a wonderful day.
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