Marriott Vacations Worldwide Corporation

Greetings. Welcome to Marriott Vacations Worldwide third quarter 2021 earnings call. At this time, all participants are in listen-only mode. The brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll turn the conference over to Neil Goldner with Investor Relations. Neil, you may now begin.

Thank you, Rob, and welcome to the Marriott Vacations Worldwide 2021 Third Quarter Earnings Call Conference Call. I am joined today by Steve Wise, Chief Executive Officer, our President, John Geller, and Tony Terry, our new Executive Vice President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. The statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Public-looking statements in the press release that we issued this morning, as well as the presentation we added to our website and our comments on this call are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information You can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release, as well as in the investor relations page of our website at ir.mvwc.com. With that, it's now my pleasure to turn the call over to CEO Steve Weiss.

Thanks, Neil. Good morning, everyone, and thank you for joining our third quarter earnings call. Before we start, I want to welcome Tony Terry, our newly announced Chief Financial Officer with 25 years of experience at MDW, to our earnings call. While most of the time we are joining you from sunny Florida, today is particularly exciting as we're at the New York Stock Exchange to celebrate an important milestone for Marriott Vacations Worldwide, our 10th year anniversary as an independent publicly traded company. Ten years ago, we were a pure-play vacation ownership company with three brands, 64 resorts, and approximately 420,000 owners. Today, we're about vacation experiences with seven brands, 120 resorts, and 700,000 loyal owners in our vacation ownership business. And we also have 3,200 resorts and 1.3 million members in our exchange business. and more than 150 other resorts and lodging properties in our third-party management business. Our large portfolio of offerings allows our owners and members to access virtually any kind of vacation experience they could ever want. We've built a business characterized by strong organic growth and recurring cash flow, driven in part by our capital-efficient inventory approach. This has provided fuel to enable us to expand our resort footprint, and pursue M&A activities, including acquisitions of ILG and wealth resorts, while simultaneously returning excess cash to shareholders. We've built an incredible team of talented associates throughout the world. I'm sincerely appreciative of their dedication and contributions to our success. I'm equally grateful for the millions of loyal owners, members, and guests who have put their trust in us to deliver remarkable vacation experiences time and time again to help fuel this growth. And there's much more to come, including new products, new digital tools to delight our existing customers, while also attracting new ones. I've been with Variant Vacations for 25 years. I can honestly say that our best days are still ahead of us. Before I turn the call over to John, I'd like to share what I think are some of the highlights of the quarter, starting with our vacation ownership business. Occupancies in our North American resorts were very strong during the quarter, despite softness in a few markets due to the Delta variant and the fires in the Lake Tahoe Basin. For example, we ran nearly 95% occupancy in Hawaii for the quarter, though when the governor asked travelers to stay away for a few months, we did see occupancy soften a few points late in the quarter. In Orlando, Another large market force, occupancies dipped during August and September due to the variant, while occupancies at our Florida beach resorts were well above 2019 levels, illustrating travelers' desire to get back on vacation. Our urban locations continued to improve nicely during the quarter, with San Diego running over 85% occupancy and Boston running nearly 95%. And encouragingly, we saw nice sequential improvement in our European locations as the quarter progressed. With the strong domestic occupancy, we delivered $380 million in contract sales, which was within 3% of 2019 levels. First-time buyers represented more than 30% of contract sales, improving sequentially from the second quarter. And this is important for the health of the system, as first-time buyers have historically doubled their revenue contribution within their first five years of ownership. And with the product we sell resonating with customers now more than ever, BPG, excluding wealth, was almost $4,500, nearly 30% higher than the third quarter of 2019, with both first-time buyer and owner BPG up double digits. Moving to our exchange and third-party management business, Interval signed a contract with El Cid Resorts, a leading all-inclusive developer in Mexico. This resort group will transition its members to Interval on January 1st, leveraging our technology to ensure a seamless customer experience. And with the acquisition of Wealth Resorts earlier this year, we are now working to transition Wealth owners to Interval effective January 1st, one year earlier than originally planned. This will not only add new members to the interval network, but also highly desirable inventory in key leisure destinations such as San Diego, Los Cabos, Breckenridge, and Lake Tahoe. In total, these agreements will bring nearly 50,000 new members to the interval system beginning on January 1st. Company-wide, we also continue to make good progress on our technology initiatives to drive growth and expand margins. For example, Our vacation ownership business recently launched new digital reservation technology, which we expect to increase our marketing efficiency and improve customer service. Integral is continuing to work to significantly expand its addressable market beyond this time shift, and we look forward to sharing our progress on this initiative with you next year. And we're making good progress linking our Marriott, Westin, and Sheridan brands into a single points-based product, greatly improving owner access across our Marriott-branded portfolio products in the first half of next year. So let's talk about the balance of the year. We continue to be very encouraged with the improvement of our business. Occupancies remain very strong in October, with particular strength seen in beach and mountain properties. The integration of wealth into our high vacation ownership business continues to go well, and we're working diligently to transition Welk Owner to interval a year earlier than originally planned. We sold more tour packages in the third quarter than we did in the second, ending September with more than 214,000 tours in our package pipeline. And with a strong ramp-up in package sales this year, we ended the quarter roughly in line with 2019, despite pausing most marketing activities for much of last year. Owner and preview reservations for the first half of next year are up 10% compared to the same time in 2019. In a recent survey, 71% of our owners stated they are likely to travel within the next three months, with 90% likely to travel in the next 12 months. With the change in government restrictions, our Cancun and Cabo resorts are once again allowed to operate at full capacity. And Hawaii's governor is once again welcoming vacationers to the islands. And we're looking forward to welcoming our international guests back to our U.S. resorts this month now that the restrictions have been relaxed. All of this puts us in a position to close the year on a high note and setting us up for a strong 2022. With that, I'll turn the call over to John.