Marriott Vacations Worldwide Corporation

I mean, we see it on our vacation ownership business, you know, typically about, you know, 25% plus or minus exchange into, you know, on the Marriott side, our Explorer program. And so that means they're taking a vacation outside the system of the vacation ownership resorts, right? So I think we'll get back to some of that normalization here as we go forward.

Thank you very much. Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Hi, good morning, everyone. Thanks for taking my question. How are you? Look, a little more of a thematic question, you know, having sat through a good portion of earnings season where we've seen mostly very good numbers and, you know, pretty good guidance also. But at the same time, still this looming slowdown or recession or however we'd like to characterize it that has yet to define itself. I'm just curious, how have you thought about that looming whatever it is in what you've talked about and given us today? Or are you just staying focused on calling it like you see it you know, so far.

Yeah. Hey, David. Yeah, I mean, this looming recession, you know, it's kind of been looming, it feels like, for 18 months now, right? Years. Right. It keeps getting pushed out now. You know, where is it going to go? How deep is it going to be? Is it going to be a hard landing, soft landing, all that? So, you know, we always look out. We're looking at trends. We're looking at, do we need to make adjustments? You know, not knowing what exactly it's going to be, that's, that is going to be what drives our management decisions. So I think you've heard me say before, I think in a normal kind of garden variety, not long, not too deep of a recession, I think we grow our business, right? We're probably not going to grow it as fast as we've guided here, but if you look at the different parts of the business, like we've talked about, the exchange side, you go back to the financial crisis even, You know, people own their timeshare. They're going on vacation. Resort occupancies on the VO side will continue to remain very high. We're at 90% coming out of the financial crisis. So, you know, people own. They want to use. You know, and then I think on the sales side is you think about, you know, contract sales on the VO. um that's like as we talked about we've got we have levers promotions we can you know adjust up the offer we do different things we've done this in the past we do it month to month at times depending on you know kind of what we're seeing to to drive sales etc so um i i think like i said if it's if it's not you know some type of deeper long recession i think we'll we'll maneuver through it you know with probably you know little bit of softness but not what I feels like the markets expecting but you know we've been talking about this next garden variety recession for I don't know 13 years now and you know we haven't really had it yet so and really don't want a recession but you know I feel like we'll be fine working our way through it and I would add a little to that you forward booking are actually looking good so

And when you look at our customer, you know, we still have low unemployment. Home prices are still decent. And you look at where our company stands and how well prepared we are, we have decent liquidity. We don't have a lot of cash commitments for inventory purchases right now. We don't have a lot of cash going out the door for debt repayments, you know, until 2025. So beyond the levers that John may have mentioned, you know, I think we're pretty decent positioned going forward if some sort of mild recession does happen.

Understood. And if I can follow that up, how long is, would you say, the tail is on that booking window, Tony, that you referenced?

Probably like the six-month we take a look at to 12 months. twelve months probably a little bit on the outside of it but when you start looking at within the next six months and through the end of the year we take a look at where we are right now versus where we were a year ago or even before that and say how many bookings do we have on the books and we do it by you know previews we do it by owner occupancy renters and all those all those metrics look pretty decent right now we've been running great occupancy at our resorts and as you know When our resorts are full, we get 85% of our sales from on-site, whether it's previews that we're putting into the inventory or whether we have owners staying or renters staying. We get great penetration rates into owners, so having them occupy is not a bad thing for our sales. So we're looking pretty good on all those forward-looking metrics.

Appreciate it all. Thanks very much.

Thank you. Our next question comes from the line of Ben Chaikin with Credit Suisse. Please proceed with your question.

Hey, good morning. Thanks for taking my questions. Just a quick one, one or two for me. First one on rentals. 1Q, I think the full year guide is to be, I think, up 10%, if I'm not mistaken, on rentals. 1Q was down, I believe, year over year. 2Q, I think Tony mentioned earlier. is going to be down, which creates a pretty strong kind of like 2H recovery. I guess my question is, is this more of a comp kind of like, not issue, but a comp dynamic, or is this an in-the-year, for-the-year kind of moving parts? And I'm asking this question in the context of swinging out to 24. Should things be kind of smooth from here, or how do we think about it?

Yeah. No, it is exactly a comp dynamic. So just... last year in the second half of the year, you know, we were, that's when our owners had their COVID points, right? That had been extended longer. And those were driving higher owner usage in the second half of the year, driving higher exchange. And so with all that, Yeah, it gives us an easier comp here without all that owner COVID point overhang, if you will, from an occupancy perspective to drive rents. And so, yes, I'm thinking about 2024 to your question. Yeah, it should be a little bit smoother on a 24 basis, but it is really driven by what happened last year with the COVID points overall.

Understood. That's helpful. And then just, I'm sorry if I missed this, in the VO business, I think, John, you were expecting, I think, last call that VPG would sequentially increase. Is that still your thought process even after the 1Q number, which is pretty strong?

Well, for the first quarter, we saw the sequential. For the second, I'm looking, I think it'll be, more flattish to the first quarter. We're obviously going to be down again in the second quarter versus last year, given the tough comp. But then as we get easier comps through the second half of the year and overall for the full year, we still feel good. We'll be maybe down a couple points for overall VPG year over year. So the full year outlook hasn't changed.

Yeah, you saw a very strong Q1 and Q2 at 4,700 and 4,600 rounded last year. This year, I think it's going to stay in a lot tighter range versus what we saw. And then last year, of course, it went downward, I think, closer to 4,400 and 4,100 in Q3 and 4. But, you know, this year... you know, we came in pretty strong in Q1, sequentially up, and we would expect it to, you know, a little bit of seasonality in there to make it, you know, go a little bit up and down, you know, quarter to quarter, but not huge moves.

Gotcha. And then one last quick one, and this may be tough, but Going into, I guess, did 1Q mix surprise in any way? And I'm asking that in the combination of BPG and TORs. I know it can be a little bit tough sometimes because they're both just different levers, but BPG was pretty, meaning did TOR volume and BPG levels come in about where you were thinking, or was one a little stronger, a little weaker than expected?

No, I think they came in pretty close to our expectations. I think coming into the year, we We guided that we expected VPG to be down a little bit. That means in order to get the 5% to 9% growth in contract sales, you're going to have to drive it through tours a little more. And that's exactly what happened. Now, Q1, quarter over quarter, year over year, was an easier comp from that perspective, from a tour perspective. That's why we mentioned in the comments that, hey, that 18% increase in tours may not happen every quarter going forward. But that was pretty much in line with what we had expected.

Got you. Thanks. Thank you.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Geller for any final comments.

Thanks, Melissa. And thank you, everyone, for joining our call today. As we've always said, people want to go on vacation regardless of the environment, and the first quarter was no exception. In our vacation ownership segment, we ran nearly 90% occupancy for the quarter, grew contract sales by 10%, and held VPG 30% above pre-pandemic levels. First-time buyers represented more than 30% of our contract sales this quarter, up roughly 200 basis points from the prior year. And we grew our tour package pipelines to support future sales. In our exchange and third-party management segment, despite lower inventory deposits, intervals, utilization, and margins remain strong. And we grew adjusted EBITDA by 8% on a year-over-year basis in the quarter compared to the prior year, while returning $134 million to our shareholders. Looking ahead, consumers are prioritizing spending on travel over other categories, and booking intentions for both domestic and international travel have remained strong. That's obviously good for our business. On behalf of all of our associates, owners, members, and customers around the world, I want to thank you for your continued interest in our company and hope to see you on vacation soon. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.