Thank you for sticking with us. Next up, we have Travel + Leisure. I'm joined by CEO Mike Brown, Michael Brown, and CFO Mike Hug. I think this is the first time that we've had you at this particular conference. I might be wrong, but for those that are less familiar with the business, would love for you to just walk through the key drivers of Travel + Leisure. You can start with the industry, but focus on your business in particular.
Yeah, just to maybe get the context out there is, we will, we will do over $900 million of EBITDA this year. It's our current consensus, and we're 70% vacation ownership, timeshare business, as well as about 30% exchange, which is that business connects other timeshare companies and allows them to exchange between one and another. We've really had a good return with travel demand following COVID. 2022 was a great year. 2023 continues growth in the entire segment. And what we, what we are continuing to find in our space is that the macro trend around travel, more space, flexibility, brands you can trust are really paying dividends for us, and we're attracting new consumers. About 35% of our sales are new consumers. We're excited.
Had a lot of great news this year, which hopefully we'll get into, and maybe separately and or a follow-up, we'll talk about the dynamics of the investment thesis in our business.
Well, let's continue down, just maybe at a higher level. We'll start off with the timeshare business, vacation ownership business. Remind us, you know, who's the core customer? And you referenced travel demand coming back. What are other kind of drivers that you look for in thinking about top-line growth for the business?
Yeah. So there's a few things happening on travel. Just more broadly, 2022 was the year of revenge travel. 2023 demand remained high. You did see a rotation toward vacations you did not get to do during COVID, which were primarily I think every American was in Europe at some point in 2023, or on a cruise. 2024, I would expect you'd see a rotation back to domestic travel, and that's great for us. We have 250 resorts around the world, the vast majority in North America. As we look at demand, we tend to look at three different elements. The first is forward-looking bookings into the first half of 2024. Those are, in total, ahead of where they were for 2023. Great sign for the start of the new year.
Mike spends a lot of his time looking retrospectively at the quality of our consumer portfolio. The consumer tends to react to the economic times, and our portfolio remains extremely solid, with an average FICO score of 738 and, pre-COVID, sort of provision levels for against our portfolio. And lastly is on the day, every single day, we speak to thousands of individuals and see their buying behavior, and it's a great barometer. We have spent the last 18 months at record-high volume per guest, revenue for every guest that we see. We've seen that come back a little bit, in the fourth quarter. We've indicated that our volume per guest will be within our range, but closer to the lower end than the higher. And I say that, and there's an immediate reaction to it.
My immediate reaction is: We're still well above our long-term guidance, which means we're in a strong position, and it's been tough to predict coming out of COVID exactly where that consumer level's out. But, we've had a great 2023, and even where the fourth quarter is shaping up to be, which is again, toward the lower end of our VPG range, that's still above where we expected to be on a long-term basis, and we're very pleased with that.
And just maybe remind us, this is, again, keeping it simple to begin with, but, you know, you have tour flow and VPG, volume per guest, but even volume per guest can be disaggregated between price-
Absolutely
... and conversion, right?
Conversion, absolutely.
And then that can be dictated by how much is existing versus new.
Yeah.
So maybe help take apart some of those pieces in terms of what you're seeing and why that. Why you're saying—you're still saying positive in terms-
Yeah, yeah
... of the out-
No, it's a, it's a great question. So, for those new to the space, let me, let me disaggregate. 65% of our sales are to consumers who already own with us.
Right.
What a better endorsement of a product than that 65% of your total sales are to people who already are vacationing with you, with you? Highest margins, great conversion rates. Another statistic is seven out of every eight of our owners have fully paid for their timeshare.
Right
... and the retention rate there is 98%.
Right。
Ringing endorsement as to the quality of the product and the satisfaction levels. However, you need to create new owners so that those people will buy 2.5 times more in the future, which is statistically what happens with our business.
Yep.
So we equally invest in a new consumer who's learning the product, understanding what Margaritaville Vacation Club, Club Wyndham is for the first time. Conversion rates on those are gonna be lower because they've not vacationed with us before.
Right.
So existing owners, 65% of sales, higher conversions, higher margins, the core of our business, we have embedded $12.5 billion of future sales in our owner base. Secondly, is the investment in the new owners, which come with a lower conversion. So to disaggregate the VPG component, average transaction price rarely moves. $20,000-$23,000 is the average purchase of an owner-
Even with CPI up, you know, 18% versus 2019, hasn't moved?
It's moved slightly, but not like hotel rates.
Right.
Therefore, what an owner-
Conversion.
What an owner has seen from that is, "Hey, let me, let me add another $20,000-$25,000, the incremental loan that I'll take on, I can afford that. I see the value in the product." And where we will see it, to your other question, is conversion rates move up.
Yep.
As inflation was going up, our conversion rates were at levels we've never seen before. Gas prices are coming down. Inflation seems to be somewhat under control, coming back down. And as a result, hurdle rates remain elevated from our historical levels, noticeably, but off the boil a bit. So when we really look at that consumer demand, transaction price doesn't move very much. It's really the conversion rate for every hundred customers that we see, which again, remains at historically elevated levels.
But there's things that you can do to influence that as well by being more targeted, for example, or better at sourcing tours, so-
That's correct.
Is there? What are some of those things that maybe have structurally improved that? Obviously, there's price and structural conversion should probably be higher with that, but what are some of the things you've done to improve attracting the right person?
Well, why don't you speak to FICO-
Yeah.
and maybe I can talk to-
Really, the key thing we did there as we came out of FICO and reopened our marketing channels was move that minimum FICO from 600 up to 640. Took out about 250,000 tours as a result of doing that, but the bottom line is, you've got a better consumer sitting in front of a better salesperson, and one of the reasons we've got those all-time high VPGs. Also, what that means is, as Michael mentioned, the average new FICO coming in is a 738 FICO. So when you look at our quality of our portfolio, especially in today's world, we're potentially heading into a recession, our portfolio is rock solid. You know, we look at delinquency levels, and they're at 2016, 2017 levels, so it's performing very, very well.
We're very comfortable with the portfolio. But that was really the big key driver was: Let's take away the focus from the provision. Let's focus on quality, better tour, better salesperson, and the VPGs go up. The other thing I'll point out is, when you talk about the pricing, we haven't, we intentionally have not gotten aggressive on pricing because it's almost a customer acquisition model, right? We make money at the point of sale, but just as importantly, we're gonna get those upgrades. We're gonna get that recurring interest income, which is great margin. We're gonna get that property management fee, which is cost plus 10%. So when we look at it from our perspective, we know that consumer is gonna come back next year, so let's get them in the family.
Let's get those recurring revenue streams, and let's get those upgrades, which not only is there $12 billion in VOI revenue embedded in our owner base, but there's another $4 billion in interest from those sales and another $2 billion in property management fees. So about $19 billion embedded value in that owner base when you look at all the recurring revenue streams that we have.
Maybe remind us, what's the typical split of where you do source customers from? Meaning, how much of it is through mail, email-
Yeah.
People in person.
So, again, contextualizing this whole-
Yeah
... whole business that is Travel + Leisure is, Wyndham used to be a company called Fairfield, unbranded, without a loyalty program, without a hotel system, became Wyndham, affiliated with a brand, and only really in 2016 did we develop a loyalty program and did we start to cross-pollinate with the hotel group. This year, we're on $2.x billion of sales, let's just say $2.2 billio-$2.3 billion of sales. We will now have over $100 million of those sales coming from our partnership with Wyndham Hotels, which was zero, virtually zero, just a few years ago. Affinity sales deck at a much greater rate than-
Yeah
... open market. However, open market, which is not affinity marketing, people that aren't familiar with Wyndham or Margaritaville, it's a great source of new owners, but they convert at a lower level. So, you know, of the $2.2 billion-$2.3 billion in sales this year, 65% will be to loyal existing customers. Another $100 million will be to our Blue Thread Wyndham relationship, and the remainder will be through open market. You know, in Myrtle Beach, having a local marketing partner there and a completely separate one in Vegas and a completely separate one like SeaWorld in Orlando, those are the relationships that we have, and that's really the mix of them. And it's balancing because our margins are industry-leading, and that's with non-affinity marketing channels.
Right. Right.
So our objective going forward is to keep supplying the new owner channels with both more affinity relationships, we'll I imagine we'll talk about Sports Illustrated in a moment, and continuing to grow what we've always been the best at, which is that open market marketing, and bringing new non-affinity guests into our system.
Before we get into some of the strategic initiatives in Sports Illustrated-
Yeah
... just walking down the P&L on that part of the business, clearly, there's a commission structure with sales folks, but the other component, I guess, would be cost of sales. How should we be thinking about cost of sales in the current environment? I think a lot of times people hear inflation and development and things like that, but you're a bit of a different model.
Yeah, no, it's and it's a natural reaction to think, "Oh, gee, these guys are selling condos and, and timeshares, and there's a lot of development costs." Where we're at today is we have about four years of inventory on our balance sheet. The reason for that is, pre-COVID, back in 2019, we were selling $2.4 billion in VOI, growing high single digits. So we have inventory sourced and coming in to support that level of sales. COVID hits, during 2020, sales dropped down to about $1 billion, and now they're back up to $2 billion. But the point is, we have a lot of inventory on our balance sheet, which means we aren't susceptible to new construction or delivery time frames, right?
So when we think about cost of sales, we're very comfortable with the inventory we have on our balance sheet and very excited about the fact that we don't have risk when you think about construction costs and delivery timelines, which obviously. The other good thing about that inventory on the balance sheet is, from a cash flow perspective, pre-COVID, we were spending $250 million a year on inventory. Now we're spending about $100 million a year on inventory. So when you think about that free cash flow conversion, you know, the model just continues to pay off in terms of how we're sourcing inventory, as well as the fact that we've got four years on our balance sheet, so no real risk to new construction costs.
And one other component of, I guess, the business is the financing receivables book. Talk to us a little bit about the provision, where it is now versus history, and what are the big drivers-
Sure
... that can push that up or down from here?
So pre-COVID, right, 2019, we run a provision around 20%. As I mentioned earlier, as we came out of COVID, we moved that minimum FICO up-
And that's 20% of-
VOI sales
... VOI sales?
Yes.
That's not 20% of the portfolio, the gross.
No, no, no, 20%... I'm sorry, 20% of VOI sales, the provision as a percent of revenues, gross VOI sales. As we came out of COVID, you moved that 600 FICO up to 640. Naturally, you'd expect the provision to come down, which it was coming down some, but we also made the decision, since our average FICO is at 738, to increase the percent of sales financed. And what that means is, when you're financing more of your sales, naturally, you're gonna have a higher provision as a percentage. But when that average FICO is coming in at 738, it's the right move to make. And the way we were able to do that, and it's not because the consumer is more dependent on financing today than they were six months ago or two years ago.
Back in January of 2009, capital markets were tight. We actually incentivized our salespeople, starting January 2009, to get a higher down payment. We kept that incentive in place until April of 2022. So when we took that incentive away from the salesperson, naturally, they're just gonna drop to a 15% down payment, which is kind of our minimum. So what that means, once again, a better quality portfolio coming in, a provision that looks like it's better than 2019, but people say, "Well, why is it lower?" The only reason it's not lower is because that percent of sales finances move up. So it's a good quality issue of more financing coming in. It's not a, a good quantity issue, I'm sorry, more financing coming in, not a quality issue at all.
As I talked about earlier, you know, our delinquencies and portfolio performance is great.
So the clear theme of this conference has been: Where's the consumer going? And a lot of the questions that we had today was, if the macro weakens, what does that do to your provision? And it might have some impact, but we're better prepared with the higher quality, everything that Mike just shared. I will share as well that if that does occur, there's likely to be an equally positive move on where interest rates-
Right
... are going. Because we swallowed in 2023 a $30 million headwind on interest, and we expect to do the same next year with roughly interest rates where they sit today. So if macro weakens and provision suffers a little bit, we'd expect to get a very nice offset on the interest side of the equation.
So two follow-ups on that. One would be, so you didn't push through on pricing then to the consumer incremental interest rates. Is there any pushback that you saw from them? And then the second question was, are you seeing anything in terms of delinquencies changing as a result of rates, right? Higher rates, maybe people have-
Well, well, we've consistently lent at that 14.5%-15% rate, and as rates have increased-
You've held it.
We've held it.
Yeah.
So the consumer hasn't seen it in our product. Now, in their personal- there are other areas of their personal life they probably have, but we have protected that from a consumer standpoint. So when I say that if rates begin to drop, we will be consistent with our lending as rates have gone up and down. So it, a headwind of $30 million next year has the potential, if things do worse and there are rate cuts, to be a positive to us next year. So it's sort of a natural hedge that we have-
Yeah
... built in.
I guess with that, maybe turning to some of the strategic initiatives, specifically Sports Illustrated.
Yeah.
Walk us through, you know, how that came to be and what the opportunity is as a result of it.
Well, let's start. My, my guess is, when you said Sports Illustrated, no one in the room said, "I've never heard of that company. What is it?" It is one of the most iconic... It's, it's probably what the most iconic name in sports, especially sports media. And the fundamental element of our business model is we used to suffer to find inventory and, and leads.
Yeah.
Inventory is no longer an issue after the great financial crisis. Mike's already shared that we've secured that. Now it's about growing your addressable market, and with a partner like Sports Illustrated, where we can be part of the hospitality extension, the opportunity to market to a new and different database that's not already in the timeshare world, number one. And number two, to begin to evolve our marketing approach with our quality partners at Sports Hospitality Ventures, at Authentic Brands, and with a great capital partner in the Eastern Band of the Cherokee. That partnership brings a powerhouse of new capabilities to us, to really drive our ability to bring new owners into the vacation club concept. Sports Illustrated alone, just to explain what a resort will look like, our first announcement is, was we're gonna be launching Sports Illustrated Resorts at college towns.
Where is passion? College sports, I think, has a little bit of passion. I just turn on ESPN and a few of these channels on a daily basis, and they'll argue for 24 hours. But our idea in our first announcement at the University of Alabama in Tuscaloosa will involve a hotel, Sports Illustrated Hotel; it'll involve Sports Illustrated condominiums-
Mm.
and it'll be a Sports Illustrated vacation club, all surrounded by the Sports Illustrated experience. The number one college that has had the most Sports Illustrated covers is the University of Alabama. We will celebrate that in a hall of fame.
Mm.
But it will not simply be a chance to see the history of Sports Illustrated. There are gonna be a lot of experiences activated at the resort that go well beyond accommodation. A way to interactively be... You know, you might, you might have a throwing contest against a virtual Alabama quarterback. I think Joe Namath wouldn't be a bad one for you Jets fans. But the idea is to take a new addressable market and a passionate brand and a passionate audience, and start to expand that hospitality concept like we've done with Margaritaville. That lifestyle is the new wave of hospitality, and we'll not only be in college towns in the future, but we'll also be in some non-college towns with a sports affiliation.
And they will be part of the broader club then, so you'd be able to have your points there and exchange in? Or is this gonna be on a standalone basis? How would that-
It'll be a standalone Sports Illustrated club.
One way or another, you'd wanna be expanding that size of that club, 'cause you get economies of scale, and-
Absolutely, and, and we already have plenty of locations in the pipeline. The response has been dramatic to the announcement of... You know, it gets back to competitive schools,
Yeah.
But folks around the University of Alabama have some competitive spirits, and they want a Sports Illustrated resort at their SEC school as well. So yeah, we wanna grow that concept. And there's alumni bases all over the United States that we think are really great opportunities for us.
And they will be affiliated with RCI.
Yeah.
If they do wanna come to a Club Wyndham property, they'll be able to go through the RCI exchange to get it?
Right. So, and then we can go into RCI next a little bit, but before we do, just to finish up on, or maybe not finish up, but continue on Sports Illustrated. Maybe just talk through the timing and how quickly you could ramp these, how material it could be in terms of contribution, then.
Yeah. We've secured the land in Tuscaloosa. We're in the planning phase now. We'd expect it to open more than likely in late 2025, for the vacation club-
Right
... and the hotel. Condominiums can happen a bit earlier, so we're working through all of that at the moment. We'd expect our second resort to our current plans, once we get that announced, will be opening around the same timeframe as Tuscaloosa, we believe. So 2024 is more of a planning and setting up the infrastructure. There may be some profitability that comes into it, but it's definitely immaterial to our 2024 number. 2025 is where we'll start to actually see sales and profitability coming in.
The condominium, then, you'd be managing?
We're still working through that. We're not going long on condominium real estate.
Gotcha.
We've got some great partners out there. I mentioned the Eastern Band of Cherokee Indians. There's lots of regional developers who've already come our way that have an allegiance to their school, that wanna be part of it. But as a participant in it, there will be economics in it for us.
And this would be more of a just-in-time deal then? And I guess, stepping back, and I didn't ask this in the beginning, but do you see any changes in terms of deal structure going forward? Most of whatever your inventory is, is that all just-in-time or recycled?
For Sports Illustrated?
No, broader.
Oh, w-
We can talk about both.
No, but more broadly, specifically with Club Wyndham, we're not gonna be investing in-
At all
... in inventory-
Got it
... much. Yeah, that, that $100 million that Mike mentioned has a little bit of new inventory, but a lot of it is-
Recycled
... is recycled inventory.
Yeah.
As it relates to Sports Illustrated, it's very similar to the Wyndham model as far as investment and just-in-time inventory. We have capital partners that are there, so I think the only puts and takes to it is that in year one, we will have 100% new owners, not 35% compared to-
Right.
That's the whole strategic purpose, is by adding brands, you're taking a increasingly mature Wyndham, and you're creating a new opportunity and a new growth vehicle. And we don't believe Sports Illustrated will be our only new growth vehicle in the future.
Right. So on the 100% new, since it is going after a new demographic, how will you find those people, acquire those people, get them onto a tour? How will that differ versus the existing base?
Well, simply you would say it's a similar model, but the reality really is, Steven, that between local community, and I'm referring to alumni, the partners we have in this with Sports Hospitality Ventures and Authentic Brands, it gives us new avenues to not only traditionally market, but digitally market differently than we always have. And that's what we're super excited about, is we don't need these businesses to be another Wyndham $2+ billion of sales. But if we can find a brand and grow it eventually to $400 million, $500 million top line, and add a stable of brands-
Right
... you recreate a Wyndham with multiple brands over time, and this is the first seed that's being planted that allows us to do it, and the first expression of the strategy of why we changed from Wyndham to Travel + Leisure two years ago.
Even though those customers, or that it'll be a standalone entity, do you anticipate that the folks that you sell into there can ultimately upgrade into Club Wyndham? Like, will that be another opportunity?
That's not our plan today.
Other than through RCI, I'd say.
Yeah. The reality is that the size, the relative size of these clubs is very disproportionate for a very long period of time. We have a broad funnel of sales and marketing, and we need to not just rely on the same funnel. We need to start creating new ones, and this is an opportunity to do exactly that.
Right.
The reason is, it's a brand and a new database, and a new
You have to build the muscle memory.
You know, I would argue we're the best at sales and marketing in the industry, the way we do it in the open market channels. And we need to continue to evolve that, to grow the business, and to accelerate the growth of Travel + Leisure.
You hinted at other potential partnerships. What are the guardrails that you're thinking about as we start to think about what other brands could be brought into the fold?
Great brands, loyal brands, brands with a database that is committed to that brand. And I think Sports Illustrated, although, you know, it was an existing hospitality with its first club in Cap Cana, which is not next to a college town, but-
Right
... at the, in the home of a lot of Major League Baseball these days. We want to announce brands that are either hospitality or non-hospitality, where people say, "I identify that brand with a lifestyle.
Yeah.
And I can attach that lifestyle with an accommodation that fits that lifestyle." And, you know, 15 years ago, if you said Margaritaville is gonna be a great vacation club and hotel brand, you would say, "Ah, it's great songs, a great musician, and, and a great drink." You know? And now it's a powerhouse hospitality brand. And I think if you're selective, you're thoughtful, and have the right expectations, there's both existing hospitality brands and, and brands outside of the space that would lend itself to broadening its own lanes to have a hospitality component in it, and we'll pursue both.
If we boil it all down to the financials of that segment, how should we be thinking about longer term how that business should grow, both from top line, bottom line, free cash flow?
Yeah, I think when we look at, you know, the growth rate for that business, you're talking, you know, high single digits, 7, 8, 9%, as far as long-term growth out of that business. And the reason we're confident is the thing that Michael's talked about, where we just, you know, every day gain new marketing channels and relationships like Sports Illustrated. So that's what we're looking for there, and then with the model we've put in place on the just-in-time inventory, right? We continue to see for the business, free cash flow conversion over the long term being at 55%-60%, which is right where we were at back in 2018 and 2019. So, good, strong growth trend and, you know, great free cash flow generation, which allows us to continue to return capital to shareholders.
On the membership side of the business, maybe we can start off by just framing the different components of that business, and how that has evolved over the past year.
Yeah. Travel and Membership is a segment with two components and represents 30% of our EBITDA. Over 90% of that segment is the business we've been in for over 40 years, which is the exchange business, or what we call RCI. The other piece of the equation is our travel clubs, which is not timeshare related. It's a membership club. Get behind a paywall, you pay a membership fee, and then you transact at deeply discounted accommodation. Our words have been excessive this year on the travel club because it's been new.
Yeah.
But the real lever in that business, the real swing in that business, is in the exchange business.
Right.
That has not had a great year this year, where we have underperformed economically has been in that space, because quite candidly, I thought propensity would remain at pre-COVID levels, and it dipped post-COVID.
Propensity to transact?
Propensity to transact with RCI. There's a lot of reasons behind that, and I didn't get the trend exactly right. As a result of that, even though we've talked a lot about travel clubs this year, it's been that the RCI side of the equation that has, not through anything other, I mean, we've had— It's not an internal issue, it's the reality of the structural nature of how the industry's changed, so we've had to react to it. What I would point out is, especially, is that those two segments, travel clubs and exchange within travel and membership, has really been the only underperformance in our business this entire year, even though travel clubs is growing. Our vacation ownership business, if we just looked at that in isolation, has exactly met the expectations that we laid out in February of this year.
Yeah.
I, you know, I knew the question-
Even with normalization with VOI?
Even with normalization-
Yeah
... and even with everything that's happened in 2023, I think it's super important to note, especially in the midst of a lot that's happened over the last two months, our VOI business is exactly what we said it would be this year, with no moderation in economic performance. Our issue this year has been a structural one on the travel and membership side. We've reacted to it, and I think we're starting 2024 in a much better place, with a lot more clarity than we had in going into 2023, seeing exchange trends and right-sizing the travel club expectations.
I guess you put a lot into that.
Yeah.
On the structural side, so what has changed?
Structurally changed.
Yeah.
Yeah.
Is that consolidation?
You know, 30 years ago, there were 150 timeshare developers, each with its own site, and if you wanted to sell the fact that you could travel the world with a timeshare, you sold RCI as an exchange mechanism. Now, that table of 150 timeshare developers is now about 15.
Yep.
Those 15 timeshare developers still have value in the RCI exchange, but equally, just like we do at Wyndham, is we prefer that they stay within their system because it gives you a better chance to upgrade within your own system. So the structural change to the industry is a result of consolidation, and our team has been, you know, valiant in reacting to that and has had to adjust the model and put investments in the right place to continue to service our affiliates. Membership's growing, just the propensity is down in that space.
Membership should just basically grow with the VOI sales, is that right? Or ownership there, or-
With new owner sales.
Yeah.
And I should just say, for those new to the space, the flip side of that consolidation is, with consolidation, a lot of people I speak to about timeshares say it's a single site developer, no brand. You go to the same place every year for the-
Right
... in the same unit. The brands came in and are now 80% of the industry, highly flexible, a huge balance sheet that supports the reputation and quality of the vacation, and it's why 98% of our owners who fully paid for their ownership stay with us every year.
I don't know if I've ever asked this question before, but when people do exchange, what's the most frequent thing that they exchange into? Is it dictated by experience, location?
It's no different than inside the club. Orlando is just the mecca, you know. There's just... Everyone, everyone wants to come be part of the magic in Orlando.
Orlando. Okay. And so on the transaction side then, why is that propensity? So I guess I'm still-
Yeah, so,
Could that continue to go down then?
Uh-
Or will that stabilize at some level?
Possibly, but the reason the propensity is down is, if someone at Wyndham has a greater propensity to change between WorldMark and Margaritaville and Club Wyndham and Sports Illustrated, all brands within our system-
Yep
... they're less likely to spend the higher exchange fee and go outside of their internal club, so-
Right
... it's a little bit of the level of the fee and a little bit of, inside a club versus outside the club.
On the club side, meaning the subscription side, what's been happening in that business? How should we be thinking about growth from here?
Yeah, so, we've seen growth in that business. We learned a lot in 2023, and the one piece that we learned a lot is how to get them to move from searching to transacting. We've made a number of technology changes in Q3 of this year, and we're already seeing the impact of greater transactions from search to book. And we thought the issue was gonna be getting people into the membership. It turned out to-
They get in, but then-
But then they look around and then book elsewhere. We've made some changes, and we're already seeing the booking rate increase.
And so when I do this, the same question for what I asked with the VOI business. Putting that all together, how should we be thinking about long-term, what you're thinking through for the algorithm, if you will, for that business?
... Yeah, well-
Top line and bottom line.
Well, I think on that equation, it's continue to see membership growth on the timeshare side through the affiliates.
Yep.
Continue to drive incremental transactions on the travel clubs. Incrementally meaning not go out and sign up 100 clubs, sign up five clubs, make sure they're transacting. So, your Travel and Membership is gonna be low single digits, whereas the VOI is high single digits.
Cash conversion on that side of the business, what does that look like?
Well, the margins there are high 30s.
Yeah, high thirties and low capital intensity because it's all transaction based, and once you get that infrastructure in place with the website and the search engine, it's great free cash flow conversion.
I think what Mike has shared on VOI and now on travel and membership, our economic algorithm is EBITDA that we talked about of over $900 million at consensus levels, 55%-60% free cash flow conversion. This year, that's allowed us to take out 10% of our share count. Since then, we've taken out-
25% of our share.
25. We pay a 4%-5%... Our, our dividend yield is 4%-5%, buy back shares, and in the pro--conserve cash through not overspending on inventory, and in the process of doing that, look for unique strategic opportunities like a Sports Illustrated, that are on top of a dividend, a share buyback, and then creating new fields of growth that are related to our core business, which is vacation ownership.
That sounds like it's effectively capital light. There's not a lot that you're putting into those incremental growth.
No.
Right, so your total social contract, if you will, dividend plus buyback, is over 14%?
Yeah.
I think we've got time for the lightning round, which you've already answered some of these. So the first was on demand, which I'm gonna hold you to. Is it, are you saying that you think it's gonna accelerate, stay the same, or decelerate as we look at the year ahead?
Well, the forward bookings would say it's at least gonna be neutral. I think the holiday season, those final two weeks, is really gonna speak loudly to consumer demand. But we've already shared how we think Q4 is gonna be, which is within our guidance range, but just toward the lower end.
Yeah. And then from a margin standpoint, we gave some of the moving parts. When we put it all together, should margins be up, flat, down next year?
Plus or minus a little of flat.
Got it, and then capital allocation, still buyback? No. And I guess I'll ask one more, which is just, there's consolidation that's happening within the industry. How does that impact your business?
Well, our delivery this year was 5%-6% growth. We've talked about how it affects travel and membership, and our capital allocation strategy is the same today that it was in 2018. We are committed to our dividend, which on an absolute basis, is paid for by our share buybacks. We've taken out 25% of our share buybacks, and we will continue to look at opportunities, whether M&A or partnership, that will add to-
Right
... our growth vehicle, and that's the same as it was in 2017, June of 2007—June of 2018, when we went public. And you know what we've done? We bought Travel + Leisure, we bought a technology platform in ARN, we sold North American Rentals, and those were the right transactions for us at the time, and we'll continue to evaluate anything new that comes in.
That's great. Michael, Mike, thank you so much. We're just out of time, so thanks, everyone, for joining us.
Thanks, David.
Thank you.