Good morning, and welcome to the Wyndham Destinations Third Quarter 2020 earnings conference call. After the speakers remarks there will be a question and answer period. If you would like to ask a question during this time simply press the star then the number one on your telephone keypad. If you would like to withdraw your question please press the pound key on your telephone keypad. As a reminder ladies and gentlemen this conference is being recorded. If you do not agree with this terms pls disconnect at this time. Thank you. I would now like to turn the call over to Chris Agnew. Please go ahead.
Thank you, Aaron. Good morning, and welcome. 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. 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. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our website at investor.wyndhamdestinations.com. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our third quarter 2020 results, in addition to an update on our current operations and company strategy.
Mike Hug, our Chief Financial Officer, will then provide greater detail on our results, our balance sheet, and liquidity position. Following these remarks, we will be available to respond to your questions. With that, I am pleased to turn the call over to Michael Brown.
Thank you, Chris, and good morning, everyone. We were very encouraged with our third quarter results, demonstrating the resiliency of our business and our ability to recover quickly since the reopening of our resorts. For the third quarter, we reported adjusted EBITDA of $139 million, adjusted diluted EPS of $0.83, and year- to- date, positive adjusted free cash flow of $120 million. Our results steadily improved throughout the quarter, both sequentially and against prior year. This is a reflection of growing consumer confidence in travel, the performance of our associates around the globe, and the overall strength of our business model, which is rooted in the resiliency of leisure travel and the recurring nature of our revenue and EBITDA streams.
Although COVID continues to present significant challenges for the travel industry, the third quarter highlighted several key distinctions of the Wyndham Destinations business model that allows us to be on the leading edge of the hospitality recovery. First and foremost, we are 100% focused on leisure travel. We have a geographically diverse resort and sales footprint, minimizing our reliance on any regional market to fulfill owner demands or to generate sales. The diverse footprint makes it easy for our owners to travel where they want, which was demonstrated this summer as consumers shifted to drive to destinations. Over 90% of our owners drove to our resorts for their vacations. We saw fewer arrivals in urban destinations and medium haul markets like Hawaii and the Caribbean, while mainland beach destinations have been our most demanded locations since the reopening.
As I mentioned, we are well diversified, with historically only two markets representing more than 10% of our VOI sales, Las Vegas at 13% and Central Florida at 12%. These factors led to quarterly occupancy of nearly 60% for open resorts, including total occupancy of 77% over Labor Day, a Labor Day occupancy level that was equivalent to 2019. In North America, we have now reopened 97% of our resorts and resumed operations at over 3/4 of our sales centers. Our sales resiliency is due to our loyal owner base and our diversified marketing channels and our greater concentration of in-market guest acquisition. When travelers arrive to a market, we have the ability to convert these arrivals to tour flow immediately.
In the third quarter, we reported $256 million of gross VOI sales, driven by a sequential improvement each month in North American tour generated gross VOI sales, which were lower year-over-year by 71% in July, 59% in August, and 49% in September. As we shared, our members love their ownership, and when they travel, they buy more. Owners consistently spend an incremental 2.6 x the initial purchase over their lifetime, and the strength of owner buying behavior post-reopening indicates to us that this metric remains unchanged post-reopening. As daily COVID cases declined in August, consumer sentiment improved, with 60% of our owners indicating they were ready to travel. We're excited by the increased engagement from our owners, and we're seeing interest in longer stays during the Thanksgiving and Christmas holidays.
We've seen searches for vacations increase to an average of nearly 1,000 mi from their home, up from around 700 mi at the beginning of June, indicating that people are gaining confidence with being able to travel longer distances. The positive momentum supports the strength in tour flow and VPGs we saw in the third quarter. VPG increased 30% in the quarter compared to pre-COVID. This is due to a combination of the sales mix being more heavily weighted to owners and the improved efficiency of our marketing channels. We have not offered promotional pricing, but instead dedicating our promotional dollars to drive future owner bookings through digital campaigns. To dive deeper on new marketing channels, new owner mix was 28% in the third quarter, with Blue Thread sales volume 13% of new owner sales.
The increased proportion of Blue Thread tours is an encouraging sign given that VPG is more than $300 higher for Blue Thread tours compared to overall new owner tours. In addition, the overall improvement in new owner sales demonstrates our ability to generate strong demand even in a challenging travel environment. In just a few days, we will begin selling our new urban resort location in Centennial Park, Atlanta, which will be available for occupancy to owners in 2022. To provide one last insight into performance at Wyndham Vacation Clubs, our loan loss provision saw noticeable improvement. We have elevated the minimum FICO qualification threshold from 600- 640, improving tour quality and driving better performance in our portfolio. In the third quarter, our loan loss provision as a percentage of gross VOI sales was just under 19%, down from 20% in the same quarter last year.
I'd now like to shift to Panorama, our exchange and membership travel business. Panorama continues to deliver on its recurring revenue model and shows the resilience we have come to expect from this segment. Revenue per member improved each month, down from the prior year 29% in July, 20% in August, and 7% in September. 78% of RCI affiliated resorts were open in the third quarter, and this is expected to rise to 88% in the fourth quarter. More importantly, we are beginning to execute on our plan to grow our base of non-timeshare relationships in this segment. Panorama Travel Solutions will offer discounted travel to closed user groups powered by the technology from ARN, while requiring upfront membership fees and recurring transaction fee streams. We are very pleased to announce our first non-timeshare affiliation agreement with Grupo Posadas.
Although immaterial to our results today, this deal is our first venture outside the timeshare model and begins our effort to expand our travel business to gain access to the more than 100 million North American households that do not own timeshare. These services are provided on a B2B basis and are complementary to our current timeshare model. Let me now move to our outlook. We are seeing the positive trends in the third quarter continue through October, giving us optimism through the end of the year. With that said, we remain mindful of uncertainties in the fourth quarter that may pose significant headwinds to our business, including spikes in daily COVID cases, next week's election, and the uncertainty around the timing and amount of a second stimulus package.
For the fourth quarter, we expect tours to be down 60% year-over-year, gross VOI sales to be 45% lower year-over-year, and VPGs to remain at 30% above the prior year. We expect the loan loss provision to remain below 20% of gross VOI sales in the fourth quarter, adjusted EBITDA margins to be similar to the third quarter, and we continue to expect to be free cash flow positive for the full year. With that, I would like to hand the call over to our Chief Financial Officer, Mike Hug. Mike?
Thanks, Michael. Good morning to everyone, thank you for joining us today. I will discuss our third 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 and year-over-year comparisons. We reported third quarter adjusted EBITDA of $139 million and adjusted earnings per share of $0.83, compared to adjusted EBITDA of $267 million and adjusted EPS of $1.57 one year ago. During the quarter, we had $31 million of COVID charges with $30 million added back to total company adjusted EBITDA. Wyndham Vacation Clubs reported revenue of $477 million with gross VOI sales of $256 million and adjusted EBITDA of $96 million. Tours declined 70% in the quarter compared to the prior year, with Las Vegas and Hawaii providing the drag.
New owner tours declined 80% and existing owner tours declined 55%. VPG, on the other hand, increased 30% to $3,039. Benefiting in part from improved new owner close rates and a higher mix of owner sales. Our underlying portfolio continues to perform well with delinquencies lower year-over-year, driven in part by deferral programs as well as a more mature portfolio from reduced originations over the historically busy summer months. Now active deferments represent just 2% of loans outstanding, down from 6% at the peak. We have remained in close contact with owners coming off deferral and are seeing the majority of them return to making payments. We remain comfortable with the overall allowance on our receivables portfolio, considering the continued uncertainty around the duration of the pandemic and its economic impact.
Excluding the results of the North American Vacation Rental business, which we sold in October last year, and the acquisition of ARN last August, our Panorama segment delivered third quarter revenue of $123 million. In the prior year, Panorama's revenue was $161 million. On this basis, Panorama's third quarter adjusted EBITDA was $59 million, compared to $70 million in the prior year. During the quarter, the average number of Panorama members decreased by 6%, and we expect that trend to continue into 2021. Panorama net transactions were down 33% in the quarter due to cancellations. However, we are seeing a positive underlying recovery trend. September exchange gross bookings exceeded the prior year by 1%, marking the first month of year-over-year growth since COVID started. Cancellations are recovering more slowly and continue to run at elevated levels, particularly internationally.
As discussed on the last quarter call, exchange member base drivers are going to become less relevant for Panorama as its travel portfolio expands, and we will be transitioning to reporting overall Panorama vacation transactions. During COVID, Panorama has remained focused on the growth and integration of ARN, and we are seeing excellent progress in our business development pipeline. In the third quarter, ARN delivered 27% of Panorama's net transactions. Turning to our balance sheet. As of September 30th, we had $1.3 billion of cash and cash equivalents, with corporate debt at $4.2 billion, which excludes $2.5 billion of non-recourse debt related to our securitized receivables. Our net leverage for covenant purposes at the end of the quarter was 4.1 x, which is 2.4 x below our covenant restriction. In the third quarter, we significantly improved our capital and liquidity position.
In July, as discussed on our second quarter earnings call, we amended our revolving credit facility while retaining some flexibility on capital allocation, and also issued $650 million of senior secured notes. In August, we completed our second ABS transaction of the year with great execution on a $575 million term securitization with a 90% advance rate and a 2.81% interest rate. This transaction will complete our 2020 term securitizations as our ability to upsize this transaction, due to the tremendous demand, allowed us to eliminate the need and the associated risk of a fourth quarter transaction. As a result, we pulled cash forward into the third quarter, negatively impacting fourth quarter cash flow. We successfully closed the renewal of our $800 million ABS conduit facility on October 27th and extended the maturity date another year to October 31st, 2022.
The bank group and commitment sizes remain the same with the renewal. The new terms provide greater efficiency for Wyndham, as the dynamic advance rate is now tied to the credit quality of the underlying assets, allowing for a higher advance rate versus the previous facility. We are very happy with the renewal and appreciate the support of our banking partners. We paid our third quarter dividend of $0.30/ share on September 30th, and we expect to recommend a fourth quarter dividend of $0.30/ share for approval by our Board of Directors in November. We are paying a dividend because we believe in the underlying strength of our business, cash flow and liquidity. We believe the dividend at this level is attractive to both current and potential shareholders and is sustainable.
As Michael previously mentioned, with a continuing range of possible outcomes through the end of the year, we still expect to be adjusted free cash flow positive for the full year. Overall, we are very proud of our third quarter results, which puts us on great trajectory to maintain our full year 2020 objectives. With that, Aaron, can you please open up the call to take questions?
If you would like to ask a question simply press the star then the number one on your telephone keypad. If you would like to withdraw your question please press the pound key on your telephone keypad. We ask that you please limit yourself to one question and one follow-up for this Q&A session. We will take our first question from Joe Greff with JP Morgan. Your line is open.
Good morning, everybody, and Michael and Mike, thanks for the details here. The first question relates to VOI sales. That was great color that you gave us, Michael, on the performance in July, August, and September, and I appreciate the VOI sales outlook commentary and that 45% year-over-year in the 4Q. Can you talk about, maybe this is nitpicking, but a little bit what you're seeing or what you've seen so far in October relative to that 49% number for September? I guess when you think about October as a percentage of the 4Q, how much is generally October? And does that shift a little bit this year given your commentary and what you're expecting for longer duration stays in November and around Christmas?
Great. Good morning, Joe, and happy to give some commentary around the Q4. On VOI sales, we are seeing continued momentum in the month of October. I would expect us easily to cross the $100 million mark for VOI sales, which not only shows improvement in the absolute number, but again, just continued improvement against the prior year. I really have to credit our sales and marketing teams. They came back and reinvented their business, and their performance has really shown through. Combine that with the fact that we're seeing increasing consumer confidence of our owners wanting to get back on vacation. We see that momentum on the areas that we control.
To be likely to continue throughout Q4. Far as rhythm of, or cadence of the fourth quarter, October, December tend to be your strongest months. While we've enjoyed sequential improvement every month, I'm not sure how November will end up because it tends to be a month that dips a little bit with a slower first half of the month, and then it begins to pick up around Thanksgiving time. We'll see. Again, the underlying performance of the VOI sales has been really strong, and I couldn't be happier with our team's performance and the fact that our owners are coming back to the resorts.
Thank you. Then if I'm piecing together your pieces of outlook for the 4Q, that would suggest that we should see 4Q EBITDA up sequentially from what you reported in the 3Q. Is that how you're thinking about it?
We're staying away from giving specific guidance just because I think there's three components that we remain cautious of, which I mentioned being the election, when the second stimulus, which we believe will come when it comes, and obviously continued COVID spikes. What I would just add to that though, Joe, is we were very pleased with the third quarter margins. I think it really reflects the early actions we took to make sure our P&L and our balance sheet were solid, and we're expecting similar margins in the fourth quarter. I think the other piece of the fourth quarter that's an important component in the overall equation for driving EBITDA is that we're seeing bookings in Q4 down 20% over last year, and in the third quarter, that number was down 27%.
Sort of to tie into your first question, which is just showing continued improvement, not only in VOI sales but in consumers' willingness to travel compared to prior year.
Great. Thank you very much, guys.
Joe, thank you.
We will go next to Chris Woronka with Deutsche Bank. Your line is open.
Hey, good morning, guys.
Morning, Chris.
Morning, Chris.
Morning. I wanted to dive into the inventory outlook a little bit, and maybe you can remind us where you are right now in terms of how much you have on hand. Also, given the distress that's out there in the market, are you seeing any opportunities to maybe go on offense there, particularly given that you do expect to be free cash flow positive for the year?
I think when we look at our inventory, with the decline in sales that we had through this year, we feel very comfortable with the levels of inventory that we have. In fact, when we look out over the next several years, on average, you'll see our inventory spending in that $200 million range rather than the $250 million that we've targeted the past several years. As it relates to opportunities, we do see opportunities coming our way. I wouldn't expect that we would take advantage of any of those this year. We think, like we saw back in 2009, 2010, those opportunities will be there for some time.
At this point, because of the level of inventory that we have, we really think that driving free cash flow as high as possible, using that free cash flow over the course of the next couple of years to get our leverage back down to continue with our return of capital to shareholders is probably more important than putting a new dollar on the map. We'll be really focused on EBITDA margins and free cash flow once again to drive that leverage down and to get us out from under our amended revolver, which gives us a great more flexibility as it relates to return of capital to shareholders.
Okay. Very helpful. Then on the Panorama segment, I know that's still in transition and there's COVID-related headwinds and all kinds of things, margin performance, pretty impressive. Is that indicative of where the margins can be when we get to a more normal operating environment or is there more to go or is there something exogenous that is not going to repeat in the future as you grow the business?
Well, I think there's a couple things. First of all, on the current margin, obviously the team has done a great job controlling their costs, putting cost controls in place where possible, and then also we do see those members that canceled earlier in the year, especially in the first quarter, start to rebook their exchanges. We're excited about the trend that we see there. Long-term margins, as we grow ARN, we could see pressure on the Panorama long-term margins. We'll still drive absolute EBITDA growth, the margins on the ARN side of the business are tighter than what we see as relates to the RCI Exchange business.
We'll drive absolute growth in EBITDA out of Panorama, but I wouldn't expect the margins that we're seeing now to continue long term, not because of a change in the exchange business, but because of ARN representing a bigger portion of Panorama.
Okay. Very good. Thanks, guys.
Thank you, Chris.
We will go next to Patrick Scholes with Truist. Your line is open.
Hi. Good morning, Michael and Mike.
Morning, Patrick.
Morning.
Morning. Just a bit of a follow-up question on Chris's question. One thing that stood out to me in your earnings release, certainly, was that sequential improvement in exchange bookings exceeding prior year at September by 1%. Is it fair to assume that is simply just pent-up demand that's driving it, and certainly people couldn't exchange because resorts were closed in much of 2Q and 3Q?
Yes.
Is that a fair assumption?
I think you're exactly right, Patrick. There's no doubt that there's pent-up demand out there, not only on the exchange side of the business, but we're seeing it on the Vacation Club side of the business as well, which is why when we look at the continued trend in vacation ownership sales, the shortfall year-over-year decreasing each month. On the RCI Exchange side of the business, we're definitely seeing those people that either canceled reservations earlier in the year rebooking their exchanges, or those that haven't yet had the opportunity to take their vacation to book for a 2020 vacation or even obviously starting to think about 2021.
Okay. Related to that, I wonder if you can give us any high-level color on how you see the Christmas and New Year's weeks shaping up. Is it possible that you could see increased visitation at your clubs year-over-year as well as increased exchanges during that time period?
We're already seeing some change in consumer booking trends for the fourth quarter. Typically, our consumer will book about 120+ days out, and we're seeing that booking window shorten to just under 90 days. We're definitely still in the Thanksgiving and Christmas booking window, and as I mentioned in Joe's question, we are seeing improvement in our Q4 net bookings versus prior year compared to Q3. We're seeing improvement there. We still think we're going to see good pickup here in the fourth quarter. There's a few different dynamics with schools going straight through and getting out earlier. We think December has the possibility to be a more full month as opposed to purely a second half of the month phenomenon, which is typical for December. Credit to our digital team is we've been out there promoting our holidays.
We just launched something for Thanksgiving to try to drive people for longer stays during the Thanksgiving timeframe. There are different dynamics from prior years, but with the improving trend that we're seeing in Q4 compared to Q3, we're very encouraged that subject to sort of the external forces here, the overall demand for leisure travel will continue to improve really in that holiday season.
Okay. Good to hear. One last question here, if I may, and I apologize if you did say this in the prepared remarks. In the 3Q, in the VOI sales, what was the percentage of new owners purchases versus existing?
In Q3, it was 28%, and of that 28%, 13% was Blue Thread. If I could rewind back to our prior public remarks, we expected that number to be 20%-25%. We were very pleased that it ended up at 28%. We did not expect that to be that large of a mix in Q3. Very positive early trend. In the prepared remarks, we did comment that a lot of that can be also due to the fact that our in-market acquisition, as leisure travel begins to pick up, Patrick, we can capture that improvement in leisure travel and convert it to tours relatively quickly.
Okay. Very good. Thank you very much.
Thanks, Patrick.
We will go next to Stephen Grambling with Goldman Sachs. Your line is open.
Hey, good morning. I guess on maybe a bit of a follow-up on thinking about new owners, or I should say new tours. Can you just elaborate on what you're seeing in terms of the demographics of the customers who are coming in now and how that may or may not have evolved? Specifically, I feel like we get a lot of pushback on whether the younger customer is still engaging with timeshare or whether they may be choosing alternative forms of accommodation instead. Thanks.
Good morning, Stephen. We get that question as well all the time. I really appreciate you bringing the topic up. Let me just share a few facts and then give you a few of my personal thoughts on the matter. This time last year, 60% of our new owner sales were to either Gen Xers or Millennials. This year that number is 58%. Given the fact that we've got less new owners coming into our mix, I think that's actually a really good sign. In the third quarter, 20% of our sales to new owners were to Millennials. Just in form of context, just a few years ago, that number was 5%- 6%. We are seeing Millennials continue to move toward timeshare and find it as a great way to vacation.
I really think when you look at the more macro trends of how people want to leisure travel, we just fit in all of those areas. Whether it's drive to is more of a near-term phenomenon, but the idea of vacation with bigger accommodations, multiple bedrooms, resort amenities everything you're seeing as the positive elements of the Airbnbs and VRBOs, we're benefiting from those same trends. I think the element that we deal with is that there's still a large part of the population that views timeshare as a fixed week.
Fixed location, same unit every year. The reality is when the brands came in in 2008, 2009, and many of the unbranded companies, we've completely changed the model, which provides maximum flexibility. For those who take the time to do the research, they see the benefits. I think it really shows up in the demographic that, like I said, 20% of our new purchasers are Millennials, and I think that's only going to continue to grow as we move forward. Needless to say, the fact that there is that perception still out there is, we have a lot of work to do, and we're going to continue to tell our story and show that it is a great way to travel like we're seeing post reopening.
That's helpful. As a follow-up, maybe for Mike Hug on free cash flow, I know you referenced some timing that maybe pulled some costs into 4Q. Are there any other kind of working capital or other CapEx puts and takes to think about as we think through free cash flow in the fourth quarter? Maybe any initial signals as we think about the recovery in the next year? Thanks.
Good morning, Stephen. Cash flow, obviously, we were very excited about that ABS transaction. I mean, the demand was incredible. We went to market with a $400 million transaction, upsized it to $575 million, really felt like we always said, that you put the money in the bank when you can, when you get 90% advance rates and the interest rate under 3%. We're fine making that decision, even though it did move some cash flow from fourth quarter into the third quarter, didn't change our overall outlook.
Really, when we look at fourth quarter cash flows, the reason it's going to be down so significantly year-over-year is driven entirely by the consumer finance activity, the lack of an ABS transaction, as well as we grow our VOI sales in the fourth quarter and not doing a fourth quarter transaction, they're only going to sit in the ABS conduit that we have that we recently renewed, that we were very excited about as well, at a 60% advance rate. It's really a timing issue where the sales that we make this quarter will go into the conduit, and then when we do our next transaction, probably in March or April of next year, like we historically do, they'll jump up to that 90% advance rate. Really nothing unusual in the fourth quarter as it relates to cash flow except for really the consumer finance activity.
Thank you, Stephen. Was there another question? I couldn't hear if there was.
Thanks so much.
Thank you, Stephen.
We can move to our next questioner, Brian Dobson with Jefferies. Your line is open.
Hi, good morning. You gave some great color on Blue Thread tour sourcing. I was wondering if you could just expand a little bit on what you're seeing in the open channel marketing?
Absolutely. Good morning, Brian. Great to hear from you. The Blue Thread, it's one of the programs, as you know, that we've been very committed to, and it provides a lot of stability in attracting new owners because of the loyalty to Wyndham Rewards and the hotel group and their stays to our hotel brands. We saw continued strong performance almost from day one coming out of our reopening at the end of May. As I mentioned, their VPGs are $300 + higher and therefore provide a good steady base of margins as we move forward. Related to open market, the dynamic is a little more, I won't say tricky, probably complex in it's a market by market decision that we continue to make.
As part of our changes as we went through this reopening, as we mentioned, we've increased our FICO minimum, and as well, we evaluated hundreds of marketing locations across the U.S. and made some decisions to close some down because margins were low, and we knew that we needed scale to reopen those markets. That summer is the peak season for the open market channels. We made some tough decisions in May and June to close locations down that we will not reopen until at some point next year, if ever. The result of that, I think, is what you saw in Q3, is that the marketing locations that do remain open are producing really good margin business, which we think will create downstream benefits for our portfolio. I always hesitate to say we've closed down marketing because that's what this business is based on.
The reality is, with 28% of our sales being to new owners, I think the decisions our marketing and sales teams made and across the organization really reflect that they made the right decisions, and it's really helped our business. This is a month-by-month evaluation. The markets are saying, we see what's going on in Hawaii, urban destinations versus what's going on here in Orlando. I'll just use that to give you an anecdote, Brian, about Orlando. 60 days ago, when we looked at Orlando 2021 bookings, it was our number seven requested destination, which it's always our top demanded destination. Roll forward 60 days to the past week or so, it's now our number one demanded destination for 2021.
I think not only does that speak to how we will approach our open marketing in Orlando in 2021. I think it speaks more broadly to the consumer confidence of booking travel in the leisure space at a little more distance from today. I think it's an encouraging sign for us, obviously, but more so probably for leisure travel to this region.
Thanks. That's very helpful. Shifting over to the loan loss provision, better than expected in the 3Q. How do you see that evolving moving forward? Should we expect the curve to decline in a linear fashion, or might there be some ups and downs along the way? If you wouldn't mind touching on your progress against the third-party exit strategy firms, that would be very helpful.
Yeah. Good morning, Brian. This is Mike Hug. I'll take the first part as it relates to the provision, and then Mike can jump in on the third party activity. As you mentioned, very happy with the provision in the quarter coming in at 18.8%. You all know that's been a real goal of ours is to get below 20%. The team's done a great job really on the marketing side to make sure that we're marketing to the people that have the ability to pay for the product and getting that minimum FICO up to 640 definitely helps with that. When we look at the fourth quarter, we would expect it to be in that same range. Even throughout 2021, our goal will be to continue to market to the right people and have a provision that remains under 20%.
Overall, we're happy with the new originations, and we're happy with the entire portfolio. When we look at the level of defaults that came through in the quarter, flat year-over-year, delinquencies are actually better at the end of September this year than September of last year. I think the outreach we're doing to our owners, continuing to stay in contact with them. The trends we're seeing as far as them booking vacations and getting on vacation, I think all bodes well for our portfolio, and the provision going forward. overall, I don't think we could be happier as far as how our consumers are continuing to pay. just as importantly, as we go forward, the marketing changes we put in place to make sure that we keep that provision below 20%.
Brian, I'll touch a little bit on the third parties and you've heard us mention many times our five-point plan. In the third quarter, we had progress on every single one of those points. We're seeing improvement on owner vacations, and their booking trends. You've seen the changes we've made to our underwriting to drive up FICO scores. We launched in the third quarter Certified Exit by Wyndham. That's traditionally been our Ovation program, but it shows that what we want is for people, whether it's through us or through a reputable exit company, to when the time is right for them to exit, to make sure they're dealing with a party that won't charge them upfront fees and will give them the straight information.
Therefore, we want to be far more upfront in the sense of make no mistake when you click on this website or call this number, the discussion that you're going to have. We've seen a nice uptick from that. There continues to be progress at the state level with regulators, both on resolving pending litigation or ones that continue down the path toward resolution between exit companies and attorneys general. Lastly, our individual company litigation continues to bear fruit. The fundamental question we ask of these companies is you can answer in front of a judge or you can change your business practices. Almost without exception, exit companies are choosing to either exit the business or change their business practices rather than face their business practices in the court of law.
We continue to see progress and are pleased that more than anything, the consumers are starting to get the straight information and can make their own decisions for themselves.
Great. Thank you. That's very helpful.
Thanks, Brian.
We will go next to Jared Shojaian with Wolfe. Your line is open.
Hi. Good morning, everyone. Thanks for taking my question. Previously the idea was COVID cases, I think you had identified, were the number one driver of arrivals. Obviously, COVID cases are still going up. It seems like trends are improving and moving in the right direction. Can you just talk about that a little bit? I know Hawaii is small for you guys, but anything you've seen since the quarantine was lifted?
Yeah. Jared, it's a great question because yes, if I dial back to June and then July and August commentary, as cases spike, you see a correlation to our net bookings. Here we are, roll forward 90 days later, we're seeing cases spike. Interestingly enough, we are not seeing cancellations, which is what we talked about as to being the corollary. We are not seeing cancellations spike. I want to say yet. The yet being I'm not sure if they will or they won't, but until now, we have not seen anything unusual in the cancellations like we saw in July and August. We are hopeful that will stay that way. We will see. We believe it could be two things, two primary drivers as to why cancellations are not spiking this time the way they did in July and August.
I mean cancellations of bookings for vacations. Number one, we think there is a bit of COVID fatigue or burnout, and people are just saying, I'm going to continue on, despite what we're hearing as far as spikes. Secondly is in the last 90 days, a lot of people have traveled. People have learned what safe travel is all about, learned that going to brands that have programs that ensure safety and follow cleaning protocols. I can point to my own experience. I traveled out to our location in Las Vegas and could not have been more impressed with our health and safety protocols in place, and felt super comfortable to be on vacation.
As time has gone on, you've seen, I think, a little bit of fatigue and a little bit of people just growing comfortable that if they choose the right place, they feel good to travel. You're right to point out what we said in the past and where we are today, and as I mentioned, until now, we have not seen that spike in cancellations that we saw in July and August.
Okay. Thank you. On Hawaii, anything you can say about the quarantine?
In Hawaii, when you look at our Q4 tour projections, actually, 120% of our decline in Q4 from our previous projection is due to Hawaii. We are starting to see bookings come into Oahu, but the outer islands, not so much. Actually, although reopened, technically, it is going to remain a very soft market for us for the remainder of the year, and it is not a dependent market for us by any stretch. What I'm very proud about is our tour projection, 120% of our tour decline in Q4 from our previous projection has been made up from the rest of the sales locations in the Mainland U.S. Sorry, that was a bit confusing. We've recovered some of the loss in Hawaii in the remainder of our sales locations, which shows really good performance in the ones that are reopened on the Mainland.
Okay. Thank you. That's helpful. Just to stick on that, it was actually my follow-up question. With tours expected to be down 60% in the fourth quarter, I think the implication was maybe they were expecting to be down maybe 50% previously. Are you saying that delta between those two numbers is entirely Hawaii? Or are there more things going on in there?
Thank you for giving me the chance to speak more clearly on the subject. It's not only entirely, it's more than that number. We've been able to offset it by strength in the other Mainland markets. Yes is the short answer that it's entirely due to Hawaii and more.
Okay. Thank you very much.
Thanks, Jared.
We can go next to Ian Zaffino with Oppenheimer. Your line is open.
Hi. Great. Maybe just following up on that question. Is there a way or have you done any surveys on bookings and motivations? I'm just trying to get a sense of how many of these bookings are just aspirational and they're not necessarily serious, just given all the kind of reductions in the strictness of the cancellation policies, et cetera. If you have that information, have aspirational bookings actually declined and you're seeing actually more real solid bookings? Maybe just some color on that would be really helpful. Thanks.
Well, good morning, Ian. It's a question that's evolved throughout the third quarter. Let's start with our cancellation policy is what it was pre-COVID now. We are providing much more flexibility as far as use years and being able to roll your points into 2021. The implication of that, knowing that we do have a cancellation policy, does show that the reservations we see are less just purely aspirational, I'm just going to put something on the calendar, and they're actually sticking. We know that for a few reasons. Number one is cancellations have been very steady over the last 60 days.
We've seen them shorten from 120 days down to 90 days, which means people have this pent-up demand and they want to get on vacation, and we're seeing that travel actually have come through from when we changed the cancellation policy to those bookings are actually happening and we're getting the arrival. There's actual proof to the cancellation numbers that we're seeing in the month of October as well. What I would also say, Ian, is that I mentioned that, I think back to Joe's original question, is we were down on net bookings 27% from prior year in the third quarter. We are currently down 20% in the fourth quarter of 2020 with a closer booking window, so improvement. We also are looking into 2021, and that number is only 5% down versus the same time last year looking into 2020.
We are seeing this consistent progression of interest to get on vacation. We think the overriding factor here is that it's the leisure travel phenomenon. Is that people want to get away and start using their vacation, get out of the house. That's why we wanted to share that statistic, that not only are they going to drive to destinations, but they're starting to look a little further afield to get on vacation in the upcoming 90 days.
Okay. Maybe just a follow-up and maybe just a little bit more color on this. It seems like the bookings you're getting are more serious. Do you think that's what's driving the decoupling, I guess, between COVID spikes and cancellations? Any color on that will be helpful. Thanks.
I do, as you can imagine, read almost every report, whether it's gaming or hotel REITs or this morning, airlines that are releasing. We've been seeing it in our business, this less correlation between daily infections and consumer confidence. Consumer confidence is at its highest level, through our surveys since April, and that includes the last three weeks, when COVID has been spiking. That's why I shared that I think it really comes down, from my perspective, two big issues. That there is a bit of COVID fatigue. People have chosen to start living their lives a bit differently. Secondly is, more and more people have traveled in the last 90 days, and when they get home, they share where and how it's safe to travel.
Again, that's my hypothesis, our hypothesis, but you're starting to see it show up in a number of other company reports when they talk about leisure and leisure travel as well, which is a bit of affirmation.
Okay, great. Thank you very much.
Thank you, Ian.
As a reminder, please press star then the number one on your telephone keypad if you would like to ask a question. We will go next to David Katz with Jefferies. Your line is open.
Hi, David.
Morning, thanks for all the information and thanks for taking my question. I know that we've asked a couple already. I wanted to go back to just one matter, having heard everything that you've said, which is, little doubt around the notion that consumers will travel and want to travel. From a separate perspective, the degree to which they can, and if you kind of look at your business today, are there any restrictions or airport constraints or things that are constraining your business that prevent a person who will travel but cannot to one of your resorts at the moment?
Well, very fair, David, and happy to take as many questions as you have. This is really what it comes down to, and although we are seeing a greater propensity to travel, if you dig a little bit more into this consumer confidence that I just referenced in Ian's statement, I do still think you can break consumers into three primary categories. The first being, they're going to travel no matter what, and we saw that throughout the summer, when there was even more uncertainty out there. There's 1/3 that say they won't travel until there's a vaccine or close to having a vaccine. That number goes between 30% and 35%, depending on the week, but it's roughly 1/3 .
It's that middle third group that really tends to be following the sentiment and seems to be less sensitive to daily infections just because as time's gone by and as we just talked about. That's how we look at our owner base, and it's really making sure that that last third who aren't comfortable to travel have as much flexibility as possible, meaning our points aren't perishable. Although you may not have traveled from March to October, we want to make sure you get the full use of your points, and that may not be this year. It may be that you need to roll them over. I received an email from a top point owner last night, and they just said, we're just not going to travel this year.
Any issue with us rolling it over? I was searching with Ana this morning, and they're happy. They're just happy to know they can travel next year. To constraints, I think this is where it comes back to one of the distinctions at Wyndham is we have 230 resorts around the world, and we have resorts in a lot of different destinations in the Mainland U.S. The fact that there's a greater proportion of people who are not willing to travel today is just fine because they'll choose from Chicago to go to The Dells or in Arizona to go up to some of our great resorts in Utah or in Arizona or Southern California, or New Mexico.
This drive to component, I think is a big win for us here for the next 15 months and allows a lot of flexibility for our owners to choose when and how they want a vacation. I think that's meaningful. I talked at our beach destinations on the mainland were our most demanded. I didn't mention, one of our affiliates has a mountain destination in Virginia, and they're having incredible demand because it's a remote location that's sort of this mountain retreat, and it's great. We have many resorts at Wyndham Vacation Clubs like that, and I think that is an important element in the short term for getting people back on vacation because they want to travel. They just need to have the options, and whether it's Panorama and Vacation Clubs, we offer by far the most extensive optionality.
Yeah. David, I think I would add a couple of other things. I think the restrictions are actually being reduced. When you look at Southwest Airlines recently announced that they're going to start selling the middle seat again. United was providing testing to their customers that were flying out to Hawaii. They were providing testing at the airports that you could start enjoying your vacation when you get to Hawaii. I think MGM announced they were going to start seven shows in November out in Las Vegas. When you look at the leisure travel, all these companies that help drive our business by getting people into our vacation destinations are actually doing things to drive more arrivals to our markets. Previously, you didn't want to go to Vegas because you enjoyed doing other things other than just gamble.
Now, potentially, you have a reason to go out there because you can go see a show. I think all the trends that we're seeing are once the states are willing to open up, other companies in leisure and travel are doing things to drive more consumers there, obviously to help their business. That also helps our business because arrivals into markets leads to tour flow and VOI sales.
I appreciate that. If I can, just one more. I recall the company during GFC getting into WAAM and WAAM 2.0, which was opportunistic when there was a fair amount of distress out in the market. Are you putting plans or structures in place that are similar to capitalize on what may be capital light or fee-based opportunities as the world evolves through next year?
We definitely are, David. In fact, we never put those plans on the shelf. We've been doing the asset light continuously since 2009, just at different levels. In fact, the deal that Mike just announced today or discussed today in Atlanta is actually an asset light transaction there in Atlanta. We are ready to roll with those transactions that come our way. We definitely feel there'll be opportunities, and we'll be smart and just take advantage of the ones that represent great inventory and great markets for us. We're ready to roll on those.
Perfect. Thank you very much.
Thank you, David.
Thank you. That concludes our question and answer period. I would now like to turn the call back over to Michael Brown for closing remarks.
Thank you, Aaron. As we launch here into the fourth quarter of what's been a tremendously unpredictable year, we've been making important strides to restoring and growing our business. Our customers continue to trust us with their vacation, we're seeing stronger travel trends around the globe. As always, our success is driven by our associates around the world, who I want to thank for their outstanding work over the past seven months. They've truly been an inspiration to me. We look forward to sharing more with you in the upcoming months. Thank you, have a great day.
Thank you. That concludes today's third quarter 2020 Wyndham Destinations earnings conference call. You may now disconnect your line at this time, and have a wonderful day.