Greetings, and welcome to the Marriott Vacations Worldwide Second Quarter 2020 Earnings Call. At this time, As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Neil Goldner, Vice President, Investor Relations. Thank you.
You may begin.
Thank you, Michelle, and welcome to Marriott Communications Worldwide Second Quarter Earnings Conference Call. I am joined today by Steve Weis, President and Chief Executive Officer and John Geller, Executive Vice President and Chief Executive Officer and President and Chief Financial And Administrative Officer. I do need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause material which could cause future results to differ materially from those expressed in or implied by our comments. Forward looking statements in the press release that we issued last night, along with our comments in this call, are effective only at the time if issued and will not be updated as actual events unfold.
Throughout the call, we will make references to non GAAP financial information, You can find a reconciliation of non GAAP financial measures referred to in our remarks and the schedules attached to our press release, as well as the Investor Relations page and the financial information page on our website. It's now my pleasure to turn the call over to Steve Weisz, President and Chief Executive Officer, of Marriott Vacations Worldwide. Thanks, Neil. Good morning, everyone. Like many other companies, the COVID-nineteen pandemic has impacted our business.
Our second quarter started in a position that most of us have never had to deal with before but slowly began to recover. As you might remember, in March we closed our vacation ownership resorts to transient renters and other guests and alerted our owners about the limited amenities they would find if they decided to take their scheduled vacation. As a result, Occupancy at our resorts in April May was in the single digits. So, that's only the beginning of the story. In late May, with leisure travel leading the recovery, we started to reopen some of our resorts for renters and guest arrivals.
At the beginning, resort occupancy was fairly low, but it's steadily improved as we moved through June, led by our drive to locations. For example, our Florida Beach Resorts ran only 17% occupancy on Memorial Day, but were running at 65% by the end of June. And remain in the mid 60% range today. Our South Carolina Resorts ran 30% occupancy on Memorial Day, but were north of 70% by the end of the June and are in roughly the same place now. We also saw occupancy in our resorts climb throughout June, reaching as high as 75% by July 4th and are currently in the high 70s.
And while clearly not drive 2 markets, occupancy in our St. Thomas and St. John Resorts climbed to 60% by the end of the June and they're now at around 70%. However, 2 of our larger markets have not recovered as quickly. Orlando, which represents almost 20% of our keys, ran low single digit occupancy at the end of But with Athene Parks reopening, we saw a steady rebound in occupancy reaching roughly 35% by July 4th.
However, due to the press reports regarding higher COVID cases in Florida, they have since weakened to around 25%. And finally, Hawaii with more than 15% of our keys remains effectively closed today, except for residents the state or those willing to self quarantine for 14 days after arrival due to state regulations. We're hoping this rule gets listed at the end of August as currently planned, but I suspect it will depend on what happens with the virus in the key feeder markets. So while we are excited about how quickly occupancy improved in June July, occupancies in some markets have plateaued, and we are watching the rise of COVID cases closely as it could further dampen the recovery. In May, we rolled out our enhanced telesales program, which has performed very well, delivering the majority of our $30,000,000 of contract sales in the quarter.
As occupancy at our resorts began to build in June, we reopened 8 sales centers predominantly in South Carolina and Florida. Based on the performance of those first eight sales centers, we reopened an additional 34 sales centers in July. And by the end of September, we expect nearly all of our propensity to tour has been encouraging, with most customers choosing to meet in person versus virtually. While tour flow is not close to pre COVID levels, VPGs have been very strong with tours skewed more to owners than usual. Meanwhile, the resort management and finance businesses in our Vacation Ownership segment reinforced the strength of our business model this quarter.
Generating more than $135,000,000 of very high margin revenue. Not surprisingly though, with occupancies in the single digits in April May, and all of our sales centers closed until June. This wasn't enough to completely offset the softness in our development and rental businesses. The story at Intervalor National during the quarter was similar to what we saw in the vacation ownership business. Early on, with nearly 1300 Resorts closed or not taking new reservations, exchange and rental volumes declined substantially on a year over year basis.
By the that are yet to reopen. Growing year over year assisted by some pent up demand. As you may remember, many of intervals members renew their membership when they transact with year over year exchanges down 12% in the quarter, it's not surprising to see membership being 4% lower than March. Looking forward, owner's confidence in travel remains relatively strong, but with COVID cases rising, as it is somewhat softened. Owners came back strong during late May June, but had plateaued in certain markets.
Exchange transaction growth has also softened somewhat from the June highs. Understandably, consumers are concerned about a potential second virus way which appears to be more than 50% of those surveyed are more likely to travel if they could cook in their unit. While nearly 70% would be willing to travel in the next 6 months, if they could drive to their destination. With a larger square footage in our units compared to the average hotel room, the majority of which have full kitchens and more than 80% of our U. S.
Keys on the Mainland, I believe we are well positioned vis a vis other companies in the hospitality industry. So where do we go from here? As of now, excluding Hawaii, owner and exchange reservations are roughly 90% of those on the books of same time tours scheduled for the second half of twenty twenty, excluding Hawaii, about the same number we had at the end of April. And with very few customers opting to cancel their preview packages, our total tour pipeline is roughly the same as it was at this time last year. With the turn in business from the April lows, we've been able to bring back more than 4000 associates from furlough primarily in our resort operations group.
But given the uncertain pace of the recovery, we have also extended furloughs for around 40% of our team to early October. $300,000,000 for this year, reduced our operating costs, improved our liquidity and as John will discuss, closed a $375,000,000 securitization transaction with very attractive terms just last week. We continue to actively pursue business transformation through the redesign and implementation of a more effective and efficient operating model Since we closed on our merger with ILG nearly 2 years ago, we have made significant progress combining and integrating the best of both businesses, while gaining new perspectives on the key success factors that will most effectively We anticipate these operating model changes along with other cost reduction measures will help propel our organization forward as we continue on the path towards recovery. To summarize, with leisure travel leading the recovery, we're seeing much improved occupancies in many of our drive to markets. We've already reopened more than half of our sales centers and we're seeing a solid customer propensity to toward our results.
By the end of this quarter, we expect nearly all of the remaining delivering more than $150,000,000 of revenue. Through the redesign and implementation of a more effective and efficient operating model. And we have gone above and beyond to help for our associates and customers safe while making smart decisions for our shareholders to ensure that we remain in a strong financial position for the future. With that, I'll turn the call over to John.
Thanks Steve, and good morning, everyone. I'd like to take a few minutes to speak about our 2nd quarter results, the actions we've taken to lower costs and manage our cash flow and the overall strength of balance sheet and liquidity position. Our 2nd quarter results reflect the impact to our vacation ownership business of very low resort occupancies and closed sale centers in April and May as well as lower transaction revenues and resort closures in our change in 3rd party management businesses. As a result, our adjusted EBITDA for the quarter reflected a loss of $10,000,000. Looking first at our vacation ownership contribution to our results this quarter, it was more than offset by losses in our development and rental businesses.
As a result, our vacation ownership business lost $19,000,000 of adjusted EBITDA in the quarter. Contract sales in the 2nd quarter were $30,000,000, the majority of which came from the enhanced phone sales program that we launched in early May with our physical sales centers closed. As resort occupancies began to steadily improve starting in late May, as states started to relax the restrictions, we began reopening 1st week of June, primarily in South Carolina and Florida, and we had 8 sales centers back in operation by the end of the quarter. Our immediate focus at our sales centers was on in house marketing and channels, and we have been encouraged by owners' propensity to tour. We've also seen strong VPGs driven by higher discounting and promotional activity, as well as a larger percentage of owner sales.
However, with lower occupancies and limited preview packages, tour flow was substantially below normal levels. Given the limited contract sales loss in the quarter. These results included $21,000,000 of favorable report revenue from Q1 contract sales that were not recognized as revenue until Q2. Given the limited contract sales We had a much smaller deferral Development margin in the second quarter was also negatively impacted by roughly $5,000,000 of unfavorable product cost true up activity and $4,000,000 of higher the portfolio, particularly in our acquired Sheraton and Weston brands. As I mentioned during our year end call, some of this performance relates to loans that were originated under sales and underwriting standards used by ILG prior to our acquisition, which we have since optimized.
These include reduced down payment requirements for buyers with sub 600 FICO scores and less qualified off premise or OPC marketing channels with little or no income qualifications for potential buyers. For our owners who have temporarily lost their income or a substantial portion of their income due to the virus, we continue to work closely with them. Deferring loan payments where we can as we work with our owners to help them transition through this difficult time. To date, we're very encouraged that only roughly 1.3% of our borrowers have taken advantage of this program, speaking to the creditworthiness of our owner base. Our resort management business generated $51,000,000 of profit in the quarter $19,000,000 lower than the prior year.
Stickier management fees were $1,000,000 of lower ancillary results due to the closure of these operations for most of the quarter. As occupancy started to improve, have started to reopen some of these outlets. Turning to our rental business, with transient keys rented down 93% and TransUnion rate down 15%, our rental business generated a $75,000,000 loss in the quarter. As we have mentioned in the past, the majority of our rental expenses are relatively fixed in nature, including maintenance fees on our unsold inventory, and costs related to owners who exchange for hotel loyalty program points or vacations through our Explorer program. So with revenue down so much in the quarter, it had a substantial impact on our profitability.
As a reminder, we paid for most of these costs earlier in the year but for EBITDA purposes, they are expensed over the course of the year, including roughly 75% of the rental expense in the 2nd quarter. We expect our rental business to continue already paid for, we continue to perform extremely well with revenues and profit relatively flat year over year despite lower note originations due to reduced contract sales. Turning to the Exchange And Third Party Management segment, exchange transactions at our interval business started the quarter soft nearly thirteen hundred resorts that members can normally exchange into were either closed or not taking reservations. But as the quarter progressed in more and more resorts, reopened, exchange transactions began to improve. The 50% decline in exchange revenue for the quarter was mitigated by the stickier member revenue, which was down revenue in news through cost savings, but adjusted EBITDA for the segment declined 59 percent to $19,000,000.
G and A expense declined $45,000,000 from the prior year quarter. This decline related to roughly $14,000,000 of lower costs associated with furlough and reduced work week programs as well as synergy savings, $10,000,000 of bonus related cost savings given the updated financial projections for the year, $6,000,000 due to a tax credit under the Cares Act and $15,000,000 from lower overall spent across the business on technology projects, travel, training and other discretionary spending, given the impact of the virus. Moving to the balance sheet restricted cash, $47,000,000 of gross notes receivable that were eligible for securitization, and nearly all of $4,600,000,000 in net debt outstanding at the end of the second quarter, including $2,700,000,000 of corporate debt, and $1,900,000,000 of non recourse debt related to our securitized notes receivable. We have no corporate debt maturities until September 2022, which is our convertible notes, and that's only $230,000,000. As we discussed on our call, we raised an additional $500,000,000 of senior notes in May, and we also amended our credit agreement to suspend our first lien covenant through the first quarter of next year.
We also completed a $375,000,000 note securitization last week, blended interest rate was 2.5% and the advance rate was 98% making it one of our most successful ABS transactions at The offering was substantially oversubscribed, including many new investors who haven't participated in our securitizations before. We expect this transaction about our expectations for recovery will be sustainable in the near term. Assuming we don't see occupancies for on whether or not it reopens as currently scheduled on September 1st. As a result of occupancies being roughly half of normal levels and our decision to not reopen most of our linkage and off premise marketing channels in the near term, we expect tour flow could run 60 to 70 percent lower than last year's third quarter. We are pleased with the response from our owners and guests who have been very willing to attend in person sales presentation and with discounting and incentives we are offering, VPG has been higher than pre pandemic levels.
To the extent tours and VPG remain in line with July levels, and we don't experience any further delays for reopenings in Hawaii's or shutdowns, contract sales in the third quarter could be between $120,000,000 $155,000,000. Typically, I wouldn't expect revenue reportability to have much of an impact on our third quarter adjusted EBITDA, but with a limited number of contract sales from 2nd quarter being recognized in the 3rd quarter, we could see revenue reported ability negatively impact our 3rd quarter adjusted EBITDA by $10,000,000 to $20,000,000. So notwithstanding the strong sales improvement we expect in the 3rd quarter, the sequential quarter to quarter EBITDA growth in the underlying business could be potentially offset by up to $40,000,000 of reportability differences given the positive reportability, I discussed in Q2. As we've discussed in the past, reportability is only timing, but given the negative reportability in the third quarter we currently expect our reported development margin to be slightly negative. The quarter on a year over year basis.
While we continue to maximize our ancillary revenue as occupancies improve, we expect results still be down costs, approximately $140,000,000 of these costs will be recognized as expenses in the second half of the year. While transient rental revenue is returning, we do expect to continue to incur rental losses through the balance of the year. The good news is that we have limited variable rental costs yet to be incurred against the rental revenue. So as revenue grows, it will improve our cash flow outlook over the course of the year. In our exchange and third party management business, while transactions at our interval business improved substantially June, they have moderated a bit and Aqua Aspen's results will continue to be impacted until Hawaii changes its restrictions on visitors.
Finally, with the cost actions we've implemented, G and A costs could be down in the 40% to 55% range in the 3rd quarter. Turning to our cash flow outlook in May, I provided a cash burn rate of roughly $10,000,000 per month for the remainder of the year. That projection assumed contract sales would be limited. Rentals would not resume at all in 2020. The exchange business would be we've continued to be down substantially and we would not be able to complete a term securitization this year.
As we've already begun to reopen occupancies remain at least in the levels we saw in July, we now expect to generate positive cash flow for the second half of the year. This is an obvious improvement from what we anticipated just a few months ago. As Steve mentioned, we brought back more than 4000 associates and still have roughly 40% of our people on furlough with another 16% on reduced work week or reduced pay. We also continue to defer substantial amount of inventory and capital spending across the business to preserve cash. These are very hard choices, but we think we can manage at this level until business further returns.
Finally, we focused on the integration and transformation of our business, including the technology and organizational changes necessary to position us best through the recovery as well as growth opportunities that
Thank you. Our first question comes from the line of Jared Shojaian with Wolfe Research. Please proceed with your question.
Hi, Jeremy.
Hi,
good morning, everyone.
Good morning.
Good morning. So first, just a point of clarification, and I appreciate all the data you've provided here. On the 3rd quarter, the contract sales, the $120,000,000 to $155,000,000, are you assuming that Hawaii is open for the full month of September? Is that the assumption?
Yes, yes. Although, as you might imagine, you can't just flip a switch and all of a sudden you're you're at full volume, but we would think it will it will build through September. Yes.
Got it. Thank you. And you said tour flow I think you said in July or maybe for the 3rd quarter down 60% to 70%. That's about what you're guiding on contract sales for the quarter. As well.
Are you not getting an outsized BTG offset right now? Can you just talk about that a little bit?
Actually, tour flow is down through yesterday in July, closer to 75% VPG is in fact, up about 40% on a year over year basis for the month of July. So, and keep in mind, there's not a straight line, you can't take the midpoint of the 120 to 155 and then divide it by and that's what you run per month. July is stronger than August as you have some people returning to school, etcetera. The end of August and the beginning of September, then it picks back up. So, yeah, we are seeing a VPG growth rather substantially meaningfully.
It stands to reason where the vast majority of the tours that we are taking are from owners and they're running a very nice VPG. And I wish I could say it's 4 boats, but the future holds on ongoing basis. But I think over time as more first time buyers come back, you'll start to see that come down.
Okay, thank you. That's very helpful. And then I guess prior to COVID, one of the industries talking points was that in a recession, you don't have to lower price the way hotels do because your inventory is nonperishable. It sounds there may be some discounting going on just based on some of the commentary you gave. So can you maybe elaborate a little bit on that and maybe just some of the pricing that you're you're getting right now, how does that compare, VPG up significantly?
Obviously, maybe that's close rate driven, more existing owner mix effect, but how does some pricing compare that you're getting right now versus a year ago?
Yes, Jared, I'm not sure, I don't think we were one of the folks that said that we will never discount. I mean, I'll harken back to the kind of the great recession. And one of the things that we did was we went back to our existing ownership group and we offered some meaningful discounts to our product back then to stimulate some demand. So, and we had said even at the end of the first quarter call that one of the options that we have was to do some discounting. So yes, we did do some discounting on our points.
We did roll back those points, plus we have provided an additional incentive for people that were paying in cash. The good news is that obviously that helped fuel some of that $30,000,000 that we got in roughly a month. And 60% of the sales that we got, were in cash. With that said, now as we enter August, we are going to begin to dial back some of those incentives. And for instance, cash and finance sales will be priced in the same fashion.
And I would think that we'll continue to look at ways to, kind of stimulate volume, but your point to make is the right one. Is while your average contract price may be lower because of some of the discounting you're going to do, the closing rates are substantially higher, which gives you the effect that you're looking for is that people that are interested in buying say, Hey, this is a pretty good deal, particularly for those that are existing owners, they say, I'd like to put some more points in my portfolio and they do it at an attractive price.
Thank you.
Thank you. Our next question comes from the line of Patrick Scholes with SunTrust.
Hi, good morning. Good morning. Good morning. You talked about, your presold package tours, I believe, being roughly in line with historical or last year's level for the rest of the year. Obviously, in that Hawaii, obviously, is a big concern about reopening in those pre fold tours what percentage does Hawaii represent?
Well, we can get that. We don't that at our fingertips. But what we're seeing on the tour side, Patrick, the pipeline remains strong. It's relatively flat. To where we were at this time last year.
We went through a period of time where we weren't selling new packages here in the second quarter. However, Obviously, with the resorts closed, people weren't taking the tours. I think the positive point is that, that package pipeline remains strong. In the near term, what we've seen is some of those folks pushing their vacations out, right? Not surprisingly.
They want to travel, but maybe they're a little bit more concerned. So when it gets closer, we have seen folks not cancel or ask for their money back, but push the timing of that package or their vacation out And so that's where it's kind of hard to gauge. I mean, we could tell you what's on the books, but there's a good chance that some of that will get pushed out. The nice thing, the one point I do want to make about Hawaii, too, is if you think about fly to, resorts that we have, The few that we've opened have come back really strong relative to even our drive thru resorts. So take St.
Thomas and St. John, where we're already running 60, 70 plus percent occupancies, at those 2 resorts. The Aruba really just opened here a few weeks ago for U. S. Folks.
And we're already up to 40%, 50% occupancy in Aruba. So That all bodes well for when Hawaii lifts its restrictions, I think, when you think about our owners and their propensity to fly. So we're seeing a good rebound on some of those markets.
Okay. Thank you. And then just one question on clarification, when you talk about cash flow, in the second half of the year to be positive, is that an is that assuming additional securitization in the backup or for the rest of the year?
No. Well, what we'd assume is that we have our warehouse Patrick. And so obviously, we can securitize those notes. But just given our volumes, we cleared out all our sellable notes and the deal we just did. And given the sales numbers I gave you, We wouldn't necessarily have generated.
Things go really well. Maybe we'd have enough notes to potentially do a deal later in the year. But most likely we were looking at our next deal in the first quarter sometime next year. But like I said, it would include the ability for us to monetize that paper at, call it roughly an 85% advance rate in our warehouse facility.
Okay, very good. Thank you. That's it for me.
Yes. Thanks, Patrick.
Thank you. Our next question comes from the line of Brett Montour with JPMorgan Chase. Please proceed with your question.
Good morning.
Hi, good morning, everyone. Thanks for taking my question and thanks for all these details. You guys gave some great color on the total pipeline for packages. You talked about occupancy, and you said that the propensity for owners to tour was strong. I was wondering if you could just flesh that out a little bit in terms of maybe how that's trended sequentially And any other color you can talk, you can give us on the health of the consumer and how they're sort of behaving.
I think that's the missing link for us to understand the full channel there?
Sure. So, as occupancy started to build, led predominantly by owners coming to the resorts. We offered them 2 different options in obviously, we already started the telesales activity that was started towards the end of May and that was continuing. So those are not people that were at the but people that were at the resorts, we gave them 2 options. Either they could go through a traditional tour in our sales center obviously with all the proper protections, plexiglass, etcetera, etcetera, etcetera, or we could do it virtually with them in their villa, where we would be on the phone and they could see us and that kind of thing and do it that way.
We thought that there might be some reticence for people to come to our sales centers. That has not materialized. In fact, the vast majority of the people that are staying at our resorts are more than happy to come to our sales centers. The good news is that through our pre arrival communication, we've made them aware of all the protection that we put in place and everything else. I think that gives them a greater sense of security knowing that they're not going to have undue exposure and the like.
And obviously, we're scheduling tours so that there's not large groups of people at any one point in time. So that really the message here. The feedback we have gotten from our owners, based on their experience, not only the sales center, but in the course of staying at our resort while they're on vacation has been very positive and been very comforting to us because we worked very hard to try to figure out how we could do this in a way that people would feel as though that they were not putting their health by coming on vacation or by talking to us about becoming an owner or increasing their ownership percentage.
Understood. Thank you for that. That's helpful. And then on a related topic, on the package sales programs, I think one concern some people have is that those, and it might not be you, it might be peers or maybe the industry on the whole, but that forward package sale programs have been slowed down or the engines have slowed down and that's created maybe an air pocket in new owner tours, next year and potentially into 2022. And so I guess the question is, have you Have you slowed those engines down?
Have you turned them back on? And how long or how long could you go with a reduced sort of forward new owner package tour sales program?
Sure. Let me, let me see if I can walk you through the arithmetic. You have a certain number of tours kind of at the beginning of the COVID crisis and you had tours that were scheduled to arrive in the second quarter that never came. They have deferred their arrival to a later point in time. As I mentioned in my remarks, only 4 some of the people have actually canceled their package.
So think of it as the package pipeline has aged a bit. In that same second quarter, we turned off the engines to drive new package bookings because quite frankly, it didn't make a lot of sense to us to go out and talk to people and say, Hey, why don't you come and take a preview package on this when they were concerned about traveling in general and everything else? We have begun to very selectively, a very slowly dial back up predominantly in the digital space, as well as some marketing through the loyalty programs, which we've gotten some good response to, to start to reactivate and bring back more packages into the pipeline. So bottom line is the same number of packages that didn't arrive in the 2nd quarter also didn't get replaced in the second quarter. So that same total is about is about the same.
I think that's probably the easiest way to think about it.
Yes, I just that. I mean, so if you think about it too for next year, given the pipeline still remains very strong, you're not going to see much of an impact. I don't think next year. That the risk maybe that you're talking about is if we don't ramp it back up here. Since these packages generally take 12 to 18 months before they're activated, it could be more of a 2020 too.
I think if we do it right, to Steve's point, we'll continue to ramp up the package tours. We've got visibility in that depending on what the market's doing to replace those that are happening and continue to keep that strong pipeline as we go into 2022.
Great. All right. Thanks guys. Appreciate it. Yes.
Thanks, Fran.
Thank you. Our next question comes from the line of Chris Moranga with Deutsche Bank. Please proceed with your question. Hi,
Chris. Hey, good morning, guys. I wanted to ask you, as you think about, reopening sales centers or keeping them open, if if the virus numbers fluctuate a little bit. What's the decision? What makes the sales center profitable enough to to keep it open versus having to shut it down or maybe it's just more an issue of reduced staffing levels.
How do you guys look at sales center level profitability?
Yes. So, I mean, clearly, the first and foremost thing we wanted to focus on, when we opened those first eight was to make sure that at least they were cash flow accretive. And so we didn't bring back the full staff. We brought back the top of our line So, we had our very best salespeople in any given sales center. There are some that are better salespeople that are stronger than others.
So, we wanted to make sure we had the best folks there. Same thing on the marketing and administrative support personnel. So we're able to module those numbers. And if tour flow were to meaningfully fluctuate south of where we are today, we can take additional actions and we can continue to downsize the line, etcetera, if we need to. Hopefully, it would never come to a point where we'd have to reclose a sales center that we had reopened, but that's always one of the tools that we have available to us.
Should that be the case? Again, the most important thing is trying to make sure that they're cash flow accretive, and we go from there.
Okay. That's helpful. And then wanted to ask, how you think about inventory costs a couple of years out because you may have the opportunity to take back a small level of inventory, maybe that's the Sheraton West. And then other opportunities might come up, right, to acquire inventory at at distressed levels. So I mean, is it fair to think that 2 or 3 years from now, your cost have been Tory is lower than it was in, say, 2019?
Yes. I mean, it's too early to tell. You're right. I think there could be some opportunity there, depending on the length of the economic impact that COVID has. And whether there's an opportunity to potentially buy more on the secondary market or not at lower costs as a mix percentage.
The other one, as you pointed out too, higher level is, if this does have a bigger impact on the lodging industry. Maybe there's some opportunities, where a year or 2 out where there could be some distressed new new product opportunities, that type of stuff. So, clearly, probably an opportunity at some level, but like I said, a little bit too early to tell yet how that's going to play out.
Okay, fair enough. Very good. Thanks guys. Thank you.
Question comes from the line of Koanugo with Jefferies.
Good morning.
A lot
of the questions have been answered. So maybe you can jump into some clarification points. The ABS securitization that you just announced, the terms are really good. And I'm just wondering what drove that. You mentioned some first time buyers were involved in there.
Just wondering if the size of the loan pool had anything to do with it or what really drove the strength?
Yes, I mean, part of it is, we always do very well in the securitization market. We've got not only was there a big chunk of new investors, but we've got the normal investors that like our paper. They know how it performs. I mean, we were generally call it 20 times oversubscribed on orders, meaning for $375,000,000 of paper, we had initial orders for over $6,000,000,000. So, when you have that type of interest in your paper, it allows you to drive better pricing and that's kind of what we saw.
So I think it just goes back to our program and how well we typically execute in market.
Understood. And just a follow-up for me. Regarding the VOI guidance for the third quarter of 120 to 150, that you said that that includes Hawaii ramping up through September. Are you able to provide a number excluding Hawaii? Should the governor push it out a few more days?
No, I mean, it's, yeah, I mean, it would be 1 month of Hawaii. Remember, not ramping up through the quarter, Hawaii is not open today. And obviously, as we get closer, it'll depend on occupancies and everything else. You got to remember right now, our focus is on in house owner sales, etcetera, as we reopen these sales centers. So there's a lot of variables there.
What I can say is, yes, if we're going to get to the higher end of our range, we need Hawaii kind of opened up and ramping September, but, it's hard to kind of break it down at that level of detail at this point.
And just to add to that. The governor's behavior, has been he does things on a month by month basis. He, you know, it's be unlikely for him to say, well, instead of September 1st September 15, I would suspect if he were to come off of the September 1st number, which we hope he won't. That he would say it's October or November or whatever it is.
Thank you very much.
Yes, thank you.
Thank you. Our next question comes from the line of Tyler Batory with Janney Capital Markets. Please proceed with your question.
Hi, Tyler.
Hi, good morning. Thanks for taking my questions. My first question just in terms of the fall act Can you give a little bit more detail on what you're seeing there? And I know you're offering a program for borrowers to defer payments So what's the criteria for that program? How many customers are using that option currently?
Sure. Right now, we've seen call it about 1.3% of our borrowers, opt or qualify, I should say, for the deferred payment program, which essentially is either you've lost your job or at least 30% of your household income because of the COVID-nineteen. So very manageable in terms of the percent of people. Not surprisingly, you saw that, showed up fairly high in April early May and then has since kind of really come down to a small amount of people at this point, that are calling and asking about the program. So, and another, just a little bit of color.
I mean, we've seen of the people that have gone on the program, because the deferral was a essentially, we stop credit reporting. We gave you a 90 day deferral, no pay payments. And then in 4th month, you're supposed to start making your normal monthly payment and call it 1.9 of the 3 month deferral. So that at the end of a full year, right, you're back to current, we we've seen of about half the folks that had their first payment due already, I. E.
They're in their 4th month of the deferral program. About a third has started making their payments already. So That's fairly positive relative to the 1.3%. We are seeing people going back to making their payments and all that. Still, early stages, but we feel pretty good about where we're at there.
Okay. And just a follow-up, Can you talk a little bit more about the membership decline in the Integral International business? How much of that was due to lower inventory available, lower transactions versus potentially some other factors that might be out there?
Yes. Todd, I I don't have a number to share with you there because it's not exactly the way it tracked. Let me just see if I can help you understand how it works typically speaking, when an interval member calls to say, Hey, I'd like to exchange my ownership. We can resort X for going someplace else, that's when, the interval agent will remind that member that their membership is due for renewal. And at that point in time, oh, yeah, I forgot, okay, we'll go ahead and charge my credit card for the renewal.
And off you go. So as the request for exchange went down, it is logical to think that the number of people that would be calling in where we would remind them of the renewal has gone down. We think this is a temporary pause because people will, in fact, as we saw in June, start to reenergize about wanting to do exchanges, and we'll see membership revenue continue to drive, to go up again. So I don't want to overreact to that, that decline, here, and just have to say that I think it's more just a way in which the transaction people that their memberships are coming due. But to be honest with you, you can send them an email.
You can drop a piece of mail in the mail to them. But until they know that they can't exchange without renewing their membership, they may not be as inclined to react as quickly as we'd like.
Okay, great. That's all for me. Thank you.
Thank you. We have reached the end of our question and answer session. I'd like to turn the call back over to Mr. Weis for any closing remarks.
Thank you very much. Thanks everybody for joining today's call. As we've businesses in just a short amount of time is proving that to be true. Customers are returning and occupancies have improved considerably, particularly at our drive to locations. Approximately 70% of our sales centers have already reopened, we've been very encouraged as sales begin to return.
Exchange transactions in interval have improved considerably, and our high margin stickier revenue businesses performed as expected, delivering more than $150,000,000 in revenue in the quarter. And we executed term trajectory of the recovery is uncertain. That's why we are continuing to aggressively pursue transformational opportunities across our business to create a more and efficient operating model, and we are doing everything in our power to make smart decisions for our associates, guests and shareholders. As always, thank you for your interest in Marriott Vacations Worldwide. Take care of yourselves.
And finally to everyone on the call and your families, Enjoy your next vacation.
May disconnect your lines at this time. Thank you for your participation and have a wonderful day.