Greetings, and welcome to the Marriott Vacations Worldwide 4 Quarter And Full Year End Conference Call. The formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Neil Goldner, Vice President, Investor Relations.
Please go ahead, sir.
Thank you, Hector. And welcome to the Marriott Vacations Worldwide 4th quarter 2019 earnings call conference call. I am joined today by Steve Weis, President and Chief Executive Officer and John Geller, Executive Vice 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 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 on this call are effective only at the time they are made and will not be updated as actual events unfold. Throughout the call, we will make references non GAAP financial information. You can find a reconciliation of non GAAP financial measures referred to in our remarks in schedules attached to our press release, as well as the Investor Relations page and the Financial Information page on our website at ir.mbw dotcom. It is 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, and thank you for joining our 4th quarter earnings call. 2019 was certainly a year of change for our organization. From harmonizing sales practices across the business to implementing new human resource and accounting of financial systems we accomplished a lot.
It certainly wasn't easy. And as you might expect, when integrating 2 companies of similar sizes, everything didn't go exactly as planned. But looking at our full total company VPG expanding by 3% and adjusted EBITDA growing 14%. I couldn't be more satisfied with how the year came together. Driven by a 9% improvement in VPG and delivering 15% adjusted EBITDA growth once again illustrating the strength of our business model.
So let's discuss how we achieved these results and our plans going forward, starting with our vacation ownership business. As we've discussed with you in the past, we spent a large portion of 2019 making changes in our sales and marketing programs and operations to capitalize on the long term opportunities we envision when we acquired ILG, and I believe we started to hit our stride. As I mentioned, We delivered 10% contract sales growth in the 4th quarter, which is right in line with what we said we would do back in November. Looking at the components of $3727, with first time buyers representing a larger mix of our tours and nearly a third of our sales. And sales growth at legacy ILG accelerated again, growing 16% in the quarter with VPG improving double digits as we made further progress narrowing the gap with legacy MVW.
Our tour package pipeline was also very strong in the fourth quarter, growing 13% in capturing some of the revenue synergies from the acquisition, I believe we still have opportunities ahead of us. For example, While VPG at legacy ILG expanded in the low double digits in the second half of twenty nineteen, it was still more than 15% lower than legacy MVW North America for the full year. I believe we have further opportunity to close the gap and will continue leveraging best practices across all of our brands to drive legacy ILG in 2019, one of our higher VPG channels, increasing package sales there by more than 30% last year. Yet with ENCORE penetration still below that of legacy MVW, we continue to have opportunity to drive more profitable tours through this channel. While we've made good progress improving the tour quality at legacy ILG, we can still further optimize our channel mix as well as continue to increase the income qualifications of those we tour.
And we also kicked off some exciting new sales marketing initiatives towards the end of last year geared towards improving first time buyer VPGs and the results have been very encouraging. We look forward to continuing those efforts for owners to enjoy while adding new flags on the map to grow sales. Following our announcement late last year of our attention to open a Marriott Vacation Club property in Costa Rica, Just last week, we announced our plans to develop 6,000,000 visitors annually and is a highly sought after destination by our owners. Once constructed, the new 100 and 10 Unit Resort will include a mix of studio and one bedroom units and offer rooftop amenities such as a pool, bar and fitness center and as a short walk to the beach. The resort will also include a 10,000 square foot sales center, which we expect to open in mid-twenty 22.
Consistent with our strategy, we anticipate developing the property in a capital efficient manner with a phase take down over time after the resort opens allowing
us to
a long term license agreement with Hyatt. Hyatt is a great brand with 22,000,000 members in its World of Hyatt loyalty program, that we think offers tremendous growth opportunities for the Hyatt Residence Club. We've already identified a number of key locations that we think make sense to add a new Hyatt Vacation Ownership Resort and I look forward to sharing more with you in the future as our plans come together. Moving to our Exchange And Third Party Management segment. Integral International membership declined 2% sequentially from the 3rd quarter, while average revenue per member increased 3% year over year.
Interval recently joined our vacation ownership brands in offering an online booking platform form powered by Place Pass. This new feature offers over 250,000 activities and experiences and more than 800 destinations around the world that can be booked digitally at the lowest priced offer online. This will provide interval members additional value for their membership fees. Looking ahead, I continue to be excited about the opportunity to transform all of our businesses utilizing new digital tools to deliver an even more connected guest experience. 2019 was an important year for our company as we made progress developing and delivering digital offerings We showed early success in our vacation ownership business growing online points transactions by 23% last year enabling our owners to transact with us more easily when and where they wanted while reducing our operating costs along the way.
We also expanded our agreement to better automate our digital marketing campaigns. In addition, we also expanded our WiFi digital on-site program to more resorts last year, ending the year with this program in 35 locations. Since this program launched early last year, we have been able to deliver thousands of tours at a lower cost than some of our more traditional channels. This year, we plan to deliver additional value added features in areas of owner self servicing and onboarding. As well as on property experience and education.
These will include improved online points reservation capabilities and greater digital offerings for our on-site activities management. And our Interville International business also continued to build upon its digital and mobile first strategies last year as well. In 2019, more than 50% of all interval confirmations were booked online downloads of intervals app increased over 175 percent and transactional revenue on the app more than doubled. This year, we'll see the introduction of more consumer facing digital tools and capabilities across all of our businesses. Including a Manu Marriott Vacation Club mobile app providing benefits throughout the customer journey.
I'm looking forward to sharing our successes with you as the us to increase our by the end
of
This puts us well on our way towards achieving at least $125,000,000 in run rate savings by the end of 2021. While these operating efficiencies are very important, we from repositioning our product offerings to modernizing systems, to employing new technologies in exciting ways. For example, we've already started employing intelligent automation to handle some of our more manual and repetitive tasks. And we're utilizing advanced analytics to drive higher yielding tours. Us opportunities to use technology to lower costs and drive efficiencies in our business.
And I look forward to discussing many of these with you on future calls. Before moving to guidance, I wanted to address the coronavirus. The safety of our owners, visitors and associates is always paramount and we have initiated precautionary measures to address this risk. To put things in perspective, Asia Pacific is a relatively small region for us, and Chinese residents represented only about 1% of our global contract sales last year. In Asia Pacific, We have seen a small percentage of our owners rescheduling their trips this year, and we've had a relatively small number of preview package customers cancel their upcoming arrival with 97% of those customers indicating that they are only post poning their visits.
In addition, cancellations from upcoming rental guests have been minimal thus far. Given our limited exposure to Now let's turn to our full year outlook. As you saw in our press release that we issued yesterday, we expect to grow contract sales by 7% to 11% this year. Full year adjusted EBITDA is anticipated to grow between 8% 13% and adjusted earnings per share growing 15% to 24%. Adjusted free cash flow is expected to be between $425,000,000 to $500,000,000 this year, bringing our 2 year for year free cash flow generation to more than $900,000,000 at the midpoint of the range.
Our uses of free cash flow remain the same first, we will focus on organic growth in our existing businesses. 2nd, we will look for strategic acquisitions and investments that can accelerate our growth and provide an attractive return. After that, We anticipate any remaining free cash flow will be returned to shareholders in the form of dividends and share repurchase. In summary, we ended the year on a very positive note and look to build on that momentum in 2020. And with that, let me hand the call over to John.
Thank you, Steve, and good morning, everyone. I too am very pleased with our 2019 as well as the progress we've continued to make on the integration and transformation of the 2 businesses. Adjusted EBITDA increased 15% in the 4th quarter, driven by strong growth in our Vacation Ownership segment as well as benefits from our synergy efforts. Looking first at our vacation ownership segment, adjusted EBITDA increased 15 percent to $226,000,000 and margin expanded by 150 basis points. Consolidated contract sales increased over 10%.
Our best sales growth quarter of the year and adjusted development margin, which adjusts for revenue, reportability and other charges, increased 18%. Our adjusted development margin percentage increased 220 basis points to 25.6 percent, driven by a higher percentage of lower cost inventory excluding the impact of purchase accounting adjustments, revenues increased 13 net of expenses and consumer financing interest expense increased 18%. This growth primarily reflects the to a higher outstanding debt balance, partially offset by lower interest rates on our securitizations. The average FICO score of buyers who financed with us in the quarter remained strong at 7 37. We have seen slightly higher defaults in our portfolio mostly attributable to loans that were originated As we have discussed previously, in order to drive sales prior to our acquisition, ILG reduced down payment requirements for buyers with sub 600 FICO scores and ramped up less efficient off premise or OPC marketing channels, with little or no income qualifications for potential buyers.
We have eliminated or substantially improved faults to improve over time with these changes. In our rental business, revenues increased 19% to $139,000,000, and rental revenues net of net of expenses decreased $2,000,000. This was driven by higher plus point revenues and increases in transient keys rented, offset by higher inventory costs at Fistana. In our resort management and other services business, revenues in increased 5% while revenues net of expenses increased 14%. This growth reflects higher ancillary and exchange company activity as well as segment, adjusted EBITDA was down $5,000,000 year over year after adjusting the prior year to exclude the sale of VRI Europe.
As we've discussed previously, the majority of the year over year decline was primarily due to the non renewal of certain corporate contracts last year. Our exchange business added new affiliations across the exchange network during the quarter. We also continue to add client outside the timeshare industry to use our products as we work to identify incremental revenue streams for this segment. As Steve mentioned, the integration of ILG continues to go well and we realized $49,000,000 in synergies in 2019, including $16,000,000 of additional synergies in the fourth quarter. We expect to deliver an additional $25,000,000 savings in 2020 and remain on track to achieve at least $125,000,000 of run rate synergies by the end of 2021.
Moving to the balance sheet. And had roughly $567,000,000 in available capacity under our $600,000,000 revolving credit facility. Our total corporate debt $900,000,000 associated with our non recourse securitized notes receivable. From a leverage perspective and including $125,000,000 of total synergy savings, our debt to adjusted EBITDA ratio at the end of the quarter was 2.4 times, in line with quarter increasing its capacity to $350,000,000. In addition to the higher capacity, the new facility also enable all enables us to monetize our Sheraton, Weston and Hyatt branded loans, which was precluded under the old facility.
We also amended our existing term loan credit agreement reducing the interest rate by 50 basis points, saving us more than $4,000,000 annually. This brings our weighted average cost of our corporate debt to approximately Regarding our return of capital in the 4th quarter, we repurchased $15.48 per share, bringing our total capital returns $1,000,000. We generated adjusted free cash flow of $464,000,000 as we continued to optimize development spending by roughly $40,000,000 to generated from the securitization of Texas parcels in Cancun and Colorado, both of which closed in the 4th quarter. In summary, our 4th quarter results were strong with contract sales growing 10%, while also continuing to integrate and transform our business. We are excited about changes we have already implemented and the results we are beginning to generate, particularly around technology and improved processes.
Now let's turn to with growth coming from a combination of and our ability to leverage fixed marketing and sales costs, we expect our adjusted development margin to remain strong in 2020. And while contract sales will be the primary driver of growth in the vacation ownership segment, we expect to benefit from improvements in all parts of our vacation ownership business. For the Exchange And Third Party Management segment, active members are projected to remain relatively stable Average revenue per member is Longer term, our strategy for these businesses continues to include diversifying beyond the traditional exchange business increasing average revenue per member, identifying and expanding benefits to exchange members and of course focusing on adding new resorts and properties to the network. For adjusted EBITDA we are projecting $820,000,000 to $860,000,000 in 20.20 or 11% growth at the midpoint of our guidance We estimate that nearly 2 thirds of the growth will come from our core businesses with the remainder coming from incremental synergy savings. We are targeting run rate synergy savings to approach $95,000,000 by the end of 2020 as we progress towards our goal of least $125,000,000 of run rate synergy savings by the end of 2021.
While we do not provide quarterly guidance, it important to remember that our Given the normal growth $1,000,000 and I would expect a similar amount this year. Again, this is only timing as the revenue will get reported as we go through the year, with most of the deferral being recovered in the 4th quarter. However, it does affect the cadence of our adjusted EBITDA growth resulting in ramping up as we progress throughout the year. We expect our adjusted fully diluted earnings share to increase nearly 20% at the midpoint of the range before factoring in any effect of this year's share repurchase activity. Lastly, with these projected financial $500,000,000 for 2020, highlighting the continued benefits of our capital efficient development model coupled with the attractive cash flow profile of our exchange and third party management businesses.
This projection does assume more normalized levels of development and other capital spending as we look to achieve our 7% to 11% long term sales growth targets proceeds we may generate from It also does not include the roughly $60,000,000 to $80,000,000 of cash we expect to invest this year to achieve further synergies from the ILG acquisition. As we've done in the past, we will continue to identify ways to enhance cash flow generation while also ensuring our spending supports future sales growth. With our pro form a leverage now in line with our longer term target rate of 2 to 2.5 times, debt to adjusted EBITDA, our capital allocation strategy remains the same. The excess free cash flow remains returning capital to shareholders through dividends and share repurchases. In summary, we finished the year strong and we expect 2020 to be another strong year of growth for the company.
As always, we appreciate your interest in Marriott Vacations Worldwide And with that, we will open the call up for Q And A. Hector?
For
questions. Your first question comes from the line of Jared Shojaian with Wolfe Research. Please proceed with your question.
John, maybe just going back to the comments on the free cash flow that you just gave us. I'm hoping you can walk us through the potential capital return build for 2020. I guess if we start with your adjusted free cash flow guide of $4.25 to $500,000,000 and work down making all the adjustments on the one timers, any new debt you may take on excess cash from I guess, the land sales that you just did, how are you thinking about how much, I guess, discretionary capital is going to be available for buybacks dividends or any other, outside activity? Thank you.
Sure, Jared. So yeah, start with the $425,000,000 to $500,000,000 as you highlighted, given some of the sales we did late last year, as well as the Asia note securitization, which generated about $65,000,000 of cash. We start the year actually with call it roughly an additional $100,000,000 plus of cash that just given the timing of those. So you can add that, if you will, to the 425 to 500. The other thing we have is we probably had another call it $80,000,000 of notes that are available for securitization within our, our trust excuse me, our warehouse line at the beginning of the year.
And then the opportunities are really around asset dispositions, additional ones this year as well as an offset for the additional spending that we have on the integration and transformation costs, which on an after tax basis, that's probably roughly $50,000,000 to $60,000,000. So when you kind of put it all together, you're talking roughly $500,000,000 to close to $700,000,000 of cash before dividends, given our current dividend, pace of call roughly $90,000,000 You're in a similar scenario today where we bought back shares north of 470,000,000 At a minimum, we should have somewhere in that vicinity and then there's potential for some upside depending on the timing of some of the asset dispositions.
All right. That's very helpful. Thank you. And then just I guess on coronavirus, can you help us understand percentage of your costs are fixed costs that are not tied to tour volumes and how that might help you if coronavirus to spiral out of control in the U. S.
And then if you could also give us, the percentages of your EBITDA out the U. S? I think you said Asia Pacific was immaterial impact, but I guess what percentage of your EBITDA is outside the U. S? And maybe if you could break by geography, that would be helpful.
Thank you.
Sure. I'll take a stab at it, probably do a better job of answering the second question on the first part of it. The, just to give you a specific, Asia Pacific in 2019, was 2.6% of our adjusted EBITDA. So again, not all that mature. And of course, Asia Pacific is represented by not only sales to Chinese residents, but also the pogamas of our sales are related to expats that are based elsewhere in that part of the world.
In terms of, I can give you a sales volume. I haven't broken down the actual EBITDA number yet, because in anticipation of your question, I can tell you, total North American sales volume from international customers was about $50,000,000 of that was eastbound from Japan to Hawaii. $30,000,000 was Latin America, And another $18,000,000 was specific to, resorts in Florida from both Latin America and from Europe. So if you apply the call it $150,000,000 of sales in North America from international customers. You take our development margin against that and 20 plus percent let's call it $30,000,000 of EBITDA, if it all went away, which certainly we wouldn't anticipate.
As far as the fixed cost versus the variable. I guess, we could try to swag it. 30% of it is fixed and 70% variable roughly. So we'd be happy to come back to you with some more specifics, if you'd like, but that gives you at least a high level view on it.
And just from an adjusted EBITDA overall, if you look at our year in Asia operations. It's, less than 5% of our, and probably a little bit more than half of that 5% is Europe and a little bit less than the 5% is coming from Asia. That's both our vacation ownership as well as our exchange EBITDA.
Okay. Thank you very much.
Thank you.
Your next question comes from line of Brian Dobson with Nomura Instinet.
Hi, good morning. So you had mentioned intelligent automation and also advanced analytics you think that you could give us a little bit more color on how you're using that to drive tour flow and perhaps give us an update on your online marketing efforts?
Sure. So in terms of automation, sometimes called RPA robotic process automation, much of that is back house stuff where we're using it to kind of leverage some of our cost structure. As you might imagine, there anything from, balance sheet, validation up through mechanical entries that today or before today people were actually having to do it and then you'd have some variability in terms of how much the cost was as well as the accuracy. With RPA, we have been able to do a number of things where we've taken some of those previously manual functions and automated them. And as you might imagine, they're much more precise in terms of how they get executed and they're also very helpful in reducing costs.
In terms of artificial intelligence or automation on the tour side, So, we've done some testing and the results have been very encouraging thus far to look at tour flow and try to profile which tours are the most inclined to make purchase versus those that are not. We now have been able to apply some of that same logic stream to looking at, how we source tours out of channels. Figuring out that there accordingly. It's early on, Brian. I don't want to declare victory yet, except to say that what we have seen thus far has been very, very encouraging for us.
That's great. And then, do you think you could also expand upon the new partnership agreements that you alluded to in the rental business far as getting, getting new users to test your product?
I don't recall. Talking about that specifically in the exchange business, you mean?
Yes, that's right. In the exchange business.
Okay. Well, this is simply a matter of the way you think about the exchange business, it kind of goes in a couple of different ways. Number 1, trying to sign up new corporate affiliations when I say corporate, that's the broader definition, not the specific Delaware Corporation things, where we sign up a new developer to be affiliated with Integral International. And they in turn pay a corporate membership fee to avail their owners, new members, with the benefits of being affiliated through the exchange company. In turn, once a member decides they want to make an exchange, there is an exchange fee that comes along with that.
So there's that part of it on the traditional kind of exchange stuff. We've talked before about the Planet Fitness affiliation, where we realized that the growth new timeshare developers and the affiliations has certainly not been at a pace than it has been historically. So now we're looking to go outside of the traditional timeshare channel and make benefits available of the services that interval provides in terms of travel, whether it be cruises, hotels, air, etcetera, as well as their obviously their ability to use their inventory that they have available to them. To those members. So as an example, plan of fitness, plan of fitness pays us a modest, affiliation fee And then we are in commissions for booking cruises or air or hotels.
We also sell them their getaway packages. And that is a benefit that they pass on obviously to their members. And in return, interval members also get a bit of a benefit in terms of their membership and plan of fitness. That's one example and we continue to have dialogue with a number of different organizations about trying to expand on those kind of relationships as a way of broadening interval's footprint in the marketplace.
Your next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi. Good morning, everyone. And thanks for taking my question. I appreciate it. With respect to the synergies, I just want to make sure that, mapping and hearing correctly, we're at 95 run rate through the end of the year.
Another $25,000,000 to $30,000,000. Was that something to come online this year? And or is that something because the stated goal was really by the end of 'twenty one to get to around $125,000,000. Is there am I thinking about that wrong? Is there a deceleration there?
Or are you quite frankly, John, are you sandbagging us here?
Let's go through the numbers. I don't think we're sandbagging you, but At the end of 2019, we exited the year with 90 or excuse me, $65,000,000. So $65,000,000 of run rate synergies in place. So said another way, if we put nothing else in place during 2020, we would end the year with $65,000,000 of synergy savings, if you will, in 2020. What we said was we expect to exit the year at a minimum of $95,000,000 of run rate synergies at the end of 2020.
And given the timing, of when those will come into place, we expect to get $25,000,000 to $30,000,000 of incremental in the year savings. Okay. And then by the end of 2021, once again, that's the minimum of $125,000,000 of run rate savings. As we've always said, we continue to look harder. We see additional opportunities and we're working through all that.
But, we're going to do everything we can to get more synergy savings than what we've talked about.
Medical statistics that we don't normally deal with. But do you happen to know what percentage of your owners or visitors are drivers rather than flyers?
Well, I'm going to give you a cute answer and then I'm going to try to get better. I believe everybody drives. Even if one flies to the airport and rents a car, they have to get to the resort in some way, shape or form. We don't have any resorts that are at airports. Got it.
With that said, obviously Hawaii is 100% fly. There are, as you get to some of the, some of the resorts on Hilton Head, I would get, I'm going to give you a swag. That's all I can give you. Because we don't bother to ask people how they got there, is I would say a greater preponderance of people drive to Hill head versus fly to Hilton Head, because quite frankly, the orientation of the ownership is basically east of the Mississippi and most of those folks will simply drive to get there. As you go across the waterfront, if you go to Palm Desert, Palm Desert is almost 100 percent drive market.
Those are mostly people coming out of Southern California. Again, I'm giving you some some process that gives you idea. So depending on the location, that's driven. I mean, we do not have a lot of resorts save some of our pulse properties that are in major metropolitan areas, which would lend themselves to be more of a fly market than a drive market. But again, we've never attempted to try to poll people to say, how did you get here?
Because quite frankly, we're not sure exactly what we do with it even when we got the information. But, that should give you some sense of things.
So unofficially quantitatively, qualitatively rather, it does sound as though a majority, it's fair to classify it, our drivers.
Yes, I think that's probably right. And I think I know where you're going with this. So let me try to get there. If you think about, because of COVID-nineteen and all that, to what degree people would be less inclined to take trips outside of the North America, so to speak. I think we are well positioned given the distribution of our product about where we have property, etcetera.
So, you know, I think we're all hopeful that this won't rise to the occasion that some people are imagining it to. But I look back on the SAR stuff 1003. And to be honest with you in SARs, our sales grew in the same year that SARs came when I checked with the ARDA numbers and we saw that they saw increased sales in timeshare in the United States in 2003 of 8%, 9% in 2004. So I think Again, we're doing everything that we know how to do to make sure to take precautions, not only for our guests, but also our associates. And we're well prepared if we need to continue to escalate what we do on the properties, etcetera.
But I think we're dealing with it as best as we can.
Your next question comes from the line of Patrick Scholes with SunTrust Robinson Humphrey. Please proceed with your question.
Hi, good morning. Good morning, Steve and John. Just one question here. I wonder if you can call out any particular properties or projects that are driving that acceleration in sales growth this year. Thank you.
I'm sorry, disproportionately are driving that 7% to 11% growth.
Yes. I think, let me, without giving you specific properties, let me say that I think we'll get an outsized proportion of that growth from the former of Astana properties, just based on the kind of sequential growth that we've been able to see in terms of VPG growth, etcetera. I mean, just to give you kind of a sense of how all that worked. We've got You may recall that in the first quarter, Vistana was actually down, call it, 5, almost 6%. Q2 was up 4%.
Q3 was up 9%. Q4 was up 12%. And we believe what we've seen thus far this year that will continue on that kind of cadence in growth. So And then I think we'll still see mid to high single digits growth in the MVC business, but I've had to break it between the 2, I would say it'd be a higher percentage of growth on the form of Astana properties and everything else. You know, just looking at our results so far this year, it's that growth is pretty well distributed throughout the system.
We're not seeing any particular property or resort, because keep in mind, we're not selling individual property results. We're selling the portfolio. And so you look at the sales distributions of that portfolio product, And, but it's breaking down basically as I described.
Your next question comes from the line of Brandt Montour with JP Morgan. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions. So I was just wondering if you could maybe talk a little bit about close rates for new owners sort of how that's tracked over the past few quarters? And then specifically with regards to ILG, maybe remind us of the major deficiencies that you've, but then how many are left to go? So what inning are we in in that specific segment?
Yes. So let me back up a little bit. As you probably are well aware, closing rates of existing owners are higher than closing rates on first time buyers stands to reason that the owners buy more in the product, they have a higher propensity to clean contract than a first time buyer. Where we have seen some very encouraging results, as I referenced in my remarks, is in first time buyer, VPGs, and that's been driven by the close rate improvement. Now that's again, we started it late third quarter into the 4th quarter.
We've seen close rates, quite frankly, go up point to 0.5, which is very material when you get to the VPG calculation and the flow through rate on the sales and marketing cost. The Stana has a higher percentage of first time buyers than existing owners, although it's not overly dramatic, but it is something that you need to understand. And so I gave a statistic in my remarks that about a third of our sales came from first time buyers and for the full year. And if you break it down the tour volume, about half of our tours came from 1st time buyer. So as we make continued improvement, in the first time buyer closing, you might imagine that unless we have a dramatic change in the shift the first time buyers versus existing owner tours that you'll start to see the percentage of sales from first time buyers go up, somewhat materially.
Does that help? I mean, we don't disclose closing rates as I think you're well aware, but that should give you a somewhat of a least atmospheric backdrop do what you need to do with it.
That was really good color. And then just maybe you could expand on your sort of thoughts on M And A and the landscape in the industry as a whole. I guess, how could how can merit vacations benefit from your position and what would be sort of an ideal ultimate outcome of the ongoing M and A?
Well, as you might imagine, we don't really discuss a lot about M and A because a lot of it's speculative and everything else. Let me just say this, but we have said all along that there's a number of different things we look at in terms of any kind of acquisition candidate we might be reviewing. One of which is, is it a good strategic fit, would it give us a broader footprint in the marketplace that, that we don't enjoy today. We can't get there through normal organic growth. 2, would there be a good cultural fit, which means, and one of the things I can report on the ILG acquisition is that's been the while we thought it was going to be a good cultural fit, I'm happy to report it's been a great cultural fit.
We had a long term relationship with the exchange company of Interval and we knew that that was a good fit, but it really has work very, very well. And so we're very pleased with that. And then of course, the 3rd most important thing is, is it accretive. Given our various uses of cash as we've talked about organic growth of the business. If there is an M and A candidate out there that makes the screen and goes through those kind of 3 tests that we apply to them, then we certainly are interested.
But I got to tell you, I think we've got a very nice stable of brands, particularly in the vacation ownership business. That is hard to find a comparison elsewhere in the landscape. And but we'll always be on the lookout and if we see something that makes sense for our shareholders, we'll certainly pursue it.
Great. Thanks a lot guys.
Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back to Mr. Steve Weisz for closing remarks.
Thanks, Hector. Thank you for your time today. I hope today's call will give you the same sense of optimism that we have for our company. We are a leading player in a growing industry, and I believe our competitive position is second to none with the best collection of brands in the business. We grew contract sales by 10% in fourth quarter and this year has started out strong.
The integration of ILG is going well, we see numerous growth opportunities ahead of us. And we expect to deliver another $25,000,000 to $30,000,000 of in the year's energy savings this year putting us well on our way towards achieving a minimum of $125,000,000 of run rate savings by the end of next year. With that, I want to thank you for your interest in Marriott Vacations Worldwide and finally to everyone on the call and your families. Enjoy your next vacation.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.