Greetings. Welcome to Marriott Vacations Worldwide Third Quarter 2019 Earnings Call. At this time Please note, this conference is being recorded. I will now turn the conference over to your host, Neil Goldner, Vice President, Investor Relations. Please go ahead.
Thank you, Satri, and welcome to the Marriott Vacations Worldwide Third Quarter 2019 Earnings Conference Call I am joined today by Steve Weisz, President and Chief Executive Officer and John Deller, 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. Statements are subject to numerous risks and uncertainties as described in us 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 today November 5, 2019, and will not be updated as actual events unfold. Throughout the call, we will make reference to non GAAP financial information.
You can find a reconciliation of non GAAP financial measures referred to in our remarks in the schedules attached to our press release as well as their Investor Relations page and the Financial Information page on our website at ir. Mvwc.com. It's now my pleasure to turn the call over to Steve Weisz, President and CEO of Marriott Vacations Worldwide.
Thanks, Neil. Good morning, everyone, and thank you for joining our third quarter earnings call. Coming on the heels of our 1st Investor Day since the ILG acquisition, I'm very pleased with our 3rd quarter performance highlighted by double digit sales growth at the acquired vacation ownership business and further synergy attainment, both helping to drive an 18% increase in adjusted EBITDA and illustrating the resilience of our business model. Excuse me. Starting with our Vacation Ownership business, I'm very happy with the results of our VO segment this quarter, growing sales 6 point 5% on a combined basis, excluding the hurricane effect, the highest growth among all publicly traded timeshare companies.
And we achieved this despite having a difficult comparison from last year when sales grew 18% and while being in the midst of a major integration. Looking at the components of or 3% after adjusting for the hurricane. Even with the hurricane, North American tours were largely unchanged with first time buyers representing 45% of total tours and VPG increasing slightly to $3789. Sales at our legacy ILG brands accelerated again from earlier in the year, growing more than 11% in the quarter, driven by 9 has begun to bear fruit. Our tour package pipeline remains very strong growing 11% in the quarter activated tours with the scheduled arrival date during 2020 increased 19% compared to the same time last year and are up nearly 50% for our Vistana brands, reflecting momentum we're building for next year.
As we discussed last quarter, since the beginning of the year, we have made substantial organizational and programmatic changes in our marketing and sales operations, as we integrate the vacation ownership businesses. Our teams work together to incorporate proven best practices from MVW Legacy Properties into the legacy ILG business, accelerating sales We absolutely believe that this growth we achieved this quarter. But while we're particularly pleased with the double digit contract sales improvement at legacy ILG this quarter, we still see substantial top line synergy opportunities over the next few years. Allow me to cite 2 examples. There's a substantial gap between the first time buyer VPG at legacy MVW and that of the acquired brands that we believe can be narrowed over time.
In addition, the These are, but two of the reasons why I feel so confident about the long term growth prospects for our Vacation Ownership business. But what I continue to be most excited about is our opportunity to transform our business by utilizing cutting edge digital tools. By using our customer centric and data driven approach, we are enhancing our self-service platforms to provide a more seamless customer experience while simultaneously increasing operational efficiencies. For example, in third quarter, total online point transactions for our legacy Marriott Points product increased by an impressive 22%. Going forward, we will continue to drive digital growth by strengthening our infrastructure, growing online package sales utilizing self-service booking tools and real time offers and enhancing the overall customer variance.
I continue to believe that digital holds the key to transforming our business and I look forward to sharing our progress with you in the future. Moving to our Exchange And Third Party Management segment, Interval International added new properties in North America, Europe and Asia to its global exchange network during the quarter. As a result, membership increased 1% from the second quarter of this year, while average revenue per member increased 2% year over year. Moving to synergies. The integration of ILG is progressing well.
We are making excellent progress towards lowering cost and eliminating redundancies. We continue to expect run rate savings to be around $60,000,000 by year end with $45,000,000 to $50,000,000 of this benefit benefiting our 2019 results. As we announced during our Investor Day, we now expect to deliver annual run rate savings in excess of $125,000,000 by the end of 2021 and continue to work hard to find additional opportunities. We also view this transaction as providing a once in a lifetime opportunity to fundamentally transform how we do business across the total company. From repositioning our product offering to modernizing systems to employing new technologies in exciting ways.
Our entire team is working hard Earlier in the year, we implemented a strategic review of our vacation ownership assets with a goal of disposing excess supply in certain locations. With the review now substantially complete, we expect the disposition of these assets to generate cash proceeds between $160,201,000,000 over the next few years. We will keep you appraised of our progress. And as a reminder, any cash we receive will be in addition to our adjusted EBITDA and free cash flow guidance. Before turning the call over to John, let me touch upon our full year outlook.
We updated our full year contract sales guidance to reflect the previously communicated impact of Hurricane Dorian. This new guidance implies 10% growth of the midpoint for the quarter. While achieving this certainly won't be second quarter of this year and is ramping up. In addition, we reopened the Westin St. John's sales center earlier this year after being closed for the fourth quarter last year was hampered by hurricane activity as well as recession fears following Thanksgiving.
So while 10% growth in the fourth quarter may be somewhat aggressive barring any unforeseen external events, we do feel that this is attainable. We also updated our full year adjusted EBITDA guidance to $745,000,000 to $775,000,000 to reflect the previously announced Hurricane impact. In terms of capital allocation, we were very active repurchasing shares during the quarter buying back more than 1,300,000 of our own shares at a cost of $127,000,000. That plus the shares we bought in October brings our year to date repurchase activity to 4,100,000 share or 9% of Looking forward I feel great about our business and our positioning. With more than a year behind us since the acquisition, our teams are melding nicely and we have what I believe to be the best collection of brands in the vacation ownership business.
We've uncovered more cost synergies than we originally anticipated. Sales at the acquired vacation ownership business have begun to hit their stride and we have a long term opportunity to fundamentally change how we do business. With that, let me hand the call over to John.
Thank you, Steve, and good morning, everyone. I too am very pleased with our third quarter results and how we are progressing this year. As we've done in previous quarters, we have included 2018 financial information that combines legacy ILG's results prior to the acquisition with legacy MVW's reported results to be comparable to our current year presentation. My comments today about growth and year over year changes refer to our combined results. Candorian in terms of its impact to the third quarter, as well as for the full year.
As you saw in our earnings release, we have the impact on contract sales to be $7,000,000 and the impact on adjusted EBITDA to be $4,000,000 for the full year. While all of the contract sales impact was Q3, the impact to adjusted EBITDA was only $1,000,000 in the third quarter due to the timing been recognized as revenue. For the 3rd quarter, total company adjusted EBITDA increased 18% and grew 21% excluding the impact of VRI Europe. This performance was driven primarily from strong growth in our vacation ownership segment as well as the flow through of synergies. As a reminder, we do not adjust our results for the impact of revenue recognition.
Which had a $2,000,000 negative impact EBITDA increased 11% year over year to $195,000,000 in the 3rd quarter with growth coming from all lines of business. In our development business, consolidated contract sales increased nearly 5% to $390,000,000 in the 3rd quarter And excluding the impact of Hurricane Dorian, contract sales would have grown 6.5% year over year. Adjusted development margin which adjusts for revenue reportability and other charges increased over 8 percent to $88,000,000 and adjusted development margin percentage was strong at 24.8%, nearly one point higher than the prior year quarter as a result of more efficient marketing and sales spend. Our financing business, revenues increased 14 percent to $71,000,000 and financing revenue net of expenses and consumer financing interest expense increased 10,000,000 pensity, partially offset by slightly higher operating costs. Consumer financing interest expense remained relatively flat year over year as formed very well.
The average FICO score of buyers who financed with us in the quarter was 7.30. In our rental business, revenues increased 3 percent to $135,000,000 and rental revenues net expenses increased 12% to $28,000,000. These results were driven by higher plus point revenues and increases in transient rate and keys rented, partially offset by higher inventory costs. In our resort management and other services business, revenues increased 1% while revenues net of expenses increased 6 percent to $59,000,000. This growth reflects higher fees from managing our portfolio of resorts as well as set light arrangements in San Francisco and Marco Island.
Turning to the exchange and third party management segment, adjust EBITDA was down $5,000,000 year over year after adjusting the prior year to exclude the sale of VRI Europe. The year over year decline was
as
percent year over year. Our exchange business added new affiliations across the exchange network during the quarter as well as additional non member product offerings as we continue to work to identify new incremental revenue streams for this segment. From a contribution to adjusted EBITDA perspective, G and A costs declined $19,000,000 year over year, driven primarily by synergy savings and lower compensation related expenses generated $13,000,000 of synergies in the third quarter bringing our year to date savings to roughly $33,000,000 With savings achieved to date as well as what we have projected for the remainder of the year, we are maintaining our target of in the year savings for 2019 at $45,000,000 to $50,000,000. Moving to the balance sheet. At the end of the quarter, cash and cash equivalents totaled $183,000,000 we had roughly $372,000,000 in available capacity under our $600,000,000 revolving credit facility.
Our total corporate debt outstanding at the end of the quarter totaled $2,300,000,000. This excludes 1,700,000,000 associated our non recourse securitized notes receivable from a leverage perspective and including $125,000,000 of total synergy savings Our combined debt to adjusted EBITDA ratio at the end of the quarter was 2.6 times, slightly higher than our long term target of 2 to 2.5 times. Regarding our corporate debt subsequent to the end of the third quarter, we issued $350,000,000 of senior notes due in 2028 at 4.75% and redeemed our 5.58 percent senior notes due in 2023 and repaid a portion of our outstanding borrowings under our corporate revolver. Also subsequent to the end of the 3rd quarter, we successfully completed a $315,000,000 note secured at a blended interest We are very pleased not only with the high demand for our paper, but also with the terms of this transaction, which are even more favorable than the securities we completed just a few months ago. Existing securitization program, year and estimate that it could generate approximately $70,000,000 of additional cash proceeds.
As a reminder proceeds from this securitization would be in addition to our free cash flow guidance for the year. Regarding our return of capital in the third quarter, we repurchased just 1,300,000 shares for $127,000,000 at an average price of $97.06 per share. Subsequent to the end of the quarter, we repurchased an additional 431,000 shares for $46,000,000 bringing our total capital returns year to date to $468,000,000. As it relates to our outstanding business interruption insurance claims we received another $38,000,000, $38,000,000 subsequent to the end of the 3rd quarter. These proceeds related to our Weston John property and represent the largest claim previously outstanding.
Few remaining claims and expect to resolve those claims over the next few months for less than $5,000,000. As we mentioned previously, Our guidance for adjusted EBITDA and adjusted free cash flow does not reflect the receipt of any insurance proceeds for our business interruption losses. Now let's turn to our outlook for the year. We have updated our consolidated contract sales guidance to 5% to 8% primarily reflect the impact of Hurricane Dorian implying approximately 10% growth in the fourth quarter at the midpoint. Embedded in this is our expectation for the legacy MVW brands to end the year strong as we lap last year's difficult December, the Vistana brands to continue their strong growth and for our new sales center in San Francisco and our reopened sale center at Westin St.
John to continue to ramp up. We now expect our full year development margin to be roughly 22%, reflecting the benefit of lower product costs. We expect reportability to be a substantial positive in the fourth quarter similar to prior years, and we expect to recoup most of the $28,000,000 We've also updated our full year adjusted EBITDA guidance to $745,000,000 to $775,000,000 to reflect the after the hurricane. This implies 14% full year growth at the midpoint of the range. Lastly, we are targeting adjusted free cash flow between $440,000,000 $490,000,000 for 2019 and continue to look for opportunities to enhance After that, we expect to continue to return excess cash to shareholders.
In summary, our 3rd quarter results were strong with contract sales growth of 6.5 percent excluding Hurricane Dorian. We have increased sales growth sequentially for the 3rd straight quarter while integrating and transforming our business and delivering significant synergy savings. We are excited about the changes. We have we have already been implemented and the results they are beginning to generate, particularly around technology and processes. I look forward to updating you on our And with that, we will open up
you. The first question is from David Katz of Jefferies. Please go ahead.
Hi, David. Hi, good morning, everyone.
Good morning.
Steve, I wanted to go back to your initial commentary in reference to digital. And I did hear you when you said we look forward to talking more about that when we're ready. But that just provokes the question anyway. How could we in some qualitative way get a sense for just how big an opportunity that is? Obviously, it's a it seems to us to be a revenue opportunity, presumably at high margin.
But how else could you characterize that scale of 1 to 5? How excited are you about it? And timing wise, when could we know more?
Okay. On the 1 to 5, I'd say I'm at a 4, maybe 4.5, We think it's a meaningful opportunity for the company. And I think you've characterized it correctly. There are certainly revenue implications to that as well as cost implications. The cost implications on the ability to source sales leads, packages, tours at a lower cost than what we currently incur today under the non digital environment.
Where we are on it just so that I can make sure that everybody has some clarity on that is. We've begun earlier actually late last year, early this year, we began some social media tests. One area I could point as an example, we did some Facebook tests to get out there with what you would classically call Facebook advertising to see if we could generate interest in going to just a couple of our that we put in a test mode to see if people wanted to take, mini vacs vacations to to these, to these locations, which in then, in turn, have them taking a time share tour and potentially creating sales. I can tell you one of the most exciting parts about that was we were able to get literally hundreds of different executions of what the advertising looked like, what the offer was, to the audience and everything else, and we were able to do that in real time. We put an ad up, we'd look at it for a day or 2.
And depending on the response rate, we either keep it up or we would pull it down and modify it and put something else up. It is that kind of thing that you can do in the digital world that you can't do in the analog own world. And so, and at the end of the day, when you get a lead from something like Facebook, the cost per tour is very low relative to what you get otherwise. So the we did we started a test with Marriott in the end of the second quarter. And we are what our plan there is to just use it on the MVC side.
And again, we've only done it with a couple of resorts in an effort to try to see how what works, what doesn't work, fine tune it once we get it to a point where we it will produce the results we're looking for, then we will roll it into the MVC business first. Then subsequent to that, we will then roll it out more broadly across the Western And Sheridan businesses. So, I'm very enthusiastic about it. I don't think it's lost on anybody that the world is clearly moving in a digital fashion. We think between that and some of the self service options that we've been working on.
We've had Deloitte working with us for the better part of a year. To try to help us understand how we can position many of our self-service offerings to be more consumer centric, and we think we're making great progress there as well. So put me in the camp of being a big believer. With that said, we have more work to do. And as we have more results, we're anxious to share them with you.
Thank you for that. And if we were to think about in the con this in the context of impact to earnings, which is where the rubber meets the road, is this something that we can be talking about as 2020 numbers start to come across? Or is it longer term than that?
I think what you should expect to see Harris talk about is, we'll start to see package production increase as we move into 2020. As I think you know, packages sometimes take anywhere from 12 to 18 months actually materialize into a tour, Argo Sales. So, I think the leading indicator will be increasing package production out of the digital channels, the trailing will be obviously. And I would expect most of the economic impact in terms of revenues would probably fall end of 'twenty into 'twenty one.
The next question is from Jared Shojaian of Wolfe Research. Please go ahead.
Morning. Thanks for taking my question. So can you just talk a little bit about some of the trends you're seeing right now from the consumer, maybe how those trends have evolved as the year has progressed and some of the, I think, broad macro data has been a little bit softer. And then related to that, I maybe splitting hairs here, but the contract sales reduction was about 50 basis points more than the implied hurricane impact. So Can you talk about that?
Is that rounding? Is that more of 3Q, maybe not as strong as you're hoping? Or I know the fourth quarter number is a big number. Was that maybe expectations there? Maybe you can help me just understand that a little bit better.
Yes. I'll take the first part. I'll let John talk about the the 50 basis points thing. If you think about it on a hurricane adjusted basis, if you take the hurricane at 6 on an adjusted basis, it's 6.5%. Our sales have actually grown sequentially over the quarters.
We were up 5% in the 1st quarter, 6% in the second quarter, 6.5% in the 3rd quarter. So I cannot point to anything in particular that would cause us to say that we are seeing any particular softness in the from the consumer point of view, I did, as I did mention in my remarks, obviously, we have probably spent a and amount of our time in the sales and marketing area focusing on trying to get our VSE house in order. Which has taken our eye a little bit off the ball on the Marriott Vacation Club product. I think again, that's the right decision the long term. What I'd like to the fact that we could have done both simultaneously sure, but there's a reality is that we have a finite number resources and experts, and we chose to deploy them in that fashion.
So I can't point to anything that today says that there's any particular softness in the consumer. John, you want to talk about the
of the guidance. Yeah, just as we looked at the fourth quarter and how things were setting up, as we talked about to to the midpoint, we need roughly 10% growth. Given our trajectory this year, we kind of felt like that was the right level of guidance. It's probably at some level rounding to your point. It's small numbers in the relative scheme of things, but That's just how we saw the fourth quarter setting up here.
Okay. Thank you. And then if I heard you correctly in the prepared remarks. I think you said activated tours with scheduled arrivals in 2020 are up 19%. Is that the Is that the best leading indicator for future tour growth that you've observed kind of historically?
And can you help us just to understand how much of your tours you have on the books, I guess, going into a year, how much of that do you already have in your sidelines?
Yes. So, clearly package tours are a somewhat of a leading indicator. Obviously, if that number was south, not north, that would be a concern to us. However, keep in mind that there are other sources of tours that we generate during the course of the year in house tours being one linkage tours being another. To be honest, we don't have a lot of visibility into a linkage tours or in house tours because they occur while people are generally in market.
So for us, we look at packaged tours as probably one of the most visible elements that we can point you to say is the future looking? So and again, then once you have total tour growth and how much are activated in the year and how much are not are for future years. And so those are the 2 indicators for us and we feel, again, pretty confident about that. I'm particularly pleased with the growth of tours for 2020 arrival dates in our VSE business, which are up substantially. Now some of that's a lot of small numbers, but at the same token being up percent, that's, that's pretty sporty, we think.
The next question is from Brandt Montour of JPMorgan. Please go ahead.
For today. Hey, how are you guys? So quick actually a longer term question just starting off and you were talking about, sort of the tour channel in the package pipeline. I guess the question is, I think you guys talked about call transfer, potentially, Eventually, I think Steve, do you think this is going to be something that shrinks? And part of the reason why you guys are going so aggressively into digital is to kind of fill that void over time as people don't use their phones anymore for actually voice calls.
I guess the question is, should we be concerned that that channel is shrinking faster than maybe you guys can get digital up and running?
No, let me give you a little background here. It's important just to put it in context. We started down the call transfer path in with Marriott in 2017. It was a very vibrant channel. I think as I may have mentioned during our Investor Day, we had the kind of the perfect storm Marriott in 2018 merged the 2 reservation platforms, the Starwood reservation platform and the Marriott reservation platform into 1, and it put new technology in place.
And to be honest, that disruption muted the amount of volume we were getting out of call transfer. That has started to come back very nicely. With that said, I think you're correctly looking at how things will probably play out over time. I think you could expect that voice call transfer will in fact over time diminish but we believe digital will easily replace if not surpass what we get on call on voice call transfer. And what's the inflection point where the two lines cross?
I can't exactly estimate. But, I think if we all think about our own individual behaviors, I do a lot more on my computer than I do on my phone. And I suspect most everybody else does as well. So, we want to be very well
to take advantage of that. Got it. That's really helpful. Thank you. And then in the 3, in the third quarter in your results, Obviously, a lot of momentum on the ILG side.
It looks like you guys even closed the gap between ILG VPG and NVW VPG by by a quarter of the way. So I guess the question is, is that more a function of the fact that you guys had tough comp in MVW. And you said you took your eyeball a little bit to focus on the ILG side, but Is that is that sort of the new line should we think about that as where these 2 should be or the starting point going forward and where these 2 should be sort of tracking or is there some sort of more transient things going on that maybe it doesn't maybe we give a little bit back before we keep moving forward? Sure.
Well, you might think about 20 19 on the VSC side as not to diminish the work involved, but somewhat low hanging fruit. I mean, we've gotten out of a number of the OPC channels, which were very high cost, very low yield kind of channels. We've started to dial up some obviously packaged growth. That package growth that we have in the VSE business it hasn't really manifested itself in a large number of tours in 2019, but certainly sets the stage for 2020 going forward. But I think I wanted to spell a notion if someone believes that, the VPG and the VSE and the VPG in the Marriott Vacation Plumb business will at one point in time be the same.
I don't think that's going to be the case. And here's the reason why. I think on the Western side, you probably could see that to be as good or even better than in the NBC side just based on of the portfolio of products in the Western business. And I think on the Sheraton side, I think you will see it to be lower than the NBC business. Again, based on the customer segmentation where the properties were located, the kind of customer that we talked to.
But again, the goal over time is to try to bring these two things together. I'll give you a little factoid, which you may or may not know, The owner VPG in VSE is actually a little bit higher. Than it is in the MVC business. That's largely because of the disproportionate amount of owners in Hawaii in Western and Sheridan. But the really real gap is in first time buyers.
I mean, the gap in first time buyers is still a little bit shy of 30%. And that's we think the real opportunity
The next question is from Tyler Batory of Janney Capital Markets. Please go ahead.
Hi, Tyler. Hi, good morning. So I just want to follow-up on the previous question a little bit more. When we look at the legacy MVW business and the contract sales there, I mean, you kind of mentioned several times taking your eye off the ball there. Can you just provide a little bit a little more granular about what you mean and what exactly is going on in that side of the business?
Sure. So on a day to day basis, there are adjustments made in our sales centers to, sales approaches, 1st day benefit offerings training in terms of proper closing techniques, etcetera, etcetera, etcetera. When you have, some of our more senior sales and marketing leaders, which heretofore has been solely focused on the MVC business, now stepping in and trying to embrace understand, learn and interact with the VSE properties. By definition, you are defusing the amount of time they have on the MVC business. And in many markets where we have similar properties, a market like Palm Desert, like Maui, like Orlando, where we're asking our in market experts to spend time on the VSE business.
That takes time away from their individual sites that they adhere to for have only been able to focus on. So I think that's what it is. I mean, if we had a complete redundancy and an overwhelming number of people experts that we could have deployed and not lost track or focus, we certainly would have done that. That's not how We're trying to get the best possible efficiencies out of our organization. You've seen some of that in terms of what's happening with the sales and marketing numbers that the costs have come down.
So again, I'm not I'm relatively unapologetic about it because I think we put the right focus in the right place I think the overall results at 6.5% before the hurricane were certainly better than anybody else put up on the scoreboard. And I think this will turn itself back around as we start to be able to kind of take the training wheels off of the VSE business and refocus again on the MVC business.
Okay, perfect. That's helpful. And just as a follow-up, I wanted to ask a little bit more about the development margin, which looked pretty strong. I think you talked about more efficient marketing and sales spend. So can you talk a little bit more about where you're finding some of those efficiencies?
And then maybe you could remind us, John, your full year target for development margin too, that'd be helpful. Thank you.
Yes. Hey, Tyler. So for the full year, we said call it roughly 22%. Remember, for a full year basis, reportability impact, right, as we've always talked about, is somewhat muted. So whether it's adjusted development margin or reported development margin on a full full year basis.
So it should kind of converge plus or minus and should be around 22%. I think on the marketing and sales side. A lot of the improvement is synergies that we've talked about $13,000,000 in the quarter. Some of that does flow through the marketing and sales side as we've collapsed the organizations, taken out redundancies, etcetera. So it's just, you know, Steve said, it's really a focus on delivering the top line growth, but at the same time, looking for ways to leverage our marketing and sales costs.
As we've always talked about, you do as your contract sales grow, you do get to leverage a certain amount of call fixed costs. I mean, all costs within any part of the business are variable, but when we talk about fixed within marketing and sales, costs that don't actually really go up in any given year with the top line growth, about halfs variable of our marketing and sales costs. They do move I. E. Commissions, things like that with the top line.
And we got about half of our marketing and sales costs that are not going to fluctuate as you grow top line. So we continue to get leverage on those fixed costs.
And Tyler, I just would add one more example. I think I spoke to it earlier, which is when you get rid of OPC tours, which are very high cost and have a very low VPG associated with them, that in and of itself that helps you lower your sales and marketing costs as well.
Great. That's all for me. Thank you.
Thank you.
The next question is from Brian Dobson of Nomura. Please go ahead.
Hey, good morning. So I've got 2 quick questions for you. The first on the exchange business, and the second on free cash flow. So I know it's early in your initiatives to capture more wallet share from your closed user group. Can you talk a little bit about the traction that you're getting with those programs?
Well, yes, I'm sure. So the whole idea on the 3rd party and exchange business is to diversify of beyond their traditional vacation ownership exchange business. Now, some of that is, in fact, increasing average per member. So in this era of expanded travel options, it's really important, we think, for interval to continuously try to evolve their membership offerings, respond to changes in consumer behavior by using different technology, new tools, new offers, to find a way to incent people to spend more of their travel dollars through this channel versus maybe some other alternatives that they have. So we think that encouraging.
I can't point to, I mean, the 2% increase in revenue per member part of that, quite frankly, is just some price increase that we've had. Some of it is because we've had a little bit of change in some of the demographics of the ownership base or the membership base. But, we think that clearly this is the way we need to move. I would point to one other thing as we think about kind of non timeshare centric customers, we talked the Planet Fitness thing that we did, which we think is certainly encouraging. I would expect to see more of our announcements coming forward with some additional customers and clients in that space going forward.
So again, it's as you think about the exchange businesses, you're talking about interval, whether you're talking about RCI, you would look at the kind of traditional growth of exchange membership to be flattish over the last several years. And that and some of it's just a share gain moving account from one to the other. But so in an effort to try to find a way to grow the business and have it continue to be a vibrant contributor to EBITDA, you've got to find other alternatives in a way to kind of source revenues. And obviously, in a high margin business such as the exchange business. If you can get the top line loaded up, it helps the bottom line very nicely.
Great. Thanks. And then just quickly on free cash flow. You've outlined a 3 year cumulative a range of $1,500,000,000 to $2,300,000,000 for available cash. How much of that do you think realistically can be returned shareholders.
I think you've done something like 80 percent of free cash flow historically. Should we expect that rate of return to shareholders over the next 3 years as well?
Yes, I mean, obviously history is probably good way to think about how we think about the return of capital. But Brian, as we've always talked about, 1st and foremost, we're going to look for opportunities to grow the business. That being said, the only acquisition we've done obviously is the ILG acquisition. We've talked about having looked at numerous ones over the years. And in some cases, even putting offers in, but not willing to pay what others guess saw is higher value.
So we're going to continue to do that, whether that's on the VO side or if there are things to enhance the exchange and third party management business. But short of that, what we've always said is we'll continue to look to return excess cash back to shareholders.
Great. Thank you both very much.
Thanks, Brian.
The next question is from Chris Woronka of Deutsche Bank. Please go ahead.
Hey, good morning guys. I wanted to ask a little bit about, staffing at the sales centers. And question is really, given how strong the employment reports have been, have you guys had A, have you had a lot of turnover especially with some of the integration initiatives. And B, are you finding it difficult to attract or retain some of your skilled salespeople?
We have had some turnover been more focused in the VSE side than the MVC side. With that said, however, on a turnover it's decelerating versus accelerating. But even with that, if you have a person that retires or decides they want to go do something else entirely, finding good timeshare salespeople, I mean, they don't just kind of grow on trees. You've got to find people that, have a certain way of presenting vacation options to people, can take rejection well. Keep in mind in a business with runs a mid teen closing rate, that means if we talk to 100 people, 15 people are going to say yes and 85 people are going to say no.
And you have to make sure that you've got a very robust very contemporary training program in place. So finding good salespeople is never been easy. I don't think that we can say with any certainty that it's any more difficult today than it used to be. I'll throw one other log on the fire when you think about trying to source timeshare salespeople. We're in destination resort locations.
As a result, some of these are not high growth population centers. So again, the number of people and candidates that you can attract is somewhat limited in that regard. But I'm very proud of our sales team. I think they consistently do an outstanding job. But We're always looking for more.
Sure. That's great color. Appreciate that. Just second question would be, Have you I know there's probably 1000 or more ways you guys cut the data, but is there any are there any discernible trends in terms of some of your your arrive your owner arrivals in terms of where they're coming from or even maybe industries that affiliated with? Just kind of getting at, is the underlying or some of the underlying profiles changing for better or for worse, anything that's noticeable recently?
Well, let me break it down into brands. The MVC side, no, there's no discernible change. The average household income has drifted up just a smidgen, but nothing that we would consider to be other than just kind of the way the economies move. In the, we're still obviously learning more and more about both the Western and the Sheraton customers, as I alluded to earlier in an answer to a question. I mean, they are different customers.
They do. They do have a different profile. You might imagine that the shared and vacation ownership customer is the demographics a little bit lower than the Western one is. But gee, In terms of owner behavior, I guess the only thing I would point to is over time, where here to four people would consistently vacation every year at one of our resorts. When we put our points program in place in 2010, and we gave them other vacation options, cruises, tours, using their vacation time to stay in private homes, etcetera.
We've seen more people do that because they like the diversity of the experience. In our average occupancy is across the system is still north of 90%. And so, I can't point to anything other than maybe that where and I think that all probably should make sense to people because, you talk to folks today and they want different kinds of experiences than they used to want. And we think we've got the right product well positioned to be able to provide that to them.
Okay, very good. Thanks guys.
Thank you. Thanks Chris.
We have reached the end of the question and answer session. And I will now turn the call back over to Steve Weisz, President and CEO for closing remarks.
Thanks very much for your time today. We had a strong quarter with EBITDA growing 18%, once again showcasing us and membership of the exchange business has stabilized. The integration of ILG is going well, enabling us to once again increase our synergy target. Our acquired brands delivered very strong contract sales growth 20, we laid the foundation for that to continue. And we're generating a substantial amount of free cash, which we're investing to grow the business while returning excess cash to shareholders.
Vacation.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.