Good morning. Welcome, everyone, to our 2015 MVW Investor Day. I am Jeff Hansen, Vice President of Investor Relations at Marriott Vacations Worldwide, and it's my pleasure today to provide you with the forward-looking statement. Please remember today, members of our management team will be making forward-looking statements concerning future events that are not historical facts. These comments are subject to numerous risks and uncertainties and are effective only today, May 15th, 2015. Any reference to non-GAAP information will be reconciled at the back of the printed package you have been provided and is also available on our website at ir.mvwc.com. One final comment before we begin to provide context to what you will hear today. Discussion of future performance beyond 2015 is intended only to present potential growth scenarios to assist you with your longer-term modeling and is not intended as guidance.
Let me first point out that in a perfect world, we would love to host an event like this at one of our world-class resorts. However, given the potential distance for many of you to travel and considering your time during earning season, we felt that we should hold our first Investor Day since becoming public closer to the majority of our audience. Where better than this iconic destination at the New York Stock Exchange? With that being said, I would like to personally thank the NYSE for their wonderful hospitality and support for this event. We have been in the planning stages of an Investor Day for some time.
As part of that planning, in the fourth quarter of last year, we also asked Ipreo to conduct a perception study of several of our key shareholders and buy-side analysts to get feedback on where we could provide more clarity. At a high level, the initial summary indicated that a little less than one-third of all respondents felt the MVW story was clear and they had what they needed to be comfortable. That means about two-thirds of you would like more clarity in at least one, but I would guess, multiple areas of our business. Thankfully, Ipreo didn't stop there and asked you where you would like to have us provide more detail and longer-range goals.
While our goal had always been to have an Investor Day to provide more insight into our longer-term strategies, this study provided direct feedback from you, our analysts, shareholders, and we hope potential shareholders, as to what you felt required more clarity. This is what you said. First, and not unexpected, you want to know how we define asset light and what does an asset-light transaction look like. Second, and somewhat related, is our overall inventory strategy, which involves much more than just asset-light transactions. Included in that, we believe, is a more of a focus on how we manage inventory once it is acquired and even sold. For example, inventory utilized for rentals, as well as how it is managed for the owners associations. Next is our development strategy. At this point, we started sensing a theme.
We needed to discuss our inventory and all of its permutations. In addition, some wanted a better understanding of our sales strategy, or better said, can we answer the questions: Why does anyone buy timeshare? What is the value proposition? Today, we will provide a deeper dive into why our customers choose to purchase multiple times a day at our sales centers around the globe. With capital allocation being last, there's really no need to get into that, right? It's possible that we will address it, but you'll have to stay to the end to find out. Lastly, while not on this list, I know 100% of the room agrees, no one wants to hear any more from me. With that, let's enjoy a brief video to set the stage, and then we will continue with Stephen Weisz, President and CEO of Marriott Vacations Worldwide.
We all have a few great moments in life that stand out, moments that may have changed us or defined who we are and who we want to be. These moments are often accompanied by a sense of clarity or self-reflection, time spent with family and friends, exploring another side of ourselves, expanding our inner circle and engaging with life. Experiences that we long to recreate over and over again. To many, the best of these moments is simply called vacation. To us, it is the business of fun. At Marriott Vacations Worldwide, we pride ourselves on creating moments unlike any other company in the industry. A task requiring a dedication to our mission, delivering unforgettable experiences that make vacation dreams come true. Each day, a dedicated team of nearly 10,000 associates immerse themselves into creating the very best vacation product possible at our collection of distinctive resorts.
Experiences and services delivered one at a time, person to person. For more than 30 years, Marriott Vacation Club has aspired to reach a higher level of customer satisfaction, now attaining the highest scores in our history with recent guest satisfaction surveys. As a global leader in the vacation ownership industry, we continually evolve our processes and focus on the most minute detail of the customer experience. With three unique brands, we offer unmatched value in terms of quality, service, and experience. We do it with a passion and commitment that makes us leaders in our industry. With the Marriott Vacation Club Destinations program, our owners are offered true flexibility to customize their moments for travel around the world, to stay in world-class lodging, take exotic cruises. Exchanging points through our carefully selected partners has never been so easy.
Our owners, members, and guests' needs are our top priority. We realize the team delivering these experiences and service must be encouraged and guided. With hands-on training and professional development programs and courses, our award-winning associates truly exemplify our culture and define who we are as a company. We believe in the importance of giving back to the communities in which we live and work, which we call the spirit to serve. Our passionate and engaged associates dedicate literally tens of thousands of hours annually through community involvement, activities, and volunteerism. Not only do we invest our time, but we also focus our efforts on corporate giving and fundraising. Since our inception, we have enthusiastically supported a multitude of community organizations, such as Children's Miracle Network Hospitals, Clean the World, and On Course Foundation.
In all that we do, we endeavor to create partnerships with and give back to the communities in which we live and work. Confident in our direction and resolute in our philosophy, we bring the world back to its moments each day with pride, joy, and responsibility. With talented, passionate associates and resourceful, engaged management, Marriott Vacations Worldwide has and will continue to set innovative new standards for the industry and adapt to the ever-changing vacation needs of our owners, members, and guests. We look forward to the next chapter in our history as we strengthen our partnerships, inspire our associates, and deliver the one-of-a-kind experiences we're known for. We will build on our success and continue to look for new opportunities to exceed expectations. We're excited about the future. Wait till you see what's next. At Marriott Vacations Worldwide, we are the business of fun.
Good morning. Want to make sure you're awake. First of all, I'd like to extend a very warm welcome to all of you, and I want to thank you very much for spending part of your day with us as we have an opportunity to share with you what we think we're all about and where we're trying to go. Again, we'll look forward to our dialogue together. The last time our executive team and I were here at the New York Stock Exchange, we rang the opening bell on November 13th, 2012, in celebration of our first anniversary as a public company. Remember, even though we are relatively new to the public markets, we've been in business for over 30 years with a senior management team with an average of over 20 years of Marriott experience.
Since the time of our spinoff in 2011, you've shown thoughtful interest in Marriott Vacations Worldwide. You've been generous with your time and your insights as we shared our vision, goals, and accomplishments with you. We especially appreciate the confidence you have shown in us. Throughout this morning, you'll hear about our accomplishments, strategies, competitive strengths that we believe will position us very well for the future and will deliver great benefit to our investors. Let's begin. This first slide is foundational, so I'll try to keep it brief. We're especially proud of the recognition we have earned as a global public company whose business is focused almost entirely on vacation ownership. Thanks to our single-minded focus, we can tailor our strategies to address our leadership in the vacation ownership industry without distraction.
As you're here today, the past four years have been especially rewarding as we've gone about the business of building Marriott Vacations Worldwide. Our licensing agreements with Marriott International provide our company exclusive rights to develop, market, and sell products under the Marriott Vacation Club, Grand Residences by Marriott, and the Ritz-Carlton Destination Club brands. I can't overemphasize the value that is created by our relationship, as it also provides access to over 50 million Marriott Rewards members across the globe, providing a great source of brand loyal and qualified customers. No less important, is our ability to rent our owner inventory through marriott.com, one of the world's top retail websites, providing us with an ability to monetize our inventory and truly allowing our Explorer Program to thrive. Of course, the brand itself cannot be overlooked as one of the most recognized and respected brands across the globe.
These licensing agreements with Marriott International have a contract expiration date of 2090, with two 30-year renewable terms at our option. Our relationship is one of our best assets, and it is not fleeting. Today, we have over 400,000 owners, very satisfied owners, as you'll hear later this morning, and they own the equivalent over half a million weeks. Our resort portfolio includes 59 properties in the U.S. and seven additional countries, and we firmly believe that our properties are without peer in design, quality, amenities, and service. In my observation, most mission statements seem to live on posters that are placed if they're out of business. Over time, their impact fades just as the posters do. Our experience has been very different.
We formalized the philosophy that inspired us in our earliest days when we authored our mission statement 14 years ago. It is as vibrant and motivating to all of our associates today as it was when we first introduced it in 2001. We manage every aspect of our business in keeping with our dedication to our mission, that being, deliver unforgettable experiences that make vacation dreams come true. Our mission statement is both simple and elegant. It's easily understood by all of our associates at every level and in every discipline. It is compelling. Our associates throughout the company see the contributions they make in support of our mission every day. During my visits to our resorts and our regional offices, our associates typically tell me of their objectives, initiatives, and results, all in the context of our mission that they readily and easily express.
Our mission is as relevant to our executive team as it is to our owner services professionals, sales executives, groundskeepers, and housekeepers. Everyone gets it and everyone cares about it. How do we make money? Our sources of revenue are quite diverse and include a sale of vacation ownership products, rental of vacation ownership villas, financing, resort management fees, and additional services for our owners, members, and guests. Including our recurring resort management fees and exchange club dues, today, nearly half of our revenues come from lines of business other than the sales of vacation ownership products. You will find our resorts and properties in the most sought-after vacation destinations in the world, from Hawaii, Florida, and the Caribbean to London, Spain, France, and Thailand.
With the announcement of our new property in San Diego and two new planned destinations in Miami Beach and Waikoloa in Hawaii, plus another new opportunity that Lani will discuss shortly, our global portfolio continues to grow. We've been in the vacation ownership business for more than three decades. In 1984, Marriott International acquired four resorts on Hilton Head Island, knowing that vacation ownership met an important need among families. That Marriott's uncompromising standards, practices, and brand reputation would be key differentiators in a fast-growing and highly fragmented industry. At the time of the acquisition in 1984, we had about 6,000 owners. Our contract sales totaled just over $14 million that year. We put significant focus on the competitive opportunity available to us.
Our owner base grew rapidly and our portfolio did as well with the addition of new vacation properties in the U.S., the Caribbean, and Europe. In 2001, we opened our first resort in Asia, Marriott's Phuket Beach Club in Thailand. Today, we have three properties in Thailand, and we expect to grow in selected markets in Asia in the near future. Innovation has been our watchword as we frequently updated our product form in response to changing owner needs. None compares to the significant change we launched in June of 2010 with the rollout of a points-based offering that allows our owners enormous flexibility. Today, our owners have access to more than 5,000 vacation experiences ranging from vacations in our resorts and more than 3,800 Marriott properties to cruises, safaris, and adventure travel experiences.
Our points-based product form, given its flexibility and breadth of options, is especially responsive to the changing vacation needs and preferences of families and leisure travelers. Today, you'll hear just how very satisfied our owners are and how they vacation. You'll hear too, that vacationing today looks very different than vacationing three decades ago. We became an independent public company in November of 2011, and last month we celebrated our 31st anniversary in the vacation ownership industry. Marriott was the first branded hospitality company to enter the vacation ownership industry, and throughout the past three decades, we have been dedicated to families and leisure travelers who know that vacation ownership with Marriott's admired standards and services is right for them. Let's set the groundwork for today's discussion by looking at our accomplishments following the spin-off in late 2011.
The spin-off required a substantial body of work during 2012 and 2013, and all told, involved hundreds of contractual arrangements with Marriott International in order to complete our spin-off. We approached all of our separation activities as a valuable opportunity to rethink how we run the business and how we could do so more efficiently in the future without compromise to our effectiveness. We established numerous new systems to support our finance, human resources, and IT functions. To do so, we defined business requirements that were more complementary to our company's unique needs, and we contracted with respected suppliers that could deliver superior solutions, in most cases, at a reduced cost. To support our needs as a public company, we expand the responsibilities of some existing departments, like our law department, and we established new departments and processes, including treasury, tax, SEC reporting, and investor relations.
Simultaneously, we optimize our existing overhead through new systems and processes designed for a public company our size. In 2011, as we prepared for the spin-off, we set aggressive goals, and we've delivered well against them. For instance, in 2011, our company adjusted development margin was 7.4%. This improved threefold to 22% in 2014. Of note too, our North America adjusted development margin in 2014 was 24.3%, an improvement of 16 percentage points over 2011. We put significant focus on EBITDA growth, and we've more than doubled adjusted EBITDA from 2011 to 2014. In 2014, our total adjusted EBITDA was $200 million, and we are on pace to deliver $222 million to $232 million in 2015, in keeping with the guidance we provided to you last month.
Since 2011, we've reduced our inventory balances by nearly $200 million, and today we have approximately two years of inventory on hand that is made up of finished goods. We originally worked to get to two years, and we got there, but we're now looking for ways to reduce this even further to optimize our financial performance. You'll hear much more about our approaches to strategic inventory management later this morning. To date, with the recent completion of our sale of our remaining $20 million parcel at Kauai Lagoons, we have disposed of approximately $120 million of excess inventory, including completed units, land, and amenities. Majority of our remaining excess inventory is represented by an oceanfront parcel in Cancun and also unfinished units in our Ritz-Carlton Club and Residences property in San Francisco.
While a sale of the land remains a viable option, we have a team at work on the best use of our Cancun parcel, which could be a third-party development opportunity. We look forward to updating you when we have more news to share on that topic. Our management team is guided by a very thoughtful balance in all that we do. We have a number of accomplishments you don't typically hear about during our quarterly calls or our visits, yet I believe they are especially important as you think about our entire company and our unique and enduring strengths. We believe that carefully managing balanced objectives produces the best results. We manage the company through four overarching objectives: Our financial performance, our innovations and processes, our customer satisfaction, and our associates' well-being, all in equal measure. No one objective is subordinate to the other.
I'd like to share with you just how faithful we are to our associate objective. That being to build associate capability necessary to enable and sustain an engaged, high-performance culture. The success of our company heavily depends on our associates' talent, expertise, and engagement at every level of the company. We rely on nearly 10,000 associates to drive our results and our reputation. Evidence suggests that companies with high scores on the drivers of associate engagement traditionally achieve superior customer satisfaction, which in turn leads to superior financial performance. Using the expertise of Aon Hewitt, a well-recognized and respected company in the human resources space, we measure our associates' engagement each year across multiple drivers of commitment and loyalty. In 2014, 96% of our associates participated in our engagement survey.
Results showed 84% of our associates are engaged, which means this: Our associates intend to stay with us, are valued assets, are aligned with the company's goals, strive to deliver exceptional effort above and beyond the normal course of work, and are proud to say they work for our company. Our 2014 engagement score was a full five percentage points higher than Aon Hewitt's benchmark for world-class associate engagement. We have outperformed their world-class employer benchmark every year as a public company. They also named Marriott Vacations Worldwide as one of the 2014 Aon Hewitt Best Employers in the United States, France, Spain, Thailand, and the United Arab Emirates. At Marriott Vacations Worldwide, all of our associates are passionate about making a lasting and meaningful difference in the communities where we live and work.
We have supported Children's Miracle Network Hospitals, an organization that raises money for 170 children's hospitals in North America, raising over $10 million in 31 years through fundraising initiatives, all of which are associate organized and managed. We are proud supporters of the On Course Foundation, which provides socialization, rehabilitation, and vocational golf programs for wounded service members. In 2014, our associates collected more than five tons of non-perishable food items in support of Feeding America's partner agencies. We also became the first timeshare company to enter into a relationship with Clean the World in 2012. Through recycling programs at our resorts, we have contributed more than 25 tons of soap for cleansing and recycling. Last but not least, we have an ongoing relationship with Audubon International, through which we learn and apply the very best practices to support environmental stewardship.
I am proud to report that all of our Marriott Vacation Club resorts in North America and the Caribbean have been certified as Audubon International Green Resorts. Our associates are generous in all they do, from serving our owners and guests to caring for those less fortunate than they. I hope it's evident to you today just how distinctive and powerful our culture is. It is a special source of pride for us, and has been so for 31 years now. The very best testimonials often come in the form of a third-party recognition, so I'm very pleased to let you know about a number of awards we've recently received. Given by the American Business Awards, the Stevie Awards, no relation, are regarded as the world's premier business awards. They honor and provide public recognition for the achievements and positive contributions of organizations and professionals around the world.
Companies like AT&T, Citi, Apple, Ford, Marriott International, and Cisco, among many others, regularly submit entries for award consideration. During the past year and a half, we have received a total of 24 Stevie Awards, 19 in 2015 alone, including Company of the Year for Hospitality and Leisure and Corporate Social Responsibility Program of the Year, which I should note for those of you that are in attendance here in the room, our corporate social responsibility booklet is included in your pad folios. We've also won for Sales Operations Team of the Year, Sales Training Program of the Year, Human Resources Department of the Year, and Customer Service Team of the Year, just to highlight a few. Our sales, marketing, and service team also took home a Grand Stevie this past February as one of the winningest teams in the global sales and service competition.
Today, our Vice President of Global Sales Operations, John Ruble, will update you on our award-winning sales training programs during our discussion. Over the past four years, our owner services organization has been recognized with the People's Choice Award for Favorite Customer Service, another competitive and coveted Stevie recognition. Additionally, we were named one of the 10 best travel companies to work for by Forbes in 2014. Last year as well, four of our resorts, Marriott's Harbour Lake in Orlando, Marriott Phuket Beach Club, and Marriott's Mai Khao Beach in Thailand, and Marriott's Village Ile-de-France in Paris, were named Top 25 Resorts for Families by Tripadvisor's Travellers' Choice Awards. While we will never rest on our laurels, we are more than happy to have such distinguished recognition.
I hope this provides you insight into parts of the business we don't typically discuss but felt valuable to share with you today so that you understand both the mind and the heart of Marriott Vacations Worldwide. Long ago, Bill Marriott Jr. said that Marriott's business was all about people helping people. Like Marriott International, we will not waver from this belief. From our mission and our care of our associates to our philanthropic commitments, we too are dedicated to helping people. We know without question it is foundational to our success. Now let me take a moment to introduce our very special guest today, Howard Nusbaum. I've had the pleasure to work with Howard since 2001 when he assumed leadership of the American Resort Development Association, commonly known as ARDA, the trade association for the vacation ownership industry.
Since becoming the association's president and chief executive officer, he has been an exceptional leader and spokesperson for our industry. Today, I believe you'll be especially interested in Howard's insights and knowledge as we discuss the industry, why consumers buy timeshare, and how we see as the industry's growth and direction in the coming years. Howard?
Thank you, Steve.
Thank you.
Good morning, everyone. What a pleasure it is to be here. A lot more fun than it was a month ago when we were having ARDA World, which is a little bit of work for me. 2,500 timeshare stakeholders from around the globe came to Orlando to celebrate our industry. Our theme was Timeshare in Real Time, the idea that today transparency, the digital world, how we have to do business differently, and I'm so excited for our industry. We also had a piece of business that was kind of exciting. This is a picture of our CEO panel, by the way. Steve was elected chairman of ARDA, so for the next two years, he will be chairing our organization, which I think is quite the tribute to the organization and the compliment to the person. We look very forward to your leadership, continued leadership.
I want to talk first of all, what I think is the big news in timeshare, and that we are not just a baby boomer product. We've been taking a look at the demographics of our owners who purchased over the last three years, and we're seeing some very exciting differences. We find that they're about 10 years younger than all timeshare owners. In fact, today, nearly four in 10 are Generation X, and we are actually beginning to touch the millennials with three in 10 of our new purchasers being millennials. Four in 10 are either African American or Hispanic. I like to jokingly say we've gone from "Leave It to Beaver" to "Modern Family," where we have more than half of our owners have children at home, which is a real sweet spot for our industry because we are such a great product for families.
Eight in 10 are married or in a committed relationship. They're highly educated. We're talking about three-quarters of the people being employed full-time. By the way, the other quarter are not unemployed, they're retired. The average income, $94,800. 72%, more than seven in 10 are college graduates with about 23%, I believe, actually having graduate degrees. These are savvy consumers. 75%, three-quarters of them have actually toured a property or had some type of interaction before purchasing. Nearly half had actually stayed at the resort in which they purchased as a guest of another owner. Timeshare owners buy, so do their friends and family. We found that 35% actually had attended multiple sales presentations before they bought. These are savvy consumers, and they are the sweet spot of what a lender would want.
The fact that they are well-educated, well-heeled, employed, and know what they want to buy, and are the kind of people that are very creditworthy. I think that is another great complement to our product. A third of them say they value saving money on vacation, but they also, almost an equal number, say they value flexibility on their vacations. Timeshare owners know how flexible this product really is. 47% made a single payment for the purchase, and I have a breakdown here for you to read, and it's in your packet of what percentages bought at different levels. Now I'd like to talk about the foundation of our year. It was a banner year for timeshare. 8.5 million intervals sold.
Our sales volume between 2012 and 2013, we've not released our 2014 numbers yet, was up 11%, double-digit growth, which was something we were used to for nearly two decades, then we had a little interruption with the credit freeze. Fortunately, the lessons learned from that have served us really well as we've come out of that into sustainable growth with 1,540 timeshare resorts domestically. These are domestic numbers I'm sharing with you. The average resort has 125 units, about 192,000 units domestically. As you can see, our sales for 2013 was $7.6 billion. Number of intervals was up 1%. It was a good year for us. The average sales price was up 9%, now at $20,400. We have more new resorts planned. We're actually beginning to see bricks and sticks and growth again, and that is really exciting with 20% planning.
Here's just a little headline for you. In Nevada, we have the largest sized resorts. In Florida, we have the most resorts, but I think Hawaii gets the big kahuna because they have the most expensive intervals and they also have the highest occupancy. We're really excited about the kind of year we've had. We're also proud of how we contribute to the economy, which is why so many destinations are actually seeking ARDA to come in and help them develop timeshare. They realize that we even out the peaks and valleys of an economy with $23.6 billion in economic impact, nearly a half a million jobs domestically. Our economic impact is a total impact is $68.7 billion, spending of $10 billion. Our spending is unique in the sense that in the hotel industry, much of the spending is done on property.
For our owners, because of the prepaid nature of their product, a lot of their spending is done off-campus, which is really important to those communities. Talk to Orlando after September 11th when the hotel industry, which is very sensitive to the peaks and valleys of the economy, and yet the timeshare owners were still coming. It would really buoy the economy. We saw the same thing in Hawaii during the dark times. Government even likes us with $8.5 billion in taxes. Those are pretty impressive numbers for an industry of our size. The other thing that ARDA's been doing, aside from our legislative and research, is we've been doing a little bit of listening in the marketplace to better understand what people value.
We saw a lot of noise on Facebook and Twitter about kitchens at timeshare resorts, especially resort. This is really specific to non-urban resorts, because I think for the urban purchaser, they have a world of restaurants and commissions. Kitchens are a little less important. Why were the kitchens so important? We found that nine out of 10 people said they were. For some people, it's because they love to cook. Really for those with young families, it was really the idea that you didn't have to eat 21 meals out in a seven-day period. The other thing is it allowed for adult dining. If you have small children, to be able to put them to bed and then open a bottle of wine.
It's really wanderlust with all of the pleasures of being at home, and that is, in a way, the secret sauce of timeshare. The other side is that we've been listening is people value the space and the privacy. Going on vacation, staying in one hotel room with mom and dad, grandma and grandpa, and three kids, well, it's not exactly exciting. If this is your sleeping arrangements on vacation, you need to get a timeshare. Most consumers know that. It's not only for romance. It's also the idea that you can put the kids to bed and you're not sitting in the room twiddling your thumbs with the lights out, that you can actually have an evening with your spouse but not worried about leaving your kids with a random babysitter. It is a better way for intergenerational travel, but also for larger families.
Sometimes your kids get a little bit older, they don't want to travel with mom and dad, they can bring a friend on a timeshare resort. Maybe that brother-in-law that you want to invite to come along, but you don't necessarily want to make him uncomfortable to say, "I'm going to pay for your vacation." "Hey, we have a timeshare. Come along, we have plenty of room." This is the way that we like to travel together, and it's, I also think, part of the secret sauce of timeshare. Just to share with you a couple insights that we have, that there's a little bit of why people buy and then why they continue to own. It's not surprising that the number one reason people say they want to buy is to save money on vacations.
When you looked at after they own, that drops down to number three. They also care deeply about resort location, overall flexibility, makes vacations a certainty, and the quality of accommodations, the certainty of that. Too often vacations become the forgotten thing, the thing you didn't take care of. All of a sudden it's Memorial Day, what are we going to do this summer? Everything's sold out, and the stress of planning. Timeshare owners have the discipline to always take that vacation, no matter what's going on in the geopolitical world, in the economy, in your family. That prepaid nature makes them go, and it's more fun to plan. There's a lot less stress in it. These are the reasons they continue to buy. Wanderlust. As you'll see, exchange then reaches into that top five because once they own, they want to see more.
That's why whether they're using external exchange or within a club as large as Marriott's, where they can exchange within their own system. I'm going to leave you with a couple final thoughts that owners' attitude about timeshare, because I think you do really want to understand why they buy. Well, first of all, it's their home away from home. That idea of I can go see the world but enjoy the comforts that I value the most. A place to spend time with the people that are important in my life. By the way, if I come and look at your scrapbooks or digital collections of photography, I promise you it's not burgers on Tuesday night. It's life cycle events and it's vacations. This is the foundation of the family life.
It helps them look forward to vacations, it's more space for family and friends, and it makes the planning a lot easier. Thank you for allowing me to share my passion for timeshare, and I look forward to taking questions later. Thank you very much.
Thanks, Howard. Pardon me for a moment. We have a bit of a glitch, and I'm sure the gentleman in the back who's listening to all this has got busted eardrums right now. Are we okay? Great, thanks. All right. Thanks again, Howard. We appreciate that you're sharing those thoughts with us, and I'm sure people were able to take some good insights away from what you had to share. Essentially, there are six areas of focus for us as we execute our growth strategy over the next several years, and these will drive our discussions today. To ensure we are as informative as possible, members of our executive team and a number of our very senior leaders will join us this morning so that they may firsthand provide you with a much more comprehensive understanding of how we run the business and where we're headed.
I'd now like to provide you with a quick overview of today's discussions. Going forward, we will continue to innovate our points-based product form just as we have done since our launch in North America in 2010. Our fee-based revenue streams are very important to our financial results, and resort management fees are especially valuable. During today's discussion, you'll hear much more about how we maintain extraordinarily high customer satisfaction with our owners and guests. No less important is our rental program, which has grown over the last several years with solid rental results contributing to the overall bottom line. This morning, you will hear more about where our rental inventory comes from and how we manage the complexities that lie within that business to continue generating solid results into the future.
A number of years ago, Thomas Watson Sr. of IBM said, "Nothing happens until a sale is made." We like to take that a step further, believing nothing happens until a sale is made that is customer-focused, friendly, and brand sensitive. We are particularly proud of our strong sales and marketing disciplined approach, which you will hear much more about later this morning. Many have said we've brought integrity to a once tarnished industry, and we will strive to continue to showcase our leadership in this arena. Our sales growth is expected to come from several sources, including new sales distributions in key destinations, new marketing programs that expressly target first-time buyers, as well as traditional price increases. As we have previously shared with you, we know that new destinations with strong sales distributions are critically important to our growth.
This morning, you will learn much more about our customer insights and the analytical processes that we employ to identify important markets for growth. We'll share more details about our plan and new destinations, we'll update you on our first capital efficient deal structure that we finalized earlier this year. We are committed to a balanced investment strategy to support our growth objectives as well as the overall financial well-being of the company. As you'll hear, our balanced investment strategy relies on a well-planned mix of deal structures to fund our new sales distributions, from more capital-efficient asset-light projects to those we carry on our balance sheet. Astutely managing these varied opportunities will enable us to produce a strong bottom line and balance sheet, along with continuing solid cash flow.
Let me now exit the stage by introducing R. Lee Cunningham, our Chief Operating Officer, who will discuss our diverse businesses and provide further insights into how we make money. Lee?
Thanks, Steve. Good morning, everyone. As you probably know, our business is driven by four primary revenue streams: the sale of vacation ownership products, financing revenues that result from those sales, rentals, and recurring revenue streams found in our resort management and other services line, revenues from our management fees, exchange company activity, and on-site ancillary businesses. Everything in our business starts with the sale of vacation ownership products, Brian Miller will provide a deeper dive into that topic shortly. I think it is important that we ground you in what our product is and what we hear from our owners and customers and guests about the product that they have purchased from us. Once we have covered the product, I will turn the discussion to our rental business, as well as several of our other recurring revenue streams.
To do so, I will ask three key leaders from our team to join me on stage to provide their expert perspective into our rental program, the importance of our brands and on-site experience to the success of our business, and our important recurring revenue streams. The Marriott Vacation Club Destinations program, our points-based ownership product in North America, represents the lion's share of the sale of vacation ownership products. We also generate a stable volume of sales in Europe and Asia. Given the impact of the North America segment on our business, much of what I will discuss today is focused there. Let's start with a brief discussion about the key components and advantages of our product, as well as how our owners and potential purchasers have embraced it. We believe that our points product in North America is unique in the industry.
Underlying ownership in our Marriott Vacation Club Destinations program is ownership, in perpetuity, of beneficial interests in a Florida Land Trust. Each beneficial interest owned entitles its owner to a specific number of Marriott Vacation Club points to use on an annual basis. This structure gives purchasers all the flexibilities of a points-based product with the security of real estate ownership and all of the benefits that go along with it. As we designed our points-based product, our primary focus was on flexibility. The Marriott Vacation Club Destinations program not only provides multiple ways to take advantage of your ownership, it also focuses on flexibility when using your ownership to stay at one of our resorts in our worldwide network of properties.
Based on the number of points owned and availability, our owners can use their points to stay any time of the year at any of our resorts worldwide for any number of nights in any size unit. The flexibility that we have built into our product is evidenced by how frequently our owners are able to reserve their first-choice vacation at one of our resorts. The First Choice Index measures how frequently our owners are able to receive their first choice when making a reservation to stay at one of our resorts or are satisfied with the alternatives that are offered if their first choice is not available. As you can see, our owners tell us they receive their first choice or are satisfied with the alternative an astounding 94% of the time, up five percentage points since the launch of our points product.
While it is not shown on the chart, I can tell you that over the last four years, an average of 84% of our owners received their first choice when reserving a stay at one of our resorts. By default, that means that another 10% of our owners were satisfied with the alternatives that were provided. There are several other key flexible options built into our points program, such as the ability to trade your vacation club points for Marriott Rewards points, to bank your points and use them next year, or even to borrow points from next year to use this year. Probably the most impactful of our new flexible options is the ability of our owners to use their vacation club points through our Explorer Collection.
The Explorer Collection provides access to most major international cruise lines, guided tours in 31 countries across all seven continents, the ability to book special packages at select hotels throughout the U.S. and around the world, and last but not least, owners have the ability to use their vacation club points to gain access to very special events throughout the year. As a matter of fact, we have had a number of our owners take advantage of these special event offerings, including several who spent a weekend in Augusta, Georgia, last month watching the best golfers in the world battle for one of golf's most coveted titles. When we launched the points product almost five years ago, we knew the Explorer Collection would be a popular feature of the program.
The interest in this component of the product has continued to grow, and therefore, the program has grown with it. Within the Explorer Collection, we have dramatically expanded our offerings with a continued focus on more flexible, owner-oriented, and even owner-exclusive offerings. As an example, in 2011, we started with eight guided tour offerings, but now offer over 60 different tours, including 32 that are created for and offered exclusively to our Marriott Vacation Club owners. In City Explorer, special packages at select hotels, we started with eight hotel packages in key U.S. cities in 2011 but now offer 65 different hotels around the world, with destinations as unique as Hong Kong, Bali, and Budapest.
We have also expanded our offerings to deliver a broad range of vacation experiences, such as Antarctic expeditions, Amazon River cruises, NASCAR racing experiences, hiking trips to Machu Picchu, and private yacht charters through the Greek Isles. Our latest innovation in the Explorer Collection has us offering in-market activities ranging from spa services to theme park tickets, from golf rounds to family dinners, all that can be purchased at our resorts using Vacation Club points. Last year, responding to feedback from our owners, we added the ability to use your Vacation Club points to purchase airline tickets. In 2014, more than 5,000 of our owners did just that. As a result of our product's flexibility, we have broadened its appeal with our existing owners as well as our prospective customers.
Our existing owners have consistently expanded their ownership since the launch of our points product, and we have seen nearly 40% of our legacy weeks owners enroll into our points-based exchange program, giving them access to greater flexibility while maintaining all of the benefits of their weeks ownership. New purchasers have also responded well to the flexibility of our points product. We have continued to see increased sales to first-time buyers as a result of this increased flexibility. As you can see, even after the initial wave of interest in our new points program had passed, our legacy weeks owners have continued to enroll in the program at a steady rate. More importantly, we have seen many of these legacy weeks owners increase their ownership by purchasing points to go along with their weeks-based ownership. These are the hybrid owners depicted in this chart.
As expected, the growth in pure points ownership provides evidence that our product is appealing to new purchasers as well. Put it all together, and we have seen participation in our points program grow by more than 100,000 owners over the last three years. The flexibility that we built into our points product extends beyond the flexibility for our owners. While our points product provides a great number of benefits to our owners, it also provides tangible business benefits even beyond those provided in our sales process. One of the significant changes to our product is now purchasers buy an interest in a portfolio of resorts rather than a single location. By selling a portfolio product, we are able to sell the same product at all of our sales locations throughout North America.
This provides great leverage for us in training, pricing, and the speed at which we can implement program enhancements. One of the most impactful business benefits of the points product is our ability to continue to sell from any of our existing and future sales gallery locations well beyond the sell-out of inventory at that specific location. In other words, as long as we continue to provide inventory to the portfolio, we will be able to continue to generate sales at a steady and predictable rate from our existing sales galleries. By selling a portfolio product, we are able to better plan and time the delivery of the right amount of inventory to allow us to reduce our completed inventory carry.
At this point, I would like to ask Nick Rossi, John Albaugh, and Anthony Terry to join me on stage for a further discussion about how our rental business works, the importance of our brands and the on-site experience to the success of our business as a whole, and the recurring revenue streams that consistently flow from our business. By way of introduction, Nick joined Marriott 33 years ago and has been part of our timeshare business for over 20 years. Over the past 15-plus years, Nick has led our efforts to optimize the use of our inventory and maximize our rental results. John is a 35-year veteran with Marriott, with extensive experience on the hospitality operations side of the business. John has spent the last 15-plus years leading our operations support discipline with particular expertise in the association governance, project planning, and refurbishment activities for Marriott Vacation Club worldwide.
Last but not least, Tony is the new kid on the block with a mere 18 years of experience with Marriott Vacation Club. Tony has led numerous efforts in several parts of the business, from brand management to inventory management and revenue management, as well as finance and accounting. Gentlemen, welcome to the stage. Nick, why don't we start with the inventory management and rental business? Could you tell the audience how our inventory breaks down at a high level?
Surely. Across the entire system, our combined weeks and points owners occupy on average about 70% of our resort capacity. That means the remaining 30% makes up our annual rental availability. I think it's important to remember also that we have a legal obligation to first ensure that our owners have access to the resort inventory associated with their purchase.
That is an important reminder. We can clearly see the impact of putting our owners first in the First Choice Satisfaction Index that I discussed earlier. Why don't you tell us a little bit more about the rental availability?
As you started, everything starts with the sale of a vacation ownership. Our rental availability is also directly related to the way our owners use their timeshare resorts, as well as how we build and sell our timeshare product. As you mentioned, our weeks-based product, of course, is flexible, but the new points-based product has added even greater flexibility. This flexibility creates rental inventory when our owners choose to do something other than occupy at our resorts. Once we've looked at that use options, there are two primarily that generate our rental inventory, Marriott Rewards inventory for those weeks-based owners who exchange for the Marriott Rewards points, and the destination points owners exchanging into the Explorer Program. Additionally, we have rental inventory that comes from the unsold developer inventory that results in the timing of the new resort delivery.
Okay. Now that we understand the sources of the inventory, can you speak to how these sources of inventory affect the rental business?
Yes. While these flexible use options enhance the value proposition for our owners, we take on the risk of the cost to cover these options. Inventory from Marriott Rewards comes with a cost of the Marriott Rewards points, and inventory from the points owners using Explorer Collection comes with a cost of the cruise, the tour, or any of those other offerings that we have. Rental availability from unsold developer inventory also carries a cost. Until that unit is sold, we have that carrying cost or a maintenance fee.
Okay, now we know where the rental inventory comes from, and it comes with a cost. Can you touch on the next steps in the inventory management process?
Well, key to our inventory process is the ability to forecast and predict our owner behavior. Obviously, the more stable the patterns and use options, the better our modeling and forecast. Today, the majority of our system is comprised of our legacy weeks owners, whose longevity and use of their product is very stable. 5 years now after launch of our points product, we're seeing more stability and more predictability in points owner patterns. Once we've got that initial view of owner use, which then creates our rental availability, we have that built up by resort, by season, and by inventory type. We then work with our marketing and sales teams to provide them access to this rental inventory to help support future sales.
Everything else, it becomes available into the open market, and it's distributed, much like a hotel, through all of the Marriott distribution channels, marriott.com, online travel agents, et cetera. Finally, the inventory that we have in the open market, we adjust rental pricing and our yield management strategies based upon market demands. Probably the biggest part of the process is to make sure that we're constantly monitoring owner activity, and we have always looking at the optimal balance of inventory for owners to use, as well as optimal rental inventory across the system.
Okay. I heard you say much like a hotel. Is it fair to say our rental business is the same as the hotel business?
No, I don't think that's fair to say. While there are some similarities with lodging, our rental product is unique in many ways. We've already talked about how our rental business is very dependent upon how our owners use the inventory. The 70% of our resort capacity that I spoke about is really the strongest at our resorts in the seasons of high demand. That means that across the system, most of our rental availability has an inverse relationship to owner demand. Of course, our system of resorts and destinations are greatly impacted by seasonality in each market. Unlike a hotel, we don't have any special corporate business to build a base, nor do we have facilities to do group business to augment our low season demand. We are really a leisure, transient-driven business.
Okay. Well, given the complexities and nuances of our rental business, can you provide a little perspective on where you see our rental business today?
Well, despite the differences to lodging and of course, the complexities of our rental business, rental margin has improved greatly over the past few years, and I believe we are very well-positioned for the future. I think it's important to remember, though, that while the rental business has such a high dependency on owner behavior, additions of new resorts and also product form enhancements are going to impact owner use patterns. I wouldn't expect that we would see any great fluctuations in their use patterns that we saw early on in the points launch. I think once stabilized, these new resort destinations will also give us the opportunity to enhance our rental performance.
Great.
A little bit later, John Geller will be providing some more specifics around our rental margin.
Super. Thanks, Nick. Let's turn to the on-site operations side of the business. John, I spoke earlier about how satisfied our owners are with the points product. Can you discuss their level of satisfaction with the physical product and how our brands are part of what we deliver?
Sure, be glad to. Welcome, everyone. Thank you for coming. Our owners and guests expect unforgettable vacation experiences. Yesterday, for me, today is an unforgettable experience. Being here, being on the market floor, being part of the ceremony to close the bell or ring the bell was unforgettable. That's what our brand is about, delivering time and time again, year after year, those unforgettable experiences. We measure this with something we call our guest satisfaction survey. It allows us continuous improvement in our process and our experiences that we deliver. Last year alone, we had about 100,000 responses to the survey. A lot of people respond. It gives us great feedback. That survey response was a remarkable 91%, up two points in the last couple of years. As compared to other hotels and lodging industries, that's about 10 to 15 points higher.
We're very proud of that score.
Well, specifically, what is it about our brand that creates these high satisfaction scores?
I think there's three factors, Lee. The first is our product, our beautiful system of resorts. The process, the standard operating procedures, the quality assurance tools, and the systems that we use to deliver that. Most important, it's about our people, our associates. They're really the ones that deliver the unforgettable experience. We would not be successful without these individuals. We believe the key is in the hiring. You have to find an individual who's going to have fun at their job, enjoy it, and care about the guests. If you do, the rest seems to fall into place. Once you hire them, of course, ongoing training is important. We want to ensure that we anticipate the needs of our owners and guests. We do this through a pre-arrival phone call and through continuous on-site contact.
In our guest satisfaction survey, we have an index we call a service index. That service index is up significantly to 93%, another remarkable measurement tool that we have to tell us how we're doing and allow us continuous feedback in this process of delivering the experience.
Thanks, John. That covers the people aspect. What is it about our product that drives guest satisfaction?
To us, it's all about consistency in product and in service. With the product, it starts in the development process with rigorous design and performance specifications so that what we build is what our owners expect and achieves our brand standards. Next, once built, we have to maintain it and clean it. We have very detailed housekeeping and maintenance standards. Of course, to be successful long term, we need a very strategic plan to management of our association's capital. All of this can be summed up and measured in the product index, another component of our guest satisfaction survey, and it's at 90%. Again, a great score and up one point in the last couple of years.
Okay, you mentioned process as the third component in delivering unforgettable experiences. What is it about our processes that adds value to our brands and our on-site experience?
Our entire focus on-site is continuous delivery of world-class experiences that delight our owners and guests. As I mentioned, associate training is the key. How do you have the individual? How do you train them that anticipates the needs and fulfills their desires and wants, sometimes even before they even express it? We have to learn from our guests as well. We listen to them through multiple channels. Then we increase experiences that are resonating with our guests. A great example of this is we heard from our guests that they wanted more on-site activities. As a result, we created Club Thrive. Club Thrive is our branded activities program that delivers multiple levels of activities throughout the resorts, many with healthy options, things like exercise programs and yoga.
Again, our guest satisfaction survey gives us a great measurement in what we call the experience index, which is at 86%, up three points in the last couple of years.
Okay, John. Do we depend solely on our owners and guests to tell us where we need to focus?
That's great input. We're not reliant on that alone. Regular and detailed inspections of the properties, what we call a quality assurance program, ensures that our product is always at standard and our service is always at standard. This quality assurance program also has all the tools in place to track the required actions so that if we are off standard, we quickly get back to standard. Of course, all of this must always be balanced with cost.
That's a great point, John. Our owners pay an annual maintenance fee as part of their ownership. Can you tell us what makes up that maintenance fee?
First and foremost, we take our fiduciary responsibility to the associations we manage as keen and very important. Any increases beyond inflation must be fair, they have to be measurable, and they have to be value-added, or they shouldn't be added at all. After all, our maintenance fee is a key discussion at the sales table. What's my ongoing cost going to be if I buy this product? It's our job to manage the resorts and ensure an efficient delivery of the expected vacation experience. As you can see in the slide, about 60% of the funds that we collect in this maintenance fee are used for delivery of that vacation experience. About 20% we have less control over, things like property tax, utilities, insurance. The last 20% is what we call reserves. It's money set aside for these long-term capital replacements.
Okay, you mentioned the reserve account. Can you give some examples of how our owner associations use these reserve funds?
Surely. We have a very rigorous program to manage this capital, what we call reserves, to ensure asset protection, the replacement of assets when their useful life is up, and maintenance of the ever-evolving brand standards. We want to avoid special assessments. We intend to plan appropriately so funds are available when needed and avoid special assessments. This year, 2015 alone, our associations are funding projects worth about $130 million in renovations to the existing resorts. Of this, $20 million is in technology upgrades alone. We also have a very detailed replacement strategy. In fact, we have a renovations department to ensure that our resorts are renovated timely, to our standard, and in a cost-efficient way.
This renovation team ensures that soft goods in the units, those are fabric items, are replaced every five years, case goods, more hard pieces of furniture, are replaced every 10 years, and hard surfaces, things like tile, are replaced every 15 years, but done in a program to ensure that you maximize the value when you replace these assets, and you maintain some design integrity, or ideally, every five years, we change the design to allow for a new, fresh look to our returning owners and guests. Last but not least, our management fee is approximately 10% of all these funds, operating, reserve, and taxes.
Thanks, John. That's a great segue to some of our recurring fees that come from our business. Tony, can you give some insight into the recurring revenue streams from our owners that you consider important?
Thanks, Lee. I'd be happy to. Based on our high resort occupancy, which routinely runs over 90%, the most obvious consistent revenue stream comes from our owners spending money at our resorts. We generally own the ancillary activities on-site. As our owners and guests enjoy our resorts, including the restaurants, pool bars, spas, golf, and other activities, it generates a solid ongoing revenue stream for the company.
Okay, ancillary revenues sound pretty straightforward. Are there other less obvious recurring fees?
Surely. Two other significant recurring revenue streams that we follow closely are the management fee stream and also the fee we get for our exchange company services, also known to our owners as club dues or exchange company dues.
Can you provide a little more color on those?
Well, the management fee, as John spoke about, is based on the % of the cost incurred to operate the resort. This is included as a component of the owner's maintenance fee. It's recurring annually and billed annually each year and increases each year in direct proportion to the increase in the underlying operating cost of the resort. Therefore, we see this as a low-risk, steady, and fairly predictable stream of revenue. The exchange company is responsible for managing the reservation and use periods of all trust members or any other affiliated programs. This would include such services as owner education, reservation services, or owner communication. For these services, we collect a fee annually in the form of club dues. Club dues are billed along with the maintenance fee. They're not actually part of the maintenance fee, and they're assessed on a per-owner basis.
You're only getting one fee per owner, and it runs about $200 per year per owner. These two fees, taken together with the results of our ancillary activities, added nearly $100 million to the bottom line of the company last year.
Can you speak to the sustainability of management fee revenue and club dues?
Yes, if only I had some sort of visual aid that could put this in perspective for me. There it is. I bring this to any fireside chat I go to. There's two main factors that we look at, and it comes into play when addressing sustainability. I think it's easiest to think about in a grid format in the slide that you see. Let me warn you, we took the 80/20 rule with this slide and oversimplified it a little bit to describe the complex relationship between profit and sources of sales.
Tony, I noticed you threw development margin into the mix.
Yeah, I did sneak development margin in because whenever you're talking about sustainability of management fees and club dues, you also have to consider the impact on development margin. Now, it's not new to anybody in the room that every time we make a sale, we get a development margin on that sale. The amount of that development margin is going to depend on two factors. The first thing is the source of the inventory sold, whether we're talking about developer inventory or pre-owned inventory, with pre-owned inventory having a higher margin because of the lower product cost associated with that inventory. Second, you have to consider the source of the purchaser, whether you're talking a first-time buyer or owner reload, with, of course, our owner business having a higher margin because there's a lower marketing cost to acquire that business.
Okay. You're saying those same two factors are relevant to management fees and club dues?
Yes, they are. It's probably easiest to go through the grid quadrant by quadrant at this point. If you start from the bottom left, selling pre-owned inventory to existing owners may have a higher development margin due to the lower marketing and sales costs and lower product costs, but it doesn't really generate any incremental recurring revenue streams to the company because effectively you're just switching out one owner for another. Now, if you move to the bottom right, we take that same piece of pre-owned inventory and we sell it to a first-time buyer, and we generate a club due in perpetuity from that new owner. If you look at the top two quadrants, every time we sell developer inventory, we generate an incremental management fee for the company.
Selling developer inventory to an existing owner isn't necessarily going to generate incremental club dues because many of our owners have already enrolled with our internal points program. However, selling developer inventory to a first-time buyer generates the best scenario in terms of immediate recurring revenue streams because you generate both a management fee and club dues, but you do so at a lower development margin due to the higher marketing and sales costs and slightly higher product costs with that inventory.
Where do we want to be on this grid?
As you can imagine, there's quite a balancing act in generating these recurring streams of revenue. One thing I'd like to point out is that the importance of that last quadrant I went over really can't be overstated. Even though you take a slight hit to your development margin, you're getting additional first-time buyers into the mix, which restocks the pond for future low-cost owner reload sales and generates additional management fees for the company into the future. In general, we believe that pursuing our current goal of 50% first-time buyer mix, along with maintaining our current pace of pre-owned inventory acquisition, will continue to produce great results for today as well as into our future.
Thank you, Tony, and thank you, Nick and John as well. As you know, there are a number of moving pieces that make up Marriott Vacations Worldwide's business model. Hopefully, the last 25 minutes have given you a little more visibility into a couple pieces of the puzzle. As I said in the beginning, everything in our business starts with the sale of vacation ownership products. It's time to turn to that aspect of our business. Before we do that, we're going to take a short break. When we return from the break, Brian Miller, Executive Vice President and Chief Sales and Marketing Officer, will take over and provide some insight into our approach to sales and marketing. All we ask is that you have your credit cards out and ready when you return from the break. We'll see you back here in 10 minutes.
We're going to get started in about one minute if everyone can grab their seats. Thank you. I didn't know if I was going to get the background music or not. I'm going to spend a little time this morning talking about how we sell and market our vacation ownership products, also provide some further insight as to why people buy our product. It all starts with our world-class brands. The Marriott and The Ritz-Carlton brands are iconic in the hospitality industry, they not only deliver a strong brand promise to our potential customers, they also provide a high level of trust, both in the product itself, as well as the way the customer perceives they will be treated in the sales process.
With that foundation, we run a highly targeted direct marketing operation that focuses mostly on those who already have a positive affiliation with one of our brands. We then provide a high level of service from the time of initial engagement all the way through our post-tour survey process, where 90% of our sales prospects who respond say they are very satisfied with the entire process. Our direct sales model is very efficient and highly measurable, allowing for constant analysis and improvement, our leadership team is second to none in the industry. Our core team has hundreds of years of industry experience, mostly with the Marriott brand. As you can see, this model has yielded a nearly 20% increase in sales over the last three years for our North American business without adding any new resorts or significant marketing channels during that period.
As you heard earlier today, we launched our points-based system in June of 2010, the primary source of this growth has come from improvement in volume per guest as our customers and our sales force have become more and more comfortable with the new product. This next slide is the VPG growth trajectory, which clearly shows our improvement since our launch of the points-based product. I mentioned the sales force's increased comfort level with the points product, there are other factors at play here, too. Our owners are finding the use of the new product to be easier and more flexible. Lee touched on our customer satisfaction rates, and in our business, happy customers generally add to their vacation portfolio. Secondly, our training and support materials have substantially improved over this three-year period. Lastly, we have continued to focus on product development.
We are listening to our customers and making changes to experiences in our system and the structure of our ownership levels to make the product more appealing in the sales process and to work better when they go to use it. Points owners returning for subsequent tours are our highest efficiency tours, which I think says it all. As a result of the volume growth and the VPG improvement, our cost of sale has dropped nicely over this period as well, which has contributed to our overall development margin improvement over the last few years. The efficiency of our model has allowed us to fine-tune our performance in many areas and create a more profitable sales environment. Let's talk a little about whom we market our product to and how we go about it.
These statistics are nice to know, they don't provide a lot of value in the targeting process. Vacation ownership has historically been a life stage product that worked best for married couples with children. Historically, we have marketed and sold two- and three-bedroom accommodations in family-oriented locations. Our points-based product is altering that paradigm. Our points product, due to its flexibility in unit size and length of stay, has appealed to both younger buyers and to empty nesters who seek shorter getaways and alternative locations. The Marriott Rewards program has always provided that outlet for our owners, now with our own currency, we can create those opportunities within our system. It was not an accident that two of the three new locations we just announced are urban locations, expanding our ability to deliver those experiences.
Our marketing strategy will continue to evolve with our product, opening new channels and allowing for greater penetration of existing markets. One of the key components of our marketing strategy is the utilization of our existing resorts in the process. We sell a high-ticket item, one of the first orders of business is to make sure the customer can experience the product prior to a sales presentation. Whether they're an owner on vacation, a prospect using our trial product, or simply someone renting a vacation at one of our resorts, they are in a relaxed state of mind and in an environment where we can enhance their experience. We know who is arriving, we target our efforts and our level of pre-arrival service to those prospects. We have found that highly personalized service is not only the right thing to do, it is good for business.
It increases our resort satisfaction scores, it increases our sales and marketing efficiencies. This slide shows our current marketing channel mix as well as the marketing cost of sale for each of those channels. The 70% number I referenced on the previous slide is made up of our in-house channel at roughly 50% of our business and our central marketing preview and trial membership channels, which together make up another 22% of our business. As you can see, our in-house and trial membership programs are not only our largest channels but also some of our most cost-effective as well. Our channel mix is now yielding an overall cost of sale of around 11%, which is excellent in this business. That number will increase slightly over the next few years as we attract more first-time buyers into these and other channels.
We expect that the additional volume will help to mitigate the increase in pure marketing cost. While our owners come to us through several of the channels discussed on the previous slide, I think it's important to show you our trends in owner reload penetration overall. There's often a question as to whether the current rate of owner sales is sustainable over time. I think these numbers show that we are on a very sustainable rate of owners purchasing more product each year. As you can see, with the exception of 2009, which we'll call a tough year overall, about 5% of our owners have purchased either more weeks or now points from us each year. This trend actually goes back several years prior to 2006.
While the percentage has crept up slightly in the last few years since our points launch, the average purchase has actually fallen a little bit over that same period. Now that they can buy less than one week, they are more selectively adding to their portfolios at a slightly higher rate. We expect to maintain this penetration rate as we increase our mix of first-time buyers. Let's switch over to our sales model and talk about how we sell and why people buy. I'm going to have our Vice President of Global Sales Operations, John Ruble, walk through the why section, let me first touch on the key elements of our sales success. We've spent over 30 years designing and improving our sales process to best represent our product to the customer and properly represent the Marriott brand in the marketplace.
When we introduced points, we had the opportunity to revamp the entire process to a system sale from a site-based sale in the weeks world. We also had the opportunity to centralize our training now that everybody was selling the same product. With the help of several outside resources, coupled with our own experiences, we were able to create a world-class process for communicating our product to our clients. I now get to speak to every training class that comes through Orlando once a month, and I always hear from them that it's the best sales training that they've ever been through. We have been and continue to be focused on the environments in which we sell and the tools that we provide to the sales force to enhance the presentation.
Our galleries are designed to create a wow factor as it relates to the experiences within our system, communicate the breadth of the Marriott family of brands, and leave the customer wanting to learn more about our product. Since the product is complex, requires customization for use, and is a high-ticket item, we do the remainder of the presentation in private offices. Our proprietary technology tool is a critical component of the sale. It allows our sales professionals to showcase the elements of our product that are important to that customer, conduct the financial logic portion of the tour, and to create a five-year vacation plan for that prospect, ultimately providing a recommendation for their level of ownership.
Lastly, we structure our product with different levels of ownership and varying benefits attached to each level so that if you are a first-time buyer or an existing owner, there is an ownership level that is attainable for the equivalent purchase of another week in the system.
With that, let me show you some quick testimonials from a couple of our owners, and then I'll let John talk about why people buy our product.
Hello, I'm Alan McGregor.
I'm Jane McGregor.
We've been owners for seven years. I think it speaks for itself. It's extremely good value. If I had not bought into the Marriott Vacation Club, we probably just wouldn't have holidayed as much, to be honest. We've got the inventory, and we jolly well make sure that we use it and use it to its best advantage, and we do it in a way that is extremely luxurious.
I think overall, if you look at it, great value for money.
Hello, I'm Larry Katzmaier. We're from Pennsylvania. I'm Peggy Katzmaier, and we have been Marriott owners since 1992. Very happy, that I might add. Yeah. Saw the value of it for future vacations, family-oriented, and that's what sold us, and we have been extremely happy and have added four more weeks since, plus the Destinations Program. We saw an opportunity to have vacations in our future that we would not even dream about, and the value was tremendous. We get so much value out of it. We own six weeks. I've managed to be able to make that into a 12-week vacation. That's pretty interesting. Everybody out there listening, go to the Destinations Program. No-brainer. You'll save money, man. No-brainer. Tell them the Katzmaiers sent you.
Thank you, Brian. Good morning, everyone. Now for the fun part. I'm going to give you a little deeper dive into how we actually go about selling the product. As this logo of our recent award-winning training suggests, there are two sides of the brain involved with making a purchase decision. The left side is the logical side. The right side is the emotional. I'll show you how both play a critical role in selling any luxury product. I think all of you that will recognize that in order for someone to make a purchase decision, it must make logical sense. Here, you can see that our presentation is designed to help customers say yes to the practical concepts of our product. Let's shift to the right side, the emotional side. Here, you can see some of the real drivers of why people actually purchase our product.
These themes represent the diverse collection of the real drivers of making a purchase. Our owners share with us that things like time with family, health, adventure, to get away and recharge, or maybe a long weekend for just the two of us are the real reasons or the why they made their purchase decision. Let me share with you now a quick video that I think will make this a little bit clearer.
What is the balanced approach? Don't all great minds make decisions based on logic and reason? In truth, logic alone often causes decision paralysis as we become confused by either too much or too little information. The result is answers like, "I need to think about it," which we all know is the same thing as "No." Most people are largely motivated by what makes them feel good, positive emotions, especially with purchasing decisions. Our emotional side says yes because it feels right. This isn't just conjecture. This is science, neuroscience. The left part of your brain that handles logic is complex. It takes time to process. However, the limbic system, the right half, where emotions are processed, is actually where the decisions are made. The limbic system is also a much simpler system and therefore responds much faster than the logic system.
This is why we experience a gut reaction. Our emotional response is triggering first, and it's usually right. Logic is the stronger force in decision-making, right? Without emotional bias, wouldn't all decisions be perfect? As it turns out, when someone has had severe damage to the limbic system, they can't make any decisions at all. They can't decide what to wear, what food to order. They can't even decide if they should turn left or right. Without the emotional side, without being able to imagine the possibilities, we simply revert to, "I need to think about it." Analysis paralysis. People's first reaction will always be an emotional one, unless they are talked out of it or given too much to think about. The emotional reaction is natural. It's how we're built. Thank goodness for the emotional part of the brain because that is where decisions are made.
The balanced approach reminds us that if decisions are in fact made based on emotion, we need to focus in on it and back it up with logic. If you want more yeses, simply speak to the heart.
I think that makes it a little clearer. I love this video, and it always reminds me of the quote, "The mind will justify what the heart desires." One of the main tenets of our presentation in justifying price is a simple concept we call renting versus owning. Here you can see the benefits in comparison to a typical hotel room. In fact, if you spend an average of $250 a night, which I know you can't do here in New York City, for 14 nights a year for just 20 years, including tax and a modest inflation rate, the average family would spend over $100,000 in just 20 years. We call these anyway dollars, as they are already spending the money, and we're simply showing them a better way to redirect the money into a deeded vacation ownership product with Marriott Vacation Club.
The rent versus own comparison supports the logic of buying. As you saw in the video, the true path to a purchase decision is understanding the customer's why, their specific emotional reason or reasons for taking a vacation. One of our top sales executives, Sandy Wall, often shares an emotional story with many of his guests. We have captured this story in another video that I think will show you the power of emotion in storytelling.
Sitting at his daughter's wedding rehearsal, watching her celebrate the start of a new life, Myron felt an unsettling rush of joy and guilt. Joy because seeing Jenny so happy, the life of the party, brought back a thousand perfect memories of the moments that lead to here. Guilt because he kept wishing there was time for just a few more. It reminded him of the time he came home to Jenny, then just eight, crying in her room. A girl in class was throwing a huge birthday party, but Jenny wasn't invited. Myron hugged her and said, "Forget about them. What would you like to do?" Jenny said, "Let's go to Disneyland, just you and me." Myron realized that he had made plans with his friends to play golf. He felt torn, the guilt of both tugging at him, but quickly said, "Sure. Let's go." And they did.
An entire day spent laughing, cheering, and screaming as they explored every corner of Disneyland. As the sound of a spoon hitting glass rang across the room, Myron was brought back to the present. He gazed at Jenny as she prepared to give her toast. He noticed all the smiling faces staring up at her and realized she had lots of people in her life, lots of love. She wouldn't always need him or have time for him, and that's okay. "To my father," she said, "because the best day of my life until this one was the day he took me to Disneyland." The funny thing is, we are all Myron. We all have things tugging at us, and as a result, we often feel guilty that we don't spend enough time with our children. Yet, to them, those are the very best moments of their life.
Pretty powerful story. After Sandy tells this story, he shares with them that he's actually Myron, whom the story's about. It's a really powerful way to remind people that spending quality time with our family is one of the most important things in life. Now, I think it's important to share with you a few examples of how others show value in selling their luxury products. We're not the only ones. Mercedes-Benz is known for their legendary engineering, safety, and luxury, but you won't find any of those things mentioned here in this ad. In fact, if you could read the small print, it would say the following: "I'm the left brain. I am scientist, a mathematician. I am order and logic. I know exactly who I am." "I am the right brain. I am passion, creativity, a free spirit. I am the feeling of sand beneath bare feet.
I am everything that I wanted to be." Anyone here wearing a Patek Philippe watch? As you can see, there's quite a difference in price from the Timex, from $75,000 to the $28 Timex. They position the watch with the tagline, "You actually never own a Patek Philippe watch. You simply care for it for the next generation." Here's another example of value. As you know, there's quite a difference in coach and first class when you fly. In fact, here there's a $3,603 difference for only 10 feet of location on the plane. Sure, you get to board first, you get to enjoy a meal, drinks, slightly larger seat, and some nice leg room. Is it worth it? The answer is value is a personal equation. Simply put, it depends on the person. We're constantly doing research to validate the many things, including how we sell.
This includes customer research in the market as well as online panels. This particular research was conducted to ask customers how they want to buy. Let me share with you some of the results. Here's what they told us. In summary, do a great discovery and listen. Personalize the presentation specifically to fit those needs. Just how do we do this? Here's a great example of how we do it in our sales presentations. This is a sample five-year vacation plan that was planned for one of our guests recently based on their specific needs and wants. Our technology allows us to not only customize this, but to print it or email it to the customer so that they can look at this and begin to plan their next dream vacation.
As you look at this, you can see they planned a summer trip to Maui, a fall vacation in Hilton Head, a Caribbean cruise, another summer vacation in Newport Beach, California, and then a European vacation in the fifth year on the Costa del Sol at our Marriott's Marbella Beach Resort. All of this with an average ownership of 3,500 points, showing the flexibility and usage. With that, I'm going to turn it back over to Brian. Thank you.
Thanks, John.
Thanks, John. That was great. Now let's look ahead some and talk about where growth can come from in the next few years. While John and I are always focused on how we can keep VPGs moving up on an annual basis, we know that there are other opportunities to grow the top line as well. The announcement of three new resort locations is also the announcement of three new planned sales locations. Those operations typically stabilize over about a three-year period from startup and provide us an operation that mirrors our overall North American performance from a cost and a margin standpoint. We're also focused on increasing the mix of first-time buyers in our tour and sales mix.
We are expanding marketing into additional Marriott hotels, increasing our call center and trial product programs, and we are working to fully implement some more scalable programs with Marriott in their call center environments. The key with adding more first-time buyers in the mix is optimizing our margin. These tours are typically more expensive and the sales efficiencies are slightly lower. We will need to do this on a measured basis and not just chase top-line growth. The new sales locations I mentioned on the previous slide are in South Beach, the Big Island of Hawaii, and San Diego. We believe each of these markets will provide great access to our target clientele, and upon stabilization over the next three years, will generate an additional $75 million-$100 million in contract sales on an annual basis. I want to thank you all for your time today.
I will turn the podium over to Lani Kane-Hanan, our Executive Vice President and Chief Growth and Inventory Officer.
Thank you, Brian. Good morning, everyone. It is my pleasure to have the opportunity to discuss with this audience such an important topic for our company, especially in such an iconic location. Our growth strategy is straightforward, and it's reflective of the transformation of our industry and our company. We're focused on acquiring new customers and growing our sales volumes. How will we do that? By adding new profitable sales distributions and resorts in highly sought-after destinations. We will continue to focus on migrating from capital intensive to asset-light inventory sources, optimizing product cost, and maintaining an efficient balance sheet. How did we get here? When we launched our points product in June of 2010, we found ourselves in what was a pretty enviable position. We had come out of the economic downturn as part of Marriott with a couple dozen properties under some stage of development.
The announcement of the spinoff soon followed. Those developments added up to roughly $1 billion of inventory at the time of spinoff, the vast majority of which was either completed or near completion. That was a pretty nice graduation gift from our former parent as we became our own independent company. For the last several years, we've been reducing our balance sheet by completing phases and infrastructure at existing locations like Las Vegas and in Palm Desert and Hawaii, and selling down that completed inventory. Today, our strategy reflects our balanced approach to growth and continued commitment to reducing capital intensity. Last quarter, we announced several new locations which we have acquired or we expect to acquire this year. Those locations will aid us in achieving our objectives. How?
Well, as Brian Miller pointed out a moment ago, these destinations, like the ones we announced, will enable profitable and incremental sales growth by providing a new sales center location in a place we're not currently selling. An additional benefit of new locations is the excitement it generates within our current owner base. We provide a new destination in our system for our owners to use, and it gives our owners a reason to engage with our sales and marketing teams. In today's environment, and with our points-based product, achieving this growth must be done with balance sheet in mind, and maintaining and improving our balance sheet efficiency is always top of mind. This means we must minimize the development spending required to achieve not only our incremental growth, but our CapEx needs in total.
Last, we must always be mindful of the balance required in how we source our inventory to achieve optimized product cost while minimizing completion risk. We can't satisfy those objectives without ensuring we start and end with one simple understanding, and that is a destination must meet customer and owner expectations as well. If we found a cheap piece of dirt in the most favorable global construction environment, but our owners don't want to spend their hard-earned vacation time there, well, that opportunity would just be meaningless. How do we tie this critical piece of the puzzle into our growth objectives to meet our overall strategy? We begin by setting our target markets based on where our customers want to go and where we don't have a flag on the map.
Those of you who remember how we operated when we sold a weeks-based product know our development strategy used to be very heavily tied to sequel markets. Sequel markets are repeat locations where you buy and bank parcels of land with the expectation of building and selling over many years. This ensured we could continue selling in a particular destination as long as possible. Now, with our more capital-efficient points model, we have the opportunity to decouple our inventory from locations in which it is sold, thereby sourcing new flags we can provide on-site sales centers in perpetuity. How do we learn about where we should put our new flags? Well, our customers talk to us. They tell us what they like, what they don't like, the experiences they want, and where they want to vacation. We also know how they're vacationing.
We know where they're using Marriott Rewards points, we also know where they're using our Explorer Collection, we know where they're going outside of our system through Interval International. We also talked to our prospects who toured but did not buy from us to find out if it was destination related. For example, we know that our owners occupy more than 100 room nights per night in New York City alone through Marriott Rewards redemptions. New York is a highly demanded destination where we currently do not have a resort, we've been transparent that it's a priority market. We continually study our target markets. In these markets, we analyze not only customer demand, but also the legal environment, labor supply, the rental market, real estate trends, construction costs, marketing linkage opportunities, et cetera, continue to refine our list to those markets that have the most viability.
Where does it leave us today? We know that our owners are seeking city-centric leisure destinations that have a variety of experiences, from cultural offerings and attractions to dining and nightlife. That type of offering is more limited in our current portfolio because historically these locations were less feasible under our weeks-based timeshare model. What markets might these be? San Diego and South Beach fit this model and are our latest planned city resort offerings. We are also looking at other destination cities such as New York and Washington, D.C., just to name a few. In addition to urban resorts, our owners are continually requesting an experience on the Big Island of Hawaii. The Big Island appeals to our Asia Pacific as well as our North American owners.
Our Florida and Caribbean beach properties run at near capacity, and Miami Beach is an obvious opportunity to fill a gap in our offerings. Mexico is always top of mind on our timeshare owners list, and if you look at Interval International exchanges, Mexico is the number one location where our owners go outside of our own system. Locations like Los Cabos, Puerto Vallarta, and of course, Cancun. As Steve noted, and as shown on the slide here, we still own this prime beachfront parcel in Cancun. We are considering various capital-efficient structures for that parcel's development that would allow us to source new inventory efficiently while providing us an incremental sales distribution in a very highly sought-after destination for our owners. Outside of the Americas, the Asia Pacific region is where we are seeking inventory and distributions to fuel growth.
We're looking at key destinations in resort areas in Japan, such as Okinawa, in destinations like Sanya in China, in Bali and Indonesia, and throughout Australia. We know that you will agree this is a very exciting list of markets and provides us quite a bit of opportunity for future growth, in many cases co-located or within Marriott hotels. Now that we've refined our target markets, our development strategy is being implemented under the objectives I just laid out. Now let me spend a few moments providing some details about our new offerings. We closed earlier this year on our first asset-light transaction at our resort on Marco Island, Florida. A third party purchased our remaining land adjacent to our existing completed oceanfront tower, on which they will complete the remaining two towers of inventory for us, or 152 units.
We have committed to take down these units over time, allowing us to more efficiently layer in this inventory closer to the time we need it for sales. That would allow us to avoid maintaining the inventory on our balance sheet during the construction. Once acquired, these new towers will provide our owners with additional pool, fitness, food and beverage options, and obviously a broader opportunity to stay in this wonderful and highly desirable destination on the west coast of Florida. Additionally, this transaction allows us to significantly expand our on-site sales center with a fully operational completed resort. After Marco, we turned our attention to San Diego, we closed on our planned new location in that market, the 264-unit The Declan Suites Hotel. This property is strategically located within walking distance of the Gaslamp District and the San Diego Zoo.
The transaction should provide incremental sales volumes next year and will be operated as a hotel throughout the conversion process to timeshare. We're targeting 2017 for the completion of the construction activities. While not asset-light, we'll see incremental EBITDA as we continue to operate the hotel during construction. Now let me walk you through our announced projects, which while not closed, and no guarantee they'll come to fruition, should be fantastic additions to our portfolio and bottom line. Well, in Miami, we have a commitment to purchase a property in South Beach and have it redeveloped to our brand standards. This unique Art Deco themed campus style property will offer 182 units, a pool bar, on-site restaurant, and easy access to all that South Beach has to offer.
Assuming it meets the current timeline and specifications, we expect to close on this property in the fall of this year and are continuing to work with an asset-light partner on the transaction structure to allow us to operate the entire resort but take down this inventory over time. Much like South Beach, we have a commitment to acquire a 246-unit tower at the Waikoloa Marriott on the Big Island of Hawaii, right on the beautiful Kona Coast. Again, assuming the contract terms are met, we expect to close sometime in the second half of this year on the transaction. The plan includes having these rooms converted into 112 timeshare units, providing incremental sales volume beginning next year. We're continuing to work on a capital-efficient arrangement with the hopes of completing those discussions prior to closing on the tower.
Finally, as Steve alluded to earlier, I am very pleased to announce that we have very recently signed a commitment to purchase the 329-unit Marriott Surfers Paradise Resort on the Gold Coast of Australia. We expect to close on the asset this summer and bifurcate the hotel to create 88 units of vacation ownership while working over the next year or so to sell the remaining 200-plus room operating hotel to a third party. Now, this would be the first new destination in our Asia Pacific region in many years. If completed, should provide a beautiful new destination for our owners and strong on-site sales distribution starting mid-next year. Okay, well, we announced quite a bit of activity over the last several months. I have a few new gray hairs, but we're here to include a summary of what you might expect.
We'll be closed on Declan Suites in San Diego with the plans to convert the units to our specifications and begin sales next year. We signed an asset-light arrangement with a third party to complete our resort in Marco Island with the ability to take down those units over time. Now we have three planned destinations, South Beach, Waikoloa, and Surfers Paradise. If all of these are completed, these new destinations will bring in over $100 million of incremental contract sales to our North America segment and generate incremental contract sales and renewed energy to our Asia Pacific team. Now, let me tie this into the higher-level discussion of how you might think about our inventory from a balance sheet perspective. Logically speaking, additional distributions generating incremental sales volumes consume more inventory. The more we sell, the more we need inventory to back those sales.
While we're sourcing inventory today, it won't be absorbed until sometime in the future. Let's talk about why we need to be sourcing tomorrow's inventory today and the required lead time. First, regardless of how we fund the transaction, through asset-light or on our balance sheet, the inventory must be constructed or converted to our standards, and that takes time. Let's say about 18 months. Since timeshare is a regulated product, in North America, for example, we must put this inventory into our Florida Land Trust and register it for sales in Florida, as well as every single state in which we intend to sell. This typically takes another six to nine months to complete. A normal cycle for us for inventory to be completed and prepared for sales is on average about two years.
While the more capital-efficient deal structures are intended to reduce a project's capital outlay as well as time on our balance sheet, the registration timeframe for that inventory doesn't change. Therefore, the minimum hold time of inventory when completed is the six to nine-month timeframe required for registration. You can do the math. Today, we are at just under two years of inventory, either completed or in process. We expect to be able to reduce that time as we grow our top-line sales and continue to focus on new capital-efficient inventory in new destinations. However, as you will see in a few minutes, balancing the sources of that inventory is critical to our sustainable growth strategy. Let's talk about the balance, specifically balancing risk.
As we focus on less capital-intensive inventory sources, we also have less control of inventory timing or if the deal will close at all. Without completed inventory, our sales centers would have nothing to sell. Let me walk you through how we balance our inventory acquisition strategy to mitigate completion risk while driving development margin. First, we expect to continue our asset-light inventory repurchases, approximately $50 million to $60 million worth per year. This inventory is quicker to market because it simply needs to be put into our points program and can be recycled fairly easily. As part of our balanced growth strategy, it's faster to market and carries with it a very low product cost. However, this inventory only supports about a third of our total sales volume and does not drive growth in the other areas of our business.
In the end, it's only replacing one owner for another and therefore does not carry with it incremental management fees, rental profits, et cetera, as Tony walked you through earlier. Second, we plan to continue to self-develop projects as we have done in the past and are doing in San Diego. The completion of this inventory requires the most time on the balance sheet, but without the transaction cost and higher risk associated with asset-light structures. Lastly, we can continue to acquire inventory under various capital-efficient structures, as we are doing with Marco Island, and assuming we're able to work out all the arrangements in Hawaii and in South Beach as well. While carrying with it the higher costs associated with third-party transactions, such structures provide a more efficient use of our balance sheet and capital and allow us the flexibility to do multiple projects in any given year.
This target mix of inventory results in a blended product cost of about 30% and years on hand of inventory of approximately two years or less. We can reduce the time by targeting capital-efficient inventory sources, but as I mentioned, that can also increase risk, and in the case of repurchases, does not provide an incremental owner or fee growth. Again, this balance allows us to optimize all areas of our business and minimize the risk under a sustainable model. How does our CapEx translate into sales volume? Well, slowly growing inventory organically at existing locations, as you've seen us do over the last several years at our current resorts, only supports moderate but steady growth. To grow at the more robust pace we expect to achieve going forward, we're going to need to add new distributions.
By adding new resorts today, we can open up new sales distributions and reach new buyers, adding incremental sales growth once the sales centers are open and fully established. This will start next year. The takeaway here, and how you should think about our CapEx, is that it is, in reality, distribution spending, essentially CapEx to back current sales, and more importantly, to drive future sales and profit through balancing our inventory sources. Okay, let's sum it up. Why the balanced approach? We have many things to consider when it comes to our inventory sourcing. We want to lighten our balance sheet by completing remaining phases at our existing resorts. At the same time, we need to grow our top line, which means adding new destinations with new distributions.
We will do this with an increased focus, but not sole reliance, on capital-efficient structures while we utilize inventory repurchases to round out our strategy and optimize our product cost. Well, I hope I've left you with a good understanding of how we are growing, but more importantly, why we are growing. With that, let's take a short break and then bring John up to wrap up the discussion regarding performance under our two growth scenarios. We will begin again in 10 minutes.
We're going to start in about one minute if everyone can take their seats. Thank you. Good morning, everyone. Welcome back. I think I'm in the home stretch here to right before Q&A, so I'll take you through the financial side of it. I'm sure no one's looked ahead in their book yet. Okay. As Steve mentioned earlier, we've executed very well against our key strategies that we established a little over three years ago. We've driven and stabilized development margins above 20%, and along with efficiencies across our other lines of business, we've generated strong adjusted EBITDA, more than doubling from $96 million in 2011 to $200 million in 2014, a compounded annual growth rate of 28%.
We've improved our balance sheet since 2011, reducing inventory levels nearly $200 million, and lowering the average years of inventory on hand from roughly three years to two years on hand by more efficiently managing our inventory spend. Along with contributions from higher adjusted EBITDA, these efforts helped generate over $480 million of adjusted free cash flow over the last three years. Finally, we've generated another $120 million of proceeds to date from the disposition of excess land and inventory, helping to reduce total assets by $300 million since 2011. We've established a balanced capital allocation approach that allows us to grow the business as our primary objective, but also to provide capital returns to our shareholders through both share repurchases and quarterly dividends. We're proud of what we've accomplished to date, but more importantly, we believe we're poised for more success going forward.
In looking at our overall business, you can see that we have a diverse composition of revenue streams. Let me take a moment to ensure that everyone's familiar with our four primary businesses. Our largest business from both a revenue and margin standpoint relates to the sales of our vacation ownership products, which we refer to as our development business. After reduction for a provision for loan losses, contract sales ultimately translate into development revenues, and after deducting the cost of the timeshare product we are selling, as well as associated marketing and sales costs, it results in what we call development margin. The business comprised roughly 50% of our revenues and 40% of our margin in 2014. This is where we have seen significant improvement with adjusted development margins growing from a little over 7% in 2011 to 22% in 2014. Our next largest business is resort management.
Here is where we report the results of our management and our exchange company businesses, both of which include recurring and stable fee streams. In addition, this is also where results for our ancillary business and customer service operations reside. From a margin standpoint, this represented nearly 30% of our business in 2014. Next is our financing business, where we finance vacation ownership purchases. We typically originate notes that carry a coupon rate of roughly 12.5%, and even after taking into account the cost to securitize the associated notes receivable, it provides a nice flow-through to the bottom line. In 2014, nearly 25% of our margin came from our financing business. Last but not least is our rental business, which as you've heard, is similar to, but not exactly like a lodging business given our changing room inventory mix and its associated inventory costs.
Much like we've done with development margins, we've made significant progress in improving rental results since the spinoff. With margins improving from a negative $8 million in 2011 to a positive $26 million in 2014. This represented 8% of our results last year. With that as a backdrop, let me translate what you've heard from our executive team into what we're targeting for 2015 and how you could think about our business by 2018 based upon various growth assumptions. What should you expect from today? Actually, there are two key points, both focused around growth, which are important for you to understand and which will be woven throughout my presentation. First, as it relates to how our business could perform financially by 2018, my plan today is to provide you with two contract sales growth scenarios throughout my presentation.
These are not intended as guidance, but as growth scenarios to demonstrate how our entire business might perform under each scenario. While there certainly are many metrics to consider for our business, the two growth scenarios we will be using today are annualized contract sales growth of 5% and 10% with a development margin percentage of 21%. We will demonstrate not only the impact that these scenarios might have on our development business, but also on the rest of the businesses, ultimately showing the impact to adjusted EBITDA, return on invested capital, and free cash flow. Second, it's important for us to maintain a balance among all of our businesses with the ultimate goal of driving growth and improving shareholder returns. I just walked you through the diversity of our operations. However, understand that although diverse, these individual businesses do not operate in isolation but rather are interdependent.
In evaluating decisions made in one operation, we must ensure that those decisions do not unfavorably impact financial results in another part of the company. Maintaining an appropriate overall balance is a key focus to our executive team to ensure we are fully optimizing our EBITDA and cash flows. Let me walk you through the value of the customer and the many ways we make money on each sale. As you would expect, most of the money we make starts with our primary driver, which is the sale of our vacation ownership products or what we call contract sales. Back to my comment about how all of our operations are interrelated, not only do contract sales drive development growth margin, they provide additional revenues as well. For example, when those contract sales are financed, we earn recurring interest income on those loans.
To the extent those sales are backed by new inventory and not from repurchased inventory, it also provides us with incremental management fees. Since becoming a public company in 2011, our timeshare contract sales have grown a little over 2% annually through 2014, driven by significant increases in VPG, partially offset by a decline in our tour flow. For 2015, timeshare contract sales are projected to increase 5%-8% to a range of $735 million-$755 million, driven not only by continued growth in VPG but also the benefit of increased tour flow. The VPG growth is expected to come from inflationary price increases as well as higher point volumes purchased, the latter of which should occur naturally as we migrate toward a greater proportion of sales to first-time buyers.
Regarding tour growth, as we've stated, longer term, we would like to see a more balanced mix of tours coming from both existing owners and first-time buyers. Working towards that goal, we will continue to develop programs focused on both of these groups. In the first quarter of 2015, for example, we saw tour flow increases come primarily from our existing owner base given enhancements we announced related to owner recognition levels. We also saw increases in our first-time buyer tours in the first quarter as we continued working on programs that will attract even more first-time buyers, we expect to see even more growth here later this year. By 2018, we expect to continue seeing growth in sales at our existing locations, additional growth should also be coming from new sales distributions, as Lani mentioned earlier.
Using the 5% and 10% annualized contract sales growth scenarios, contract sales would be between $850 million to slightly over $1 billion in 2018. Recognize that these amounts simply represent scenarios of potential results for discussion purposes today. We will continue to grow the business as quickly and efficiently as possible, particularly in light of new sales distributions that we are able to deliver. We are proud of what we've accomplished with development margins over the last several years. Our plan at the time of the spinoff was to improve those margins above the 20% level. We are now on to the next chapter as we prepare for future growth. Our plan now is to maintain the appropriate balance between investing in top-line growth and optimizing those margins, all with the goal of maximizing total returns for the business.
From a product cost perspective, as Lani mentioned, we are targeting a balanced mix of inventory that will cost 30% or less. We will continue to manage this mix of inventory in a way that balances both cost and overall inventory levels while providing new resort locations to enhance the owner experience. Regarding marketing and sales costs, we will continue to optimize our spending and leverage fixed costs as we have done over the last few years. We anticipate reinvesting any optimization in new marketing programs to help drive incremental tour flow, as well as to fund startup costs associated with the new sales distributions.
It relates to our development margin percentage, for discussion purposes today, we are assuming it approximates 21% over the next few years, given our balanced mix of inventory and investment required in support of new distributions and first-time buyer tour growth. We've done in the past, we will continue to manage our spending to push margins higher when possible. For 2015, with annualized contract sales growth of 5%-8% and development margin percentages between 21%-22%, we're expecting development margin dollars could be between $148 million-$156 million, a significant improvement over 2014. Longer term, with 5% and 10% contract sales scenarios and with development margin percentage at 21%, development margin could be between $164 million-$193 million by 2018. Moving to resort management, let me walk you through a few of the major contributors to this business. Let's look first at management fees.
Unlike lodging fee streams, where a component is dependent on the profitability of the hotel, our fees are dependent on the cost to run the resorts, which typically experience inflationary growth, as well as growth associated with the development of new resorts and phases. It's for that reason our fees have proven resilient even during recessionary times. These are our most stable recurring fee streams, the majority of which flow through to the bottom line. We earn these fees for managing our resorts, whereby we're paid a fee that typically equates to roughly 10% of the cost to run the resorts. When the owners associations hire us, they trust we will provide our world-class service and resort experience, here's where the balance comes in.
As our owners ultimately pay for our services through their maintenance fees, we have a responsibility to provide this world-class service at an affordable cost, maintaining the value proposition inherent in their original purchase. With annualized contract sales growth scenarios of 5% and 10%, this recurring fee stream could grow to between $90 million and $92 million in 2018. Exchange company fees include fees from annual club dues earned in connection with our North America points program, roughly $200 per owner per year, as well as fees from our external exchange service provider. Similar to our management fees, this revenue stream is very stable and will grow as we continue to increase contract sales and bring new owners into the system. With annualized contract sales growth scenarios of 5% and 10%, this recurring fee stream before expenses could grow to between $57 million and $60 million in 2018.
Another component of our resort management business is our ancillary operations, which include results associated with providing certain amenities to our owners and guests, including food and beverage, retail, golf, and spa offerings at our resorts. Please note that the financial results from this business prior to 2015 included operating losses associated with a few of our golf course operations. With the disposition of those underperforming assets over the last 18 months and with continued efforts to drive efficiencies at our other ancillary locations, results in 2018 could grow to be between $18 million and $20 million. Bringing all the parts together for resort management for 2015, we are expecting resort management margin to be between $111 million to $113 million, driven by growth in our stable recurring fee streams as well as improved ancillary margins.
Looking ahead to 2018, with annualized contract sales growth scenarios of 5% and 10% and with improved ancillary results, resort management margin could grow to between $131 million and $137 million. Moving to our financing business, before I get to the financial results, I want to first take a few minutes and provide a little background on how this business works and how we make money. As you know, we offer financing to the purchasers of our vacation ownership products. The business provides us with recurring revenue streams in the form of not only interest income but also fees we earn from servicing the vacation ownership notes portfolio. After these notes have seasoned a bit, we take advantage of the ABS market and securitize the notes at terms that have historically been very favorable to us.
These transactions provide us strong cash flows that we can utilize to support our ongoing operations as well as fund future growth. While the economic environment somewhat dictates the cost of funds, we have been fortunate in that we have executed successful securitizations even during difficult economic times. Given current contract sales volumes, we currently perform just one securitization transaction in the ABS market each year. However, we also have the ability to leverage our corporate warehouse facility to securitize eligible notes at other times throughout the year. This slide highlights a few characteristics of our notes receivable portfolio. Our typical North American loan carries a coupon rate of roughly 12.5%, is usually 10 years in duration, and represents a note between $20,000 and $25,000 after an average down payment ranging between 10% and 15%.
Altogether, these factors result in a monthly payment of $300-$400, a convenient and manageable monthly payment amount for our target market. For 2014, our financing propensity, or the percentage of buyers who financed with us, was 42% in North America. Although propensity has remained relatively consistent over the last few years, we would like to see financing propensity higher given the profitability of this business. While we continue to evaluate various programs to help drive propensity higher, we do expect propensity to increase naturally over the next few years with the migration of sales to more first-time buyers. Since 2000, we have securitized over $4 billion of loans in various structures, providing significant cash flow to us.
Our overall notes receivable portfolio performs extremely well in terms of low default activity, which is currently at historic low levels and compares extremely favorably to others in the industry, as well as most other asset classes. We would love to say that the strength of our portfolio comes solely from our rigorous underwriting standards, it also reflects the quality of the market we target for vacation ownership purchases. You can see on the chart that nearly half of our buyers that finance with us have credit scores over 749, and the average credit score for 2014 of approximately 730. In 2014, our securitization in the ABS market provided us with gross proceeds of $240 million and carried an advance rate of 96% and an all-in cost of funds of 2.29%.
Given our weighted average coupon rate of roughly 12.5%, you can see how profitable these securitizations are to our business, as our 2014 transaction carried historically high excess spreads exceeding 1,000 basis points. The excess spread on the 2014 securitization was at record levels, over the next few years, we could expect that performance to moderate slightly, probably closer to 900 basis points on new transactions to the extent the cost of funds begins to increase. We will do all that we can to maximize excess spreads. One option in an escalating rate environment would be to increase the average coupon rate for newly originated notes. As you might expect, it's important to maintain a good balance, as raising the coupon rate to maintain existing spreads could actually lower financing propensity or negatively impact sales volumes given the higher cost to the consumer.
This is something we monitor closely to optimize overall results. Our financing business delivered $79 million of margin in 2014. For those of you familiar with our recent history, financing results have declined over the past few years as our vacation ownership notes receivable has declined faster than we have been originating new notes. We have seen this trend continue into 2015. We do expect it to begin to stabilize later this year as the declining portfolio begins to be offset by growing contract sales volume. For 2015, we expect financing margin could be between $75 million-$76 million. On a longer-term basis, the growth of this business is predicated on top-line contract sales growth, higher financing propensity levels, and ability to execute successful securitization transactions.
Assuming 45% financing propensity and modestly lower excess spreads, financing margin could be between $79 million and $85 million using the same 5% and 10% annualized contract sales growth areas. Excuse me. Moving on to our rental business, as you've heard, our business is a bit different from lodging given the changing inventory of available rooms, both from a number of rooms perspective as well as from how they are dispersed geographically. In addition, we also have to absorb the annual cost of acquiring that inventory, which changes each year. Rental margin has been a growing contributor to our bottom line, and we strive to optimize the results of this business. However, we can't focus simply on driving unit growth and continue to push top-line metrics, but rather we must work to balance the profitability from monetizing the inventory while ensuring a reasonable value proposition for our owners.
For unsold inventory, our goal at a minimum is to offset the carrying costs or the maintenance fees associated with the inventory until it is sold. We also receive inventory back from our owners as they take advantage of the flexible usage options of our points program, such as through Marriott Rewards or the Explorer Program exchanges. These programs enhance the value proposition for our owners. However, when we take their inventory in exchange, we take on the risk to cover the associated third-party costs through future rentals of that inventory. It's important for us to effectively price these programs through the number of points needed by the owners to participate in a way that ensures a reasonable value proposition for our owners but also ensures our profitability from this business. Again, there is a balance here to maintain.
Of course, we could attempt to increase our rental bottom line in the short term by increasing the number of points required to take advantage of these programs. However, that could have unintended consequences in the longer term through lower owner utilization of these programs, lower perception of the value proposition for the overall product, and lower sales to our owner base. It's important that we strike the right balances when evaluating these decisions. As we look ahead, we will continue to identify ways to optimize the rental bottom line. While we do not believe the rate of growth that we've seen in the past will continue to the same extent we've enjoyed the last few years, we do expect continued growth from this business.
Using 4% and 6% top-line growth scenarios for this business, coming from both more keys rented and higher transient rates, as well as from lower unsold maintenance fees over the next few years, rental margin could grow to between $48 million and $50 million by 2018. At these levels, rental margins could approach the mid-teens. I've talked to you about our four primary businesses. The last piece of the pie includes mainly our corporate, general, and administrative expenses, as well as the royalty fees we pay to Marriott International. We are projecting these costs to grow roughly 3% to 4% annually over the next several years. All in all, growing basically at inflation, we expect to leverage these costs on our growing revenue base through 2018. Now that I've walked you through all the pieces, let's see how everything fits together.
For 2015, we are targeting adjusted EBITDA of $222 million-$232 million, a $22 million-$32 million increase from 2014. Given the information I shared with you as it relates to the different components of our business, adjusted EBITDA could be between $270 million and $310 million in 2018 under the two growth scenarios presented. Return on invested capital, or ROIC, is another area where we have made significant progress and where we expect continued improvement over the next several years. We believe ROIC for timeshare companies should be viewed a bit differently than the traditional or more textbook calculation for ROIC, which utilizes earnings before interest and taxes, or EBIT, divided by average net assets. Rather, a more appropriate view is to look at ROIC net of our non-recourse securitized debt.
In our calculation, we make adjustments to reduce net assets by the non-recourse debt associated with the securitized notes receivable and reduce EBIT for the related consumer financing interest expense. This calculation is actually consistent with how we calculated ROIC prior to a change in the accounting guidance in 2010 and reflects the fact that these notes are sold non-recourse to us. We can't repay this debt even if we wanted to, as this debt is paid down with the collections from the notes receivable. We have made significant progress in terms of growing ROIC from 3% at the end of 2011 to nearly 15% in 2014. While our earnings growth since 2011 has been a significant driver of higher ROIC, it has also improved as we have optimized our inventory spend and disposed of underperforming and non-strategic assets, including Abaco and land at Kauai Lagoons most recently.
In fact, in 2014, our adjusted EBITDA had increased twofold and total assets declined over $300 million since 2011. With the growth scenarios presented, as well as ongoing focus on balance sheet efficiency through asset-light transaction structures for new development, ROIC could range between 26% and 30% by 2018 under the two growth scenarios. Even with that performance, there are additional opportunities to lower our asset base to the extent we can further reduce years of completed inventory on hand, as well as build out our existing projects, thereby reducing overall land and infrastructure investments on our balance sheet. What does all this mean in terms of cash flow generation over the next few years?
Well, as you know, we have worked diligently to generate significant amounts of free cash flow and as a result, have been able to return nearly $300 million of that cash back to our shareholders since we began returning capital to shareholders in the fourth quarter of 2013. To the extent we are able to grow the business, as I've highlighted today, we expect the cumulative free cash flow for 2015 to 2018 could be between $700 million and $775 million. Let me take a moment to provide some additional color. We've included a traditional cash flow view in the appendix, but I want to walk you through this view because it highlights the gross cash we could generate from operations and securitization activities before we invest in inventory to support contract sales growth.
As you can see, we could generate between $1.7 billion and $2 billion of gross cash over the four years. From there, we've layered in roughly $900 million to $1 billion of both identified and to-be-identified inventory spend, including sales center capital expenditures, all of which will be needed to support our contract sales growth in North America and Asia Pacific and inventory levels required for roughly two years of completed inventory from there. There are investments of $66 million to $100 million in corporate capital expenditures to support technology and ancillary operations and roughly $90 million for the final payment associated with our pre-spin Marriott Rewards liability. Turning for a moment to our 2015 free cash flow guidance of $145 million to $170 million, I would like to go through our current assumptions around inventory spend in 2015, given all the acquisitions that we have discussed.
In North America, our acquisition of San Diego was done on balance sheet, with spending on renovations expected to occur primarily in 2016. For South Beach, our guidance assumes we acquire this inventory asset-light, with a portion of that inventory spend later this year and the remaining spend occurring over the next few years. For Waikoloa, our guidance assumes that this inventory will be asset-light also, with the renovated inventory being acquired in 2017. In Asia Pacific, given our limited supply of completed inventory, our 2015 cash flow guidance included a placeholder for inventory spending, which is in line with the timeshare component of the Surfers Paradise hotel acquisition Lani mentioned. Our goal is to sell the remaining downsized hotel before the end of the year. There is risk that this could slide into 2016.
With that being said, from a cumulative free cash flow perspective, our goal is to continue to reduce our investment in inventory, and our $700 million to $775 million of cumulative free cash flow projections would not be impacted. However, beyond this amount of free cash flow, we also have other items that could enhance our total cash flow potential even further. First, as you are aware, we have additional debt capacity given the current leverage of the business. Assuming excess capacity of one to one and a half times adjusted EBITDA on the growth scenarios discussed today, this could provide incremental cash flow of roughly $270 million to $465 million. Second, Lani talked about our completed inventory years on hand being roughly two times. To the extent we can further reduce our years on hand closer to one and a half years, cash flows could be $125 million to $150 million higher.
Third, as you know, we have not completed the disposition of our non-strategic assets. To the extent those are completed by 2018, it could provide incremental cash flows of $50 million to $80 million. Prior to any returns to our shareholders, total cumulative cash generated over this period could be roughly $1.1 billion to nearly $1.5 billion. Where does this leave us? You'll have to agree that it leaves us in a very strong financial position. We will continue to grow the top line through new resorts and sales distributions that, in turn, will drive higher adjusted EBITDA and, more importantly, additional free cash flow. Beyond that, we will opportunistically evaluate new business opportunities that will enhance or expand our current business model. Lastly, we will continue to evaluate the best way to return capital to shareholders through dividends and share repurchases. Where does this leave you?
I hope in a much better position in terms of understanding our business model. I believe that we can grow the business and generate significant cash flows in the process. For my final thought, we recognize that the timeshare industry typically trades at a discounted multiple when compared to the lodging industry. We assume this could be from the perceived greater earnings volatility, the capital intensity of the industry, or a combination of both. I trust that with your greater understanding of the industry and specifically our business model, you will recognize that we have a significant amount of stable, recurring revenue streams and an ability to generate cash flows and efficiently manage our balance sheet through leveraging asset-light transactions for new inventory. Looking ahead, we've outlined detailed plans to continue to drive financial growth in this business.
Given our track record to date, as well as our confidence in our plans for the future, we believe this company remains a tremendous value to investors. With that, thank you for your time and attention today, and I'll turn it back to Steve.
Thank you, John. I'd like to ask Lee, Brian, and Lani to come up and join us, and we're going to turn to your questions if we could, please. The way this is going to work, Jeff Hansen has a microphone. If you have a question, we'd appreciate it if you'd raise your hand. Simply for those on the webcast, if you identify yourself so that they know who's asking the question, and then you can either direct the question to any one of us individually or just get it out there, and we'll figure out who's going to answer it, okay?
Thanks, guys. Oh, sorry. Peter Lewis, Castle Ridge Investments. What are the key differences in strategy between you and your largest competitors, and how might they reflect different views of the future demographics or structure of the industry?
We had a little difficult time hearing you. Was it what are the key differences in our strategies between ourselves and that of our competitors? Is that correct?
That's correct, yes.
Yeah, I think in some respects, they're not dissimilar to what some of the other quality tier competitors do in terms of selling product, et cetera. I think one of the primary differences with us is really there's a couple things. Number one, we really focus since the very early days of this business about having a very diversified portfolio of product. If you look at some of the other people in the same kind of tier, which we find ourselves, you'll find that they have much more limited distribution than we have. Secondly, obviously, we believe that our points program is materially different than what some other people provide, and you've heard a lot about that today in terms of its flexibility, not only for the customer and the owner, but also what it does for us in terms of a capital standpoint. It's a very different approach.
Obviously, the Marriott affiliation is not dissimilar to what Starwood has with their vacation ownership business or Hilton has with theirs. We certainly believe that it's a very strong affiliation for us. I'd invite anyone else to add anything here that they'd like. Well, the only thing I would add is we have had a lot of people over the years work with us and other people as well, and everybody that has crossed over to even the quality tier brands say we, by far, have the best culture. We're the preferred employer in the business.
Just in terms of more concrete, I'll give you an example. Is there a trade-off between credit scores, credit underwriting standards, and how you can access younger buyers? Are there sort of things like that where you guys differ, seem to have different views on where the industry is going? Obviously, you all are bullish on the industry.
You going to take that one? Okay. Well, you saw Howard's numbers up there, that the average buyer in the industry is around 40, and they're buying an average of about $18,000, $20,000 worth. Our average buyer, which you saw, is around 50, 51, buying about a 50% higher average purchase on our first-time buyers. We market to a slightly more affluent, slightly older clientele than the rest of the industry, sell a higher priced product, and operate at a higher quality tier. That just happens to generate higher credit scores and everything else. They're just more affluent. Dave.
Hi, it's Steve Kent of Goldman Sachs. I had a question for Lee first on his slide, page 46, which was the matrix of development margin and management revenue, exchange revenue, and sort of looking through that. I guess I'm still struggling with what the development margin for owner reload or pre-owned, what kind of percentages are we talking about? The sort of the deltas between that versus the development margin for the pre-owned first-time buyer. Just trying to understand how profitable those channels are depending on who's buying and sort of where the source is.
Right. Basically, the pre-owned inventory comes at a lower cost of acquisition of that inventory by a couple of points. If you look at our owner business from a sales and marketing cost versus our first-time buyers, there's probably a couple of points in there as well. It depends on the combination of how that works as to what the swing in the margin is. Overall, it's probably two, three points difference between those two scenarios. The trade-off, as indicated in the slide, is a focus on how do you drive some of the recurring revenue streams that are important to the overall profitability of the business, as well as continue to replenish the owner supply so that you can continue to penetrate those owners and sell at the 5% rate that Brian mentioned earlier.
I think the other thing that wasn't reflected on that slide, in retrospect, we probably should have, is that first-time buyers have a much higher propensity to finance their purchase, too. You actually get financing revenue from a first-time buyer that you may not get from an owner reload.
Okay. I had a question for Lani on her slide, page 86, which is the chart that shows new asset-light inventory-
asset-light repurchases. Can you give us a sense as to what % of the inventory is coming from asset-light repurchases? We've sometimes said 50%. That's from what our calculation is, but we'd love to know sort of what your expectation is. I guess because I was looking at the chart, I was wondering if the size of the blob is indicative.
We like to call them bubbles, Steve.
Oh, bubbles, not blobs.
Bubbles, yeah.
Okay. The bubble, whether the bubble is indicative because it would suggest that asset-light repurchases are much smaller than the new asset-light inventory, and I just wanted to understand that. Since I've got the mic and probably won't give it up the idea just on the asset-light side, you didn't mention who you're working with on asset-light to do that for the financing, and also whether when you go asset-light, will you control financing? Will you still provide financing to that consumer, whether it's asset-light or not?
All right. Let me take a stab. There is half a dozen questions baked in there, I think. Let me take a stab, and then if I miss something, let me know or John, if you want to add something, but I'll kind of start backwards. Yes, in all the cases, we are controlling the consumer financing piece of those equations, and I think that was your last question. When you look at the blob, I believe, right? You can also notice that in each of the projects, we have built in some flexibility and phaseability of the inventory. That while the inventory can be available, we can take it down over tranches over time that might help smooth out the blob. Inventory repurchases that you talked about, those we target at the $50 million-$60 million of product each year.
That is for us fairly sustainable and will be part of our blended growth source of inventory going forward. Help me out. What else did we miss?
Yeah. That $50 million or so, since it is a much lower product cost, that actually supports closer to a third of our sales in any given year. That gives you a little bit of flavor in terms of the size.
If I could add, given its low product cost, you'd like to get as much of that as you can. It's not available to us. The good news about our owners is they like our product. Generally what gets gifted back or comes back to us is it's people that have owned the product for a lot of years. There's a lifestyle change. They can't travel anymore or divorce or death or all sorts of other things that come along with that, and that's when they say that they'd like to release their ownership. We make an offer for it, and we buy it from them. Yeah, the difference between default rate on the maintenance fees and default rates on the loans. Maintenance fees, 1%.
Yeah. It's less than 1% a year of the defaults. Our current default rates on the loans are slightly higher than that, but not that much higher really. Our delinquencies are running mid-3%. Actually, I think in North America, this past month, we were under 3% in terms of the delinquent loans in our North America portfolio, which is about as low as we've seen it.
That's just in delinquencies.
Right.
We also have a relationship with all of our owners associations on the defaults on the maintenance fees, where we will buy that inventory back from them and prevent them from having to worry about selling the inventory to recoup their default.
Anto Savarirajan, Goldman Sachs. Two questions. One is can you talk about going downstream in terms of the clientele that you're targeting? There is a big delta between the average household income that ARDA looks at for the U.S. versus your product. What is the longer-term view on that? Second, if you could also talk about some of the puts and takes in the 21% margin target, let's say, or the average target for 2018. Understand that you're bringing in newer tour flow or newer members, but what are the sensitivities? How can that vary?
Yeah, I'll talk about the first part of that. As you've certainly indicated, as Howard showed in his slide, the timeshare business is kind of fairly large footprint. We play in the upper quality tier, and with our Ritz-Carlton product, obviously in the luxury tier of that space. We have looked over time about the opportunity to expand our footprint in the space by looking something below where we are today. We actually tried an effort there. I think timing in life is a lot of things, but we actually had a Horizons product, which was a more moderate tier product. I will also say to you, it was probably not our finest hour as a business. We probably didn't adapt some of our sales and marketing techniques and everything else to deal with a consumer that had a lower average household income and the like.
We exited that space a number of years ago. Having said that, it's not something that we would rule out. Typically speaking, if you'd like to get in that space, there's two different ways to do it. Obviously, you can go out and do a deep greenfield startup, or you could do it through some sort of M&A. If the right kind of acquisition opportunity were to come along that could be a good strategic fit and be accretive to our shareholders, we'd certainly look at it.
Howard, correct me if I'm wrong, that 41 years was just in the last couple of years what the consumer is, right? If you looked at the overall average of who owns timeshare in ARDA, it would look very similar to our 51. That's just who's been buying the last 18 months. It shows we're attracting as an industry a new generation of consumers. If you looked at who's bought from us in the last several years, it will skew, especially with the points program, allows us to offer smaller packages which we can tailor to someone first entering the industry. Then we reload them and let them grow with us as their vacation needs grow.
Then development margin.
Yeah, I'm sorry, I didn't pick up the last part.
Yeah. On the 21%. Like I said in my remarks, by no means is that a ceiling by any means of what we think we can do. However, as we've talked about, given the marketing and sales programs, as well as the first time through costs that hit the P&L before you actually get into sales when you open up a new sales distribution, there's going to be some headwinds on the marketing and sales side. The other piece is the product cost side a little bit. We don't know over the next three years, like I said, though we have called $1 billion of inventory spend, we haven't even identified all of that yet. To the extent that we can source things more cheaply or there's a different mix in terms of how we're doing asset-light, I think there's opportunity.
Once again, just for ease of going through numbers today, we had to pick a number just to do the math. That's what we used on the 21%. By no means are we going to stop or set that as a reasonable target. We're going to continue to work on improving that margin and growing the business and making the investments that need to be made for the long-term health of the company.
I'd add to that, our assumptions on cost per point growth are roughly inflation. They're pretty conservative in my perspective. As the portfolio continues to grow and attractiveness and everything else, there may be some additional opportunity there, which obviously would help drive your development margin. Any other questions?
We answered.
David.
There we go.
Can you go over a little bit about David Baron of Baron Capital. The Airbnb impact and what we've seen so far and how we're adapting to that and what we think about that.
Yeah.
All right.
Lani, why don't you go?
Sure. Rentals of vacation homes and individual rentals is not new to the industry. Obviously, it's been more available with the advent of technology. Our model to rent to that market has always been there, and rentals has been a sustainable and growing part of our business. For us, attention in the space of renting a larger product in the vacation home product is one that's good. There is some changes that we see that may happen for that business model in general, as today it's not quite as regulated as the lodging industry. There's lots of discussion as to whether or not Airbnb renters will need to pay occupancy taxes in certain cities and if they'll have to comply with fair housing, fire life safety standards, Americans with Disabilities Act.
We see all of that kind of catching up with that business model as well. It certainly brought some attention to the industry. Obviously, you've seen from our growing numbers, it hasn't impacted our top-line rentals.
It's not affecting us on the sales side. Our customers are not using that. Families aren't using that for vacations. What we are seeing a lot of is as the vacation home rental business is getting aggregated online that a lot of our customers, existing owners, and tour no-sales are renting homes more regularly now than they used to. Seeing everything we've added to our product to date, it's probably not that much of a stretch to think we might be looking at something like that for our product as well. We're aware of it and working on it. No. Any other questions? We've worn you out. All right. Thank you very much.
Before Steve gives closing remarks here.
Yeah
If you indulge me here a second. I do want to thank our gracious hosts here at the NYSE for putting on a great day and the team that's helped us out here. Also, as you might expect, this isn't something Jeff and I can do on our own. There's a lot of folks that did a lot of work behind the scenes. So I do want to recognize a few folks on my team that helped pull this all together. Tim Crapo, Carolyn Young, Kim Frates-Mazzilli, and [Chris Anoba], and of course, Jeff, for really taking the lead on this. It's an incredible amount of work, as you probably can appreciate. Thank you, everyone.
Okay. Thank you, Anto. Yeah, that's it. Before I turn it to Jeff, who just go through some housekeeping details here at the end, let me just close with the following comments. Our company's leadership went about the hard but immensely rewarding work to create Marriott Vacations Worldwide, the industry leader that it is today, and I believe we have delivered very well against the objectives we set in 2011. Throughout a period of enormous change from the time of our spinoff up to today, we've never lost sight of what matters most to all of us. Our mission, our balanced objectives, our dedication to serve others, and our responsibility to our investors. Hopefully, you've heard that we are excited about the future and what it holds for us. We have a plan to grow in markets that make sense for our customers, the business, and our investors.
We believe we have a winning formula. Vision, talent, and passion. Vacation business is hard work, yet it's also especially rewarding. We are dedicated to delivering unforgettable experiences that make vacation dreams come true. We will not waver from our mission. Thanks for the opportunity to share the next chapter of our accomplishments, strategies, and plans with you. We believe it will be our best chapter yet as Marriott Vacations Worldwide continues to lead and grow. In closing, I hope that wherever your travels take you, that you encounter unforgettable experiences for you and your families that make your vacation dreams come true. Trust me, it matters immensely. Thanks very much for joining us today, and enjoy your next vacation. Jeff.
Thank you. Thank you very much. One last comment. As you could tell from one of our earlier conversations, we like surveys, and you will be no different. We've given you a survey on your Padfolio. We would love it if you could give us some feedback as to how today went for you. If you turn that in in the back, there's a flash drive that will have today's slides already loaded on that. Thank you very much.