Pleasure to welcome you to our 2022 Investor Day. Before we start, I need to remind everyone that many of our comments today are considered forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties which could cause future results to differ materially from those expressed or implied by our comments. Our forward-looking statements are effective only today and will not be updated as actual events unfold. Throughout the day, we will be making references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures in the schedules provided which, for those listening to the webcast, can be found on our website at ir.mvwc.com. We have planned a full afternoon for you, including multiple Q&A sessions, and I encourage you to direct your questions to those executives you don't normally have access to.
For those in the webcast, you can send your questions directly to me in my email at neil.goldner@mvwc.com. With that, it's my pleasure to welcome our CEO, Steve Weisz, to the stage. Steve?
Is everybody here okay? No.
Yes.
All right. Let's see if we can get this sorted out.
You couldn't hear me?
Sorry, but no sense sitting there struggling to hear what people have to say, right?
Heard.
Are we okay? Okay. All right. Thanks, Neal, and welcome to all of you in the room, as well as those of you who are listening via the webcast. I can tell you it feels really great to be back in person with you, all of you after the last couple of years we've all navigated. As Neal mentioned, we have a full agenda today. I trust that when we're done, we will have answered your questions, and you will share in our enthusiasm about our company's growth and understand more about our optimism for the future. Let me start by setting up the day for you. John and I will start by talking about our strong recovery from the pandemic and the strength of leisure travel, which is 100% our focus.
We'll also talk about our proven resilient business model and our overall growth strategy. Lori Gustafson will talk about an important transformation program for our Marriott-branded vacation ownership business called the Vacation Next Initiative and the launch of Abound by Marriott Vacations, which we put out in a press release this morning. Lori will also speak about the introduction of Hyatt Vacation Club and other new and exciting digital and brand changes that are going to help propel our growth. Jeanette Marbert will talk about the exchange and third-party management business with particular focus on Interval's growth strategy. Brian Miller and Stephanie Sobeck Butera will then discuss the vacation ownership business, focusing on our resilient business model, Abound by Marriott Vacations, and expansion of our Hyatt Vacation Ownership business to grow contract sales.
Our CFO, Tony Terry, will come up to bring it all together with our view of what the financial performance would look like from 2022 through 2025. We'll also provide you ample time to ask questions both during the day and after Tony has presented our growth outlook. These presenters are part of a strong and seasoned management team with 210 combined years of industry experience. Together, this team will deliver on the growth priorities we will set forth for you today for Marriott Vacations Worldwide. I would point out that he was not going to be able to be with us today because of an illness. I thought I'd lay out what I think are some of the most important messages you'll hear today.
Namely, we have well-positioned leisure-focused products and a business model that has exhibited resiliency in recessionary environments, driving growth across the segments by integrating our powerful iconic brands and leveraging technology enhancements throughout the business. We have a disciplined capital allocation strategy that produces an efficient free cash flow engine that has allowed us to grow organically and through acquisitions while maximizing shareholder value. Let's begin by discussing the resilience of our business model and how we are driving sustained long-term growth through our industry-leading performance over the past years despite the pandemic. Let me start off by reminding you of the profile of our businesses. In the vacation ownership business, we have a diverse portfolio of seven powerful and iconic brands, which are the best in the vacation ownership business, serving the upper upscale and luxury sector of the market.
We have grown our vacation ownership business to approximately 700,000 owner families with more than 120 resorts and doubling the number of owners and resorts since 2011. In the exchange and third-party management business, we have the premier exchange company. Our exchange and third-party management business operates under both the Interval International and the Aqua-Aston brands, and we have grown Interval International to approximately 1.6 million members with a portfolio of nearly 3,200 affiliated resorts in over 90 countries and territories. I'd also point out that our exchange business has been generating over 50% adjusted EBITDA margins and requires minimal capital investment. We are well positioned to sustain the rapid growth we have seen into the future for a number of reasons.
First, we are 100% leisure-focused with a product that is flexible and accessible in highly desirable locations. Our offerings address some of the needs of younger generations who now see a merging of their work life and home life and want ways to integrate the two. In fact, according to a recent travel survey, it states that 19% of U.S. survey participants said they've taken an extended vacation of more than 10 days blending both work and leisure. Our spacious villas allow our owners and their families to have space to spread out for both work and play. Our high-end customer base is anxious to go on vacation, and our high-end steady occupancy show that demand is very strong and hasn't shown any signs of waning. Inflation has made our value proposition relative to hotels with smaller accommodations even stronger.
We have continued to see strong occupancy across our portfolio, which has allowed us to raise our mix-adjusted average daily rental rates well above our previous historical averages. Speaking of resort occupancy, allow me to point out that despite the slower recovery in urban and international markets, we expect resort occupancy to exceed pre-pandemic levels by the middle of this year. After adjusting for mix of rental inventory, the average daily rate is expected to run 17% higher than 2019 levels. This not only should help us improve our margins, but as more owners and first-time buyer prospects fill our resorts, that translates into more tours from greater in-house penetration. How about you, guys? Just like church, everybody sits in back.
To show you how strong our recovery has been, let's look at contract sales for us versus HGV and TNL, excluding our recent acquisition of Welk and HGV's acquisition of Diamond. On this chart, you can see that we recovered at a much quicker pace than our peers. We've achieved industry-leading contract sales with just our organic growth while HGV and TNL remain under pre-pandemic levels as of the first quarter of this year. In fact, despite reducing our reliance on OPC channels in both the Westin and Sheraton businesses and lower hotel linkage due to the pandemic, our contract sales have recovered ahead of our peers due to the powerful benefit of our brands and more efficient marketing channels delivering better quality tours.
Turning to the vacation ownership industry, we've increased our U.S. market share to 17% as of the end of 2021 versus 10% in 2012 through strong organic growth and our two successful acquisitions. I believe that this highlights the fact that despite economic slowdowns of the market that we and the rest of the industry have experienced, we have a strong track record of growing organically and through acquisitions. In fact, from 2015 to 2019, while the industry grew 5%, we grew 7% just based on organic growth. These results have been driven by consistently high levels of owner satisfaction and a strong desire by many of our owners to increase the size of their vacation portfolio, which in turn have resulted in higher closing rates and VPGs.
Not only have contract sales exceeded 2019 in the first quarter, but so has adjusted EBITDA. We experienced a relatively quick recovery in 2021 versus 2020 due to high levels of pent-up owner demand. For 2022, using the midpoint of our recently updated guidance, we expect to be at 119% of 2019 adjusted EBITDA. This results in adjusted EBITDA margin of 28%, 400 basis points above 2019, driven in part by our transformation and synergy programs. In fact, the $930 million high-end of our 2022 adjusted EBITDA guidance is within the low end of the 2022 pre-pandemic guidance we shared during the 2019 investor day.
We believe that we've not only shown that we've been able to grow organically at a strong pace, but also have a proven acquisition playbook. From the launch of a points-based product in 2010 to the spin-off from Marriott International in 2011 and transforming our business with two acquisitions in 2018 and 2021, we have continued to deliver strong, consistent adjusted EBITDA and cash flow. Since we became public in 2011, we have grown adjusted EBITDA at a compounded annual growth rate of 20% for the last 10 years, which we believe is a notable accomplishment. More importantly, our capital allocation strategy has allowed us to also grow adjusted fully diluted earnings per share over 20% for the same time period.
We believe our strategy of organic growth and acquisitions, coupled with our capital allocation approach, positions MVW well as a notable market leader for EPS growth. I'd also point out that only three other companies in the travel and hospitality industry are on the top of these indexes for EPS growth. Now let me turn to ESG. We have always had an open and inclusive workplace coupled with a caring culture which we believe that all of us are truly better together. In addition, we've always been mindful of the impact on the communities where we live and work, and we strive to give back whenever and wherever we can.
With that said, we continue to refine our focus on other ESG elements and initiatives, including creating an ESG governance structure and steering committee charter, serving our owners and our associates to determine what was important to them regarding the environment, and ensuring diversity and inclusion with our U.S. management level positions. We are planning to publish our first ESG and citizenship report later this year, which will give you further details in regards to all things ESG. MVW has also created a comprehensive philanthropy and corporate citizenship initiative to complement our ESG strategy. This includes identifying specific causes and partnerships that reflect our brand values and culture, engages our associates and customers. We also provide annual charitable giving, which is made up of in-kind donations, associate volunteer time and cash donations. In 2021, in cash alone, our contributions were roughly $2 million.
Now let me turn the mic over to John Geller, President of Marriott Vacations Worldwide. John?
Thanks, Steve, and good afternoon, everybody. I appreciate everyone joining us here and online. Before I get to my prepared remarks, I'm gonna break one of my management rules, which is your boss should never be surprised at work, right? Don't surprise your boss. If you'll give me a minute here, indulge me. I wanted to recognize Steve on June fifth celebrated his 50th year with Marriott, which obviously a pretty astonishing career. He's been our President and CEO for the last 25 years. We're going to talk about all the growth and things that he's helped lead the business through. Even with Marriott, when he started, I think there was 12 Marriott hotels, 13 Marriott hotels when Steve started at Marriott. Right? Put that in perspective, 8,000+ hotels today.
Steve was on the cutting edge of leading Marriott's first loyalty program. If you remember, it was called the Honored Guest Award program, which is now the Marriott Bonvoy program, as well as a lot of other key initiatives. We put together a short video just to highlight. If we could play that video. Thank you.
Today we recognize Steve Weisz, CEO of Marriott Vacations Worldwide, and his incredible 50 years of leadership within the hospitality and travel industry. 25 years of hotel experience and 25 years of service within the vacation ownership space, all connected by a common thread. The Marriott brand, trusted, widely known and loved by many. Steve's personal leadership story is one of excellence, integrity, innovation and caring. His beliefs in taking care of associates and giving back to the community have been at the heart of the company's success. While at Marriott International, Steve had many accomplishments, including starting a customer loyalty program, now known as Marriott Bonvoy, and helping to open over 30 hotels as a member of the pre-opening team.
At MVW, under Steve's leadership, the company has experienced strong organic growth, from a resilient core business model to strategic mergers and acquisitions to a strong associate base dedicated to fulfilling the lives of owners, members and guests with memorable vacation experiences. Let's take a quick look back at Steve's remarkable legacy. Steve Weisz started his career in 1972, learning the Marriott Hotel business inside and out. In 1997, Steve became president of Marriott Vacation Club International, which then included some 23 resorts. Some accomplishments in Steve's tenure include the 2001 opening of Marriott's Phuket Beach Club in Phuket, Thailand, the company's first resort in Asia. Followed by the launch of our first points-based product in Asia in 2006.
By 2009, the company celebrated its 25th year with nearly 400,000 owners and members, demonstrating the power of the vacation ownership experience. The points-based program was introduced in North America in 2010, providing owners and members more flexibility in choosing their vacation experiences. In 2011, Marriott Vacations Worldwide became a separate public company on the New York Stock Exchange. Later, as a strategic complement to resort experiences, Marriott Vacation Club Pulse is introduced and has grown to include properties in the heart of these vibrant U.S. cities and more. In 2018, through the steady hand of Steve and the leadership team, MVW acquired ILG, which dramatically expanded the company's growing portfolio of brands and businesses, including Sheraton Vacation Club, Westin Vacation Club, and Interval International.
In 2021, during our 10th year as a publicly traded company, Marriott Vacations Worldwide acquired Welk Hospitality Group to grow the Hyatt Vacation Ownership business. Today, some 700,000 families own their vacation with us across a diverse portfolio that includes some of the most iconic vacation ownership brands. The company also operates exchange networks and membership programs with tremendous reach across the globe. It's a testament to Steve's leadership that the company continues to grow and thrive and is perfectly positioned for the future. Marriott Vacations Worldwide is a leader and innovator in the leisure vacation industry, upholding the highest standards of excellence in serving customers, associates, and investors. We thank Steve for his strong leadership. He's navigated the company through great opportunities and great challenges, and because of him, we have a tomorrow full of new possibilities.
I think you can all agree, quite the career, quite the legacy, and thank you, Steve, for your leadership. It's been incredible. All right. What is it that today's vacation customers are looking for? Since our founding almost 40 years ago, our customers have always looked for great vacation experiences, product consistency, and ease of use. But in addition to that, today's vacation patterns and length of stays have evolved, and consumers continue to look for more flexible options and a wider array of vacation experiences. We continue to transform and enhance our products to provide these to our customers. We have the ideal product for the next generation of leisure traveler, and probably even more so today in a post-COVID world, as travelers desire more spacious units that have more to offer than smaller hotel rooms.
Guests also want their villas sanitized and cleaned. Finally, we have amenitized resorts within the Marriott and Hyatt brands that people trust, located where families wanna go on vacation. I should point out, in those locations, we're typically oceanfront, ski-in, ski-out, so in prime locations within the best leisure destinations in the world. Turning to our business model, let me highlight some of our competitive advantages. We have a unique and resilient business that has driven value across numerous economic downturns, including the recent pandemic. We have diverse revenue streams, including recurring revenues related to our management and exchange businesses, which produce roughly 40% of our recurring adjusted EBITDA. That doesn't mean that our contract sales and other revenue streams are not as resilient.
In fact, we expect contract sales this year could be between $250 million-$300 million higher than 2019, or almost 20% at the higher end of that range based on the updated guidance we gave this morning. We're also not just vacation ownership. The ILG acquisition brought us the leading quality exchange and membership platform with its recurring revenue streams and high adjusted EBITDA margins. Our vacation ownership business has exclusive timeshare access to both the Marriott Bonvoy and World of Hyatt loyalty programs, which drive our strong VPGs, as well as highly efficient marketing and channels. When you combine all this with our capital-efficient inventory model, this enable us to deliver strong free cash flow on a consistent basis. One of our greatest competitive strengths is the power of our brands.
We have a broad and diverse portfolio of over 120 resorts around the world, with seven of the best brands in the vacation ownership business, generating roughly 90% of our business revenues. In our exchange and third-party management segment, which was slightly less impacted by the pandemic, has recovered nicely. However, there's more to come as we expect owner exchange patterns to return to more normal pre-pandemic levels next year. Brian and Jeanette will discuss in their updates our plans to grow these segments even further in a few minutes. The recent inflationary headwinds have helped highlight the value proposition of timeshare. As we've seen hotels increase ADRs quickly in leisure markets, these actions make the future costs of hotel stays more variable and more expensive for the customer.
If you look along the top of this slide, you'll see that for timeshare, remember, a big chunk of an owner's future vacation cost is locked in when they purchase. The increases in the annual fees have historically remained relatively stable, thus creating more value to our owners versus renting hotel rooms or similar accommodations, especially in periods of higher inflation. Starting with the left side of this slide, you'll see resort occupancy has been strong due to the continued pent-up demand for vacations and has returned to pre-pandemic levels despite some of our lower occupancies in some of our urban and Asia Pacific resorts, which are still recovering. With 85% of our tours coming from on-site guests, including our owners and preview packages, this translates into higher contract sales, which I mentioned before are well above our pre-pandemic levels.
In addition, higher sales and occupancies drive revenue growth across our business, financing, management, exchange, ancillary businesses. This recovery, as you saw, not only helped us in the pandemic, but also in prior recessions. Let's take a look at the resorts. At spin-off from Marriott International, we had 64 resorts, so a little over 10 years ago. Now let's take a look at how that footprint has grown, both organically and through the two acquisitions. Since 2015, we've grown our system of resorts organically. When I say organically for us, that would be the Marriott Vacation Club brand, right? That we developed by roughly 15%, adding new flags on the map in highly desirable locations such as Waikoloa, San Diego, New York City, Miami Beach, Bali.
Also with the ILG and Welk acquisitions, this has allowed us to continue to broaden our footprint, helping us more than double our resorts since our spin-off in 2011. Now, these acquisitions, which came with excess built inventory as well as lower sales, right, from the pandemic, have created a temporary pause on our needs for new resorts. We expect our capital-efficient inventory model to allow us to start adding new destinations soon and actual timing of the payment would be in the future when we need it to support sales. Let's look at how our business has grown and evolved over the last few economic cycles. Clearly, in the front of everybody's minds here with the market right now. Just by way of background, for the 30 years prior to the financial crisis, right?
If you looked at industry contract sales, they grew through what I would call more garden-variety recessionary periods. While no two recessions are alike, history would say that depending on the length and depth of the next recession, we may be able to grow contract sales, albeit at a slower rate. The other thing that's really changed in our business model, it's evolved and changed tremendously over the last 40 years. With the launch of our North America Points product in 2010, we moved to a system sale versus site-specific sale, and we moved away from offerings like residential and fractional offerings. Not only is the Points product a better value proposition to the customer, it allows us to better match our inventory spend with our contract sales.
In fact, during the recent pandemic, as Steve discussed, you saw the benefits of our resilient business model as we had limited inventory commitments and where we were pretty easily able to manage our cash flows when our operations were virtually shut down for a couple of months, as well as through the ensuing recovery. In addition, with close to $600 million of excess built inventory and minimal near-term inventory commitments, we're better positioned than we were prior to the pandemic. With the acquisition of the ILG brand, ILG in 2018, our brands have expanded. We're about to launch, as we announced this morning, the new combined Marriott product later this summer, which will greatly improve the value proposition, as we'll talk about.
The Welk acquisition has allowed us to jumpstart our Hyatt Vacation Ownership business growth, and we're well on our way to unlocking the value of the combined Hyatt portfolio. The ILG acquisition also added Interval International and Aqua-Aston, which increased our recurring adjusted EBITDA to almost 40%. With the low capital needs of this business, brought a strong and consistent cash flow. Finally, as we'll talk about here, our investments in technology should continue to drive even more efficient marketing channels, allowing us to grow sales while containing costs. Now let's discuss our growth strategy. We think about growing the business in three key ways. First, continuing to transform our business and product offerings. Second, leveraging technology and digital transformation to grow the core businesses, Vacation Exchange, as well as potentially launch new leisure product offerings.
The new offerings would leverage our existing leisure expertise in areas such as marketing and sales, managing resorts and clubs, and delivering vacation experiences. These products would allow us to expand our portfolio of businesses, outside of VO and Exchange and diversify our business over time. Third, drive adjusted EBITDA and cash flow, allowing us to deliver strong organic growth as well as potentially invest in strategic acquisitions like we've done in the past, ILG and Welk, and new leisure-focused product offerings. Since we acquired ILG, we've been on a journey as a company to transform how we grow our business, and you've heard us talk a lot about this. While a lot of this started as, you know, driving synergies, right, as part of the ILG acquisition, what I've seen is our culture change, and it is more innovative.
A good example of this is the launch of the Abound by Marriott Vacations later this summer. To enhance the experience for current owners and, you know, future buyers, we're unifying our Marriott branded products, so Marriott, Westin, Sheraton, into a single global points currency to be used across all of Marriott branded vacation ownership clubs. Lori and Brian are gonna talk about this in more detail here in a few minutes. Growth strategy two is about leveraging technology for growth and efficiencies. You're also going to hear about continued investments in technology across our vacation ownership and exchange businesses. This example here is from our vacation ownership business. From a sales and marketing perspective, you've heard us say this, it's all about, you know, making the right offer to the right person at the right time.
Working with Salesforce, we're gonna continue to enhance our CRM processes and leverage data to generate more qualified tours that will drive higher closing efficiencies and sales. We're also gonna enhance the customer experience to fully engage customers and owners and deliver an enhanced digital experience across the entire customer journey. Finally, our ability to deliver 55%-60% normalized adjusted EBITDA free cash flow conversion in the past has allowed us to successfully acquire and integrate ILG and Welk. In fact, and since we started repurchasing shares in 2013, we've repurchased nearly 20 million shares for $1.7 billion and have issued almost 22 million shares worth $2.6 billion as part of the ILG and Welk acquisitions.
The result is our adjusted EBITDA is up roughly 500% since 2012, and we were able to offset almost all of the shares that were issued from the two acquisitions, from the share repurchase with the share repurchase program at a much lower average price per share. We expect to continue to evaluate opportunistic and strategic M&A, expand our portfolio of leisure-focused travel products, and repurchase shares and provide dividends, delivering even more shareholder value as we target a 65%-70% adjusted free cash flow conversion for the future. All that is after investing in our organic growth through new development projects and strategic IT investments to grow our resort system and sales. Here are the growth targets over the next few years, which we expect will result in a strong compounded adjusted EBITDA.
Tony's gonna discuss these in more detail in a few minutes. In summary, we have an experienced management team that has delivered strong growth and results, and we've recovered quicker than our peers and the industry from the pandemic due to our iconic brands and proven resilient business model. Over the last 10 years, we've grown the business rapidly through both organically and through accretive acquisitions with a disciplined approach to returning excess cash flow to our shareholders. That has allowed us to deliver a 20%+ compounded annual growth of our EPS over the last 10 years. We have clear growth strategies as we expect to drive 7%-10% annual contract sales growth and 7%-11% adjusted EBITDA growth.
With that, it's my pleasure to welcome Lori Gustafson to the stage to talk more about all the exciting things we're doing in the brand and digital arena. Lori.
Thank you, John. It's incredibly exciting to be with you all today, and I'm going to talk a little bit about our powerful strategy underway, which is really about our digital transformation and business transformation, driven a lot by our brands. Let's dive into it. You can see here we've got three key areas, and we're gonna start off by talking about our great brand portfolio. Hard to replicate this brand bar, as each are powerful, trusted, globally recognized premium brands and each with a high level of customer preference and satisfaction. What does our brand portfolio provide? First, our brands give us a solid customer base. That base is built on the lodging loyalty programs, with the largest being Marriott Bonvoy, with 164 million members across 30 brands, and World of Hyatt, with 30 million.
I'm sorry, with 30 brands or 19 brands and 30 million members. Great base. Second, the power of the Marriott and Hyatt brands give us a great opportunity for global expansion, which John just touched on earlier. Last, Interval International is a leading exchange provider with a 45-year history and prestigious affiliations like Disney Vacation Club. In summary, our brands provide a great foundation for innovation and growth. How will we use our powerful brand foundation to transform and grow in the future? Let's take a look at some trends driving travel and digital innovation. One, you can see here there is pent-up demand for leisure travel. We're all seeing this in the marketplace. We know this to be true. Two, leisure travel is back and booming and is anticipated to grow at a CAGR of 22% between 2021 and 2027.
Third, digital is the channel of choice when it comes to travel. Two years ago, less than half of our owners' points reservations were made online, and today, that number has grown to more than 50%. With our Interval business, more than 50% of exchange members are transacting on Interval's website and mobile app, and we only expect that trend to continue. Fourth, the next generation of travelers are further driving the leisure boom. In fact, 67% of millennial respondents want to book a once-in-a-lifetime vacation this year. We are also seeing this trend in our business, with 66% of first-time buyers being Gen X or millennial. Lastly, vacations and leisure are all about experiences. As a company focused exclusively on vacation experiences, we are perfectly positioned to meet this need. How are we addressing these trends?
How do we appeal to the next generation of traveler? How can we provide a new level of service leveraging best-in-class technology solutions? Well, let me introduce you to our Vacation Next Initiative, our answer to designing the vacation ownership experience to current owners and the next generation of travelers. Vacation Next is a multiyear journey, and it's gonna do three things. First, it supports unification of our Marriott-branded vacation ownership product and introduces a new owner program, which is Abound, and we'll tell you more about that. Two, it connects our powerful Marriott brands into an integrated, singular digital experience. Three, it transforms marketing, sales, and service for owners and our next generation of travelers. Vacation Next is really our overall program and kind of big picture enabler for our business transformation efforts.
To illustrate this a bit more for you, let's turn to this video so we can show you what Vacation Next is all about.
Introducing the Vacation Next Initiative, Marriott Vacations Worldwide's answer to what the next generation of ownership looks like. It includes flexibility and access to a broad portfolio of destinations, personalized experiences, and a more seamless transition from online planning to actual vacationing. As a part of this multiyear transformation, we are launching Abound by Marriott Vacations, an exclusive owner exchange and benefit program that provides access to a combined portfolio of premium branded resorts and experiences around the globe. The Vacation Next Initiative also enables an integrated, customized digital experience with transformed service that helps simplify how our associates work and enhances how we market, sell, and service our products to current and future owners. We know the world wants to go on vacation, and at Marriott Vacations Worldwide, we're more than just vacation ownership. We're about vacation experiences.
As part of our Vacation Next effort, we are bringing to life Abound by Marriott Vacations, set to debut later this summer. It is an exclusive new owner benefit and exchange program which provides more options and access for owners. Today, owners have to call an agent in order to book a vacation experience outside of their specific club or type of ownership and navigate multiple web experiences. With Abound by Marriott Vacations, we have integrated our five Marriott-branded vacation ownership clubs into a single program that simplifies our offerings, unifies our vacation ownership products with a common currency, which we will call Club Points, and amplifies program benefits.
Through this new program, owners have access to 90+ vacation club resorts, more vacation experiences including 2,000 cruises, guided tours, and more, access to the 8,000+ Marriott-branded hotels through Marriott Bonvoy, and continued ability to leverage and use Interval International from an exchange perspective. In summary, with Abound by Marriott Vacations, vacationing is about to get even better with more brands, more destinations, and more choices. As I mentioned before, Vacation Next has three elements. Let's turn to the second, which is all about enhancing our sales and marketing process through new tools. To illustrate this, let's imagine that James, who's in his early forties from Florida, is looking to take his family on summer vacation. He receives a direct marketing offer from us for a preview package to go to Saint Thomas.
Up until recently, he would have had to call us to purchase that package and then call us back to finalize dates and preparation for his trip. In our future state, leveraging Salesforce, this will help significantly enhance our marketing and sales capabilities by delivering new tools. First, we're gonna be digitizing the online preview package purchase and activation process that James just experienced. Second, we'll be using personalization to better target leads with the most relevant offers and then continue a personalized pre-arrival journey by giving prospects new planning and booking tools. Lastly, for our marketing and sales associates, we'll be delivering next best action recommendations to inform which offers and destinations to lead with when speaking to prospects about their next vacation. Clearly, this has several benefits, most notably driving efficiencies by reducing the number of manual steps it takes to convert leads.
Moving on to servicing our owners, which is another key enhancement on our Vacation Next journey. We're doing this by consolidating our owner reservation platforms, which will lead to more personalized service and an increase in productivity among our associates. To illustrate this, let's imagine a recent new owner named Susan. She's in her fifties and calls to make a reservation. On the other side of the line, our vacation ownership advisors have to navigate over nine different systems or applications, and today see a pretty limited portfolio or I would say profile of Susan's preferences. Leveraging Salesforce for our owner servicing teams, we'll have a holistic view of Susan's transactional history, usage patterns, and we can proactively recommend ways for her to use her ownership.
We'll also be delivering owners like Susan a one-stop portal, kinda online access that reduces the number of times she has to call, so she can see all of what she owns right in one view. All of this will deliver an improved owner experience, an improved owner onboarding experience, and we believe will greatly increase engagement, thus reducing rescission in the future. Another key work stream for us is delivering a modern and end-to-end data capability and platform so that we have a holistic view of our customer, both on the prospecting side and current owners. Today, imagine Ben, a customer who shares his information about his vacation preferences with us or with a sales executive.
Well, that data, all the data and insights that Ben shared during that discovery process stays at the sales table and isn't captured into any singular source for future use across marketing, sales, or service. We know that data is an asset, and through new tools, we'll be able to give sales and service associates much more information about Ben and keep it all in one singular place. They'll be able to see Ben's profile, ownership and usage, tour history, vacation preferences, and all the historical information that's relevant. This will serve as the foundation for all personalized messaging, offers, and engagement, and will drive a consistent customer experience across all touch points. Let's talk about all of the benefits from our Vacation Next program.
For owners, it enables better flexibility through a unified product in a single global points currency, club points, and access to a full view of their ownership through self-service way. For our associates, it results in simplified processes and a better view of our customer, which I shared before positively impacts sales, marketing, and service. For the business, here are a few key milestones from selling a unified product to onboarding owners online. We expect to deliver $25 million-$50 million in incremental value to the business. Brian will go into more detail later today in terms of the sales and marketing upside as a result of this important initiative. We spoke all about our Marriott Vacation Ownership business. Now let's move to Hyatt. As a reminder, we purchased Welk Resorts in April of 2021 to grow the Hyatt Vacation Ownership business.
Since then, we've invested in a brand narrative for Hyatt and converted Welk to Hyatt Vacation Ownership by introducing the Hyatt Platinum Program. These efforts will accelerate growth on the Hyatt side, and Stephanie will speak to them later today. Building a brand just isn't about a new name and look. Building a brand is about connecting with the target customer and offering a great product that drives business growth. We started with consumer research of our Welk owners and then really dug into what the Welk Resorts were known for. This research helped serve as the starting point for how this unified brand will deliver world-class experiences and great vacations. We then looked at Hyatt's reputation and heritage as the cornerstone. Hyatt's reputation provides trust, expertise, and genuine care to deliver vacations that lead the industry.
United, these two become Hyatt Vacation Club with a culture of vacation champions who are passionate about vacations and the differences they make. At Hyatt Vacation Club, we believe in the power of a great vacation and that vacations make humans better. Let's see how Hyatt Vacation Club comes to life in this quick video.
We believe we should all know what we work for. For memories that shouldn't just be pictures on a cell phone. FaceTime that should really be face time. For smiles, lots of them. Over breakfast, over lunch, over dinner, over a campfire, over anything, really, because smiling is a good thing, and laughing is too. For play, play, and playtime. Lazy times in the hammock. The dive in the pool. The slopes on the mountains. The 100th round of golf. For a week, for life. We are for vacations, for getting back lost time and for making time. We are vacation champions because vacations make humans better on and after and in every way. For a better world, a happier world, a kinder world, a more wonderful world. Pack your bags, people.
Okay. Moving over to our exchange business. At Interval, we are looking to broaden the brand's appeal and deliver a new member-centric digital experience, making it more convenient, more personal, and inspiring to search and book through our digital channels. Jeanette will speak to this later today, but at a high level, we will be applying our focus on modernizing, enhancing our data and analytics platforms, and delivering new digital solutions that will drive member retention and share of wallet. A good example of this is leveraging Adobe Campaign to drive more one-to-one or personalized messages. Through Adobe and other technology solutions, we'll reinforce the value of membership by educating and wowing our members in critical vacation planning and booking moments. Okay. To bring it all together, let's talk about the strategic priorities that are gonna unlock growth.
As we talked earlier, priority one is about delivering a next-generation vacation ownership experience powered by Salesforce and delivered in an omnichannel way that's relevant to our customers. Priority two is about delivering modernized data platforms and predictive analytic capabilities. This will help us accomplish several things, including better targeting of our prospects, segmenting our customer bases, optimizing tour flow by understanding propensity to purchase, and applying business intelligence solutions to make data-driven decisions. Lastly, priority three is about maximizing the power of our brand portfolio. For the Marriott Vacation Club, it's all about differentiated experiences and unique brand positionings. For Hyatt Vacation Ownership, we will accelerate growth by building on our new Hyatt Vacation Club brand. For Interval, we will reenergize the brand and create a member-centric digital experience to broaden its appeal. In summary, I'd like to leave you with these four takeaways.
First, our best-in-class brand portfolio will fuel growth. Second, through our investments in data and analytics, we will deliver more personalization and a single view of our customers, helping to fuel our business. Third, vacation ownership is being redesigned for the next generation of traveler who desires experiences and views travel as highly aspirational. Lastly, through digital, we will transform how our associates work, how our owners and members experience and interact with our brands. As you can see, we have an incredible journey ahead of us with the best brands in the industry. I appreciate the time and, at this point, we'll have Steve join us as the moderator to do a Q&A session. Thank you.
All right. Have John come up and rejoin us. We're gonna do questions and answer. I'm gonna ask something particularly for the benefit of folks that are on the webcast. If you would raise your hand, and when someone with a mic comes to you to ask your question, please identify yourself and your organization, and then, of course, proceed with your question. I'll do our best to figure out which of us is gonna try to answer that. Okay? Who wants to go first?
Got some over here.
Well, good afternoon. It's Farshid from Jefferies. You know, Abound sounds like a great initiative and opportunity for owners. Can you maybe help place additional numbers around it and how you kinda think about the long-term opportunity?
Lori?
We definitely can speak to the growth targets. I mean, the growth targets are sort of baked into the numbers we share, but we definitely think it strengthens the value proposition significantly at the table. You know, for us, it's all about new news and, you know, being able to say to an owner, "Now you can go to one singular location and access this entire Marriott branded portfolio," is differentiated in the industry. You know, we also believe in our categories is able to say the same. You know, as we think about growth, I mean, Jonathan-
Yeah.
Can speak to that too. We can talk a little bit about that too.
I mean, you don't wanna look ahead, but Brian's gonna talk more about, you know, the sales growth prospects, including this value proposition with the new club. There'll be more discussion on that. Yeah, obviously, you know, heretofore, we've been selling the Marriott Vacation Club, the Westin, the Sheraton Club, and they, you know, have different use options. Obviously, the portfolios are smaller on the legacy Westin and Sheraton versus the Marriott. The opportunity really of bringing this all together, and especially for the Westin and Sheraton owners, and we've talked about our Explorer program within Marriott Vacation Club. The Marriott Vacation Club Explorer program, that's your ability to go on African safaris, go to the Super Bowl, you know, 8,000+ vacation experiences that you can use your points for.
The Westin and Sheraton had some things around cruises, but very limited, right? Now those owners are, and you know, as you sell a consolidated product and the Abound, if you will, brings that all together, you know, that's what customers want. They want more flexibility. They wanna be able to use their ownership on things outside necessarily of going on a vacation club every year. We've historically, on the Marriott side, seen roughly 20%-25% of our ownership base opt into these Explorer programs. They're great value additions in terms of how people think about vacationing. Clearly, people want experiences more and more, and this really adds to that across the portfolio.
Okay. Who's next?
Hey, everyone, and thanks for taking the time. Just wanted to ask about the booking process. There was a lot said there about the difference between digitization and actually calling. Legacy, historical. You guys have done a lot of calling between your guests and the booking process. Maybe you could just clarify for us, at what point now in the new process would you actually have to call to book as a member or call to book in the pre-member process? If you could in any way quantify what you think is lost historically on the conversion between.
Are you talking about booking packages or are you talking actually?
Well, both.
Both.
Booking packages as well as existing members, you know, what you can do online versus what you need to call for.
Yeah. Yeah, I mean, today, it's gotten better, I think, you know, the owners are booking, you know, call it roughly 50% of their vacations online, right? You know, heretofore, it's really been booking within the system of vacation ownership. When I talk about all those Explorer packages, you clearly would have to call, right, to do that. You know, envision a world in the future with, you know, whether you're on your computer, omni-channel, right? On your phone and app, right? Where everything that we can offer, tens of thousands of vacation options, right? You can do it right on your phone. I mean, that's gonna take some time on the technology side, but that, in my mind, is where you wanna get to. That's what the customer expectation is at some level.
I mean, it's hard to say, but you know, we've offered the online booking on packages. We've talked about that historically. It's hard to say, but clearly if you click on something, and now you either have to call or it gives you a number to call, right? There's a lot of people that are gonna X out of that, right? Now you can actually book and book your vacation, right? Your package online, right? I think you're gonna see better conversion. Clearly, everything we wanna do, more on the analytics side of making that right offer to the right person, right? That ultimately is gonna be more likely to buy timeshare when they come.
That's a lot of all the things that we think we can improve and enhance through technology, and a lot of the initiatives you'll hear us talk about with Salesforce and things that we're gonna be working on.
I would just add, you know, one of the idea of connecting it between marketing, sales, and service. Today, you know, we don't have that horizontal view, so the power of being able to kinda capture that information when you click on that St. Thomas package. We know you're interested in beach, and you love the Caribbean. That's gonna carry through to the sales executive, who will then be able. When you go to book your first vacation, if you do have a question and you were to call, what a great opportunity to surprise and delight you and maybe upsell potential other options. Furthermore, if you just wanna go online and take care of all that yourself, now you have one singular view.
To be able to leverage the data and analytics on the back end of that for us as we look toward the future is really the vision.
Okay. Other questions? Neal, do you have something from-
I do. I have one from email. I think John mentioned growing sales over the next recession. Can we run through what you have seen in the past, maybe 2008 and 2009, and maybe why growing contract sales over the next recession could be possible?
What was the last part? Why?
Why growing contract sales over the next recession.
Sure.
Could be a possibility.
Yep. When you think about the sales at the table, right? We have a very structured offer, right? Based on the environment. The more you buy, you get a greater discount and then you also get first day benefits and things like that. The great thing about timeshare is if you see some softness in the market, you can adjust the offer, right? You can offer a little bit more incentive, especially for owners. Owners who have been in and they see what, you know, some of the pricing or what the first day benefits look like, when they see those opportunities, right? They might be waiting for that to reload. Historically, being able to adjust that offer is what gives you a lot of the ability in a normal recession.
I would also say I don't know about, you know, for everybody in here, but I do think vacations in general, especially on the customer demographic that we target, not really discretionary anymore, right? When you think about your budget. People are going on vacation every year. I go back to the financial crisis. Steve and I used to joke, you know, I knew somebody, their house was under foreclosure, but they were on vacation, right? I mean, it's in a lot of people, that's a major part of what you wanna do and you need to do every year, right? Get on vacation. That demand, even in a higher recessionary environment, I think with the customer demographic, I mean, our first time buyers are typically 50.
Our owners, you know, call it 60, and a household income of, you know, $130,000-$140,000 a year. Our owners have a, you know, self-reported net worth of $1.5 million on average, right? That customer is pretty resilient. I think the ability to adjust an offer, but at the same time, our customer demographic, even in a higher recessionary environment. More generally, like I said, if you go back over the last 30 years in normal recessions, not the financial crisis, but who knows what this recession, if it happens, what it looks like, the depth, the length and all that. We, you know, have those proverbial levers that we can pull to help drive business.
On the exchange side of the business, go back to, you know, the financial crisis, their revenues actually EBITDA grew, right? People own their timeshare. They wanna exchange, they wanna go on vacation. It's just very resilient.
I'd also like to recognize Jason Gamel. Jason, can you just raise your hand? Jason is the president of the American Resort Development Association, which is essentially a timeshare trade association. The numbers that John has been reciting have borne out in what he's characterized as the normal garden variety recession, that in fact, the industry has grown during that period of time. This isn't just an MVW phenomenon, this is actually something that's been across the industry, largely because we do have other levers to pull in an environment where there is maybe a little bit more price sensitivity, because we can do things creatively in terms of providing additional incentives for people to buy.
We feel reasonably confident that if the R-word does rear its ugly head in the not-too-distant future, that we'll have an opportunity to not only fare that fairly well but actually, do pretty well through it. Other questions?
Hi. Can you just go through in a little more detail the legwork behind the scenes to be able to go cross-brands and cross-platforms and equitize the points, and why that's a differentiator and why it's not easy for everyone to do? Then also mechanically, is the Abound incremental? So is it extra cost, or are you automatically opted into that? Or how does that work for as you have your existing and new members?
I'll start with the first part, and then we'll ask Lori to chime in on the second part. There is no question that when you have three different platforms, whether it be Marriott Vacation Club, Westin Vacation Club, or Sheraton Vacation Club, they were all started in different iterations, different currencies, et cetera. Trying to find the common denominator between those and make sure that no one is disadvantaged as a result of joining Abound, which in fact is just another overlay. It's another use option that you have. If I'm a Sheraton member and I don't choose to become a member of Abound, that's fine. I still have everything that I bought. If you're a member of Abound, what happens is there's a currency translation for what was Sheraton currency now into the Abound currency.
There's the mental gymnastics of going through how you control inventory and point levels and all the other things. There's also the regulatory side of things. Our legal department, working with, not only our team, but also some outside entities, have worked very hard to make sure that we can get to this point without tripping over anything. Because let's face it, timeshare is a regulated real estate product. We have to go through those kinds of things. Of course, there's the whole communication.
Internally communicating and training our associates about what's different about Abound versus what they were selling before, and also how we communicate that to our owners so that they understand what benefit's gonna come to them as a result of choosing to avail themselves of the Abound opportunity. Regarding the additional, I think you said incremental cost to owners, et cetera, that's a very easy answer.
It's completely additive, and there's no incremental cost to an owner. This is a great, again, value proposition, another reason to buy, another reason to be part of, you know, the Marriott Vacation Club family. As it relates to the technology, it is a journey. We're simultaneously retiring legacy systems and really moving to more modern solutions. We've referenced Salesforce numerous times. We're looking at that across, you know, multiple brands. We're sort of making these product changes at the same time as we're also trying to, I would say, leapfrog a bit from some of the legacy technology solutions that we acquired and some of the technical debt that we've had. That's a key differentiator in this whole process.
We believe it's about a three-year journey for us. We've already begun that. We're about a year into it as we speak, and this was sort of Abound is really sort of the first we just talked about. Really moving the booking, all the booking, you know, I'd say the booking path and all of our web experiences, everything moves over so that we have opportunities to continue to innovate and grow.
Is that one sale?
Let me ask you to repeat the question for the folks on the webcast, please.
Would that be one sales motion across all the brands, or will they each have their own flavor of Abound through Sheraton and Hyatt and Marriott?
Abound will be consistently presented, but when you go to a Westin Vacation Club, you'll still I mean, that's a Westin Vacation Club experience, so we wanna keep those resort experiences really distinct that, you know, if you are just, you know, a loyalist to Westin only, that's wonderful. If you wanna be able to elect, and that's a yearly selection, that process that you'll get the opportunity to do. If you wanna participate and kinda jump into the pool one year but not do it the next, you will also have that option.
It's very much being able to sort of say, "Okay, I'd like to maybe see what else I can do with my points." There's a lot that Brian will also speak to about how, from a business perspective, that gives us a lot more flexibility, you know, in how we sell our product and how it's the makeup. There's some upside into product costs and things of that nature too.
Otherwise, yes, question right here, please. Thank you.
Thanks. So you updated guidance this morning based on greater owner percentage in the business, right? Is there a leading indicator that gives you guys a sense for how long that persists? I know you said 2023, you expect more normal mix in the business. Just was wondering if there's kind of an indicator that you look at. Secondly, as you go through that normalization, can you just talk about how that affects the business, whether it's the VPGs or other KPIs that you guys look at or other things we should think about in terms of the overall profitability?
Yeah. I'll start, and John, I'll ask you to chime in. The numbers that you see in our presentation have anticipated the updated guidance that we announced this morning. You don't need to layer in anything on top of that to say, "Okay, I gotta add $100 million or something like it to the base case." As you'll hear Brian talk about, in particular, in the areas of VPGs, we believe that while there will be some. I mean, VPGs have been very robust. We've reported that each quarter that we've been going forward. While as you increase the percentage of first-time buyers that traditionally have a lower VPG than existing owners, arithmetically, you get a little bit of change in the VPG.
Based on everything that we see at this point in time, based on demand, on what our updated tour flow looks like and everything else, we expect VPGs to remain reasonably high relative to what they have been in the past. Again, those numbers have been baked into what you see in the presentation in front of you. That was part of your question. I'm sorry if I didn't get to all of it.
It is? Okay. I just was wondering if there was something you guys look at, so obviously demand overall, right? But is there a way that you can look at unused points or anything like that gives you a sense of how, you know, much, you know, how much sort of pent-up demand we might have from the owner's side?
I'll give you a stat for what it's worth, and we update this, you know, every quarter. So for instance, one point of reference, and as you can appreciate, oftentimes, particularly because of the pandemic, many organizations point back to pre-pandemic 2019 as a reference point. So here's one stat for you. If you look at the reservations that we have on the books for the second half of 2022, for both owners and preview guests, those numbers, those room nights are 14% higher than they were at the same point in time in 2019, looking towards the end of 2019. 2019 was a pretty good year, right?
We've also looked at those advanced bookings into 2023, et cetera. They look reasonably strong. I'm not gonna share with you a number because it's a little early yet for some of the 2023 stuff. To say that we hadn't taken that into consideration as we started to put forth in our projections as we go into 2023, 2024 and 2025, that would be misleading because we certainly have. Question right here.
On page 12, you talk about your performance versus HGV and TNL. Can you talk about what you believe is driving that outperformance?
Well, I think the first thing I would point to is the strength of our brands. Nobody has the stable of brands that we have, particularly in the upper upscale and luxury segments that we enjoy. I couple that with, you know, we're almost 40 years old as a company, and we've been to this rodeo a few times, and each time, we have continued to try to enhance the performance of our sales and marketing organization. And I would put our sales and marketing organization up against anybody in the business in terms of their ability to not only uncover potential prospects, but also get them to a point where we can present the product to them and hopefully make a sale. I think that's what leads us to this.
The fact that, you know, there was a whole lot of pent-up demand during the pandemic. I mean, we saw it come running back in the summer of 2021. It in fact had not the Omicron variant reared its head in August of 2021, we would have even had a better 2021 than we had, which was a pretty good one relative to the others. I think those things coupled together have led us to this outperformance. Not to say that this is not intended to be a shot at those two organizations at all. It's just facts.
Thank you.
Okay. I got time for one more question. I got the signal from the back. Any other questions either in the room or from the webcast? Okay. Just a reminder, we're gonna take a quick break. We're gonna give you about 15 minutes for your break. My watch says it's 1:40 P.M. If you could plan on being back at 1:55 P.M., I would appreciate it. We'll go into the next section, which is about our exchange and third-party management business and our vacation ownership business. We'll have a similar Q&A with Jeanette, Brian, and Stephanie. We'll go through that. We'll bring Tony up, he'll do the numbers, and then all of us will be up here together to answer any further questions you have.
If you said, "Oh, I should have asked that," and it didn't come up, just jot it down. You'll have another shot at it. Okay? All right. We'll see you in 15 minutes. Thank you.
If everybody could find their seats. Hi, if everybody could find their seats, we're about to get started in a few minutes. All right. At this point, it's my pleasure to welcome Jeanette Marbert, our President of Exchange and Third-Party Management. Jeanette.
Hi, good afternoon. I'm Jeanette Marbert, President of MVW's Exchange and Third-Party Management segment. To begin, I will share an overview of the businesses in our segment, and then focus on the core strengths of our proven business model and those we are leveraging for growth, and conclude by providing insight on our strategic growth initiatives. This segment consists of two businesses, Interval International and Aqua-Aston Hospitality. Interval is an established, well-respected brand in the vacation ownership industry. It operates membership programs for timeshare owners worldwide and provides value-added services to our members, developer clients, homeowners associations, and other affinity groups. Foundational to the Interval business is its exchange network of nearly 3,200 resorts around the globe and the 1.6 million families who are members of this network. Aqua-Aston Hospitality is a leading resort operator based in Honolulu, Hawaii.
It manages full-service resorts, stylish boutique hotels, and condominium resorts to deliver leisure lodging across a broad range of consumer preferences. Aqua-Aston Hospitality has a strong presence in Hawaii, with most of the managed properties located in the Hawaiian Islands. It operates under its own proprietary brands and also as an approved manager for properties branded by Marriott International, Hilton, and IHG. A key focus for this business is expanding its presence through recognized global hospitality brands. A key attribute of this segment is that it delivers significant free cash flow back to the company, as its business model is asset light and its capital needs are low, historically in the range of 1%-4% of revenues. In addition, a significant portion of its revenue is both recurring and predictable.
This is primarily a by-product of the membership model for the Interval business, which is the majority of the segment's adjusted EBITDA. Given the significance of the Interval International business to this segment, we'll now dedicate the rest of the time to this business. The Interval Exchange business has several compelling attributes and key strengths. I'll touch on each of these items in the coming slides. First, Interval has a proven business model. Founded in 1976, its focus has always been about quality, affiliating leading resorts in key regional and international destinations. We have maintained strong multi-year exclusive relationships with resort developers globally with an average tenure of 18 years among our largest clients. We serve members that own a variety of product structures, including points-based vacation clubs, traditional week-based timesharing, fractional resorts, private residence clubs and all-inclusive vacation clubs.
Through our core exchange memberships, we provide customers with the ability to exchange their usage rights to a particular resort or club for a different resort, hotel accommodations, or other leisure accommodations such as a cruise or an experiential vacation. In addition to the ability to exchange, all our membership programs offer leisure travel services with special member pricing on many of the offerings. We also offer non-exchange membership programs which leverage all the core capabilities developed for the exchange customer. This has broadened our addressable market. Second, the Interval business has proven resilient during challenging economic times. During the Great Recession, Interval member revenues grew while industry vacation ownership sales declined. The pandemic also had a well-documented impact on the global travel industry. For the timeshare sector, while U.S. vacation ownership sales were down more than 50% between 2019 and 2020, Interval fared much better.
These demonstrate Interval's resiliency and the stability of its revenue streams. These revenue streams are both recurring and predictable, with 38% coming from membership fees and 60% generated from predictable transaction revenue due to the prepaid nature of the vacation ownership product. Additionally, through the pandemic, the segment driven almost exclusively by Interval continued to maintain high margins, which is another key strength of the business. Interval and the timeshare sector, in general, are well-positioned coming out of the pandemic to capitalize on market trends. Timeshare is 100% focused on the leisure segment. Many markets have already returned to pre-pandemic demand and occupancy. This should result in new member growth for Interval as more developers return to their pre-pandemic levels of new member generation.
The Interval global network of resorts includes the top-tier brands of our parent company, in addition to quality independents and world-class brands, such as the recently affiliated Disney Vacation Club. Our resort network is comprised of properties that are generally professionally managed with amenities, such as pools or other water features, also offer experiences unique to the destination. All of this is in line with consumer trends and preferences, and our membership products help connect customers to these varied travel offerings, helping them make the most of their vacation time. The Interval business is also highly complementary to vacation ownership business. Owners from our parent company brands make up 39% of our membership base, and the inventory from these upper upscale properties fortify the exchange platform. This high-quality branded inventory, when deposited in the network, is highly desirable and utilized at a very efficient 96%.
Our customer base is another great strength of the business, with 95% citing exchange as a critical component of their ownership and more than 40% owning multiple weeks, which show the strong affinity to the timeshare product. These customers are affluent and highly engaged, with 54% of member families with income greater than $100,000 as compared to an industry average of 29%. I highlighted earlier how important the exchange was to our members, and in a recent survey, 53% of our members indicated that they intended to exchange within the next year, and their predominant preference is to do so via its digital channels. These highly engaged members provide Interval with insight that can be utilized to provide more personalized and relevant offers as well as evolve our membership features.
In the coming slides, I will highlight how digital initiatives and data analytics fit into our growth strategy. Now turning to our strategic growth priorities. Our key initiatives are centered on three priorities that will keep Interval at the forefront of the ever-changing travel market and creates a roadmap to reach a broader target audience. One of Interval's assets is its members. Our ability to make them feel special and address their travel needs will ultimately increase our share of wallet. I'll touch on each of these in detail in the coming slides. We all want to connect with brands now, how, and when we want to, and increasingly via digital channels. Interval's members are no different. Not only does digital deepen levels of customer engagement, it also presents opportunities for the monetization of new services.
Earlier in the presentation, I shared that 50% of our members intend to transact with us through digital channels. Our mobile app was designed so that customers can easily shop and transact with us, featuring a single search engine for exchange or rental and leverages many of the key features of the smartphone. Lori also shared the importance of enhancing the digital experience across our enterprise to drive member retention and share of wallet. For Interval, it starts with the ability to map the member journey from the moment they purchase the product to when they become an Interval member. Leveraging enhanced analytics, we will have deeper insight into our customers. This will inform our approach to creating more connected experiences and relevant content. This allows us to better meet customer expectations, which results in enhanced brand perception, deeper member engagement, and increased recurring revenue.
This leads me to our second growth priority, which is increasing wallet share by providing personalized content and products to our members. Just as enhanced analytics will support our digital-first strategy, we are also modernizing our approach to data management and customer segmentation. We are currently in the process of upgrading the way we engage our members with Adobe Campaign. This work will allow us to shift from multi-channel to omni-channel marketing and provide a seamless customer experience across all channels. To illustrate, Marcos is an Interval member and a golfer. Because Interval will have greater insight into his preferences and the ability to communicate with him more easily, we will be able to target him and others with similar interests to offer an amazing members-only golf vacation, driving an incremental purchase and growing wallet share. We will continue to leverage customer insights to expand our product offerings.
Our varied and diverse mix of travel benefits and exchange options were developed by listening to our members' needs and their preferences. We have a global member base, and we are currently undergoing a review of our product mix to ensure that we are offering products that both resonate and are relevant in our key markets. By deepening the relationship with our 1.6 million members, we will continue to increase engagement and drive recurring revenue streams, all of which strengthens our core business. While core exchange products continue to be a strategic focus, our third growth strategy involves expanding our business by building out our membership and travel platform to reach a broader audience. To support this initiative, we are using our Leisure Time Passport platform, which was originally developed for the vacation ownership industry.
Earlier this year, we relaunched this platform with a dynamic travel and loyalty portal. The platform sources preferential member rates from multiple travel suppliers on travel products such as hotels, cruise, car, and resort rentals to find the best available rate at time of booking and usually will reflect a savings below retail rates. The new loyalty benefit allows the member to earn points which can then be redeemed towards future bookings. Resort ownership is not required to be a Leisure Time Passport member, and we have a robust pipeline of membership and affinity groups that want to leverage this platform to enhance their own membership programs. The platform can also be customized for clients and be integrated directly into their own membership system. We have laid the foundation for growth and will continue to evolve this platform in the coming years.
This product expansion leverages our core strengths from our customer service expertise to our travel product knowledge to our strong partnerships and inventory sources and, of course, the insights from our 1.6 million existing members across the globe. Turning now to the segment's three-year growth outlook, we have highlighted our stable and predictable business model that has repeatedly proven its stability during challenging times. We expect between 3% and 7% compound annual adjusted growth in adjusted EBITDA. The segment will continue to provide significant free cash flow, which will assist in the growth strategy for the entire enterprise. In summary, we are excited about the future and hope you leave today with a clearer understanding of our core strengths and the opportunities that lie ahead for the Interval business. Interval is high margin and proven business model.
Our products and service complement the core vacation ownership product, and we will continue to invest in product innovation and leverage our core strengths to reach new audiences. With that, I'll turn the stage over to Brian and Stephanie. Thank you.
Okay. Thank you, Jeanette. Good afternoon, everybody. My name is Brian Miller. I'm gonna talk to you about our vacation ownership business for the next few minutes, and I'm gonna make some specific references to our Marriott-branded portfolio. I'm gonna ask Stephanie to come up and give you a more specific update on our Hyatt Vacation Ownership business. I'll come back at the end and wrap it up. The first thing I wanna do is remind you of the strength of our current platform. I wanna remind you of these five key pillars of our current platform for two reasons. Firstly, they are the primary drivers of our current performance metrics, which are at historic highs. Secondly, they will continue to provide the foundation for our growth over the next few years. Let's get started.
As you've already heard, we've now aligned our five primary Marriott brands into one global point system Abound by Marriott Vacations. Owners from all five clubs will now be able to book directly into the entire system of 90 resorts directly with our global points currency. Sheraton and Westin owners will now have access to our expanded experiences such as cruises, resort homes, exclusive owner events, and much more. All owners are now on the same ownership ladder, or what we call owner benefit levels. It's a recognition program for how much people own with us. The more you own, the higher level that you are with us, you're rewarded with higher Marriott Bonvoy status, greater experience access, just as examples. This now ties it all together for our quality tier timeshare owners, and I'll talk about what that means a little bit.
Next, I'd like to talk to you about our global footprint. John referenced footprint of our resorts. I kinda look at footprint for VO; it's comprised of three different areas. The first is our resorts and the number of villas that we have. I mean, obviously, the more villas that we have, the more owners that will be staying in those villas, the more rental guests that will be staying in those villas as prospects, and the more our preview package throughput is increased, so we can increase our package pipeline. The second area is marketing presence as part of our footprint, and that's exposure in new and existing markets and increasing that, and I'll talk to that in a few seconds. Lastly is our sales centers. Obviously, they're becoming less important.
I'm gonna talk about some of our virtual tours as well in a few minutes. All of our sales centers, they are perpetual, as John said earlier. We're always looking to upgrade and expand the tour capacity of our existing sales centers. Obviously, when we build a new one in a new market, that increases tour capacity as well. I mean, historically, for the vacation ownership business, increasing the footprint in those three areas has been a key component of growth. Continuing with footprint growth, you can see here how our brands are represented in some of our key markets globally. You can see here where we already have two markets that have all three quality tier brands, Scottsdale, Arizona, and Kauaʻi in Hawaii. We have multiple opportunities in existing markets to add our brands for growth.
We can also always continue to go into new markets, which drive even more robust growth 'cause that expands the marketing component of your footprint as well. The third strength is our continued focus on our sales process. While we apply continuous improvement to all aspects of sales, we've created some great virtual capabilities as a result of COVID. Our training, which used to be all face-to-face for new hires, is now virtual on a global basis, and it provides great consistency of delivery. Additionally, virtual sales presentations are now a growing part of our mix. I'll talk a little bit more about this later, but as an example, in our Asia Pacific region, where travel restrictions have continued in many of our key source markets, close to 50% of our sales presentations year-to-date have been virtual.
I was just with our New York team yesterday morning, and I was even surprised to find out that over 30% of their tours so far this year have been virtual. It's becoming a bigger part of our mix in all markets. As you can see, we've also made some great strides in direct marketing. We're leveraging technology across all aspects of our marketing platform. Lori talked about some of these, so I won't be redundant with those. A big win for us recently has been our increased digital access to the Marriott Bonvoy database. You saw the size of that database, and the quality of that database is fantastic. We now have better campaign-oriented access, which is driving response rates higher and greatly lowering our cost of customer acquisition.
We've lowered our tour acquisition cost by over 20% in the last 2 years in direct marketing channels, and VPGs have increased at the same time, back to the tour quality that Steve was talking about earlier. Next, our inventory repurchase strategy, which began with points launch in 2010, coupled with a growing number of first-time buyers in our sales mix, has helped to create a very engaged owner base. Every year for Marriott Vacation Club, over the last 12 years, we've bought back 10,000-12,000 legacy week owners and added about the same number of first-time buyers into the owner base. That equates to about 3%-4% of the base every year converting from a legacy week owner to a highly engaged points owner. The box on the right here shows you the higher level of engagement in numbers.
Over the last 12-13 years, we've taken a legacy weeks owner base and largely converted them to a highly engaged points-based owner group. Lastly, I'd be remiss if I didn't discuss the current market dynamics. As John said, our resorts are resonating with customers for rentals and purchase now more than ever. Our customers' savings and home values have increased substantially over the last couple years. You know, we think there's legs in this. We think our consumers will remain germ aware for some time, and so our product's gonna continue to resonate. We think the wealth effect is real with our customers, so we believe this environment's going to continue.
Even if we get into a you know, a normal kind of recessionary environment, we don't believe it's going to impact our target market, the upper middle class, like it will, other elements of the population. Okay, how can we build on this solid foundation? Let's look at where we see growth over the next few years. These numbers are meant to be directional, but we feel pretty good about them. For example, two of them, the return of international travel and hotel marketing, is simply getting back to 2019 levels and building on that, organically. As Lori mentioned, we have $25 million-$50 million of growth opportunities, which we included in this slide in the owner engagement area, that she covered, so I won't mention those.
Then the combined products represent opportunities in marketing channel expansion and increased in-house penetration, as examples. The total range here, I'll do the math for you, is about $265 million-$440 million in contract sales over the next three years. I mean, John, I think mentioned this earlier. It's no secret that VPGs have been running at historically high levels for the last two years. There are a lot of reasons for that, which I won't go into 'cause I think we've already talked about them publicly on multiple occasions. We recognize that we're gonna have some headwinds as we begin to grow again and add first-time buyers to the mix.
All the items on the right-hand side there, some of which I've already talked about, should help us keep VPGs at a very high, fairly high level. They may subside some this year as we increase tour flow with a higher mix of first time buyers. They close at a lower rate, we all know that. We expect they will stay well above 2019 levels into 2023 and beyond. John talked about our strong resort occupancy numbers. We expect them to stay above 90% for the rest of the year as demand is projected to remain strong.
March and April this year, we ran over 95% domestically in North America, which I mean, just getting the inventory lined up to run 95% across, you know, 100 resorts is pretty hard to do. We got very strong demand. We think ADR growth may subside some due to stronger comps, but we expect continued strength, particularly in our prime destination and beach locations. Additionally, most of our urban markets have rebounded nicely as well. We've talked a little bit about how this new product, Abound by Marriott Vacations, will work for Marriott owners and the Westin and Sheraton owners, but it also creates additional marketing opportunities in many markets. For example, we can now market in multiple hotel brands in a market.
Take New York here, we're just marketing in Marriott hotels. We've got a Marriott Vacation Club sales center and project. We can now go put a Westin Vacation Club desk in the Westin Hotel in Times Square or any other Sheraton or Westin product in the market, and we can bring that person through a Westin-branded process, and they'll be presented the Abound product, which will give them access to Westin Vacation Club products as part of the sales process. Any owner now of any of these brands can now tour in the same sales center, and whatever they already own, or whatever they purchase is gonna be additive now 'cause we've aligned the products on the owner benefit levels, like I talked about earlier. It's really gonna give us a lot of greater penetration in existing markets.
Lastly, virtual presentations are now opening new channel and sales opportunities on a global basis, as I've already mentioned. This was probably our most important innovation from 2020 and the pandemic. The biggest win we're getting with it is it's helping us increase penetration in our in-house channel. Those of you who are close to our business know our in-house channel is about 50% of our business, so any minor uptick in penetration there is gonna help us quite a bit. It also allows for new program development. For example, we now book 90-minute sales presentations from our marketing call center directly into our central telesales team, and it's working great.
You know, as you can imagine, efficiencies are a little bit less than a face-to-face tour, but the costs are also a lot less too, so it's a very efficient process. We expect this to become a larger component of our plan over time. I'll come back in a few minutes, but with that, I would like to introduce Stephanie to talk about our plans for our Hyatt brand.
Great. Thank you, Brian. I'm excited to talk to you today about Hyatt Vacation Ownership. Through the presentation, I'll refer to it as HVO. As you may know, MVW has owned HVO since the acquisition of ILG in 2018. Our initial focus was the integration of the Sheraton and Westin brands, as well as Interval International. In 2021, MVW announced the strategic acquisition of Welk Resorts, which was the perfect opportunity to jumpstart the growth strategy for the HVO business. This also allowed us to utilize all of the learnings that we gained from the ILG acquisition. Over the past 16 months, I have had the exciting opportunity to lead the HVO team in both the integration and rebranding of the Welk Resorts, lay the groundwork for the future growth plan, and develop the operating model for Hyatt Vacation Ownership.
On April 1, 2022, a year after we acquired Welk, we completed the first phase of integration and rebranding and successfully introduced the Hyatt Vacation Club Platinum Program. During that time, we had many accomplishments, including we affiliated the Welk Resorts to Interval International. We removed Welk from the resorts, moved them onto the hyatt.com platform from a rentals perspective, and then we integrated them with the World of Hyatt program. The team is now working on the next phase of the HVO evolution, which includes alignments of processes, standards, and experience across the HVO business, creating a master exchange, which will allow owners to utilize all the HVO properties throughout the system using a common currency while adding owner benefits. The HVO business is a classic example of changing the tires on the car as it drives down the road at 100 miles an hour.
Concurrently with integration and rebranding efforts, we are working to set the foundation for the HVO business that provides the opportunity for future growth in an efficient and cost-effective manner and continue to perform successfully every day. Here are the 4 key growth drivers to our future success that I will discuss with you today. Turning now to our first growth driver, one of the great things about HVO being owned by MVW is that we have been in the business for almost 40 years, and therefore, there's many best practices that we can leverage to benefit HVO. These includes improving the quality of tours, implementing changes in our tour pipeline, which include income qualifications, the addition of Hyatt loyalists, developing training programs similar to MVW's long-standing best-in-class programs to set sales and marketing teams up for sales excellence.
Expanding telesales and our virtual tour technology to meet the changing needs and scheduling of today's customers and grow our sales distribution footprint. On the next growth driver, we are currently selling two different products, Platinum and Portfolio, from 11 galleries. As I mentioned, we are working on a master exchange option that will allow usage across the HVO resorts using points, which we are working to roll out in 2023. This will expand our owners' usage options. This is similar to the work that is culminating on the Marriott Vacation Club side of the business through Abound. There's also work on the future product for sales, which we are estimating to roll out in 2024, which will be a single unified product that we will be able to sell in all of our sales galleries.
The third growth driver, once we have sold through most of the remaining inventory and sold out and rolled out the unified product, we will continue to grow the brand footprint. There are extensive opportunities for the HVO growth. We have large timeshare markets that HVO doesn't have a presence today, like Orlando. There's markets with adjacent Hyatt hotels, where we get the benefits of having marketing opportunity through linkage, potential integration agreements, and opportunities to share amenities and costs. This map highlights the many areas that we are currently located in, but more importantly, it illustrates the areas that there is growth potential. With each of these opportunities comes a new sales distribution, which helps us expand our footprint. The final but equally important growth driver is focusing on development profit improvement.
This includes optimization of new channels and reducing other less efficient channels in order to increase margin and top-line sales. Currently, we are working on several programs, two of the most notable being call transfer pilot. This program has been successfully used in our other brands, and the initial results from the HVO pilot has been very positive. We are currently working with Hyatt Hotels Corporation to make this a permanent program. Additionally, there is a focus on our trial program, which we call Access. This program has been successful within our business, allowing us to capture customers who tour but don't purchase an interest at that time. These programs will help increase Hyatt loyalists into our galleries, thereby increasing closing percentage, which drives down marketing and sales costs while reducing reliance on the less effective marketing channels that are expensive.
These changes together should result in an estimated development profit improvement of $15 million-$25 million over the next 3 years. As you've heard, there's a lot going on within HVO over the next several years, and there's incredible opportunity in this segment of our business. We expect to complete phase two of the integration by 2023. We're working on increasing both sales and development margin through new and efficient marketing and sales channels. We are unveiling new usage benefits for owners, which will reignite excitement for the product, and we are pursuing several opportunities for new resorts and sales locations. I'm incredibly excited about the future of HVO and look forward to updating you in the future on our progress. Now, I'll turn it back to Brian.
Thank you, Stephanie. Definitely exciting times for our Hyatt Vacation Ownership brand, Hyatt Vacation Club. We talked about our great foundation that we have in our business, our vacation ownership business. We talked about our plans for growth with our world-class brands and products. We think all this is gonna allow us to achieve a 7%-10% compounded annual growth rate on contract sales and a 6%-10% CAGR on adjusted EBITDA over the next three years. In summary, I can boil down our focus to three primary areas. First, we're gonna utilize our brands to increase marketing opportunities and expand our development strategy. Secondly, from improved digital marketing to Salesforce implementation, we are applying technology across the business.
Lastly, our product evolution, coupled with our strategies for owner engagement, like this increasing first-time buyers and implementing Salesforce, will drive continued growth from our owner base. That's it for vacation ownership. Now we're gonna turn to a Q&A session, again, moderated by Steve.
Okay, everybody knows the drill. If you have a question, raise your hand. We'll get you a mic, and we'll try to make sure we answer anything that's on your mind. Chris?
The ability to sell all of our brands packages on the same platform. We've refined our digital marketing so we've been able to have a lot more success on social media and Google with digital marketing, which has been lower cost. Just in general, we took the opportunity during the downturn, like Steve mentioned, getting rid of some OPC channels and things. We also got rid of a lot of marginally cost-effective direct marketing programs and we just stuck with the ones that are working best. You know, we switched database providers to Merkle and they're providing great assistance in advanced analytics on our program. There's a lot of levers that we've been pushing over the last couple years.
We didn't slow down during the downturn, but now let us come out of the blocks here with this travel demand to be a lot more cost effective. What was the second part? Does that have application where?
Yeah. The second part would just be, can you re-pivot, you know, if we have some economic weakness, right?
Yeah, right.
It becomes a little easier or harder to get the first-timers in. Can you still keep acquisition costs down, or how do you pivot back?
Yeah. You know, again, we're direct marketers, so we don't have a big media spend out there that we have to keep, you know. If we're not getting the response levels that we need to be cost effective, we can dial back our spending. If we're not getting the tour flow that we want, we can dial it up and just deal with a slightly higher cost of acquisition. We manage it in our overall mix. You know, marketing is about 12%-13% of our cost of sale. It, you know, if it went up 10%, it's not the end of the world. If we can continue to retain the VPGs that we're achieving, then we'll cover it.
Okay. Patrick, mic coming to you.
Thank you. In this morning's press release where you raised the full year guidance, you had noted high owner usage at your existing vacation ownership resorts. Does that, I would say, limited unoccupied units change how you think about the need for new development going forward?
Yeah, I'll take a shot and then invite anybody else to chime in. We have about $600 million worth of excess inventory today on our balance sheet. That's a kind of a combination of several things. One, of inventory that we acquired partially because of the Welk acquisition, some residual inventory left over from the ILG acquisition, plus coupled with the fact that we were building into 2019, for example, we were building into what we thought was gonna be the sales velocity for 2020 and 2021, et cetera. Obviously, as that fell off, we still had a number of projects that were in some stage of completion, and so we concluded that. I think what will happen here is, obviously, as sales continue to be robust, we will hopefully burn through that $600 million quicker.
As a result of that, we will be back, you know, looking for new resort additions, et cetera. We'll try to do all of that in a capital-light fashion where we're essentially renting somebody else's balance sheet, so we time the cost of the inventory to our sales velocity. The other thing we'll look to do is to try to do it in markets where we don't have a sales presence today. We then establish a permanent sales distribution channel in those locations. I think there's a couple of different things at work here, but that should give you some indication of where it is.
I will also say to you that we have built into the numbers that you've seen in front of you some already capital money that we're putting in to begin starting to identify those new locations because it takes 3, 4, sometimes 5 years to bring a new project online from the time that you identify the opportunity until you actually are able to open the doors.
Thank you.
Steve, can I also add to that? 2022 is a bit of an anomaly year in terms of owner demand because we had a lot of people that didn't get a vacation in 2020, and we gave them points, replacement points, that had a shorter booking window. We're getting unusually high owner demand this year. All those points expire at the end of 2022.
Okay. Thank you. Another question. Have you been raising the interest rates that you are charging your buyers? What have been the latest trends on that?
Yeah, we just. Did we already raise them, Tony? Or we made the decision to.
We made the decision to.
Yeah, I think in the next month we're gonna increase them a little bit, but not just marginally. You know, we've got sophisticated buyers who have access to capital that's, you know, our average coupon rates in the 13%-13.5% range. You know, that's not overly attractive to our clients. You know, we've incent them to take our financing and, you know, a good 55% of them, 60% of them do. It's good business, as you know, for us. No, I don't think we're gonna. We're not gonna be able to do it in conjunction with the cost of funds that we're seeing in the market. You know, we think our customer can maybe, you know, another half a point or point we might be able to get over the next year or so, but that's about it.
It's the blessing and a curse of dealing in the tier that we deal in with a relatively sophisticated buyer. Oftentimes in the timeshare business, a timeshare customer would take a look at financing as simply what's the cost of the monthly payment. Our folks have a tendency to actually look at the disclosure agreements and everything else and find out, and they reach a kind of, I don't know, philosophical ouch point when you get a little further up the tier because they say, "Hey, you know what? I have the wherewithal to write you a check." Instead of taking your financing, I'll write you the check. Well, by holding that coupon rate a little lower than what maybe some others would do, you're still getting a pretty meaningful spread between the cost of funds and what your coupon rate is.
If you, in fact, continue to raise it and drive that person into writing a check, you get zero money on the financing side. It's kind of a delicate balance. We have probably done 25 different experiments that I have seen in my years that I've been with the company where we've tried to do this. We've tried to say it was 0% financing for six months and all the other things that go along with that. We think we pretty much understand how this works. You know, your point, I think is the obvious one, which is that as the base rate goes up, obviously it does affect our spread a little bit.
At the end of the day, we think it's all manageable because as you continue to drive additional contract sales through the top, if you still keep that same financing propensity at, call it, roughly 50%-60%, you're still getting incremental volume coming through, so your financing revenues don't suffer as much as you think it would be.
Thank you.
Thank you.
Yeah, a question. I think when we did this three years ago, you gave the same contract sales and EBITDA growth targets, but you broke down the four areas of the VO segment, like development, financing, rental, and management with the EBITDA CAGR. I was curious if you could do that now, like, or at least qualitatively, what those four areas would grow at over the next few years.
Yeah. I think maybe you might wanna just hold that question until you see Tony's presentation. I think he can get to some of that for you. If we don't lay it out exactly as you'd like, we can certainly come back to you with what you're looking for. I mean.
Sure.
Here's the reality. When we did an investor day in October of 2019, a lot has changed since then. The point I tried to make in my opening remarks was that, when you look at the contract sales number, at least if you take the high end of our guidance that we issued this morning, we're at least at the low end of what you would've thought, you would've seen in the 2019. I actually think that's fairly remarkable. I think if we took a survey of people and asked, you know, "What did you think that would be?" I don't think anybody would come close. Let's keep your question, if you don't mind, relevant. When you see Tony's, if we don't get the rest of it answered for you, we'll come back to you.
Sure. Just to follow up on his question about the financing, and you said, yes, the rate may come down, but the spread might come down, that you're earning against the cost, but if people have the same financing propensity and you grow the sales.
Right.
The top line might grow. Do you think that the EBITDA or the profit from financing will grow over this time?
Well, it.
Like in absolute dollars.
If you think, keep in mind, we've got quite a substantial portfolio of mortgages that's already been out there, and that's not gonna get affected by what's going on. As you think about it, if where we used to make 1,000 basis points between our coupon rate and the cost of funds, let's say that comes down to 900 or 800 basis points, your per mortgage profit will come down. Couple that with the fact that as sales continue to accelerate, you've got more sales taking a mortgage. On a pure numerical basis, you may not have as much of a dip. On a per mortgage basis, yes, you will see a decline. This. There's an ebb and flow to all of this. We've seen this before.
I mean, let's face it, when we were doing securitizations at, you know, 1.5% cost of funds, as recently as last fall. You know, that was extraordinarily low, historically from where it's been. We didn't lower the coupon rate then. We just made more money. As things go the other way, you take a little less, but over time, it basically evens out.
Thanks.
Other questions? Right here. Aaron?
Hi. Thank you. You had that slide showing the VPGs are up pretty significantly from 2019, and there's a number of reasons for that. My question is, have you increased prices relative to 2019 in terms of, like, just points that you're selling? I don't think you have, but can you confirm that? I know there's elasticity here and ideally you want more owners because then they're gonna be contributing more money over the lifetime. Are we at optimal prices where you're selling your timeshare points today, or do you think there's a lever to pull where you should be raising prices on these point sales?
Well, if you go back to our long-range plan in 2019, we had essentially a 3% annual price increase, kind of slightly above inflation built into our model. We obviously discounted pricing heavily in 2020 in order to reignite sales from a direct sales standpoint. Since then, we've increased our price. We're actually at the end of this year, we'll be ahead of that long-range plan and pricing from 2019. Yes, we have increased prices back. You know, in this inflationary environment, we've got to keep looking at it.
Tony's gonna talk about impact of inflation on our business, and there's not a huge impact on our business right now because we don't have really much in construction or anything like that, so it's really just labor cost, much of which is borne by the COAs. We're gonna keep looking at it, but you know, we don't feel like we need to overreact to the inflationary environment. We've got you know, above 3% price increase in play this year. We think it's in a good spot, you know. We don't feel like you know, you could argue we could charge more now that we're launching Abound and bringing the products together.
You know, the other side of that equation is, you know, you don't wanna kill the golden goose either. You know, our VPGs are running really high. People are perceiving a good value proposition. You know, our margins are close to 30%, have been over 30%. You know, you don't wanna get too greedy, right?
Right. Just for some context, can you tell us how much higher are your prices today versus 2019? It sounds like it's not that much higher, but I mean, leisure ADRs are something like 30% higher than 2019. Help me think about that difference. I mean, are you seeing that at the negotiating table where buyers are more excited about the value proposition because they're owning their vacation at a significant discount relative to, like, where ADRs historically are? Like, how does that kind of factor in?
Well, I mean, customers aren't, you know, being overly effusive about how cheap our product is. You know, we still only sell about 20% of them. You know, it's not flying off the shelf, if you will. No, we feel good about the pricing strategy. We're probably by the end of this year be about 11%-12% points pricing above 2019 levels. We've kept that steady planned increase going. Again, dip in 2020 and more aggressively increased pricing in 2021 and 2022.
Where you typically would see consumer reaction to pricing, all other things being equal, would be in your closing rates. If you took your pricing up to a point where now there's some higher degree of sensitivity, your closing rates would drop. We have not seen that thus far. Now, you might say, "Well, can't you raise it a little bit more?" you know, we're maybe a little different than some others in this business. We believe very strongly in price integrity. The only difference between our stated price per point and something someone might pay is if they agree to buy a lot more, we discount it a little bit. There are others in the industry that employ the tactic, which I call shoot high and fade fast.
Put out a number, and if somebody reacts to it, "Oh, well, I'll drop." We don't do that. We've always believed in a more modest annual price increase when we can, 'cause we believe in the long term, that gives us the best possible results. Obviously, if the inflationary environment continues in the way that it is, and there are other mitigating factors that would suggest that we should be more aggressive in raising prices, we'll do that.
If I-
Neal, what you got?
Me? Can you hear me? Yeah. Okay. Jeanette, this one's probably for you. Abound sounds really compelling. However, conceptually, this makes the exchange platform less desirable, presumably, as you can now move throughout the system seamlessly. One, am I thinking about this correctly? Two, in your guidance, did you include a slight drag on exchange profit in the deck? It looks like there is some EBITDA growth embedded.
I didn't hear the end.
I know. Sorry about that. Number two, in your guidance, did you include a slight drag on exchange? Because in the deck, it looks like there is some EBITDA growth embedded in your
Okay. I think I got it. Clearly, I don't think it makes the exchange platform less attractive, which I think was what the question was. We do anticipate that there are transactions today that are occurring between the Westin to Marriott properties, for example, that have an external exchange fee attached to them. Certainly when Abound gets launched, that will be an internal transaction, and we won't be getting a fee for that. We still have, obviously, a lot of other destinations, and there's still in terms of our overall network, and the customers still wanna go places that we don't currently have as part of the club. Then I think the second part was about our guidance. We took, obviously, into consideration the launch of Abound.
We still see opportunities for growth in the exchange business, and that's what's reflected in the outlook that we put forward.
Okay. All right. Yes, Sean?
Just a couple of questions. What percentage of your owners do you expect to take up on the new Abound program?
Abound? Abound, yeah. Well, that's a great question because it is totally elective. There's no price to join Abound, so it literally is just adding another use right to your ownership level. I would tell you that when we first went to points, there's an analogy here which I'll try to draw to the two together. When we first went to points in 2010, we thought, well, everybody's gonna sign up for points 'cause it's just adding another use right. The reality is that still to this date, maybe 40% of our owners, ±, have never gone to points. That's because they are very resort centric. You know, "Hey, I always go to Hilton Head every year.
I always go to the same resort every year, and as a result, I don't see any need or desire to join the points program," 'cause there is a club fee to be a member of the points program. I wouldn't be surprised if there will be some people that, particularly on the VSC side or Sheraton and Westin side, that don't elect to get into Abound. That's clearly their option. We're not gonna legislate it. We're not gonna mandate it. It'll be up to them. I think upon further reflection, I think people will start to see, "Aha. Yeah, I think there's value here." The other thing to remember is that as we continue to go forward, becoming a member of Abound or having that option will be part of every new sale going forward.
I think you'll see it happen, but I don't expect it to be, you know, everybody immediately.
Got it. Just one on the mix of marketing. You know, you have call transfer, email, social media. Are there any big changes that you're expecting, you know, the next three years versus prior?
Brian?
Well, in terms of our primary channels, I would expect that digital marketing that I spoke about will become a larger percentage. It's not a very large percentage today. I mentioned the greater access that we've gotten with Bonvoy, and 'cause that's you know kind of digital marketing to the Bonvoy database. I'll throw that in there, too. That's gonna make digital become a much, much bigger piece of our marketing mix, no question. The other thing that's kinda again we're just starting to understand is the capabilities that we're gonna have with these virtual tours and how that'll allow us to you know find new channels or expand existing ones like I mentioned. I mean, I mentioned the in-house example.
People that stay with us for one or two nights don't really have time to take a tour, right? We don't really even market to them. Now they can stay with us for two nights. We still get in front of them, and we'll set up a presentation at their home a week later. They still have just stayed at our resort. They were in the ether. They experienced it, everything else, and we can increase penetration there. I think there's multiple ways that we're gonna be able to, you know, increase existing channels, and digital's definitely going to, you know, become a big part of the mix.
That deeper penetration with Bonvoy, was that something that you needed Marriott to come around to, or was that contractual? What happened to change that?
Yeah. When we spun off from Marriott, we did a license agreement with all of our marketing access, and we probably just maybe at the time weren't as aggressive on what we needed from an email digital standpoint. When we bought ILG, the Starwood Vacation Ownership group had a licensing agreement with Marriott that gave it a lot more access digitally to the Bonvoy database. Just recently, our legal team has been harmonizing those two license agreements, so we only have one with Marriott, and that work's pretty much done. As part of that harmonization of the marketing component of it, they gave us the additional access that they were giving to the Westin and Sheraton brands. It was a big win.
Okay. I think we may have time for one more question if there are any more out there. Okay. All right. 15 minutes. It's 2:55 P.M. If you can be back here around 3:10 P.M., we'll pick back up with, we're gonna bring in the big closer. Tony will be up here to talk about the numbers, okay? We'll see you then.
Okay. Everybody could take their seats again. Great. Okay. It's my pleasure to welcome Anthony Terry, our CFO, to the table.
All right. Oh yeah, you might wanna see the presentation. All right, got the thumbs up now? All right. All right, now that you've had the chance to hear from our team, I'm gonna take you through our business model and discuss how it will deliver our growth outlook and create longer term value. Starting with our compelling business model. As Steve indicated, we are 100% leisure focused with some of the most powerful and trusted brands in the industry, in addition to over 120 vacation ownership resorts and nearly 3,200 affiliated resorts. In short, our business model simply cannot be replicated. Our investments in our people, products, and technology are propelling our business and will drive growth well into the future.
Our disciplined approach to manage costs and capital expenditures has allowed us to produce high margins and considerable cash flow, enabling us to grow the business as well as repurchase shares and provide a recurring dividend. Now, most of you have seen this slide before, but it's still a very fair representation of one of the strengths of our highly resilient business model. With the acquisition of ILG, we significantly increased our scale and further diversified our revenue streams. With that diversification comes margin improvement, given the higher flow through of the exchange of management fee revenues. Even more importantly, a greater proportion of our revenues come from parts of the business that we consider to be more recurring or sticky in nature.
Even as we look to continue to grow contract sales and development profit, which can be a more variable revenue stream, we still expect a large portion of adjusted EBITDA to be recurring and predictable and shouldn't drop materially from the 40% that you see here. Now notwithstanding variability of the development profit stream I was talking about, we have seen impressive resiliency in this part of the business during the pandemic and post-recessionary periods. On the next couple of slides, let's address two issues that we are frequently asked about. What happens if we experience a recession in the next 6-12 months, or what happens if inflation continues?
To start, we believe that we are in a strong position to withstand a normal recessionary environment due to the following: We have a resilient consumer base with above average household income levels and higher than average net worth. In addition, since our owners have prepaid their vacations, they tend to use their time keeping our resorts full and the exchange business busy. With 85% of our sales occurring on site and our ability to offer discounts or enhanced purchase incentives, as long as our resorts are full, we have the opportunity to continue to produce tours and to make sales. Besides our $230 million of convertible notes and our Waikiki deal, which we expect to structure in a capital-efficient arrangement, we have no material inventory or debt commitments for the next few years.
Finally, given the higher default rates experienced during COVID-19 pandemic, we believe that this actually accelerated notes that would have otherwise defaulted at some point in the future, strengthening the remaining notes receivable pool on our balance sheet. Though we hope for the best for the economic future of the industry and for the country in total, given all these facts, we believe that we can weather a downturn. Now, turning to the second issue, the impact of inflationary pressures. We believe that our company is a little more insulated than many others from the potential negative impacts of inflation. With our affluent owner base and enhanced value proposition from higher hotel rates, rising prices are less impactful on our vacation ownership business. In addition, our exchange business has few inflationary pressures as the underlying information technology infrastructure and systems are stable.
Wages and other expenses at the property level are mostly borne by the homeowners associations, while many of our marketing and sales positions are commission and incentive-oriented based on production. Given our excess inventory, we have little construction underway, limiting our exposure to the inflation on the development side of the business for the next few years. We always have the ability to drive price per point as well as higher pricing in ancillary and rental business, allowing us the potential to offset higher costs in those business lines should we choose to do so. Although increases in the ABS cost of funds only impact future securitizations, we do have some ability to raise consumer lending rates. Although not totally immune to higher inflation, our business model does have some natural mitigants.
Now from an adjusted EBITDA to free cash flow conversion rate standpoint, we have historically delivered a range of 55%-60%. However, with $600 million of excess inventory, high margins, and attractive capital structure, we expect an elevated conversion rate of between 65%-70% through 2025. As we cycle through the excess inventory, we expect the conversion rate to remain elevated over the next 4 to 5 years. As an update on our synergy savings, during the last Investor Day, we communicated an expected $125 million of savings by the end of 2021. Although we lost some time due to the COVID-19 pandemic, we steadily increased the savings estimate to $200 million over the past couple of years, expecting to deliver $75 million in additional synergies over our 2019 Investor Day estimate.
To date, we have completed $160 million of synergies with another $15 million-$20 million of in-the-year run rate savings during 2022, and the remainder to be delivered in 2023. We have a pretty incredible margin story in our business, with future adjusted EBITDA margin expected to be in a significantly stronger position than during the pre-pandemic period. Adjusted development profit margin is expected to grow 600 basis points from 2019 to 2025, driven by the 7%-10% contract sales growth as we maintain strong VPGs, leverage our fixed costs, and continue to increase tours. However, with the recent trend of rising interest rates, we expect financing profit margin to narrow due to the higher cost of funds on our future securitization deals.
We do expect financing profit to continue to increase as we grow our top-line sales. Rental profit margin will improve slightly as we maintain strong occupancy levels and drive ADR growth. Our management and exchange profit margin will also improve modestly as available inventory, management fees, and product pricing all continue to increase. Now let's review the growth outlook for the company. We were excited to announce this morning that we raised our contract sales guidance by $100 million for the full year 2022 based on the strength that we are seeing in our marketing and sales metrics. Even in light of this material increase to our guidance, we still expect contract sales to grow at a three-year compounded annual growth rate of 7%-10% through 2025 from the midpoint of the 2022 updated guidance.
This growth is driven by several factors, including maintaining higher VPGs and year-over-year pricing, the continued recovery of international and the expansion of our hotel marketing programs, the expected benefits from technology-enabled leads and combined product form, and growth in our Hyatt Vacation Ownership business. Given the contract sales projections and revenue increases in other lines of business, we expect total revenues excluding cost reimbursements to grow in the 6%-8% range by 2025 from the midpoint of 2022. We also expect the revenue growth just discussed to result in a robust adjusted EBITDA and adjusted free cash flow. Adjusted EBITDA is projected to grow to between $1.1 billion and $1.2 billion in 2025 or 7%-11% annually from the midpoint of the 2022 range.
As discussed previously, with a strong adjusted EBITDA to adjusted free cash flow conversion rate, we also project to grow adjusted free cash flow to between $750 million and $900 million in 2025 or 6%-12% annually from the midpoint of the 2022 range, providing even more liquidity to continue our growth. Now focusing on our segments, it'll be no surprise that we expect to see higher growth in the vacation ownership segment versus the moderate growth expected in the exchange and third-party management segment. Adjusted EBITDA for each segment is growing roughly in line with the revenue growth at the low end of the range, while the high end of the range also anticipates some margin expansion.
This results in an expected 6%-10% adjusted EBITDA growth rate for vacation ownership, while exchange and third-party management adjusted EBITDA will grow in the 3%-7% range. Leveraging our G&A cost as our top line expands and achieving further cost reductions will drive total adjusted EBITDA growth rates in the 7%-11% range, slightly higher than the individual segments. Now let's discuss how strong cash flow is driving value creation. MVW currently has the benefit of a stable, conservative, and flexible balance sheet. Specific to our corporate debt, as I mentioned previously, we have no near-term debt maturities other than the $230 million of convertible notes due this year.
With almost $750 million of remaining capacity on our revolver that carries a variable interest rate of about 3.1%, we have ample flexibility in our capital structure. In addition, we are afforded some protection against rising interest rates since approximately 90% of our corporate debt is effectively fixed with a 3.3% interest rate. Besides having minimal debt maturing prior to 2025, you can also see that we don't have a lot of capital commitments in the near term as well. We generally try to target around 1.5-2 years of inventory on-hand to avoid a stock-out in our points clubs.
However, we accumulated excess inventory as part of the ILG and Welk acquisitions, while also experiencing fewer sales due to the pandemic, which led to the buildup of over 5 years of inventory on-hand. The good news is that we believe this inventory balance will normalize to 1.5-2 years on-hand by 2025. This is directly a result of the low inventory commitments over the next 3.5 years, consisting primarily of Waikiki, low-cost reacquired inventory, and about $175 million of expenditures for future development projects with the goal to add new locations as we structure deals in a capital-efficient manner which will push the majority of the inventory spending past 2025. As we've mentioned previously, our consistent and disciplined approach to capital allocation provides us for a strong adjusted free cash flow conversion.
We expect to deliver a cumulative $3.9 billion-$4.3 billion of adjusted EBITDA for the four years ending in 2025, translating to $2.6 billion-$3.1 billion over the same period in adjusted free cash flow or a 65%-70% conversion rate. This assumes limited inventory spending and another $400 million of other CapEx spending on items such as sales centers and technology projects.
At the end of the day, we could have $2.4 billion-$3.8 billion of cash available to return to shareholders after adjusting for some non-routine cash items, including $155 million-$180 million in excess non-strategic asset dispositions, up to $900 million of additional leverage capacity, assuming 2.5x-3x leverage on the low and high end of our adjusted EBITDA range, and payment of about $175 million of integration and transformation costs over the time frame of which the majority is expected to fall within 2022. This $2.4 billion-$3.8 billion of cash available is a significant amount and can be used to further accelerate the company's growth, support strategic mergers and acquisitions, or return cash to shareholders through share repurchases and dividends.
Just to put this in perspective, and these numbers keep changing on me, at the high end of our cash available range, this represents over 70% of our existing market cap, and that was done a couple days ago at $130 a share. We have to really keep going back and recalculating that. Today, it's probably closer in the 75%-80% range given the market the last couple days. I trust this discussion was helpful in showing you our overall growth strategy for the business. In summary, some key highlights to wrap up. We have transformed our product through investments in technology, which in turn fuels growth and provides margin improvement.
We have created a diversified, resilient business model that produces high margins and extensive free cash flows. This business model better positions us to weather the next economic downturn. We have a disciplined approach to driving growth and free cash flow and returning capital to shareholders. Lastly, our success to date, and especially how quickly we recovered from the pandemic, could provide everyone some comfort in terms of achieving our longer-term strategy and delivering strong financial results well into the future. Thank you for your time this afternoon and your interest in Marriott Vacations Worldwide. I invite our speakers back onto the stage, and now we'll open it up for questions with Steve as the moderator again. Come on up.
Okay, it's free fire zone. You can either fire anything at Tony or any of the rest of us that are up here. Who wants to start off? Patrick.
Question for Tony. On the existing securitizations out there, what I would say over the last maybe 2 months have you seen in the propensity for the class, let's say C and D, or even A and B and notes for those to pay? Have you seen any change in that?
Yeah, we haven't seen any changes in any of our tranches in the notes. You know, they're done pro rata, so the A and B, C and D, they all perform similarly. Right now, at the end of Q1, I think we reported out that our delinquencies were at pre-pandemic lows. You know, default rates were still at pre-pandemic lows, and nothing to date has changed in that. From how our notes are performing, all of them are performing just as well as they were back in the pre-pandemic timeframe. You know, there's nothing recently that has made us change our opinion. Everything's looking good.
No, no uptick in the last six months or anything?
No, not at this point. Nothing that we can see, nothing measurable that we've seen.
Thank you.
Next question. Wow.
That presentation nailed it, right? It's about everything.
You rocked them. Jared? Okay, here and there.
Thanks. Yeah, the 7%-10% contract sales growth, do you think you could break that down, the drivers of it? Like, what are you assuming for conversion and, you know, average package pricing?
Yeah. I think Brian's presentation gave you a little bit of, you know, here are some of the drivers. I really can't break it down to all the individual pieces. I mean, there's a lot of different levers that you could push and pull. In general, when you look at it, you know, maintaining high VPGs is going to be a big driver of that contract sales growth going forward. Recovery of a lot of the tours that haven't quite recovered yet is another big part. You know, Asia-Pacific isn't back all the way. Our urban markets aren't back all the way. We're still not penetrating exactly into our in-house business as we were before. Package sales are all ramping up.
If you start looking at all those different pieces of it, all that is gonna be driving the growth and plus higher owner engagement, as Brian and Lori were talking about. With the new technology coming in, being able to convert owners better is really gonna help drive those ranges. You know, if we get higher than expected engagement and higher expected closing efficiencies and able to target our customers better, then we're gonna hit up at that high end of the range, you know, so we're hoping for that. I don't know if you had anything to add on that, Brian.
No , that pretty much covered them. You know, I think they're pretty well covered.
Maybe a different way of asking: What is conversion today, or what was it in 2019, like, the last pre-COVID year? If you were to get to, like, the low end or high end or midpoint of the guide, what do you think it would be?
Conversion, you're talking closing percentage?
Yeah. Closing.
It's higher. We're doing much better. We don't disclose the absolute closing efficiency number. We never have. We've always talked about it. Pre-COVID, more in that mid-teens range, if you will, and it's gotten better. A lot of the improvements you're seeing in VPG are prior closing efficiencies, right? I mean
Yep.
That's the end game.
We don't talk about it 'cause it's, you know, it's like talking about just occupancy on the hotel side, right? It's without the, you know, the other side of it's kind of just an interesting number.
Jared.
Maybe a question for you, Tony. In your slide showing the cash available over the next four years, you have these three buckets: organic growth, strategic M&A, and then return of capital to shareholders. John, I think you even talked early on about evaluating M&A opportunities. Is there much to do out there on the M&A side? As you think about your stock and where it is today, how do you view any kind of M&A opportunity versus just repurchasing a ton of stock over the next several years? If you could also comment on when you become unrestricted on your blackout to start buying back stock again.
Yeah. Let me start kind of at a high level, and then I'm gonna invite John, Tony, and others to come in. We have always said that in order of priority, finding ways to grow the business, either organically or through M&A, is the best and highest use of cash that we can do. In the absence of either one of those, then obviously we're going to look to return cash to shareholders because we don't get any merit badges for carrying a lot of cash around in our balance sheet. When you think about the M&A side of things, it's not lost on you that there have been a number of large timeshare transactions over the last several years where there have been some consolidation.
There's probably one more out there that could fall at some point in time, to be honest with you, that's in a tier that probably wouldn't have a lot of interest to us, to be frank. There are other things kind of, well, I'll call them Welk-like. This is where you have privately held, call it short chains and independents, where the principals may be looking for some sort of a liquidity event, because of their aging or whatever it is. This was the case in the Welk transaction. They had had a very successful run, but based on the ownership interest in the Welk family, they decided they wanted to monetize their asset.
If there were, and there are a couple of candidates out there that you might think about, none of which have raised their hand yet and said, "I'm interested." But if that were to come along and it was kind of Welk-like in terms of the quality of the product and the customer segments they do business with, I think you could anticipate that we would take a serious look at that and try to see if there was something that could be both accretive to our shareholders and be a nice fit in the portfolio. That's how we think about acquisitions. I don't know if anybody wants to add anything else to that.
No, I mean, I agree. I think we've always said. Like everything in life, it's a bit of a balance, right? There will be opportunities that'll come. I expect to Steve's point, they're gonna be, you know, they're not gonna be ILG-type opportunities as I see them, because for us, it's all about us leveraging our existing brands, right? So you're looking for stuff in the upper upscale, maybe luxury in the higher end, right? That you can use, you know, like we talked about. We got the seven of the best brands in the business, right? How do you leverage that? The synergies, grow the platform, add new branded owners because you're gonna rebrand it like we did in Welk. That's the opportunity. There's continued consolidation, and we continue to look at those opportunities as they come along.
If it doesn't have the right cultural fit, if it's not, you know, the right business model for us, we're not gonna do it either, right? Then for us, like we've always done, I think we've been pretty judicious about returning excess capital to shareholders. When the stock price is down, we try and get more aggressive, right? In buying back shares. Clearly, you know, an opportunity today as we sit here is where the stock price is at. If the right opportunity comes along, we can grow the business. Hopefully, we've shown as a management team that we've been successful doing that with ILG. We're not there. You know, Stephanie talked about all the great stuff we're doing with Welk. We're not a hundred percent there, but it's the same playbook, right? You know, I was talking to somebody earlier.
We don't get asked this question anymore, but remember when we bought Vistana. VPGs at Vistana were 25% lower. I was looking at our year-to-date sales flush. The legacy of Vistana, it's not completely apples to apples, was a couple bucks higher than our legacy MVW VPGs. Now, some of that is stuff that we've done to take out the lower yielding channels, things we talked about, the OPC locations, et cetera. A lot of it is leveraging our know-how that Brian talked about on the marketing and sales side, you know, proven formulas of selling a product, the brands, all that stuff. That's clearly gonna continue to be stuff we look at.
Jared, I'm sorry. There's the other half of your question, what happens with blackout dates, et cetera?
That's right. I imagine with the Analyst Day and maybe your retirement, there's been some restrictions. Can you start buying back tomorrow?
Well, yeah. Well, at the end of the first quarter, we had $350 million, I think, left on our authorization from the board to go purchase stock. We did, what? $119 million of stock repurchases in Q1 at, what? $140 bucks and change a share. We're trading today a lot lower than that. That should probably give you an answer.
Right. In terms of like when there's blackouts, like, are you able to?
Blackouts will probably be over next week, Tuesday. I think markets close Monday.
Got it. Okay. Thank you.
Yes, John.
Can you maybe characterize the disposition proceeds and, you know, what type of assets are in there? Because you just disposed VRI for $60, but the numbers looks pretty high to me, and maybe if market conditions still allow you to dispose of those as you previously planned.
The disposition, the non-strategic assets that we're talking about?
Yeah, the $155 million-$180 million.
Yeah. Yeah, that one. No, that does include VRI because it was a 2022-2025 range, so that might be throwing you off a little bit. The other big assets in there, we got a couple hotels that were purchased as part of the ILG acquisition, you know, strategically, we don't really need new, more inventory in those specific locations. They were kind of part of the deal came along, so, you know, we're working on disposing of those. There is a retail complex over in Arizona that we're looking at monetizing as well. We're not in the retail business. No need to take that on or keep it. Those are gonna be the four big things that are in those buckets. That there.
Any other questions? Neal, you got one?
I have a few. I'll do them one at a time. This is a follow-up to John's comment. I think you suggested that in previous recessions, this is before 2008, 2009, back in the industry, gross contract sales, I guess, through recessions. Is the difference between previous cycles and 2008, 2009 access to the securitization market?
Yeah, I mean, if you go back and, you know, I was just joining. I mean, from a securitization market, we were still part of Marriott back in 2008 and 2009. The market did close for a period of time, but in previous recessions, there was no market disruption from a securitization. You know, I'm guessing our interest rates were, you know, market level in terms of probably 4% or 5%. I mean, it wasn't until recently that you started to see, you know, rates in the 2%, 1.5% range on the securitization given the overall markets. You know, we've always said on a more normalized basis, I would expect our securitization borrowing rates to be in the 3%-4%. You know, they'll normalize up and down.
We'll push rates like we talked about where we can a little bit here or there. You know, the excess spreads are strong. You're getting 98 cents on the dollar back. Even when the market, you know, closed back in 2009, Marriott did a deal. We were part of Marriott with one of our lenders mainly to show like a lot of businesses at that time, if you remember, that you had access to capital, right? You know, the overnight markets were shut down. The cash was, you know, it was a crazy time. Marriott wanted to show that it had access, and it did it, and the terms weren't great.
We refinanced that, call it 6 months, 7 months later in the term market, and while the advance rates weren't back to the 98%, and I think the all-in cost of funds were in the low fours, right? It was probably more in the 90% advance rate, which obviously has gotten better than the 98%. You know, from a securitization market, that's the only time I'm aware of that it was ever closed down, and that was a financial crisis type environment, but it wasn't very long. Then obviously we have our warehouse facility, which is insurance at some level.
We use it occasionally, but it is there, you know, if there was ever some level of disruption, that we have access to warehouse those notes for a period of time, too, until the market would come back to more normalized levels.
Yeah. The other piece is the impact on the consumer, as well. A lot of you are younger in here. I've been in this business 37 years. I think I've been through 5 recessions. Unfortunately, the last two recessions have been pretty devastating to the consumer. Recessions before that really didn't impact the upper middle class, our target, market very much. They're not the ones who lose their jobs. Their home values didn't go down. You know, their savings didn't go down. It really affects people maybe in lower socioeconomic, realms. You know, again, if we have a normal recession, coming next, that's why we think we can continue to grow the business through it.
You got another one, Neal?
This one, I think Brian gave the example of putting a Westin and Sheraton marketing desk in hotels in New York, which you were not doing previously. How many more marketing desks would it make sense to add? Background, can you remind us the difference between a marketing desk and a sales center?
Right. A marketing desk simply in a hotel is just that. We run the concierge department for the hotel, and at the same time as we're servicing people, we'll see if they wanna take a tour at our sales center in the market. I mean, I don't have offhand. I mean, if you go to all the markets that we're in, Marriott's got a lot of hotel brands in every market. Every market, I guess, seems like they dominate just about every market in the country. We've got, you know, probably in the next few years, dozens and dozens of opportunities to expand in our existing markets in other Marriott branded hotels.
Obviously the difference between that and a sales center, a sales center is where we actually take those tours and make sales. They're very distinct operations. We can definitely expand our footprint in our existing-
I mean, an example, we were in Vegas recently, right?
Yep.
Where we've got the Marriott Vacation Club right there on the Strip. There's a couple Westins in Las Vegas. We've never done a marketing desk into those Westins. Now, because of bringing the portfolio together, those are the opportunities, right? To put a marketing desk in and bring people in because you're selling a, you know, combined product, if you will, and access to the Westin brands through the new Abound program. That's a specific example, but we do think there's gonna be a lot of those opportunities. A lot of times, those marketing desks, too, they're not even for day tours. They're selling packages, right? That are people come back later and take a tour with their significant others. It's just another way to access that loyal Marriott branded customer.
Not all hotels are great candidates for a marketing desk, as an example, because if you have a hotel that has a high convention mix. Typically speaking, that's not a very rich target environment for us to try to source packages out of. You have to look at each one individually. You have to look at things like hotel ownership. Keep in mind, Marriott doesn't own these hotels, individual hotel owners own them, and then you have to go negotiate some sort of a presence with them and all the other things. It gets a little more complicated than that. By virtue of having Abound and now wrapping these programs together, I think our opportunities grow exponentially. Any other questions? Sean?
I guess in the context of the recessionary question, you know, you most likely lean on your owners a bit more, just like you did during COVID. How do you feel about the propensity of your current owners? Do you feel like you have enough buffer there in terms of selling more?
Have we tapped them out? Is that your question?
That's the question, yes.
Yeah, well, I'll let Brian answer. I'll say in general, while clearly in 2020 and 2021, we had a higher percentage of our sales to our existing owners wanting to buy more of the product, I've seen no particular evidence that all of a sudden everybody's bought everything they wanna do. Put that together with now Abound, particularly in the Sheraton and the Westin space, where now those owners, which heretofore have been basically kind of restricted unless they went out through Interval to get to someplace else, they've been restricted to that brand. Now they'll see the opportunity to go elsewhere. I actually think it's probably better than it was before. Only time will tell, but we'll see. Brian, your comments?
Well, remember the slide I showed on how we're buying back legacy weeks and selling in first-time buyer points owners and continuing to enroll people in points. Our owner base continues to become more engaged, and you saw higher propensity to tour and higher propensity to buy when they're playing in points versus legacy weeks. That's going to continue. Now bringing the Westin and Sheraton owners into the overall mix with Abound, we think is gonna increase their engagement and their enrollment and election into points on an annual basis, too. Well, no, I mean, our owner base, we've always, you know, over the last 30 years, I mean, the runway just continues to go. They continue to add to the Portfolio.
When they get to the point where, you know, they've owned it for 30 years and they're 75 and not vacationing as much anymore, we buy it back from them, take it back from them, however we do it, and bring in younger buyers. It's pretty resilient.
I guess the last one for me, maybe just on the Hyatt Welk integration. You know, what are you hearing from your Hyatt owners about maybe having the Welk available to them or the Welk owners about being a part of Hyatt, and how are they kinda feeling about this?
Steph?
-future?
Sure. You know, both of the brands or both of those groups of owners have been looking for new vacation options for a long time. The opportunity that we have to give them each other's locations, you know, they're very comparable properties. You know, they're very high-end in complementary markets. It's gonna, you know, it's gonna be a great fit. Beyond that, we're gonna add new vacation options for them that neither of them have had either. You know, I think it's gonna be great 'cause for each set, we're gonna be putting new dots on the map, but we're also gonna give them other ways to go out and enjoy what they own with us.
Anybody got anything else? Right over here.
Just looking at the slide 115. Wow, that's a long book. Which Tony put up. It's just interesting, you don't often see sort of the low end of adjusted EBITDA growth lower than the actual revenue. So in other words, the 7%-9% and then the 6%-10% on the vacation ownership growth. Just wondering, what's the scenario where you're growing vacation ownership 7%, but you're actually de-levering and you're growing EBITDA 6%?
That's a great question. It's really, it comes into, you know, the cost and are we gonna get all the savings that we expect to get in the future. If you look at the range of revenue, and if you get that low end of the range of revenue, and then you don't quite get the expansion in the margins that you expect to get, it could drive you a little bit lower over on the Adjusted EBITDA side.
The reason why you wouldn't get the margins is really on the cost side then or something on the synergies that you guys said?
Yeah. There's only synergies are left just a little bit in there. Yeah, for the most part, that's gonna be it.
Anything else?
The slide about the inventory cost versus actual spend and how you get down to 1.5-2 years by the end of 2025, how does that compare to what you'd call normal inventory on hand? Are you still over-inventoried by then or is that normal?
Oh, the 1.5x-2 x?
Yeah.
No, that's normalized. I mean, that's what we target, you know, consistently over the past few years or past multiple years. Once we're at that level, we try to maintain that. It's really because with our point structure and our products, they're in a trust, and we can't just take inventory and slap it into the trust real quick. We have to go through a process of registration, getting it registered in all the different states. You have to have a decent amount of inventory on hand ready to go in there that are in that registration timeframe at some point in time so that you don't get into a stock -out situation. You have a little bit of a long lead time.
That 1.5x-2 x, if it starts getting lower than that, you start running the risk that, hey, you know, there's a potential stockout situation that you could get in. We could probably run it leaner if we chose to, but probably don't wanna take that kind of business risk.
You'd think that after that point, we should model the expense about equal to the cash cost?
Correct.
When you were talking about that pie chart, 30% of EBITDA from the development profit, and you said you've seen resiliency there. I was curious how you would break down that development profit between what you'd call, like, purely discretionary versus, I don't know, this family had another kid, so they need another room in their place when they go vacationing or some sort of non-discretionary piece, but of development profit, how you would think about that.
The development profit's all transactional. I'm not sure I'm following the question with part discretionary and non-discretionary.
It's all discretionary, but maybe like the reason for purchasing something.
Well, development profit is contract sales, financed sales, minus sales and marketing costs, minus product costs, which is the hard cost.
Yeah.
Are you saying what portion of the hard cost is discretionary?
Net of the cost of the profit.
The revenues?
Understanding that it's all discretionary, but thinking about people's reasons for purchasing. Is there a part that you would call, I don't know how to describe it, but where they're not doing it, maybe it's versus repeat-
Yeah. Tom, I think I know where you're going. At a high level, maybe Brian can jump in a little bit. You know, when you start looking at why owners purchase. You know, it's starting to get to that value proposition that we talked about before. You know, if I'm going to spend $400 a night in two hotel rooms, and I'm going to bring my family, they're gonna be there, and you start, you know, saying that's it for a week, you know, $800 a night for a week, $5,600, or we could purchase this, you got a $25,000-$28,000 upfront purchase and, you know, maybe a $1,500 maintenance fee, that value proposition starts coming together. A lot of people purchase because that's a good proposition for them, and they think economically it makes sense. Other people purchase because they like the space.
You have a full kitchen, you got the, you know, all the amenities and everything about our product. People make that kind of decision, and then you have people purchasing, because they wanna do more with the points that they have. I have 2,000 points, but, you know, maybe that doesn't get me a full week in Hawaii, so I reload and get more points. Those are kinda some of the major reasons why people purchase.
Yeah. You know, why people buy. You know, I'm not sure we have. You know. You also gotta remember. You know, I don't know if you're married, you have kids. I mean, we're selling vacation experiences, and we talked about our great locations around the world. Vacation. It's an emotional purchase at some level, right? People wanna go on vacations. They wanna make memories with their families. I always say, and it's a bit mushy, but I, you know, I think back on the things I remember as a kid. We went on camping trips, right? We didn't have vacation ownership and all that. They're still my most vivid memories I have with my parents and my brother and my sister are vacation experiences, right? I think as you get older, that's what people wanna build, right?
You know, does the value proposition need to make sense? Sure, right. You know, no one's gonna buy our product if they don't feel. Value is different to everybody, right? You know, why does somebody buy a Rolex versus a Timex watch? They both tell time, right? There's that emotional stuff that comes into the purchase. In today's world, more than ever, right, people need a break. They want vacation experiences. We're providing that. I do think a lot of times you can't put a dollar or a reason on stuff other than people wanna create a tradition with their family, experiences that are gonna create those memories of a lifetime.
I think, you know, I can't remember who exactly said it, but we do have levers that we pull, you know, during a recessionary period. You know, that either you can get a better purchase incentive or, you know, we discount the pricing. A lot of people, you know, our owners will look at that as a bargain, you know, if we discount 10% more or something like that. That helps us keep kind of, you know, the machine going as well during a recessionary period. If we find that that's one of the levers we have to pull, some people look at that as a bargain opportunity to get in, repurchase, you know, get some more points and enhance their their overall value.
If I look at the last normal year, say 2019, of the development profit, how much was from new first-time purchases? New buyers versus existing.
Back then, it was, what, in the 35% range, up to 30-
Yeah.
35%-40% range were first-time buyers back in 2019.
Okay.
Neal, you have another one from the web?
I do. Got a Hyatt question. You talked about unifying HVO product in 2024. Can we quickly run through what this means and why it is important?
As I mentioned, we today are selling two different trust products. We're selling what we call Portfolio and Platinum. We had different sales galleries that are selling those specific products. What we're talking about is by the time we get to 2024, actually having a single product that all of our sales galleries sell. What that'll enable us to do, we'll be sold out of our other properties by then. We have, you know, excess inventory right now in those two trusts.
Once we sell those out and we put kind of all of our sales guns pointing at one trust, it allows for that development opportunities to really continue to start kicking in because we, you know, have really get to move a lot of inventory, and we get to have a unified and single experience in all the sales galleries. When we have the master exchange that we'll be entering into in 2023, and then that new product in 2024, we'll have a single HVO, you know, full HVO kind of experience from a sales perspective and from an owner perspective.
Okay, I'm trying to get you out of here on our appointed time, so if we have time for maybe one more question, if there is one out there. Going once, going twice. Okay. Let me close by saying we hope that you found today to be both informative and quite frankly, we'd like to hear your feedback. As we do these investor days, we like to hear what you have to think about how we did and the things we can improve or do more of or less of. So tell us what you think with a quick 2-3-minute anonymous survey. The survey is going to be open through June twenty-second. And there's this QR link and code that I think you have in your decks there, if I'm not mistaken.
We'll also send a follow-up email, shortly as well. Before we close, I'd like to reiterate today's key messages. We have a compelling business model that generates consistent and substantial adjusted EBITDA and free cash flow. That's why we are now well-positioned to continue our growth story. We've transitioned our business through investments in technology while simultaneously delivering even more synergies than we told you at our last investor day. We expect to generate 7%-11% compound annual adjusted EBITDA growth from 2022 through 2025, and we have a clear growth strategy to get there. We have a dedicated team of seasoned leaders that have a clear path to continue to deliver even more growth for many years to come. I wanna personally thank you for your interest in Marriott Vacations Worldwide and for attending today.
We wish you continued health and treasured time with family and friends. Stay safe and enjoy your next vacation. Thank you.