Marriott Vacations Worldwide Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2024

There are 10 speakers on the call.

Operator

Greetings, and welcome to the Marriott Vacations Worldwide First Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

Neil Goldner, Vice President, Investor Relations for Marriott Vacations Worldwide. Thank you. You may begin.

Speaker 1

Thank you, Melissa, and welcome to the Marriott Vacations Worldwide First Quarter Earnings Conference Call. I'm joined today by John Geller, our President and Chief Executive Officer and Jason Marino, our Executive Vice President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties, which could cause future results to differ materially from those expressed in or implied by our comments. Forward looking statements in the press release that we issued last night as well as comments on this call are effective only when made and will not be updated as actual events unfold.

Speaker 1

Throughout the call, we will make references to non GAAP financial information. You can find a reconciliation of non GAAP financial measures referred to in our remarks in the schedules attached to our press release and on our website. With that, it's now my pleasure to turn the call over to John Geller.

Speaker 2

Thanks, Neil. Good morning, everyone, and thank you for joining our Q1 earnings call. It was great to see so many guests enjoying time with their family and friends at our resorts making lasting memories during the Q1. That's why they come back year in and year out. And with a system wide occupancy running 90% in Q1, we grew contract sales by 3% excluding Maui, despite having a difficult VPG comparison with first time buyer tours growing 9%.

Speaker 2

We also started taking reservations for our new Marriott Vacation Club Resort in Waikiki at the end of the quarter, which remains on track to open later this year and reservations have been strong for this new property. Owners have consistently told us they wanted us to add a location in Waikiki and this new resort is already bringing excitement to the system. Concurrent with the resort opening, we plan to open a new sales gallery that we believe could be a meaningful contributor as it ramps up over a few years. And with Japanese arrivals to Hawaii up almost 75% year over year in the Q1, the timing of this new resort couldn't be better. We've made good progress adding new marketing and sales executives in Maui and still expect contract sales to be up around $5,000,000 this year.

Speaker 2

International contract sales grew more than 25 percent year over year, driven by double digit growth in Asia Pacific as the market continues to recover. I'm also happy to announce that we recently signed an agreement to develop a new 60 unit Marriott Vacation Club Resort in Thailand. The resort will be co located with an existing JW Marriott Hotel in Kalak and will include a new on-site sales gallery when it opens in a few years. This will be our 7th resort in the Asia Pacific region and the team is busy working on other potential development opportunities around the world. Our Hyatt business also continues to progress nicely.

Speaker 2

By leveraging proven branded channels, we've been able to grow our Hyatt package pipeline, while simultaneously replacing lower quality tours with higher quality, more cost effective tours. Our Hyatt Vacation Club owners continue to utilize and enjoy the new owner benefits that we rolled out last year through the Beyond program and we continue to work toward launching a consolidated Hyatt product. In our Exchange and 3rd party management business, Interval International performed in line with our expectations for the quarter with active members unchanged year over year and membership and getaway revenue increasing. As previously discussed, last year we hired a new Chief Information Officer to drive our IT transformation efforts and he spent a considerable amount of time analyzing where our opportunities lie. While this is a multi year journey, our IT efforts this year will continue to be centered around consolidating legacy systems, modernizing our software and increasing automation, while continuing to enhance our data and analytics capabilities to improve the efficiency of our marketing campaigns.

Speaker 2

Looking forward, we ended the quarter with 270,000 packages and our team is working hard to get these customers on vacation. At the same time, the consumer shift to experiences continues to benefit our business with 84% of people recently surveyed planning to spend more or the same amount of money on travel this year compared to last year. International inbound travel to the U. S. Continues to recover and is expected to approach pre pandemic levels this year.

Speaker 2

Meanwhile, although the economy remains on solid footing, consumers are concerned about elevated price levels, which could impact their spending. Finally, as we approach the important summer vacation months, keys on the books in both North America and internationally are up a few points year over year. With that, I'll turn the call over to Jason to discuss our results. Thanks, John. Today, I'm going to review our Q1 results, our balance sheet and liquidity position and our outlook for the rest of the year, Starting with

Speaker 3

our Vacation Ownership segment. Coming into the year, we knew our most difficult sales comparison was going to be in Q1. So we feel very good about our Q1 results. Contract sales declined 1% due to Maui and the difficult VPG comp, while tours increased 4% year over year. And as John mentioned, contract sales grew 3% year over year excluding Maui.

Speaker 3

As expected, development margin declined year over year due to lower VPGs, higher marketing and sales costs and a higher reserve as well as unfavorable reportability. The delinquencies and defaults continue to run higher than history would suggest, which is a continuation of last year's trends. We continue to work hard to get delinquencies down and we believe our reserve is currently at appropriate levels, though we do need to see loan performance improve. Rental profit increased $12,000,000 year over year, driven by increased rental revenue and lower expenses as more preview nights were used for marketing purposes. Financing profit declined 4%, driven by higher interest expense, partially offset by higher financing revenue, while resort management profit increased 8%.

Speaker 3

As a result, adjusted EBITDA in our vacation ownership segment declined 7% year over year, driven primarily by lower development profit, while margins remained strong at 29% in the quarter. Moving to our exchange and third party management business. Adjusted EBITDA declined $5,000,000 compared to the prior year with lower average revenue per member and exchange volume being partially offset by higher getaways at interval, while profit at Aqua Aston declined year over year due to softness in Hawaii. As a result, total company adjusted EBITDA declined 8%. Moving to the balance sheet.

Speaker 3

We returned $78,000,000 to shareholders during the Q1, repurchasing $24,000,000 of common stock and paying $54,000,000 in dividends. And with the shares we've repurchased over the last 12 months, diluted shares outstanding declined 5% year over year. Given the seasonality of our cash flows, we ended the quarter with net debt to adjusted EBITDA of 3.9 times $855,000,000 in liquidity. At the beginning of April, we refinanced our term loan, which was our only near term maturity extending it out to 2,031. As a result, our next maturity isn't until Q1 2026.

Speaker 3

We also have nearly $1,000,000,000 of inventory on the balance sheet, including inventory in PP and E, enough to support more than 2 years of future sales. We also completed our first securitization securitization of the year, raising $430,000,000 at a blended interest rate of 5.5%, which is approximately 100 basis points below our last ABS deal. Moving to guidance. Our full year adjusted EBITDA guidance remains unchanged at $760,000,000 to $800,000,000 We still expect contract sales to grow 6% to 9% this year with our strongest sales growth coming in the second half of the year as we lap the Maui wildfires and for development margin to be down a few points including in the second quarter. Financing profit will continue to be a headwind to growth this year due to higher securitized debt cost.

Speaker 3

And while we do expect rates to be a headwind again next year, financing profit should increase. Our rental business had a good Q1 and we're working hard to drive incremental demand and manage our cost. And management profit should show fairly consistent year over year growth over the balance of the year. In our exchange and third party management business, we expect interval members to be down slightly and for average revenue per member to increase. Finally, we still expect G and A expense to be slightly up slightly year over year.

Speaker 3

Moving to cash flow. We expect our adjusted free cash flow to be in the $400,000,000 to $450,000,000 range this year. Our plan is to deploy our free cash to repay some of our corporate debt as well as return cash to shareholders through dividends and buybacks, while targeting to get our leverage back to 3 times by the end of 2025. With that, we'll be happy to answer your questions. Operator?

Operator

Thank you. At this time, we'll be conducting a question and answer Our first question comes from the line of Ben Chaikin with Mizuho Securities. Please proceed with your question.

Speaker 4

Hey, good morning. Thanks for taking my question. Would love to dig into the strength in rentals. It sounds like from the prepared remarks there was more preview nights. Is that pretty lumpy through the year?

Speaker 4

Do you expect to stay elevated for the rest of the year? And then I guess related to the higher preview nights play a role in the higher VOI sales and marketing? If not, what drove that up? Thanks.

Speaker 2

Sure. Hey, Ben. Yes, I think as you look at rentals for the year and what books, we do expect those to continue to be much higher than the previews that we've done last year. So that obviously helps from a tour perspective on the sales side. And with that, as you also mentioned, it's a bit of geography on the P and L.

Speaker 2

There was about $6,000,000 of higher costs, right. We use rental inventory to supply those and that cost gets charged over to marketing and sales. So it was a headwind on the development margin, but a benefit to about $6,000,000 on the rental side of the business. The other area that outperformed a little bit in the Q1 over year were our usage of plus points. So those are the single use points we give out as incentives.

Speaker 2

They were up in terms of the timing of those usage and so that also benefited the Q1 year over year. So as we set up for the balance of the year, we feel better about rentals and where we're heading. The other thing I should mention too on the rental side, our RevPak was up about 3%. So the actual rentals, we are mostly through occupancy rate was relatively flat, but we're able to do a lot of our marketing campaigns to continue to get those rentals on the books. We talked about overall occupancies being up a couple of points as we go into the summer months.

Speaker 2

So, people want to get on vacation, and we're seeing that in our rental results.

Speaker 4

Got you. And then just a quick follow-up. In Maui, it sounds like demand is coming back. I think your baseline expectation is limited year over year growth. In Maui, you mentioned $5,000,000 of contract sales or so.

Speaker 4

Is the major headwind still on the sales side, like meaning the personnel side? And then if so, what's being done to alleviate that? How do you think about the business going forward? Thanks.

Speaker 2

Sure. Yes, in Maui, it's a couple of things. 1, resort occupancies in the Q1 were in the low 90s. So not back typically in Maui we were running 97% type occupancies. So occupancies are coming back, so that's obviously a bit of a headwind just in terms of in house tour flow, but we expect to hopefully see that continue to come back over the balance of the year and get back to more pre fire levels.

Speaker 2

And then it is on the sales and marketing talent. We've made good progress in terms of replacing some of the talent we lost. We're not completely back to fully staffed yet. The trade off a little bit is you're bringing in potentially new talent, right, versus losing experienced talent. So there is a bit of a ramp up time, getting those sales people up to kind of that normal production.

Speaker 2

But the setup right now is pretty good. We expect it to continue to get better as we go through the year. And as you mentioned and then I talked about in my remarks, we should be up year over year. And obviously, we got easier comps in the second half of the year in Maui with the impact of the wildfires last year.

Speaker 4

Understood. Thank you. Nice quarter.

Speaker 2

Thanks, Ben.

Operator

Thank you. Our next question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

Speaker 5

Hi, good morning. Good morning, Patrick. I want to follow-up on what I thought was a bit of a cryptic comment in the prepared remarks. This concern the loan loss provision. You talked about needing to see performance improve.

Speaker 5

I assume that means if it does, am I correct to interpret that if it doesn't improve, you would have to take another charge? Maybe you can flush out talk a little bit more about that?

Speaker 2

Sure. Yes. I'll give you some comments and then Jason can add too. When we took the reserve last year in Q3, obviously, we were seeing higher delinquencies, higher defaults and we took an estimate as to how those would kind of play out. But we said at the time, the expectation would be over the next 3, 4 quarters, right, we'd start to see the improvement, some of the timing and what we thought was the impact of the defaults really coming from some of the higher CPI inflation, things like that were impacting some of the customers.

Speaker 2

So, the good news in the Q1 was, while delinquencies were higher than they were last year. Over the course of the quarter, we saw those delinquencies improve sequentially And even through April here, we saw some more improvement. So the trends are still good, but yes, if our delinquencies, I guess, Patrick, to answer your point, if your delinquencies never came down from what we were experiencing, yes, that would potentially be more loan loss reserves we've had to take. We feel good about where we're at in the trajectory, but we still need to see some more improvement here over the next quarter or 2 to get back to more normalized delinquency trends.

Speaker 5

Okay. Thank you. And then some follow-up questions on Maui. Starting in August, you'd be lapping in the horrible fires of last year. John, in your view, do you think that sets you up for proverbial easing year over year comparison?

Speaker 5

Or do you think Maui is still going to be struggling where you wouldn't necessarily refer to it as an easy year over year comparison beginning in August?

Speaker 2

Well, simply, yes, it will be an easier year over year comparison because for a period of time, obviously, we're shut down, right? We're running 90 plus percent occupancies as I mentioned right now. We're back. We've got most of our sales force replaced. Hopefully as we get to August, right.

Speaker 2

A lot of those newer sales people will be hitting more normalized production levels for sales people. And so, yes, on an absolute basis, we should do much better August forward than we did last year just given the trajectory of where we are at right now.

Speaker 5

Okay. That does make sense. And then just last question on Maui, John, you probably saw there was some news about some some regulations in New York City have really helped the hotel industry. But is this a non event or could again, could this be a potential needle mover for legacy properties like yourselves?

Speaker 2

Yes. I think what you're referring to is the Governor signed some legislation that kind of gives the, I think the power to the mayors of each island to potentially and this is where we don't really know yet exactly what the outcome could be or how it might impact us positively or negatively, but have greater decision making around short term rentals. So we're obviously watching it. We'll 1, make sure we understand exactly what's in the legislation, how it could potentially impact us. But part of it will be actually what actually the mayors decide to do, right?

Speaker 2

So kind of early days at this point, I don't necessarily see anything. Hopefully that will impact us in the near term, but we're going to keep an eye on it.

Speaker 5

Okay. Thank you. I'm all set in a moment.

Speaker 6

Great.

Operator

Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.

Speaker 7

Hey, good morning.

Speaker 3

Hey, Chris.

Speaker 7

Hey, John. So you mentioned the new development you're going to be doing in Thailand. I think you said it's part of a JW complex that already exists. And so I'm curious looking forward, are you seeing more opportunities to do things on sites of existing hotels, whether domestic or international? Because I think we're starting to see transactional activity pick up a little bit in the States.

Speaker 7

So I'm curious whether it's going to be an opportunity going forward.

Speaker 2

Yes. Great question, Chris. The short answer is yes, in both locations. We've always had more opportunity just given resort development, I'd say in Asia Pacific, right, more opportunities, more resorts still getting done over there, brand new construction. But we've got some opportunities we're looking at here currently in the U.

Speaker 2

S. As well. So I would expect us to potentially do some more of those deals here in both locations as we go forward. But yes, the development is coming back. It's just a little bit location by location.

Speaker 2

And as you know, the co located ones actually work well where we can leverage in house across the co located hotel. At the same time, we've got our units and leverage the amenities in the facility. So it will be a little bit facts and circumstances, but there are some good opportunities out there right

Speaker 7

now. Okay. Good to hear. Thanks, John. Follow-up is on kind of the loan portfolio, but in a different direction, which is I'm curious what you're seeing on current day originations.

Speaker 7

Is the propensity to finance or down payment or any of that on new loans changing at all and would that affect your how you think about that going forward?

Speaker 3

Yes, Chris, this is Jason. We haven't seen too much too many changes in sort of day 1 behavior. Propensity was down a little bit in the quarter, a couple of points, but Q1 is always seasonally our lowest propensity quarter, just given the mix of buyers 70% first time buyers sorry, 70% existing owners in Q1 this quarter. So that sometimes just goes with that mix as well, but nothing else really different.

Speaker 7

Okay, very good. Thanks guys.

Speaker 2

Thanks, Chris.

Operator

Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Speaker 6

Hi, good morning, everyone.

Speaker 2

Good morning, David.

Speaker 6

Thanks for taking all the for all the commentary and for taking my question. John, you made what seems like maybe a passing comment about pricing and consumers' behavior toward pricing. Could you just go back to that and elaborate a bit more on sort of how that's showing up or what the sort of basis is for that? Hearing bits and pieces of it through earnings season in

Speaker 5

even

Speaker 2

even adjusted for Maui, our VPGs were down slightly in the Q1. And I would argue, if you go back to last year, we had a strong Q1. So it was a tough comp. As we went through last year, we did see a little bit more normalization for lack of a better description of VPGs and then things for the most part as we got through the 3rd Q4 kind of stabilized, right? And so that's where we see it.

Speaker 2

At the end of the day, David, is a little bit in the VPGs. I would say, the broader macro, while the overall economy still headlines are pretty good, as we've talked about, no different than we've seen on the loan portfolio, right? Higher costs, I think at some level when you see it in other businesses, right, there is some stress on the consumer. I think the good news as I also said in my prepared remarks is people seem in terms of their wallet spend, they're prioritizing experiences and vacations, right? And that's what we're seeing are on the books are up as and they were strong last year, right, going into the summer and they're up a bit, right?

Speaker 2

People are getting on vacation. People are spending. And so that's a positive dynamic for us, the business we're in and where people want to spend their money. And that is, as we've always talked about a bit of the kind of post COVID, right? People have kind of shifted to how they want to spend their disposable income and get on vacation.

Speaker 2

So that's a good tailwind for us.

Speaker 6

Understood. And one more and if we're triple clicking on this, apologies, but the depreciation change that's embedded in the guidance, could we just be clear about, right, it sort of changing the EPS guide, but not the EBITDA? And I just wanted to make sure we totally understand that.

Speaker 2

Sure, David. At a high level, we changed some estimates versus our guidance in terms of the timing of depreciation, just when some newer assets were going online, estimated useful lives of assets. So it's not a cash flow impact by any means. It's just the timing of some of the depreciation versus what we estimated at the beginning of the year from a guidance, just fine tuning that a bit.

Speaker 6

Okay, fair enough.

Speaker 2

Thank you. All right. Thanks, David.

Operator

Thank you. Our next question comes from the line of Shaun Kelley with Bank of America. Please proceed with your question.

Speaker 8

Hi, good morning. Good

Speaker 7

morning, Shaun.

Speaker 8

Good morning, Shaun. Thanks for taking my question. I just want to go back to the loan loss commentary for a minute or the provision commentary. And I'm just kind of trying to follow the more just the expectation that you guys have embedded here. So obviously, there was an increase last year.

Speaker 8

And I think the way you packaged it in the answer to the former question was that the expectation was that would normalize a little bit after we kind of got through some issues last year with the consumer. But as we just kind of look at it on a percentage basis, it looks like it's actually continuing to increase sequentially. So my question is sort of what level of normalization were you kind of embedding or are you embedding today? And what if we were to stay at the current run rate and just sort of current behavior, what would that imply or how big of an impact would that have?

Speaker 3

Yes, Sean. So to your first question, what we when we looked forward as of Q3 last year and looked at the environment that we were in, we knew it was going to take some time for those delinquencies and then ultimately the defaults to kind of run through the system. So we're seeing that today, and it's continuing as we thought. So think when we provided the guidance here in February, we indicated that the loan loss was going to be higher year over year in Q1, and that's what we're seeing. So really, as we look forward, in terms of estimating any kind of future delinquencies and defaults, it's hard to give you an estimate as to what the impact could be.

Speaker 3

As John mentioned as I mentioned on the call too, we do need those delinquencies to improve here, and that's what we've been seeing over kind of the end of the Q1 and here into April. So Sean,

Speaker 2

the only other thing I'd add there, I think in terms of a more normalized run rate, we did talk about because the way the models work on the defaults, right, if you have higher defaults that goes into your static pools and therefore you're using that to predict the future. So we talked about our run rate loan loss for this year and going forward could be 100 basis points, 150 basis points higher, right, in terms of higher more normalized loan loss. So that does get kind of embedded into the future in terms of new loans. So that's embedded in our overall development margin and what we've talked about is that we are going to need to continue to provide for new loans at a slightly higher rate than we've done historically because of the higher defaults we've experienced.

Speaker 8

So John, just to recite that back to you then, sort of 100 basis points to 150 basis points off of, let's call it, a normalized level would be what's kind of embedded in the outlook as you see it today. We're obviously a little bit above that percentage. I think if we look at it year on year, it's like closer to 200 basis points. Is that am I kind of in the ballpark of how to think about it?

Speaker 3

Yes. That's right. And remember, the Q1 of last year was before we started seeing some of this increased delinquency activity. So Q1 last year was lower than the rest of the year. So that's why the Q1 looked year over year worse than kind of the guidance for the full year.

Speaker 8

Yes. Okay. I follow that, Jason. Thank you. And then my follow-up would be just sort of the puts and takes between development and rental margins as you outlined it.

Speaker 8

So if I caught it correctly, I mean, I thought coming into the year that with rental, the issue was going to be that you were going to have higher HOA fees and then that was going to be a bit of a headwind on the cost side because you were having to pay to support some of that inventory that you hadn't sold yet. Perhaps I misunderstood that, but where does that kind of net out today? Because obviously you're able to utilize some of this rental pool and move some of those dollars between. But on an aggregate basis for the year including Q1 now, how do you think about that rental profit? And then I think development you just said a couple of 100 basis points for the year below last year.

Speaker 8

Is that kind of the right ballpark for those two line items? Thanks.

Speaker 2

Sure. Yes. On the Development margin side, yes, for the full year, we expect that development margin and we talked about this in our original kind of guidance for the year to be down couple of 100 basis points year over year. Some of that is the higher loan loss reserves, right? That's a deduct from revenue and impacts your margin and some higher marketing and sales costs.

Speaker 2

Yes, on the preview packages as we do more preview packages and allocate the rental income, you are charging because of the higher unsold maintenance fees and cost of that inventory, you are charging over to marketing and sales a slightly higher cost, but there's also a lot more keys getting used in the previews. So that was the $6,000,000 or so I mentioned earlier, which is just a bit of geography, right, that's improving the rental profits. It's an impact on your development margin a little bit. Yes, for the full year for rentals, we're feeling better just given as you know, as you're shaping up as I talked about, Our occupancy was up call it about 2.5%, 3% year over year and last year was a good Q1. So team is doing a great job getting rentals there.

Speaker 2

And as we've also talked about, when you think about the cost of our rentals overall, about 85% is a bit fixed coming into the year. So for us to really drive better profitability and that's what we did in the Q1, we got occupancies up, right? And we were able to keep the average rate fairly flat year over year. So our setup for the year is looking better, still a bit early days, but we're hopeful that maybe rentals could be where we're at last year or maybe a little bit better. So we'll see how the year goes, but we got off to a good start here in the Q1.

Speaker 8

Thanks so much.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Ryan Lambert with JPMorgan. Please proceed with your

Speaker 1

question. Hey, good morning.

Speaker 5

Good morning.

Speaker 9

Thanks for taking my question and congrats on some of the progress you're seeing with demand at your new Waikiki property. And in terms of some of the puts and takes with guidance changes, it looked like, at least to me and correct me if I'm wrong, a little bit more spend this year on inventory. I'm wondering if that's just a function of timing or if you're seeing anything on the development side with higher input costs?

Speaker 3

Yes, Ryan, this is Jason. What you're really seeing there is the add back from net income or adjusted EBITDA. So it's really we had a little bit lower product cost, and we think that's going to continue versus our initial expectations. So it's not necessarily on the spending side. It's really on the add back and really impacted by a little bit lower product cost than we had originally anticipated.

Speaker 9

Okay, great. And following up on some of the rental comments, it sounds a lot more positive for this year. When you look into next year with some additional inventory, is that, are your expectations for 2025 incrementally better? Or would that just be kind of a continuation of the trends you're seeing in 2024?

Speaker 2

Yes, it's a great question. It's a little early for 2025, I guess, in terms of working through all that. But given Waikiki coming online that to your point, I think, will give us additional keys, right? Some of those will obviously be used by owners and all that, but that'll create other rental availability at other properties depending on where people stay. So I think we'll know more as we get through the year like every year the way to go rentals right is driving your rent pack every year and also big focus this year on keeping maintenance fee increases back to more historical levels,

Speaker 5

which will help on the cost

Speaker 2

of that inventory given our unsold maintenance fees we have. So, but yes, if we're able to continue to drive some rate occupancy as we go into 25 on potentially some more keys if you will with some of the new inventory coming online that should bode well.

Speaker 9

Great. Thank you.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Patrick Scholes with Truist Securities.

Speaker 5

Hi, good morning again. Hey, good morning. Just a follow-up question. Hello? Yes.

Speaker 2

You're breaking up a little bit. Go ahead, Patrick.

Speaker 5

Okay. Can you hear me okay?

Speaker 3

We can. Yes.

Speaker 5

Yes, great. So I'm just trying to follow-up a little bit on the bound sales program, had been an issue last summer. Can you, I guess, safely say sort of those hiccups have been put to rest here? And how has the I believe the challenges were with the legacy Weston customer. How is that going with that customer at this point?

Speaker 5

Thank you.

Speaker 2

Yes, sure. As we talked about on the last call, yes, the transitions are behind us, right? The impact we saw more in the Q2, because if we recall Q3 last year, we actually saw VPGs improved significantly off of what we kind of saw at the transition site in the second quarter. It was really around just the marketing sales teams selling the product, getting up to speed better and getting confidence in selling the new product. It was a different sell, selling the system and all the abound exchange opportunities.

Speaker 2

But we also talked about and we talked about the fact that more people in the legacy Vistana systems, Weston and Sheraton are now enrolled in abound. They're using the product, right. There's that getting familiarity with the benefits of the program and actually using it. So those two things continue to go well and we've seen those VPGs over the balance of last year really kind of come back to where we were before we launched the balance. So, behind us, like we said last call, I don't expect any impact going forward.

Speaker 5

Okay, good. And then just a last follow-up question here. Last year, you had announced 2 new Weston Club projects, Charleston and Savannah. Do you have opening dates? Is that next year or the following?

Speaker 5

And then related to that, are those going to be part of the abound trust? Do those go into the trust system or will those be separate? Thank you.

Speaker 2

Those will go into the trust into the now Marriott Vacation Club Trust, right, as we've talked about feeding all kind of new U. S. Inventory into that trust. So both of those will create points in the trust. From an opening date perspective, I think we've got Charleston in 2026 and then Savannah is 27.

Speaker 5

Okay. And did I hear correctly previously the Waikiki new Marriott Vacation Club Resort, is that still scheduled to open in the back half of this year in the sales center, correct?

Speaker 2

Yes. I was just out there visiting our teams in Hawaii, got to see and tour the new Waikiki property is coming along great and it will open up. We started taking reservations already beginning in October. So we're on track there.

Speaker 5

Great. I think that's it for me. Thank you.

Speaker 2

Thanks, Patrick.

Operator

Thank you. Our next question is a follow-up from the line of Ben Chaykin with Mizuho Securities. Please proceed with your question.

Speaker 4

Hey, thanks for taking this call. I appreciate it. Thank you. I

Speaker 5

think you said

Speaker 4

in the prepared remarks the management business profit should be constant through the year. If I heard you correctly, just to kind of like double click on that, are you referring to the management profit within VO that was plus 8% or are you referring to kind of like the consolidated P and L management and exchange profit that was plus 2% just to clarify

Speaker 3

which That was probably a comment on the vacation ownership management business.

Speaker 4

The Plus8 management business with Envio, correct? Yes. Great. And then, would love to dig back into Maui. I guess, going back to kind of one of the previous answers, what do you think closes the gap between the 90% 97% occupancy?

Speaker 4

The 90% that you're experiencing today, the 97% that you've had historically? And then kind of part 2 on the sales personnel side, not to belabor the point, but do you have all the bodies in place? Is this just a function of learning and ramping? Or are you still trying to hire an onboard? Just would love to kind of like learn more about that process.

Speaker 3

Yes. Ben, just on the occupancy, we were running, call it, 93%, 94% in Maui, so just a couple of points off. I think what closes the gap is just people continuing to go to Maui, talking about how great it is and things like that. John was just there and the devastation is still quite real around the properties and that's going to take several years to come back. So we do think it comes back, but how fast it gets back from 'ninety three to 'ninety four to 'ninety seven, time will tell.

Speaker 3

And then your second question was about the sales existing. Can you repeat the second part?

Speaker 4

Yes. I was saying on the sales personnel side, it sounds like there's still a ramp. And my question was, do you have everyone in place? Like do you have all the hires that you want? And you're just in terms now they're just learning and ramping?

Speaker 4

Or are you still trying to source sales personnel?

Speaker 2

Yes. For the little tour flow that we have, because we're still down a little bit, yes, we've got the teams in place. We need to get a little bit more on the sales side as occupancies continue to ramp and tours continue to ramp. So we're in a good spot relative to handling the demand for tours right now, but we still aren't back to kind of 100 percent, if you will. So we'll continue to manage through that as occupancy and tours come back.

Speaker 4

Got it. Thank you. Appreciate it.

Speaker 2

Thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Geller for any final comments.

Speaker 2

Thank you everyone for joining our call today. As I hope you can tell, we feel very good about the way the year has started. We ran 90% occupancy in the quarter, contract sales grew 3% excluding Maui and first time buyer tours grew by 9%. And with a pipeline of 270,000 packages, international inbound travelers returning to the U. S.

Speaker 2

And reservations on the books for the summer months up a few points, we feel good about the balance of the year. On behalf of all of our associates, owners, members and customers around the world, I want to thank you for your continued interest in our company and hope to see you on vacation soon. Thank you.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Marriott Vacations Worldwide Q1 2024
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