Marriott Vacations at Morgan Stanley Conference: Strategic Insights on Timeshare Business

On Tuesday, June 3, 2025, Marriott Vacations Worldwide (NYSE:VAC) participated in the Morgan Stanley 3rd Annual Travel & Leisure Conference, providing insights into its strategic focus on modernizing operations and capital allocation. While the company faces challenges from macroeconomic volatility, it remains committed to driving growth and attracting younger consumers through innovative offerings.

Key Takeaways

• Marriott Vacations aims to modernize operations, targeting an incremental EBITDA of $150 million to $200 million by next year.
• The company is actively working to reduce its inventory level from three years to two years, enhancing future cash flow.
• Efforts are underway to attract Millennial and Gen X consumers, who make up 60% of first-time buyers.
• Marriott Vacations is enhancing its exchange business by offering more flexible and dynamic options to increase wallet share.
• The modernization program is expected to result in $35 million in savings this year.

Financial Results

• VPGs (Volume Per Guest): Sales were down 2% in the first quarter due to macroeconomic factors, but there is a positive trend with sales increasing in May.
• EBITDA: Approximately 40% of EBITDA is recurring. The modernization program aims to boost EBITDA by $150 million to $200 million by the end of next year.
• Free Cash Flow: Historically, the free cash flow conversion rate has been above 50%, but it is expected to be in the low 40% range this year due to higher inventory spending.
• Delinquencies: Improved delinquency rates are attributed to proactive outreach and lower maintenance fee increases.

Operational Updates

• Occupancy: Resorts maintain a high occupancy rate of over 90%, with locations like Hawaii reaching 97%-98%.
• Customer Demographics: The average household income of owners is $275,000, with an average net worth of $1 million.
• Sales Channels: Increased online bookings, rising from 30% to 70%, demonstrate a shift in consumer behavior.
• Modernization Program: Aims to improve margins by driving VPG growth and reducing costs, with a focus on cultural change and agility.

Future Outlook

• Inventory Management: Reducing inventory levels is a priority, expected to create a cash flow tailwind.
• Exchange Business: Enhancements aim to drive wallet share among 1.6 million members with flexible options and dynamic pricing.
• Technology and AI: The company plans to leverage AI for improved vacation planning and booking, expanding its use in call centers.
• Asset Sales: Non-core assets are being identified for sale, including properties like the Sheraton Kauai Hotel.

Q&A Highlights

• Cyclicality: The company addressed misconceptions about the cyclical nature of the timeshare industry, emphasizing its long-term investment value.
• Consumer Environment: Promotions and incentives are used to counteract potential declines in demand due to macroeconomic conditions.
• Generational Appeal: Efforts to attract younger consumers include evolving product offerings with point systems and city experiences.
• Credit Book: The company has improved delinquency rates through proactive outreach and adjustments in maintenance fee increases.
• Capital Allocation: Focus remains on share repurchases, inventory management, and modernization investments.

Readers are encouraged to refer to the full transcript for a detailed understanding of Marriott Vacations Worldwide’s strategic initiatives and financial performance.

Full transcript - Morgan Stanley 3rd Annual Travel & Leisure Conference:

Unidentified speaker, Moderator: All right, everybody, we’re going jump into our next session, is with Marriott Vacations Worldwide. I’m joined by John Geller, who is the President and CEO, and Jason Marino, who is the CFO. Just to start things off, and we had a conversation to start the day

John Geller, President and CEO, Marriott Vacations Worldwide: with one of your peers,

Unidentified speaker, Moderator: and I think one of the things that people often get either confused by or there’s a misconception around timeshare in general and vacation ownership is that it’s highly discretionary, highly cyclical. Maybe talk to us a little bit about how you think about the cyclicality of your business model and maybe help dispel some of that thought process.

John Geller, President and CEO, Marriott Vacations Worldwide: Sure, sure. So while it is a discretionary purchase, right, your upfront purchase of timeshare, It is an investment as we talk to folks into your future vacation. So it’s not about just purchasing for this year, right? It is the value you’re going to get over the lifetime of vacations. And I think half our business is when you talk about the management portion, management fees, our membership, you got even our financing business, Good recurring cash flows where you potentially see some volatility is if on the broader consumer, right?

There’s some hesitancy to buy for whatever reason. They like the product, but they just decide not the right time to write, on average $25,000 30 thousand dollars check or finance it with us. And so we saw a little bit of that as we went through the first quarter. Like I say, if you’re a glass half full, the fact that given all the macro volatility, our VPGs, whether those were for first time buyers or owners, were down roughly 2%. Right?

So people are still buying, right? They’re making that long term investment. And quite frankly, if you think there’s going to be higher inflation and things like that, it might be a good time to buy because once again, this is for you’re locking in on a price today that is going to go up over time. Take our price per point up, but if it’s a highly inflationary market, right, it’s going get more extreme.

Unidentified speaker, Moderator: You’re making me think that we need to do tour at the end of this day for everybody.

John Geller, President and CEO, Marriott Vacations Worldwide: But it is, the other thing, and you’ve heard this, I’m sure from a number of people you talk to in terms of the pure leisure side coming out of COVID, people have put a much greater priority on experiences and that’s what we offer. So we continue to see that our resorts this year will be 90 plus percent occupied year round across all our vacation ownership resorts. We run a very high occupancy and we see that as we look through the balance of the year. So people are gonna show up. For us, it’s about informing them about the benefits of that lifetime of vacations and getting people to buy.

Jason Marino, CFO, Marriott Vacations Worldwide: And one other follow-up on that question

Unidentified speaker, Moderator: would just be beyond just the demand, which maybe we’ll take into the demand side further. But what about from a business model standpoint or maybe remind folks of how much operating leverage or lack thereof there is and what are the main levers that you have to pull to kind of navigate if things go both positive or negative?

John Geller, President and CEO, Marriott Vacations Worldwide: Yeah, like I said, 40% of our EBITDA is recurring and it typically grows every year, our financing profit notwithstanding higher securitization rates. We’re starting to see growth in our financing profit as we’ve been securitizing at higher rates and the lower rates have kind of cycled the management fee business and even the membership side of that, both on the VO as well as the interval side, we see good consistent great cash flow. The volatility comes and we talked about this a little bit on our first quarter call was if people are a little bit hesitant in buying, and that’s where we’ll manage that and that’s where we can offer some, what we call, first aid benefits, higher incentives to make the value proposition a little bit sweeter and get people to buy. That worked. We rolled out in March for first time buyers, we rolled out some incentives and you saw the increase, I think we were of our competitor set, our mix of first time buyers is the only one that went up.

Our competitors went the other way in the first quarter in terms of their mix of owner and first time buyer sales. And then on the owner side, we did roll out some promotions here in May. So we’re starting to see the benefits of that as well in terms of closing efficiencies.

Unidentified speaker, Moderator: So I guess to follow-up on that. So if you see kind of deviations in the consumer environment, one of the levers, the first lever that you would pull in terms of like the playback playbook that you would follow would be promoting to try to drive demand. Sounds like you saw some of that. Is that, I guess, are we seeing should we be anticipating then that there’s a temporary kind of pressure point on margins before they then re expand because of

John Geller, President and CEO, Marriott Vacations Worldwide: some Yes, goal in when you think about our margins, obviously, have a broader modernization project to take costs out of the business, which should help improve margins across the business. But it’s really about getting VPG growth, right? So your cost to get all the tours and everything is fixed. If you can get a slightly higher closing efficiency, you’re going to get better margins, better flow through in that. So we’re focused.

We had finally started coming out of COVID, which was kind of an all time high for VPGs in ’twenty two with a lot of pent up demand, that had continued to kind of still way above 2019, but you saw the VPGs coming down. Then finally, in the second half of last year, really saw the stabilization in the fourth quarter was, I think, our first quarter where we grew VPGs year over year. As we talked about on our call, we saw January get off to a good start and then you had a lot of the more macro noise kind of kick in February and March, and that’s where we saw some of that softness. So we don’t make those decisions day to day, right? You’re looking at it over a couple of weeks, what are the trends, what are we hearing at the sales table to kind of sweeten that offer and then we’ll make adjustments.

And so the good news is, at least knock on wood here, recently, there’s not as much volatility in the day to day that that could change. But if we’re successful, get that DTG growing again, that’s going to help with your development profit and leveraging your marketing and sales costs.

Unidentified speaker, Moderator: So maybe to make sure I reframe correctly, it sounds like there was a bit of a step down from the volatility, but feels like maybe we’re on firmer footing.

John Geller, President and CEO, Marriott Vacations Worldwide: Yes, it’s definitely stabilized. What we saw, we talked about on the call, were down, VPGs were down, our sales were down roughly 3% March and then April, which with all the tariff stuff, we saw more volatility down 4%. And for May, we’re still down, but not down as much. So we saw some improvement with some of the initiatives and that continues to be the focus. How do we get that DPG going the other way?

Unidentified speaker, Moderator: So maybe looking long term, the other kind of area of pushback that we hear from folks is that it’s for a different generation, that it’s not going be able to attract the younger consumer. What do you see in your business that would give you confidence that the next generation is going to be as much an owner of your timeshare as the prior?

John Geller, President and CEO, Marriott Vacations Worldwide: Yes, I mean, it’s a couple of things. If you look at our first time buyers, I think millennial, Gen X, about 60%. So I’ve always said it’s a bit of a life stage product. But at the same time, you also look at how the product has evolved over time back when we used to sell specific week at a certain property and you didn’t have all the options. As the product has evolved with the point system and all the things you can do outside of just staying in one of the villas exchange for cruises, African safaris, there’s a lot more opportunity for folks to get on vacation different ways.

And then also for younger travelers, added a lot more city experiences and we call our city collection. And so we’re gonna continue to enhance the offer and it’ll become, I think, more and more relevant to folks. But given the size of our units, two bedrooms, typically 1,200 square feet, full kitchen amenities, things like that, they do kind of trend towards people with families. And that’s why I call it more of a life stages. You start to travel if you have kids and staying in a couple of hotel rooms and different than maybe some of the short term rentals where you can rent a home or a villa.

These are all brand standards, right? And so for our customer, it is about the value proposition, knowing that you’re going to get a very comfortable bed and the units are going to be clean and all that stuff, consistency is big in terms of as you get older, right, you’re willing to pay a little bit more for that consistency and not have the variability in your vacation. So it continues to resonate as and we haven’t seen the demographics change over the last twenty years in terms of average age of a first time buyers, early 50s, average age of our owners are about 60 or so. So it’s not like you’re seeing that age trend change as people and how they want a vacation and what we have to offer, it resonates.

Jason Marino, CFO, Marriott Vacations Worldwide: Two follow ups on that. One is

Unidentified speaker, Moderator: just remind us from a customer demographic, what’s the average kind of income and household worth? And then secondarily, as the new buyers have maybe not grad they’re not younger, but could their behavior shift in terms of upgrades? Or has that been pretty consistent as well?

John Geller, President and CEO, Marriott Vacations Worldwide: So for the first part of your question, average household income we target is in that $275,000 a year. Average self reported net worth is about $1,000,000 for our owners. And that’s been very consistent over the last fifteen, twenty years in terms of who we’re targeting. In terms of the upgrades, what we see is, first time buyer, typically 40 ish percent will upgrade and that hasn’t changed much either. They like the product, they want to make it more of their, I’ll call it vacation wallet, right?

Buy more points, have more time at our resorts, they add more over time.

Unidentified speaker, Moderator: So one of the sourcing channels is clearly kind of the existing customer base for new customers or new owners, I should say, remind us what are the primary sources and what are some of the initiatives that you have to potentially either expand or enhance those?

John Geller, President and CEO, Marriott Vacations Worldwide: Yeah, yeah. So historically, given our licensing agreements with Marriott and Hyatt, we do a lot of marketing into the Bonvoy in the world of Hyatt. And we’ve got probably 28, 30 data points that help us focus in based on what we learned historically of who’s most likely to buy, who to make offers to things like that. It’s interesting more recently, on the Marriott side, for example, there are a lot of people that book at a Marriott hotel, but are a Bonvoy member. And historically, we’d say, well, they’re not gonna be a good marketing prospect.

And what we have found as we’ve kind of looked and tested different channels is actually, if they’ve got the other data points in there, they actually are a pretty good target. So we’re always looking to kind of, I call it, expand the marketing funnel, try different ways of making offers to people that maybe historically we hadn’t tried or we thought for whatever reason, but with all the data and analytics and things that we’ve been doing, helps, right, in terms of expanding that funnel.

Unidentified speaker, Moderator: I think you mentioned that, was it 70% growth in online as a source? Is that mainly email that they’re coming through and clicking through? Do you know? Or where

John Geller, President and CEO, Marriott Vacations Worldwide: Well, I think what you’re referring to is owners are booking 70% of their villa stays now online. Like Yeah. Three or four years ago, that was about 30%. And so people would call our donor services, our call centers to book their villa stays. As we’ve enhanced the technology, but you also got to remember that there’s more opportunity there because about 20%, twenty five % of people use their ownership points each year to book outside of villas.

And right now, to book those type of vacation packages, you have to call. And the goal is over time, no matter however you wanna use your points, In a villa, go on a cruise, all that, more online and Gen AI becomes a real opportunity with some of that too, in terms of how people wanna plan and book their vacations. So a lot of great work as part of our modernization to continue to move off. We use AI today. We’ve rolled it out in our call centers over the last couple of years, whether that’s our virtual voice.

So a lot of questions, you don’t even need to talk to a live operator, they can handle, and then we’ve got chatbots and things like that, that we continue to enhance what they can handle. And that’s where, once again with Gen AI, and you start to get the real opportunities there over time, it’ll be able to handle more and more without ever talking to an operator.

Unidentified speaker, Moderator: But I guess I was also thinking about then that can also, I would imagine over time tie into how you even get people to tour, how to sell packages. Yeah, absolutely. Maybe remind us where, what percentage of your tours come from packages and then where could that be?

John Geller, President and CEO, Marriott Vacations Worldwide: Yeah, it’s about 25. And typically, those are first time buyers that are potential first time buyers. Want to first and foremost, and I said we’re on a 90% resort occupancy. We want to get our owners happy with the product because they potentially buy more, so we want to make sure they get their vacation needs met. But we also get a big chunk of inventory every year for people that exchange to go outside the system or inventory that we own that we haven’t sold yet.

And that’s where we typically, that’s the inventory we use for packages because we could otherwise rent it. So for us, when you run a 90% occupancy and definitely high demand locations like Hawaii, where you might run a 97%, ninety eight % year round occupancy, it’s more the supply of rooms to put those packages in. It becomes a bit of a limiting factor in terms of driving more package growth over time. So we’ll continue to do it because while, yeah, you make a little bit of money on the rentals, the opportunity to make sales, right, is more than worth it. So it’s always trying to maximize that value.

Unidentified speaker, Moderator: You talked about the consistency in owner upgrades. I guess what percentage of owners have upgraded at this point?

John Geller, President and CEO, Marriott Vacations Worldwide: I don’t know if you know the Yeah, I mean, we used to talk about in terms of weeks, but on average, that hasn’t changed much. An owner owns on average about one and a half weeks of times so one of the things that we do with our points program and we’ve on the Marriott side have been in business now over forty years is people that have gotten a lifetime of vacations, aren’t traveling as much, we recycle that. We’re taking people out that wouldn’t otherwise buy more and replacing those with first time buyers and that opportunity to buy more and upgrade over time. So we do know, like I said, first time buyers on average in the first, call it ten years, forty percent of them will buy more. Right.

And that might be a half a week, a week, it could be a couple of weeks, right? That’s where depending on the owner.

Unidentified speaker, Moderator: When you were referencing the volatility in the demand, was that centered on any particular sales center or geographies?

John Geller, President and CEO, Marriott Vacations Worldwide: No, it was generally kind of across the system. Like I said, in the first quarter, VPGs for first time buyers and for owners were down 2%. While there could be a little bit in one sales center versus another, it was pretty much kind of across the system that you saw that just high level general softness in closing efficiencies. Right.

Unidentified speaker, Moderator: So you mentioned at the outset that, you have a master plan effectively for modernization. That could be an opportunity. I mean, it is an opportunity for margin enhancement. Maybe give us an update on where you are in that and where to get where the savings are going come from, not only now, going forward.

John Geller, President and CEO, Marriott Vacations Worldwide: Yes, yes. So yes, we’ve targeted 150,000,000 to $200,000,000 call it an incremental EBITDA above just normal growth that we expect to get over the next couple of years with the idea that 150,000,000 and $200,000,000 run rate will be in place by the end of next year. When we came out this year, our original guidance, we said this year should have called 15,000,000 to 25,000,000. As we’ve gotten into the program and have been able to accelerate initiatives, we took that up to about 35,000,000 this year, which will also pull forward more savings in revenue opportunities next year from what we originally said. And the teams are working hard to do more, right?

Like I’ve said, as important as getting the revenue growth and the efficiencies, It’s also about changing our culture on how work gets done, the agility, and we’re already starting to refill the pipeline of future opportunities and things like that. So while we talk about the program in terms of two years, the idea is we kinda, I call it muscle build that agility and muscle and how the organization moves quickly, how we hold outcomes and accountability and deliver on that and really change the speed at which we move going forward. One

Unidentified speaker, Moderator: of the other areas that you had some improvement on was the cost of VOI to start the year. Can you talk about what changed there? Was that more efficient buying or are there tools that are going to drive a sustainably lower cost of VOI? Yes.

Jason Marino, CFO, Marriott Vacations Worldwide: So it’s really two things as we think about just not just the first quarter, but the rest of the year and then the out year. So for a number of years now, we’ve talked about slowly increasing our cost of VOI, which we sometimes call product cost. Just as we look at the mix of how much is repurchased inventory that we’re recycling from owners, as well as the cost of new inventory. And so where we sit today in the first quarter, we were a little bit lower and that really had to do with the mix of the product we sell. So we try to sell owners kind of what they want.

We have Sheridan, we have Weston, we’ve got Marriott owners, they all have slightly different product costs within them. And so as the mix of customers changes, that has some impact on it. And then as we thought about the rest of the year, as we brought our contract sales guidance down, the mix of the inventory that we’ll sell more repurchased inventory this year. So it’s really just that mix of products that we’ll sell this year as we move forward.

John Geller, President and CEO, Marriott Vacations Worldwide: Does that mean

Unidentified speaker, Moderator: that next year we should be assuming that maybe that goes up, but it’s going be coming at the same time that these other initiatives kind of fully kick in?

Jason Marino, CFO, Marriott Vacations Worldwide: Yes, I don’t think it really impacts next year as you go forward. Next year, we’ll have a different set of assumptions and we were going to have the higher product costs next year anyway. So I don’t think it really does anything on an absolute basis to the plan for next year. As we’ve talked about it over the last few years, the last couple of years, we’ve guided towards having this higher product cost over time and each and every year, as we get into our repurchase programs and tweak those on the margin to try and continue to drive lower costs on the repurchase side, we’ve been able to offset some of that increase that we’ve been foreshadowing for a number of years. So this is really just a continuation of those efforts.

Unidentified speaker, Moderator: Is that more purchasing of existing inventory, meaning just recaptured inventory relative to new inventory? And then how do you think about the right inventory level, the right mix of inventory?

Jason Marino, CFO, Marriott Vacations Worldwide: Yes, it’s a lot of that continuation of that. If you go back over the last fifteen years, we’ve done a lot of good things on the product cost side from that repurchase inventory, whether it’s the deals that we strike with our COAs because the COAs are responsible for the maintenance fee, delinquencies and defaults in terms of that’s their bad debt. We repurchased that inventory from COA. So we’ve adjusted our pricing to them. As we exercise the right of first refusal on inventory that trades in the secondary market, we’ve gotten involved in that.

So we’re always looking to do the best that we can for the company as well as the owners on that side in terms of letting folks out.

Unidentified speaker, Moderator: Makes sense. So maybe thinking about the credit book, mentioned last quarter that delinquencies improved despite everything that was going on in the macro. And I think some of that followed some initiatives that were put in place. Perhaps talk to how you’re getting delinquencies to kind of buck that trend. And is there further opportunity there to improve the credit book in the portfolio?

Jason Marino, CFO, Marriott Vacations Worldwide: Yeah, so we’re always working to enhance our collection procedures and things like that. I think one of the bigger drivers that really we associated with the delinquencies, rises delinquencies over the last couple of years was really the increases in the maintenance fees that we had in ’twenty three, as well as ’twenty four. We had almost a 25% collective increase for the two years combined. And so it was really important for us to keep those maintenance fee increases for ’twenty five down to more of that historical low single digit number. And we achieved that being in the low 3% for our points based products.

So we think that had definitely something to do with the performance we know from owners calling us up about maintenance fees. Those calls are down about 30% year over year. But then in addition, more proactive outreach, email campaigns, making it easier for folks to pay online as we talk about the modernization and better technology. So a lot of the tools that are available in the market, we’ve also implemented over the last nine months as the delinquencies rose. And so we feel really good.

Year end is always our highest delinquency quarter. So there is some seasonality in terms of delinquencies, but the year over year improvement through the quarter, and into April continue to get better as well. So delinquencies right now are approximately where we were in 2023. So we’ve kind of gone through that peak of ’24 and we’re back down and we feel good about it. And also, as it relates to the overall loan book, we’ve increased our reserve percentage about two points on a balance sheet basis, so versus where we were two years ago.

So we’re continuing to reserve at a higher percentage, but we feel pretty comfortable with the portfolio as it currently stands. Just a couple of follow

Unidentified speaker, Moderator: ups on that. One, the delinquencies that you did see last year and then the improvement this year, is that specific to certain geographies or customer types or even within the brands?

Jason Marino, CFO, Marriott Vacations Worldwide: As we think about it, we did see more stress at the lower FICO score bands, as you might expect, but there’s nothing really geographical or to really point to. So it was really more FICO band oriented than it was anything else.

John Geller, President and CEO, Marriott Vacations Worldwide: And from a brand perspective, we’ve seen improvements across all the different brands as well. So those have come down pretty consistently across brands. From a delinquency basis, correct. And

Unidentified speaker, Moderator: your FICO scores then by brand, there’s a lot of mix that’s happening. But if we look independently at those, have they improved as well? And then how should that inform us of where your provision should go?

Jason Marino, CFO, Marriott Vacations Worldwide: Yeah, we do do. We use FICO as a primary indicator of credit risk. Our overall FICOs for first time, for originations, not first time buyers, but originations is about seven thirty five. That’s up a little bit over the last several years. The most improvement that we’ve had has really been on the shared and consumer.

When we acquired ILG in 2018, we really focused on eliminating some of the lower quality channels like OPC and things like that. So we’ve moved the FICO scores up since we acquired ILG in 2018. So it’s up about 10 points or so in that front.

Unidentified speaker, Moderator: Have you changed what percentage needs to be put down or are you seeing any change in what people are willing to put down?

Jason Marino, CFO, Marriott Vacations Worldwide: No, our product has largely always been a 10% down product. We do drive for higher down payments, but generally it’s a 10% down requirement to purchase for financing.

Unidentified speaker, Moderator: Got it. If folks have questions, I’ll go out to the audience. I’ve got a couple of others. People need their caffeine pick up in the afternoon. One of the it’s a smaller portion of your business in EBITDA, but good free cash flow business is the exchange third party.

What are the major initiatives and changes that you’re implementing or contemplating to shore up the trajectory of the top and bottom line in that business?

John Geller, President and CEO, Marriott Vacations Worldwide: Yes, it’s high level, it’s about a little bit more about wallet share. So our overall member count in that business has been pretty steady over the last couple years. But, you know, I think, Steven, as you know, as timeshare on the vacation ownership side has changed and more people like us on the branded side expand their club offerings, less people are exchanging, They’re more of those playing in their own corporate club versus that kind of week for week exchange. So for us, is how do we continue to get owners to the deposit time, right, and market and do those types of things. But from a wallet share perspective, we offer getaway vacations, which are rentals with third parties where we have inventory and things like that, and it’s enhancing those offerings.

So for example, those have typically been non refundable. And so we are gonna expand that offering to have a refundable offer. And so those are things that if it’s non refundable, you might be like, well, I’m not gonna book that. But if I got a refundable opportunity and all the stats would say typically 80% of the refundable stuff will stick, right? And so you have some optionality.

It’s also we’ve got a lot of legacy systems there that we got when we bought Interval. It’s about enhancing that, dynamic pricing in terms of what’s going on. It’s very kind of static and manual right now in terms of how we adjust offerings on the rental side. So it is about, we’ve got this 1,600,000 members, right? Can you bring different offerings besides pure exchange?

And that’s where we’ve got some real opportunity to add that over time.

Unidentified speaker, Moderator: So let’s change gears and look at capital allocation and your free cash flow. One, just give us a sense of where free cash flow conversion has been and where it should be longer term.

Jason Marino, CFO, Marriott Vacations Worldwide: Yeah, so historically, our free cash flow conversion has been really well north of the 50% mark, 55%, sixty %. There was a couple of years there during COVID when we really coming out of COVID had really high VPGs and inventory spending was lower that we I think we achieved seventy percent one year. This year, we’ll be kind of in that low 40% range and that’s driven by a couple of things. We do have a little bit higher inventory spend on a relative basis than we’ve had. As you think about how we think about inventory over cycles, we always think over the long term, you’re going to have a little bit of growth in the business.

You need to grow your inventory relative to your cost of product each and every year. Inventory is not, we’re not selling widgets, we’re selling physical units and resorts and the development is a little bit more than bite size sometimes. We’re always planning it three to five years out. So as you go back in time, we had expected to have a little bit higher contract sales. So our inventory spending is a little bit higher.

And then during COVID, we had contracted to buy a property in Waikiki that somebody was developing, a third party was developing. So now we’re acquiring that a few years later. But we do our best to modulate that and keep that consistent with our product costs as we go forward. And you look back over the last fifteen years, most years we’ve had really positive inventory, cash flows from inventory, but longer term, we do think it’ll be slightly negative. Right now, we’re sitting with about three years of inventory on our balance sheet.

That’s a little bit more than we would like. We’ll work to get that down to two years. So there is a little bit of embedded tailwind there over the next several years from a cash flow perspective as we work our way through some of these commitments. And then obviously, we have the repurchase program, which is running about $170,000,000 a year as well.

Unidentified speaker, Moderator: And you sold some non core assets recently. Guess, are there other opportunities for that? And do you think about how you allocate that capital different than what’s generated from the internal business?

Jason Marino, CFO, Marriott Vacations Worldwide: Well, don’t include it in

John Geller, President and CEO, Marriott Vacations Worldwide: our free cash flow, right, as we talk about it.

Jason Marino, CFO, Marriott Vacations Worldwide: Understood. But yes, in

John Geller, President and CEO, Marriott Vacations Worldwide: the near term, as you mentioned,

Unidentified speaker, Moderator: we got about $350,000,000

John Geller, President and CEO, Marriott Vacations Worldwide: of call, biggest one being Sheraton Kauai Hotel that can’t be converted to timeshare. It generates EBITDA, it’s good, but we’re not a long term owner of hotels. And so we’ve had to work through some of the agreements there and it’s on a ground lease. And so it’s taken a little bit longer since we bought ILG to sell that, but that’s the biggest opportunity. And then Waikiki, there’s a retail component of that.

And so selling, we don’t need to own that retail and we’ve got a parking garage in San Francisco. Just things as part of those projects that are excess and we’re going to in the near term, what we’ve talked about is, got call it, dollars 200,000,000 plus or minus of investment related to getting these modernization benefits of 150,000,000 to $200,000,000 is really to kind of offset some of that here in the near term from an overall cash flow perspective.

Unidentified speaker, Moderator: Makes sense. We’re almost out of time, but I’ve got a more of a hypothetical question. It’s going to be I always throw these ones out at you. I guess if I think about you said you’re not a long term owner of hotels and resorts, but theoretically you could recapture and you would own all of your properties eventually.

John Geller, President and CEO, Marriott Vacations Worldwide: Well, the trust alone. Correct. Owners, yeah, but the owners own a beneficial interest in that trust. So at the end of the day, they still own real estate, but maybe not a week specific.

Unidentified speaker, Moderator: But I guess I’m getting at the value of your stock, the enterprise value of your stock should probably be in some way, shape or form tied to the value of that underlying property, meaning how many rooms do you have again?

Jason Marino, CFO, Marriott Vacations Worldwide: 24,000 villas, I believe.

Unidentified speaker, Moderator: 34,000 villas, that’s individual rooms roughly.

John Geller, President and CEO, Marriott Vacations Worldwide: Yeah, two bedroom on average.

Unidentified speaker, Moderator: Typical hotel development, how much does that cost per key?

John Geller, President and CEO, Marriott Vacations Worldwide: Probably a $1,000,000 per key now today to rebuild that. And to your point, we’re in locations like Substantial discount to NAV right there. Yeah, West Maui. We’ve got a couple of Westins, a Marriott and a Hyatt, and there’s no new timeshare going into West Maui and Kaanapali Beach where we’re at, right? So in a lot of locations, there’s no new product coming online, especially from a timeshare perspective.

So yeah, you got a lot of opportunity.

Unidentified speaker, Moderator: Could you, I guess, because it’s in the trust, you can’t theoretically carve out an individual asset if you were to recapture almost an entire asset. Well, that was my process for the day. We’re right at the end here. So please join me in thanking Marriott Vacations team for all the thoughts. Thank

John Geller, President and CEO, Marriott Vacations Worldwide: you.

Unidentified speaker, Moderator: You guys need 24,000. Mean, someone talking about It’s to be a

Jason Marino, CFO, Marriott Vacations Worldwide: lot more than a million a key, but Yeah. And when you think about Newport Coast, it’s

Unidentified speaker, Moderator: probably seven fifty keys in Newport. Good luck. Right. It’s just

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