Travel + Leisure Co. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Brand Expansion: Announced the Sports Illustrated Resort in Chicago, the Eddie Bauer Adventure Club partnership, and continued growth of the brand portfolio. These brands target distinct traveler profiles, expanding addressable market and diversifying revenue streams.
• Owner and Guest Experience: Invested in digital and AI tools for seamless vacation planning, launched the Club Wyndham and Worldmark apps, and saw owner engagement scores increase over 120 basis points in 2025. Focused on enhancing the on-property experience to drive deeper engagement.
• Operational Discipline and Scale: Focused on efficiency, achieving an adjusted EBITDA margin of 25% year-over-year. Returned $106 million to shareholders during the quarter, including dividends and share repurchases.

Segment Performance

• Vacation Ownership: Generated revenue of $876 million, up 6% year-over-year, with adjusted EBITDA of $231 million, up 14%. Gross VOI sales reached $682 million, supported by 2% tour flow growth and VPG of $3,304, a 10% increase. Adjusted EBITDA margin expanded 200 basis points.
• Travel and Membership: Segment revenue was $169 million, up 1% year-over-year, while adjusted EBITDA was $58 million, down 6%. This segment represents approximately 20% of consolidated revenue.

Guidance

• Raised full-year adjusted EBITDA guidance to $975 million (range $965 million to $985 million) due to strong third quarter performance.
• Increased gross VOI sales midpoint to $2.45 billion to $2.50 billion and raised full-year VPG to $3,250 to $3,275.
• Fourth quarter guidance reflects a measured approach, with 8% growth in gross VOI sales, VPG near $3,300, and approximately 2% EBITDA growth, accounting for comps, new brand investments, and normal cadence of variable comp true-ups.

Risks

• Resort Portfolio Maintenance: Closing legacy resorts to optimize demand, seasonality, and satisfaction scores. This involves balancing potential losses from sales locations against carry cost reductions, with approximately 10-12 resorts expected to be closed this year as part of normal portfolio maintenance.

Question and Answer

Q: What's driving the strong performance in the Vacation Ownership business?

A: Two elements: investments in digital and platform to simplify vacation experiences, and fine-tuning credit requirements and consumer profile to attract higher-income, better-credit consumers.

Q: What's the traction in the Travel Club transactions?

A: There's a 30% acceleration in transactions due to multiyear work refining strategies, focusing on profit-producing clubs and marketing efforts.

Q: What's the status of the loan loss provision and FICO scores?

A: Full year loan loss provision is expected to finish at 21%, unchanged from prior guidance. Weighted average FICO scores for new originations stayed above 740.

Q: Can you discuss the resort portfolio closing?

A: It's normal portfolio maintenance to close legacy resorts to optimize demand, seasonality, and avoid special assessments. Approximately 10-12 legacy resorts are expected to be closed this year, with the process ongoing.