管理層發言
Greetings, and welcome to the Travel + Leisure Q3 202 earnings conference call and webcast. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Erik Hoag, Chief Financial Officer. Please go ahead, Erik.
Thank you, Kevin. Good morning to everyone. Before we begin, we would like to remind you that our discussions today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings and in our press release accompanying this earnings call. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our third quarter results and our longer-term growth strategy. And then I will provide greater detail on the quarter, our balance sheet, and outlook for the rest of the year. Following our prepared remarks, we'll open up the call for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.
Good morning, and thanks for joining us. Travel + Leisure delivered another exceptional quarter that reflects the strength of our model and the consistency of our execution. During today's call, Erik will focus on the specifics around our quarterly metrics, and I will dedicate more time to our strategic priorities and progress against them. Our strategy is focused on delivering outstanding vacation experiences for our owners and members while building lasting value for our shareholders. We're executing this strategy by broadening our brand reach, expanding our data-driven marketing, investing in digital innovation, and enabling our associates to deliver excellence every day. Leisure demand remains robust, and vacations continue to be a priority. In the quarter, we generated over $1 billion in revenue, $266 million in adjusted EBITDA, and $1.80 in adjusted earnings per share, all up meaningfully year-over-year.
Our strong free cash flow generation allowed us to return $106 million to shareholders during the quarter. These results were fueled by the strength of our Vacation Ownership business with sustained momentum in volume per guest, or VPG. We ended the quarter at $3,304 above the high end of our guidance range. This marks our 18th consecutive quarter with VPGs over 3,000 since we changed our credit quality standards in 2020. Tour flow remained healthy this quarter at 200,000 tours, a clear sign that our consumers' appetite for travel remains strong. By focusing on high-quality tours and owner engagement, we are driving stronger close rates and higher long-term value. These results reflect the core of our business, a resilient customer base built around leisure travel and a compelling value proposition. Beyond this quarter's results, we continue to advance 3 strategic priorities to drive sustainable growth.
First, expanding our brand portfolio. In September, we announced our newest Sports Illustrated Resort in Chicago, just 1 block off Michigan Avenue. The property will be transformed into approximately 250 units by late 2026, while remaining open during construction. We also recently launched the Eddie Bauer Adventure Club in partnership with Authentic Brands Group. Sales are now underway, and the first resort in Moab, Utah, is set to welcome owners in early 2026. This progress builds on a year of expansion, where we've grown our portfolio with Sports Illustrated Resorts, Accor Vacation Club, and Margaritaville Vacation Club locations. Each brand targets a distinct traveler profile, expanding our reach and diversifying revenue streams. Sports Illustrated Resorts delivers immersive sports-themed experiences. Accor Vacation Club expands our reach into a growing international market. Margaritaville Vacation Club offers a laid-back lifestyle built around fun and relaxation and Eddie Bauer Adventure Club introduces an outdoor-focused brand.
Together, these brands expand our addressable market, deepen engagement with younger and more diverse travelers, and generate incremental VOI sales from customers seeking fresh and distinctive vacation experiences. Second, we are focused on elevating the owner and guest experience. We are investing in digital and AI tools that make vacation planning seamless while redesigning our on-property experience to be more immersive and personalized. This goes beyond satisfaction scores. Our goal is to drive deeper engagement, repeat usage, and ultimately greater lifetime value. In 2025, our owner engagement scores have increased over 120 basis points versus the prior year. We have also reached 215,000 downloads on our Club Wyndham app, with 28% of bookings coming through the app, a clear sign that our digital investments are enhancing engagement. We are pleased to announce that our Worldmark app officially launched in the App Store as well.
Lastly, on the third strategic priority, driving operational discipline and scale. We continue to focus on efficiency and sustainable growth. By leveraging our scale, we are driving healthy margins even against a more dynamic macroeconomic backdrop. This approach has allowed us to expand our adjusted EBITDA margin year-over-year from 24% to 25%, positioning us to balance strong near-term performance and long-term value creation. Looking ahead to the final quarter of 2025, we've seen no significant change in our customer behavior related to VPG, portfolio performance, and booking pace. Booking pace is consistent with the prior year, which gives us confidence that our consumers are prioritizing travel. We are also encouraged by the growing interest from younger generations with almost 70% of new buyers coming from Gen X, millennial, and Gen Z households. We are building a platform that combines a recurring revenue model with strong cash generation, enabling the enterprise to invest in new opportunities.
Looking ahead, we see opportunities to expand our owner base, deepen engagement, and leverage our scale in ways that enhance revenue and profitability. At the same time, we remain disciplined in how we invest and allocate capital, ensuring that each decision supports shareholder value creation through sustainable growth and our consistent dividend and share repurchase program. Since spin, we have returned $2.8 billion to shareholders. During that time, we have consistently paid a dividend and reduced our share count by 35%, giving our shareholders a bigger stake in a growing business. With that, I will hand it over to Erik to walk through our financial performance, capital allocation and how we are positioning the business for the remainder of the year.
Thanks, Michael, and good morning, everyone. The third quarter was another strong period of outstanding execution for Travel + Leisure. We delivered solid top-line revenue growth, expanded margins and generated strong cash flow and earnings. We also continued to return capital to shareholders and strengthen our balance sheet. These results demonstrate the resiliency of our business model and the consistent cash generation that sets Travel + Leisure apart. We're a capital-efficient compounder, converting steady growth into expanding cash flow, higher per-share results, and long-term shareholder value. The quarter has reinforced our confidence and highlighted momentum across our business, and we'll keep the pedal down as we close out the year and head into 2026. I'll begin by reviewing our consolidated financial results, followed by segment performance. Lastly, I'll address our cash flow, balance sheet, and provide an outlook.
Total company revenue in the third quarter was $1.044 billion, up 5% compared to the prior year. Adjusted EBITDA was $266 million, up 10% year-over-year and above the high end of our guidance range. Adjusted EBITDA margin expanded 100 basis points to 25%, reflecting both operating leverage and efficiency gains. We exceeded our $255 million guidance midpoint by $11 million, driven by higher gross VOI sales and effective cost management, resulting in improved profitability in the quarter. This quarter again demonstrated the power of our compounding model where 5% revenue growth translated into 10% adjusted EBITDA growth, 8% adjusted net income growth and 15% adjusted earnings per share growth, reflecting both earnings expansion and the accretive impact of share repurchases. A higher effective tax rate modestly tempered flow-through from adjusted EBITDA to adjusted net income, but 14% adjusted pretax profit growth underscores the strength of our model.
Turning to the Vacation Ownership segment, our core growth engine. Revenue grew 6% to $876 million, while adjusted EBITDA increased 14% to $231 million, demonstrating both strong demand and inventory efficiency. This growth fuels our free cash flow engine, which in turn funds reinvestment and consistent shareholder returns. Gross VOI sales accelerated to $682 million, supported by 2% tour flow growth and VPG of $3,304, up 10%. This reflects strong execution from our sales and marketing team. Vacation Ownership adjusted EBITDA margin expanded 200 basis points year-over-year, reflecting measured cost management and efficient inventory deployment. Our disciplined capital-light development strategy and low-cost recovery programs that help us recycle inventory efficiently allows us to support growth while preserving returns on invested capital. Our consumer finance portfolio remains stable and consistent with expectations.
Delinquencies and defaults are showing no signs of deterioration. The full-year loan loss provision is expected to finish at 21%, unchanged from our prior guidance. Weighted average FICO scores for new originations stayed above 740, demonstrating the continued strength of our underwriting standards. Now turning to our Travel and Membership segment. Segment revenue was $169 million, up 1% year-over-year, while adjusted EBITDA was $58 million, down 6%. Through this platform, we booked 422,000 transactions, putting over 1 million customers on vacation, a clear reminder of the scale and relevance of this business. We remain focused on optimizing profitability and cash generation while managing the ongoing mix shift between Travel Clubs and Exchange. The Travel and Membership segment represents about 20% of our consolidated revenue and continues to be an important source of cash flow that supports both reinvestment and shareholder returns.
Across the company, adjusted free cash flow continues to be the clearest proof of our model strength and discipline as capital allocators. Through the third quarter, adjusted free cash flow grew 23% year-over-year, and we now expect to generate approximately $500 million for the full year, converting about half of our adjusted EBITDA into cash. This is a powerful engine when considering our track record of consistently paying a dividend and reducing shares outstanding. During the quarter, we returned $106 million to our shareholders, including $36 million in dividends and $70 million in share repurchases. Through the third quarter, we've repurchased $210 million of stock, representing 6% of our beginning share count, underscoring our commitment to disciplined capital allocation. Our dividend remains healthy, providing a compelling and reliable return. Combined with repurchases, this has driven meaningful total shareholder return year-to-date.
We ended the quarter with net leverage of 3.3x, down from 3.4x a year ago, and we now expect leverage to be below 3.3x by year-end. Our liquidity position remains strong, nearing $1.1 billion, including $240 million in cash and $815 million available on our revolver. During the quarter, we issued $500 million in new bonds priced at 6.125%. This pricing was slightly favorable to the maturing bond that we refinanced. And last week, we completed our third and final ABS transaction of the year, raising $300 million at a 98% advance rate and a 4.78% coupon, our most efficient ABS execution this year. As CFO, my focus remains clearly and fully aligned with our long-term strategy, driving sustainable growth, disciplined capital allocation, and a resilient balance sheet. First, we invest in growth, including new brands, our sales infrastructure, and digital platforms to enhance customer experiences and engagement.
Second, we return capital to shareholders through a compelling dividend and a consistent share repurchase program. And third, we maintain balance sheet strength and flexibility, positioning us well to both invest in growth and navigate a wide range of economic environments with confidence. Turning to our outlook for the year. For the full year, we're raising the midpoint of our adjusted EBITDA guidance to $975 million with a new range of $965 million to $985 million, reflecting our strong third quarter performance. With the momentum in our Vacation Ownership business, we're also increasing our gross VOI sales midpoint with a new range of $2.45 billion to $2.50 billion and raising our full year VPG to between $3,250 to $3,275. While third quarter results were ahead of expectation, our outlook for the remainder of the year reflects a disciplined approach to forecasting and the seasonality we typically see in the fourth quarter.
To sum up, the third quarter was a strong one for Travel + Leisure. As we close out the year, we'll keep the pedal down, focused on disciplined capital allocation, maximizing free cash flow per share and positioning the company for sustained compounding growth. The fundamentals of our business are solid, and our teams are executing with discipline as we prepare for the opportunities ahead in 2026. I also want to thank our associates across Travel + Leisure for their continued focus and execution. They are the driving force behind our results, and their dedication gives us confidence as we close out the year and position the company for continued success in 2026. Kevin, we can now open the line for questions.
分析師問答
Our first question today is coming from Chris Woronka from Deutsche Bank.
Congratulations on a strong quarter. Michael, could you provide some perspective on your VOI business, which has been performing exceptionally well? This quarter certainly exceeded our expectations. What do you think is contributing to this success, especially considering reports of consumer weakness in certain areas? Additionally, could you remind us of your income levels and any changes made in your business strategy to attract higher-income customers, as well as adjustments you may have implemented to address any hesitation among buyers?
I agree with you, Chris. This quarter has been very strong overall. There are two main factors driving our continued strong performance on VOI related to consumer strength, in addition to the consistency of leisure travel. We have invested significant energy and capital in recent years to enhance the customer experience at our resorts, making vacations easier and more enjoyable. This includes our app implementation and new partnerships that allow consumers to have experiences beyond just the resort. These improvements have led to higher satisfaction scores. As we've mentioned previously, when people go on vacation, they typically enjoy it, love the product, and tend to spend more. We're currently experiencing the positive impact of our investments over time, which is particularly evident among our owner base. Additionally, over the past five years, we have refined our credit requirements and improved our consumer profile.
Our average FICO scores have risen to over 740, reflecting a significant increase. Household income has also gone up from around $100,000 to approximately $115,000. We're striving to make our business model as efficient as possible, and part of that involves fine-tuning our demographics, which we've achieved successfully. The next step is to expand our product offerings to capture a larger addressable market, and we have already begun this brand expansion work.
Thank you, Michael, for the insightful perspective. As a follow-up, last quarter you announced the Sports Illustrated development in Chicago, which is an existing hotel property. Can you discuss whether you see many additional opportunities there? Specifically, regarding Margaritaville and the Sports Illustrated project, do you think there are urban hotels that could be converted to timeshare, possibly due to brand issues or other factors? It would be helpful to get some insight into the economics. I understand you're pursuing an asset-light model initially; any further details would be appreciated.
Absolutely. And we're very excited about Sports Illustrated. I know there would be some competitive commentary amongst other urban locations, but we know that Chicago is a great sports town, one of the best in the U.S. And there are many others that definitely have our eye. And given where the real estate market is, we mentioned in the last call, I think the last 2 calls that at this point in time in the cycle, conversions are a better opportunity for us and for many people than greenfield development. We've now got 3 resorts announced for Sports Illustrated. We will start sales by the end of this year as we've previously committed to, no change to that. But at this stage, we'll go where the market leads us, and it's to great urban locations and in the last 2 examples, conversions. I will, though, come back to our original outlook on Sports Illustrated is we see lots of opportunities in college towns. We continue to pursue those options. And just because our last 2 are in urban destinations, don't think that, that's a shift in strategy. We will be announcing over the upcoming quarters more college locations because we think that's a tremendous market as well.
The next question is coming from Ben Chaiken from Mizuho.
I guess one thing that stuck out is traction in the Travel Club transactions up 30%. I guess what did you change there, if anything? And then I'm asking this question in the context of '24 transactions being down 1%. So is this a comp dynamic in 3Q? It seems more than that. Or is it a sequential acceleration in the top line?
Good morning, Ben. Yes, it's the compounding momentum and effort we've put in over the last three years. We've focused on Travel and Membership and refined our strategies there. One of our team's efforts in 2024 was to return to the profit-generating clubs, where we believed we could accelerate growth due to loyalty and transaction potential. We implemented that change in '24 and dedicated significant resources to marketing and securing commitment from those clubs. What we are seeing in Q3 this year is a 30% year-over-year increase in transactions. Although revenue per transaction has decreased, it's generally accepted that this is a normal aspect of the growth cycle, where the primary objective is to drive transactions by 30%. Revenue per transaction dropped by 12%, but overall revenue is starting to rise nicely. This reflects the results of several years of work to determine what works and what doesn't in this new business, and I commend the team for discovering the right strategies. The next phase of our efforts will focus on improving margins. For now, we are very pleased with the transaction growth in the Travel Club business.
Got it. That's helpful. And then on SI, you have Chicago, which you referenced on the call, you've got Alabama and Nashville. I believe both Nashville and Chicago are conversions, if I'm not mistaken. I guess, could you remind us what is going to open first between those 2? And then do I have the mechanics correct, as soon as one of those are converted, that puts inventory in the trust and you're able to sell access to the entire portfolio. Am I thinking about that correctly?
You are. So I'll start with the second part of that question first is, it is one of the big benefits of conversions is once it's registered and we can put a conversion into the club. Sports Illustrated in Nashville will open late first quarter, early second of next year. It will go through a conversion. And then we will keep Chicago open during the transition, but it will open as a rebranded property toward the end of 2026. So both will be 2026 branded and occupancy. Sales will begin in Nashville at the end of this year and then sales will begin in Chicago at the beginning of next year.
And so people could buy as soon as the Nashville inventory is in there, then you could in theory buy Alabama, if you were happening to be an Alabama fan.
You'll be a member of the Sports Illustrated club at that point, which will ensure eventual access to Alabama. We will not be selling football weekend in Alabama yet because we're not registered there. And so you can become a member of the club, but Alabama-specific reservations and priorities will be at the time that it's registered and available for sale.
Do you consider these as varying significantly? Historically, when we think about new locations, whether they are resorts with sales centers or traditional timeshare openings, where would you place this? Do you have higher or lower expectations due to seasonality? What is your general thought process on this?
I have a different view on seasonality compared to some of the questions we've received. Sports towns, in particular, have shifted from being weekend-focused to a much less seasonal market. For instance, Myrtle Beach used to be seen as a four-month market, but now it operates almost year-round. Sports towns attract alumni returning to universities, making them similar to year-round destinations. I anticipate this trend will continue. In fact, I believe these markets will be less seasonal than ski areas, which tend to have peak seasons around Presidents' Week and Christmas. Universities create numerous reasons for visits throughout the year, and cities like Chicago, with their sports teams, offer many attractions that encourage year-round tourism. Therefore, I think these places will become increasingly appealing. One aspect we appreciate about the upcoming launches of Sports Illustrated and Eddie Bauer is that they will start in 2026 to 2027, bringing in new owners at a significantly higher rate than our existing core brands, in percentage terms rather than absolute numbers.
Next question is coming from Patrick Scholes from Truist Securities.
Looking at the statistics from your latest securitization, it appears that the weighted coupon was the lowest it has been in several years. I remember a couple of years ago, you mentioned an initial EBITDA headwind of about 2% to 3% to growth at the beginning of the year. Given the recent decline in that coupon, do you expect to face a headwind at the start of next year, or would it be more of a tailwind? Or do you think it will be neutral?
Patrick, thanks for the question. Last week's ABS transaction priced out at 4.78%, and that's really on the heels of our July transaction, which came in at 5.12%. So rates have continued to head downward. We are starting to see the weighted average cost of funds on the loan portfolio begin to turn. So year-over-year, our weighted average cost of funds in the third quarter was down about 15 basis points. So it's modest, but we are starting to see a benefit, and it's going to set up a multi-year tailwind as spreads continue to move our way.
Okay. And then my next question, I believe you continue to target increasing new owner sales. With new owners, you do historically, to start off with, get a lower margin on that sale. How would you expect that shift for next year, assuming you do continue that increasing new owners? How would you expect that to impact your 2026 margins and expectations for loan loss provision?
I agree with you, Patrick, that when driving new owners, it typically results in lower margins, which can create some pressure on owner sales. Looking at our strategic outlook for new owner sales, we aim to keep those in the 30% range. It will vary between the high 30s and low 30s from quarter to quarter. As long as we remain within that range, we are confident in our ability to maintain margins similar to what we have demonstrated over the past several years, which is a margin range extending from 20% into the 25% range recently. You are correct in your assumptions about how this plays out, but we have proven that we can stay disciplined and keep margins between 22% and 25% while pursuing new owner growth. New owners are essential for the future of our business, and with our new brands, we are clearly committed to this strategy while managing our capital allocation on operational and inventory fronts. We believe we can effectively balance margins, new owner growth, and capital allocation, and we have factored this into our guidance for this year and as we look ahead to 2026.
Our next question is coming from Brandt Montour from Barclays.
Could you provide more details on the new owner close rates or the trends in new owner demand during the quarter?
No, we haven't focused on that yet, but I'm glad to discuss it. In the quarter, new owners represented 31% of sales. We observed an overall increase in VPG on a year-on-year basis, which is encouraging. It indicates that the new owner business is gaining momentum. You may recall that over the past year, we've discussed enhancing our marketing programs to make new owner marketing more efficient. We will start to see the impact of that in Q4 of this year. Throughout this year, we've experienced an increase in tour flow quarter-on-quarter, moving from negative in Q1 to two consecutive quarters of 2% to 3% increases. We expect that to accelerate in Q4, which is a very positive sign. In summary, new owner VPG is up, though it is slightly below our long-term target for Q3. This is due to several factors related to how we've adjusted the new owner and owner mix over the past year. However, we are excited about the anticipated tour growth in Q4 and the partnerships we've announced this year, which will contribute to the new owner narrative as we approach 2026. Although Q3 was relatively flat compared to last year, we expect acceleration in Q4 with year-on-year increases in VPGs.
Okay, that's really helpful. I have a quick follow-up regarding the guidance for the fourth quarter. You had a strong performance in the third quarter but only reflected about half of that in the full-year guidance. I believe the commentary indicated a disciplined approach to forecasting, which I assume is what you meant. Is there anything specific you want to mention about why the implied guidance for the fourth quarter is slightly below previous expectations, or is it more about being conservative?
Brandt, thank you for your question. To address your point, we exceeded the midpoint of our Q3 EBITDA by $11 million and raised the lower end of our full-year guidance by $10 million. The anticipated metrics for the fourth quarter indicate an 8% growth in gross VOI sales, VPGs nearing $3,300, and approximately 2% growth in EBITDA. Regarding the 2% EBITDA growth, which is central to your inquiry, we have a solid year-over-year comparison from Q4 2024, where VPGs were similarly close to $3,300. Additionally, we're making incremental investments in new brands, which introduces some uncertainties. Lastly, our fourth quarter will showcase the typical adjustments in variable compensation as we conclude a very successful year for T&L. We are confident in our guidance; it is cautious yet attainable and reflects the current operating environment.
Next question today is coming from Ian Zaffino from Oppenheimer.
Just wanted to go back to VO for a second. And maybe walk through kind of where you saw some strength maybe on a regional basis. Was there any areas that were a little bit softer? Or do you think you've kind of seen just broad-based demand kind of across the system and across your sales centers?
The strength we observed is more related to a specific segment rather than a particular region. Our performance with owners in the third quarter was remarkable, with VPGs reaching near all-time highs. All regions and teams performed exceptionally well, and I commend our teams for delivering such a standout quarter. While the new owner VPGs showed significant improvement over the previous year, the performance on the owner side was truly impressive. This success didn’t just happen by chance; it resulted from deliberate efforts across the Travel + Leisure portfolio, enhancing our systems, making it easier for owners to book, and connecting our in-resort experiences with in-market experiences. There are numerous areas where performance is strong for our owners, reflecting their desire for experiences, which we consistently hear about. Instead of just acknowledging this trend without action, we have invested in technology and enhanced experiences over the past few years.
For instance, as an owner, I used to call to make reservations, but just two months ago, I booked my spring 2026 ski vacation in under five minutes using the app, with no human contact involved. I quickly checked availability, selected my dates, booked, and received a confirmation in that time, which is record speed for me. Considering there are more than 500,000 Club Wyndham owners, and with the Worldmark app launch generating thousands of downloads in just a week, it is clear that owners are appreciative of and actively using what we have developed in technology.
I would like to follow up by discussing travel and membership. Considering the distinct directions these two segments are taking, what do we anticipate the revenue and profitability mix will ultimately look like, especially given the margin differences? Also, could you remind us of the strategic importance of the exchange business at this time, particularly since the VO business is performing well? I wonder if the challenges in the Travel and Membership business, especially the exchange aspect, are overshadowing this performance. Any insights or strategic thoughts on this would be appreciated.
Certainly. Our performance in Q3 showed improvement compared to the first half of the year. The team has been innovative in finding ways to grow and sustain the business, and I'm grateful for their efforts over the first nine months. When we embarked on this journey in 2018 and 2019, we were solely focused on the exchange business, which has faced structural decline due to industry changes. Although the industry is growing, consolidation has put pressure on the demand for exchange transactions. Instead of simply enduring this pressure, our team developed the Travel Club business, which faced challenges in 2021 and 2022 but has started to grow again, evidenced by a 30% increase in transactions. To answer your question, the majority of the EBITDA, more than 80%, is still generated by the exchange business, so the structural decline cannot be entirely offset by the Travel Club's performance at this point, though it does help alleviate some challenges.
In Q3, transactions in the exchange segment were slightly down, and EBITDA also dipped modestly, while the Travel Club business showed strong performance. The strategic value is significant, with over $200 million in EBITDA from that segment, nearing $250 million, and maintaining healthy margins in the 30s, which generates excellent free cash flow. As Erik explained, this cash flow can be invested in ways beneficial to shareholders. Given the nature of the business, it requires minimal capital investment, although we are investing in our booking platform. Overall, this segment offers considerable integration value and economies of scale, with over 3 million members providing meaningful economic benefits that we are leveraging to deliver value to our shareholders in various ways.
Next question is coming from David Katz from Jefferies.
If we take a longer-term view of the VOI business and the new brands being added, can you share your thoughts on the earnings potential of these additional brands in the portfolio? Assuming the existing core brand continues to grow, is that a reasonable assumption? How should we evaluate the potential earnings of these brands five years down the line?
David, your question addresses the core of our strategic outlook for the next three to five years. We firmly believe that our key brands, such as Club Wyndham, World Mark Shell, and Margaritaville, will continue to thrive, and we are dedicated to their growth. As demonstrated in Q3 and heading into 2025, these brands are on an upward trajectory, and we anticipate this will continue in the coming years. However, our strategy isn't about acquiring brands just for the sake of it. Since we're in a direct marketing industry, having an addressable market is crucial for our success. Through our collaboration with Authentic Brands, we have successfully introduced Sports Illustrated and Eddie Bauer, rejuvenated Margaritaville, and acquired a core Vacation Club. These initiatives focus as much on building affinity, loyalty databases, and expanding our addressable market as they do on enhancing our brand portfolio.
Historically, our strong partnership with Blue Thread has allowed us to significantly boost VPGs for new owners compared to the general open market, and we believe this can be replicated across the new brands. While we’re not providing specific guidance, we generally believe each brand could generate at least $200 million in top-line revenue, potentially more, depending on the brand and its database. In the first five years, we expect these new brands to have a proportionally higher appeal to new owners, shifting towards an affinity and owner upgrade model over time, similar to our current approach. Overall, we foresee a sales target of around $200 million for each brand initially. We’ll gather insights from Sports Illustrated and then aim to provide clearer long-term guidance later in 2026.
I have a follow-up question. Did you provide the sales figures for Blue Thread for the quarter or the annual guidance? Also, do you have a long-term sales goal for the next five years?
Yes, you did not miss that. Blue Thread represents around 3% to 4% of our total company sales. It's an important part of our new owner business. The story in Q3 is very similar to what it has been over the last two quarters, stabilizing at around $100 million of annual sales. We finished last year at $96 million, and we're generally on the same track for this year. We have seen a dramatic shift from voice to digital booking, which is a major source of our lead generation and has stalled growth. We haven't provided 3- to 5-year guidance. I previously mentioned $200 million, but I believe that target is more challenging now due to the shift from voice to digital. We are working closely with our colleagues in New Jersey to explore new avenues for growth. This trend is not unique to us; the hotel industry has been discussing the switch from voice to digital booking for years, and this is one consequence of that. On the positive side, despite this shift, as evidenced in Q3 and throughout this year, and reflected in our revised upward guidance on VOI sales, our teams are continuing to discover new areas for growth and are dedicated to improving categories where we see significant potential, including Blue Thread.
Next question is coming from Lizzie Dove from Goldman Sachs.
I wanted to touch on the kind of loan loss provision side of things. You mentioned upfront, there's no signs of deterioration there despite some of the headlines we've seen in other industries in the quarter. You reiterated the 21%. I'm curious how you see the kind of longer-term opportunity there for those to kind of come down over time with some of the initiatives you've been doing?
Good morning, Lizzie. To provide some context on our loan loss provision, we began the year with a provision rate of 20%. Initially, we noticed elevated delinquencies, which led us to adjust the full year rate to 21% following our first and second quarter calls. We are aligned with our historical default trends, and the third quarter continued in that direction. Looking ahead to the fourth quarter, we are beginning to see a decline in year-over-year provisions. To answer your question, we anticipate that our longer-term provision rate will settle in the upper teens, which you can expect to see reflected in the fourth quarter.
Got it. That's helpful. And then kind of unrelated question, I'm sorry if I missed this, but I'm curious on the booking window. I think earlier in the year, you'd mentioned it come down a little bit, maybe like starting off the year like 130 days down to 109 last quarter. Any kind of update you'd share there in terms of that booking window and how it's progressed?
There are two points to mention. The booking window remains consistent with the last number we shared, slightly closer than historical trends, but not significantly enough to raise any concerns. Honestly, we often hear in the hospitality industry that people are taking a bit longer to book. The second point, which we briefly touched on, is that the booking pace for Q4 appears very much in line with what we experienced last year, which we consider a strong positive indicator for the outlook as we approach the end of the year.
Next question is coming from Stephen Grambling from Morgan Stanley.
Just one more follow-up on the provision. At this point, the provision compared to the gross financing receivables is kind of near peak-ish levels as you kind of referenced outside of maybe the GSC despite better FICO scores. And historically, it seems like we've seen step-ups if the macro rose. But given we're already elevated, how would you think about the sensitivity to the provision in different backdrops? Like could we already be provisioning above and so there might be less? Or any thoughts would be helpful.
Yes. I think we've got a pretty good sense of where we think the provision is going to be, Stephen. I think when you look across the quarters of the year, historically, the second quarter and the third quarter are above the full year average; the first quarter and the fourth quarter are below. To the question from Lizzie, we expect the fourth quarter provision to be the low watermark in 2025 as we exit heading towards 2026.
Great. And maybe one other follow-up. I realize that it's still early for 2026, but I imagine you're still probably in the process of trying to make some implementations or changes around pricing for the managed clubs. Any initial thoughts on where you think kind of year-over-year pricing or HOA fees could end up as we think about kind of flowing through that more perpetuity-like fee stream?
Great question, Stephen. While price often comes up, we believe that value in this industry is largely determined by the annual fees. It's important to note that 80% of our owners have fully paid off their ownership, meaning their vacation costs are primarily those maintenance fees. To answer your question, we aim to stay close to the Consumer Price Index level. Although we cannot predict the CPI, we do not anticipate significant changes for 2026. However, I want to emphasize that in 2026 and beyond, particularly considering the inflation over the past 4 to 5 years, maintenance fees and HOA dues will be a critical focus for us. Our goal is to ensure we provide as much value as possible while leveraging our scale to benefit our owners. We have made considerable advancements in technology, and maintenance fees will also contribute to the value we aim to provide in the future. Ultimately, we want our owners to experience pleasant surprises rather than unexpected costs.
Next question is a follow-up from Patrick Scholes from Truist Securities.
Great. Just a quick follow-up question here. I've noticed some online message board discussion about closing a handful of your legacy resorts. If, in fact, that's true, it's not something you typically see. If, in fact, that is happening, I'm curious what the rationale for that may be and what, if any, might be the financial impact to your company from that?
Well, Patrick, you're probably about 30 minutes to an hour ahead of us. You'll see it in our disclosures today, as part of our Q. I would refer to this as maintenance of our resort portfolio. What we're doing is catching up on actions we should have taken over the last decade, similar to what all hospitality companies do. You assess your demand in both high and low-demand locations, look at satisfaction scores, and introduce new inventory with better demand and seasonality through newer construction. We have announced a significant number of these resorts in recent years. On an annual basis, we evaluate our portfolio and remove those that no longer meet demand, primarily those with low occupancy or satisfaction scores. This year, I estimate that it might involve about 10 to 12 resorts, although I can't provide an exact number since we haven't finalized the process yet, but it is a relatively small number.
This year is a catch-up year. Another important aspect of this decision is that we have been in business for decades. As resorts age, renovations start to involve larger items such as infrastructure, leading to bigger expenses. This process also helps us avoid significant special assessments, which benefits the owners and the overall system. So, I would say this is a normal procedure of integrating new resorts into the system while removing those that have reached the end of their useful life. We are also providing owners with options to either rejoin our system or exit completely. Overall, this is standard maintenance and a bit of a catch-up that we should have been addressing over the last decade, and others continue to do.
Okay. Good color. So fair to think that one of the reasons perhaps for closing these down, if you do have unsold inventory, which is inventory you own, you would not be on the hook for a special assessment. So it might save you money there by closing these down. Is that a one way to think about it?
That's one way to consider it, but it's only part of the answer. The primary factor is still the overall resort portfolio. Additionally, whether it's an individual owner or us as a developer, what you mentioned is correct. However, some of these resorts have sales locations. So while you might assume this situation is purely beneficial, there are some economic downsides to consider. If any of these resorts have sales locations, that represents a counterbalance to the benefits. Ultimately, when we assess everything, the major advantage is having a better, newer, less seasonal portfolio with higher demand and occupancy. There will also be economic impacts we haven't yet estimated or discussed, including decreased sales at those locations and reduced carrying costs. This is a balance we will evaluate if these resorts do close. If that happens, I anticipate providing an update in our Q4 call and as part of any guidance for 2026.
We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.
Thank you, Kevin, and thanks again for joining us today. Our third quarter results highlight the strength of our business model, the discipline of our execution and the opportunities ahead. Most importantly, none of this would be possible without the dedication of our associates who deliver exceptional experiences to our owners and members every day. We remain focused on creating value for our customers, associates, and shareholders. We look forward to speaking to you throughout the quarter at conferences and on our fourth quarter call in February. Thanks, everyone. Have a great day.
Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.