Travel + Leisure Co.'s Q3 2025 Earnings Call: Contradictions Emerge on Loan Loss Provisions, New Owner Sales, and Booking Window Trends

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 22, 2025

Financials Results

• Revenue: $1.044B, up 5% YOY
• EPS: $1.80 adjusted per share, up 15% YOY
• Operating Margin: Adjusted EBITDA margin 25%, expanded 100 bps YOY

Guidance:

• Raised full-year adjusted EBITDA guidance to $965M–$985M (midpoint $975M).
• Increased full-year gross VOI sales guidance to $2.45B–$2.50B.
• Raised full-year VPG guidance to $3,250–$3,275.
• Expect adjusted free cash flow of approximately $500M for the full year.
• Expect net leverage to be below 3.3x by year-end.
• Full-year loan loss provision expected at 21%.

Business Commentary:

* Strong VOI Business Performance: - Travel + Leisure Co.'s Vacation Ownership segment revenue grew 6% to $876 million, while adjusted EBITDA increased 14% to $231 million. - Gross VOI sales accelerated to $682 million, supported by a 2% tour flow growth and VPG of $3,304, up 10%. - The growth was driven by strong execution from the sales and marketing team and disciplined capital-light development strategies.

• Digital Innovation and Engagement:
• The company's ownership engagement scores increased over 120 basis points from the prior year, with over 215,000 downloads on the Club Wyndham app, contributing to 28% of bookings through the app.
• The Worldmark app officially launched on the App Store during the quarter.

• These improvements are attributed to investments in digital platforms and AI tools that enhance the vacation planning experience and deepen engagement.

• Brand Expansion and Diversification:

• Travel + Leisure Co. announced new Sports Illustrated and Eddie Bauer Adventure Club resorts, with launches expected in 2026.
• The company plans to expand its portfolio with Sports Illustrated Resorts, Accor Vacation Club, and Margaritaville Vacation Club locations.

• Brand expansion is aimed at attracting new demographics and expanding the company's addressable market, enhancing revenue diversification.

• Cost Management and Efficiency:

• Adjusted EBITDA margin expanded 100 basis points to 25%, reflecting both operating leverage and effective cost management.
• The company returned $106 million to shareholders, including $36 million in dividends and $70 million in share repurchases.
• This efficiency is supported by disciplined capital allocation, a focus on sustainable growth, and a resilient balance sheet.

Sentiment Analysis:

Overall Tone: Positive

• Management described an "exceptional quarter," citing >$1B revenue, $266M adjusted EBITDA and $1.80 adjusted EPS, all up year-over-year; adjusted EBITDA margin expanded to 25%; guidance was raised and the company emphasized continued investment and capital returns, saying "we'll keep the pedal down."

Q&A:

• Question from Chris Woronka (Deutsche Bank AG): What is driving the VOI outperformance given pockets of consumer weakness — demographic mix, income levels and business changes?
  Response: Higher VPG driven by investments in digital/apps and on-property experiences plus tighter underwriting/upgraded customer profile (weighted avg FICO >740; household income ~ $115k).

• Question from Chris Woronka (Deutsche Bank AG): On the Sports Illustrated Chicago conversion — do you see many similar urban hotel conversion opportunities and any color on economics/asset-light approach?
  Response: Conversions are preferred in the current cycle (asset-light); Chicago and other urban/college markets are attractive and sales will proceed on the planned schedule.

• Question from Benjamin Chaiken (Mizuho Securities USA LLC): Travel Club transactions are up 30% — what changed and is this just a comp dynamic?
  Response: Result of multiyear refinement to focus on profit-producing clubs and targeted marketing; transactions +30% YoY, revenue per transaction down ~12%, next focus is improving margins.

• Question from Benjamin Chaiken (Mizuho Securities USA LLC): For Sports Illustrated, which property opens first and once one converts does that enable selling access to the full portfolio (e.g., Alabama)?
  Response: Nashville opens first (late Q1/early Q2 2026) with sales starting at year-end; conversion lets buyers join the Sports Illustrated club for eventual portfolio access, but site-specific reservations (e.g., Alabama) require registration there.

• Question from Benjamin Chaiken (Mizuho Securities USA LLC): How should we think about seasonality/initial expectations for these new urban/college resorts versus traditional timeshare openings?
  Response: Sports and college-town resorts are expected to be less seasonal and more year-round attractive than ski markets, likely supporting steady owner demand.

• Question from Charles Scholes (Truist Securities, Inc.): With ABS coupons moving lower, will you see an initial EBITDA headwind or a tailwind next year?
  Response: ABS coupons have declined (latest priced at 4.78% vs. 5.12% in July), lowering weighted cost of funds (~15 bps YoY) and creating a multiyear tailwind to financing costs.

• Question from Charles Scholes (Truist Securities, Inc.): If you increase new-owner sales (which carry lower initial margins), how should we think about 2026 margins and loan-loss expectations?
  Response: New owners targeted in the ~30% range will pressure margins initially but management expects to maintain corporate margins in roughly a 22%–25% range while growing new owners; loan-loss provisioning considered in planning.

• Question from Brandt Montour (Barclays Bank PLC): Can you dig into new-owner close rates and demand trends in the quarter?
  Response: New owners were 31% of sales; new-owner VPG rose (slightly below long-term target) and tour flow improved quarter-over-quarter with expected acceleration into Q4.

• Question from Brandt Montour (Barclays Bank PLC): You beat in Q3 but only flowed half to the full year — is Q4 guidance conservatism or are there specific headwinds?
  Response: Q4 guide implies ~8% gross VOI growth, VPGs near ~3,300 and ~2% EBITDA growth; conservatism reflects tough YoY comps, incremental investments in new brands and variable compensation true-ups.

• Question from Ian Zaffino (Oppenheimer & Co. Inc.): Was the VO strength regional or broad-based across sales centers?
  Response: Strength was broad-based across regions, with the owner segment delivering standout VPG performance aided by technology and improved owner experiences.

• Question from Ian Zaffino (Oppenheimer & Co. Inc.): Given divergent paths of Travel Club vs. Exchange, how do you expect mix and strategic value to evolve?
  Response: Exchange is structurally pressured but continues to drive >80% of segment EBITDA; Travel Club is growing and mitigates declines but doesn't fully offset them — the segment remains a high-margin (~30s) cash generator (~$200–$250M EBITDA).

• Question from David Katz (Jefferies LLC): How do you think about the earnings power of the incremental brands over a 3–5 year horizon?
  Response: Core brands will continue to grow; new affinity brands (Sports Illustrated, Eddie Bauer, etc.) are expected to expand addressable market and could each target roughly $200M+ annual sales over time.

• Question from David Katz (Jefferies LLC): Size of Blue Thread sales this quarter and multiyear aspiration?
  Response: Blue Thread is ~3%–4% of company sales, roughly $100M annualized; prior $200M aspiration is challenged by a voice-to-digital shift in booking behavior.

• Question from Elizabeth Dove (Goldman Sachs Group, Inc.): You reiterated a 21% full-year loan-loss provision — can this come down over time with initiatives?
  Response: Full-year provision remains 21%; delinquencies are stabilizing and management expects the provision rate to trend down toward the upper teens over time, with Q4 showing inflection to the downside.

• Question from Elizabeth Dove (Goldman Sachs Group, Inc.): Any update on the booking window (previously ~130 days down to ~109)?
  Response: Booking window remains in that previously reported range (slightly tighter than historical but not meaningfully changed); Q4 booking pace looks consistent with prior year.

• Question from Stephen Grambling (Morgan Stanley): Given elevated provisions relative to receivables, how sensitive is the provisioning to macro scenarios?
  Response: Provision exhibits seasonality (Q2/Q3 above full-year average; Q1/Q4 below); management expects Q4 to be the low watermark in 2025 as provisions trend downward into 2026.

• Question from Stephen Grambling (Morgan Stanley): Early thoughts on 2026 HOA/managed-club pricing or fee changes?
  Response: Plan to target maintenance/HOA fee increases roughly in line with CPI; no expectation of outsized fee increases for 2026 while focusing on delivering value via scale and technology.

• Question from Charles Scholes (Truist Securities, Inc.): There's chatter about closing legacy resorts — rationale and financial impact?
  Response: This is routine portfolio maintenance (catch-up), removing a relatively small number (~10–12) of low-demand/low-satisfaction resorts to improve overall portfolio quality and avoid major special assessments; owners will have options and impacts will be disclosed as process finalizes.

• Question from Charles Scholes (Truist Securities, Inc.): If you close resorts with unsold inventory, does that save you from special assessments but cost sales — how should we think about net impact?
  Response: Closing can reduce carry and special-assessment exposure but may reduce sales at those specific locations; net effect balances reduced costs versus lost local sales, and management will provide updates in Q4 and in 2026 guidance.