Travel + Leisure - Q4 2023
February 21, 2024
Transcript
Operator (participant)
Greetings. Welcome to Travel + Leisure fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Michael Hug, Executive Vice President and CFO. Thank you, you may begin.
Michael Hug (CFO)
Thank you, Sherry, and 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 earnings 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 website at travelleisureco.com/investors.
This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our fourth quarter full-year results and outlook, 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 will open up the call for questions. With that, I am pleased to turn the call over to Michael Brown.
Michael Brown (President and CEO)
Good morning, and thank you for joining us. As you saw from the press release, we had a solid finish to the year with fourth quarter adjusted EBITDA of $240 million, a 7% increase over the prior year. Adjusted diluted earnings per share was $1.98, inclusive of a $0.37 income tax benefit which Mike will discuss. Excluding this benefit, our adjusted EBITDA adjusted earnings per share growth would have been 24% over fourth quarter 2022. Our full-year 2023 results reflect an intense focus on organic execution, delivering 5% year-over-year top-line growth, 6% year-over-year adjusted EBITDA growth to $908 million, 10% adjusted EBITDA growth in Vacation Ownership, our core business segment reflecting strong consumer demand for our product and great execution by our teams, and 26% adjusted EPS growth over the prior year.
Excluding the Q4 tax benefit, our adjusted earnings per share growth would have been 18%, reflecting in part our strong continued commitment to share repurchases. For the second consecutive year, we returned approximately 15% of our market capitalization to shareholders. That brings our cumulative capital return to shareholders since then to over $2.1 billion. Now let me review the operational highlights from the quarter and full year and touch upon how we're positioned for growth in 2024 and beyond. I'll begin with our core business, vacation ownership. In a year that demonstrated the stabilization of domestic leisure travel demand, our VOI business delivered fully to the 2023 guidance that we laid out last February. Gross VOI sales in the fourth quarter increased 4% year-over-year to $540 million, with a VPG of $3,058. For the full year, gross VOI sales increased 8% year-over-year to $2.15 billion, with a VPG of $3,128.
We delivered both gross VOI sales and VPG at or above the middle of our 2023 expectations, a credit to our sales and marketing teams. Tours increased 17% year-over-year in the fourth quarter and 18% year-over-year for the full year. We made great progress last year in sourcing and securing new owners. As we mentioned in last quarter's call, we have been investing in new owner marketing channels, focusing on both additional marketing packages for future stays as well as adding new off-premise marketing locations. The results have been strong, with new owner transaction mix improving 330 basis points in the fourth quarter and 240 basis points for the full year. In our experience, new owners in the system spend, on average, an additional 2.6 times their initial purchase during their ownership, giving us a large, reliable revenue pipeline. Our receivables portfolio continues to perform well.
The portfolio grows naturally with sales, but we are accelerating that growth somewhat while maintaining our tightened credit standards to help offset higher interest expense. We expect the provision to remain below 19%. Turning to Travel and Membership, we reported fourth quarter Adjusted EBITDA of $52 million, above the range of $45-$50 million we shared on our October third quarter call. We completed our cost realignment during the quarter and feel confident that we have right-sized the business to execute our plan and fully leverage future opportunities. With these changes, we expect Travel and Membership Adjusted EBITDA to grow low single digits in 2024, providing recurring revenue, high margins, and strong free cash flow. In addition to strong organic execution in 2023, we were excited to announce the acquisition of the rights to the Sports Illustrated Vacation Ownership business in September.
It represents an opportunity to drive incremental growth for years to come with the most celebrated name in sports. So far, we have announced our first resort in Tuscaloosa, Alabama, home of the University of Alabama, which is expected to open in late 2025. The Sports Illustrated Club will be immaterial to 2024 earnings but will support our long-term growth. We look forward to announcing more locations at universities and leisure destinations in the months and years ahead. Last month, we announced the addition of Accor to our vacation ownership portfolio, which already includes Wyndham, Margaritaville, and, as noted, Sports Illustrated. This was the second significant milestone in executing our multi-brand strategy in less than six months, demonstrating great momentum. It is further affirmation of our ability to be a trusted steward of world-class hospitality brands for vacation ownership development.
The agreement gives us the exclusive license to grow the Accor Vacation Club brand utilizing the Travel + Leisure global platform. The acquisition will add 24 resorts, 30,000 members, and finished inventory to our Asia-Pacific region. It lays the groundwork for economic benefits for years to come, providing revenue streams from sales, resort management, and consumer finance. We expect to close the transaction next month, and I couldn't be more pleased to welcome Accor to the Travel + Leisure brand family. Mike will review guidance in a moment, but let me first share some color on the key performance indicators we monitor to gauge the health of our consumer: forward resort bookings, sales volume per guest, and the performance of our consumer finance portfolio. Regarding forward bookings, 2024 owner nights on the books are ahead of 2023, reflecting continued robust consumer demand.
VPGs are normalizing from post-pandemic pent-up demand for leisure travel but remain at the high end of our 2021 investor day range and 30% above pre-pandemic levels. Finally, as I mentioned earlier, our continued focus on credit quality has resulted in a portfolio that continues to perform to our expectations. To summarize, we were pleased with our performance and execution in 2023. We delivered our full-year plan with 5% top-line growth, 6% Adjusted EBITDA growth, and 26% Adjusted EPS growth. We returned a significant amount of capital to shareholders, paying $136 million in dividends and repurchasing 7.8 million shares of stock. These results were achieved by the strength of our business model and by an intense focus on organic execution by our associates around the world. I want to thank each and every one of them.
For 2024, we are off to a solid start with a strong foundation in our core vacation ownership business and a clear line of sight for execution in the travel and membership segment. Reflecting our confidence in the future, we intend to recommend to the board a first quarter 2024 dividend increase to $0.50 per share. This action supports our continued commitment to use our significant free cash flow generation to drive shareholder value through increased dividends, strategic M&A should opportunities arise, and continued share repurchases. The ability to generate and effectively utilize our free cash flow, combined with our proven track record of organic execution, leaves us excited about the opportunities ahead. For more detail on our performance and outlook, I would now like to hand the call over to Mike Hug. Mike.
Michael Hug (CFO)
Thanks, Michael. As well as discussing our fourth quarter results, I will provide more color on our balance sheet and cash flow as well as our outlook for 2024. All of my comments will refer to comparisons to the same period of the prior year unless specifically stated. We reported fourth quarter adjusted EBITDA of $240 million and adjusted diluted earnings per share of $1.98, increases of 7% and 52% respectively. For the full year, adjusted EBITDA was $908 million and adjusted EPS was $5.70, representing year-over-year growth of 6% and 26% respectively. Full-year adjusted EPS includes a $0.35 benefit from foreign tax credit carryforwards that we now expect to be able to utilize. Looking at the fourth quarter performance of our two business units, Vacation Ownership reported segment revenue of $776 million and an increase of 5%, while adjusted EBITDA increased 12% to $208 million.
We delivered 172,000 tours in the fourth quarter, growth of 17%, and VPG was $3,058 in line with expectations. Revenue in our Travel and Membership segment was $158 million in the quarter compared to $163 million in the prior year. Adjusted EBITDA was $52 million compared to $57 million in the fourth quarter of 2022. Exchange member count continued to grow, but as expected, exchange transactions were down 8%, reflecting the continued mixed shift to clubs whose members have a lower propensity to exchange. As Michael said, we have right-sized the business to the current environment, which will drive EBITDA growth in 2024. Our full-year performance was solid despite significantly higher interest rates and disappointing results at Travel and Membership. We partially offset these challenges with strong, decisive cost cuts throughout the year and reductions in variable compensation expense.
We continue to drive strong Adjusted EBITDA margins across our businesses, with our 2023 full-year Adjusted EBITDA margin coming in at 24.2%. Moving to our balance sheet, our financial position remains strong, and in the fourth quarter, we continue to return capital to shareholders through share repurchases and our quarterly dividend of $0.45 per share. For the full year, we repurchased 10% of shares outstanding at the beginning of the year for $307 million and paid dividends totaling $136 million for total capital return to shareholders of $443 million. As you saw in the press release, we completed three important transactions in the fourth quarter. We closed two timeshare receivable financings, a $300 million term securitization transaction in October and a $238 million term securitization transaction in December.
Also in December, we secured additional term loan borrowings under our credit agreement, which we will primarily use to pay the $300 million senior notes due in April. Adjusted Free Cash Flow was $379 million for the year, resulting in a 42% Adjusted EBITDA to free cash flow conversion. Excluding the impact for the Sports Illustrated investment of $41 million, adjusted free cash flow conversion would have been 46%. We ended 2023 with our Net Corporate Leverage Ratio for covenant purposes at 3.4 times. Remember, our goal was to end the year below 3.5 times leverage. Overall, our capital allocation for the year was right in line with what we anticipated when looking at our share repurchases, quarterly dividends, and by year-end leverage. Now let me provide some more detail about our expectations for the full year and first quarter of 2024.
For the full year, we are providing a guidance range of $910-$930 million for Adjusted EBITDA, and for now, we are most comfortable at the midpoint of the range. Note that our guidance includes $30 million of incremental interest expense on our ABS debt and assumes no variable compensation benefit in 2024. For comparison purposes, the variable compensation benefit in 2023 was $17 million. Turning to vacation ownership, we expect gross VOI sales in the range of $2.25-$2.35 billion, with VPGs in the range of $2,900-$3,000. For travel membership, as Mike already mentioned, we expect Adjusted EBITDA to grow low single digits in 2024. For the full year, we expect an effective income tax rate of 26%-28%. Turning to the first quarter, we expect Adjusted EBITDA in the range of $185-$190 million.
Keep in mind that vacation ownership adjusted EBITDA faces a $9 million year-over-year headwind to interest expense in the first quarter as a result of higher interest expense on our most recent ABS transactions. In vacation ownership, we expect first quarter gross VOI sales of $460-$480 million and VPGs of $2,925-$3,025. For travel membership, we are guiding to adjusted EBITDA in the first quarter of $75-$80 million. And finally, we expect our first quarter tax rate to range from 28%-30%. Turning to cash, we expect our 2024 adjusted free cash flow conversion to be in the neighborhood of about 50%. Elevated interest rates have increased our ABS and corporate interest expense assumptions for 2024 approximately $75 million from when we set out our cash flow conversion goals in September of 2021.
However, as Adjusted EBITDA grows and interest rates decline, we expect to move towards an Adjusted Free Cash Flow conversion of over 55%. In closing, we are pleased with the earnings and free cash flow we delivered in 2023 and proud of our continued ability to return capital to shareholders. For 2024, our guidance reflects our confidence in the strength and resiliency of our business and our ability to grow. Long-term, we expect our Adjusted EBITDA growth rate to return to high single digits as interest headwinds subside and we no longer lapse the 2023 variable compensation benefit. With that, Sherry, can you please open up the call to take questions?
Operator (participant)
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Our first question is from Chris Woronka with Deutsche Bank. Please proceed.
Chris Woronka (Director and Senior Equity Analyst)
Hey, good morning, guys. Thanks for taking the questions and for the details so far. Michael, I was hoping you could talk a little bit about some of these OPC channels and some of the other marketing channels you're looking at this year. The question is really kind of you sit here in February, you have a plan, I know you have some new partners. How do you kind of typically evolve or adjust some of your mix of partners through the year as various events unfold? Just trying to get a sense as to whether your visibility to some of the tour flow and the bookings improves with your partner mix. Thanks.
Michael Brown (President and CEO)
Good morning, Chris. Yeah, the new order of questions is a very important one. And as we came out of the pandemic, we said that there were two very important elements. Number one was we wanted to increase our marketing standards, the credit standards. And secondly is we wanted to ensure our marketing partners delivered positive margins as well as new owners. So we took a very measured approach coming out, and we've seen our, I would say, diversified OPC channels grow on a regional basis. We're not overly dependent on a single partner. We do have some bigger partners that generate a lot of tours for us. But region by region, each of our regional marketing executives will evaluate the best opportunities in their region and therefore contract locally.
What typically happens in the cadence of the year, and you also see it in our VPG guidance in the first quarter versus the full year, is the summer months are your big new owner months. So our teams right now will be working with marketing partners to sign up deals for the upcoming summer. So you're just building on the success of last year, which was 18% tour growth from the prior year, and we're expecting tour growth this year over 10%. So it's just a steady growth on a regional basis of developing the right partners that'll deliver, A, new owners, and B, at a profit from day one.
Chris Woronka (Director and Senior Equity Analyst)
Okay. Very helpful. Thanks, Michael. Just as a follow-up, this is on the Travel and Membership clubs business. It sounds like you said you've right-sized the cost structure. And you obviously have a couple of growth initiatives that have started. But the question would be going forward, is it possible to kind of maintain level EBITDA with very minimal top-line growth? Or could you do more on the cost side if you need to? Or is the expectation really that we begin to see the top-line growth accelerate a little bit in that segment? Thanks.
Michael Brown (President and CEO)
Yeah. Well, yes, you can get the growth through top-line growth. One of the key elements that we've modified is that the addition of the travel club business is driving incremental EBITDA growth in that space. Although it's not meeting the expectations we originally laid out on investor day, it is providing growth, and it is providing a new source of revenue for that side of the business. So the right-sizing was really a reflection of the growth trajectory we saw in travel clubs. And we've seen a lot of predictability start to come into the exchange side of the equation. As we've seen coming out of the pandemic, it dropped, but we're starting to see that stabilize to a revenue range that we thinks pretty predictable.
So yeah, I think we can see top-line growth, and we just needed to make some changes to make sure the cost structure reflected what we thought was the future growth and revenue in the travel and membership space.
Chris Woronka (Director and Senior Equity Analyst)
Okay. Very helpful. Thanks, Michael.
Michael Brown (President and CEO)
Thanks, Chris.
Operator (participant)
Our next question is from Joe Greff with JPMorgan. Please proceed.
Joe Greff (Managing Director)
Good morning, guys. Mike, the reference to the variable compensation expense benefit in 2023, you indicated at $17 million. Can you break that out between segments? Does that hit corporate? Does that hit VO, T&M, as well as corporate? And does that even through the year? And then I guess my bigger picture question is this. I mean, your full-year EBITDA guidance implies a low single-digit EBITDA growth rate. You referenced the variable compensation year-over-year delta, the incremental interest expense of $30 million. Would you basically expect VO to grow low single digits as well and Travel and Membership to flat? I'm just, I guess, trying to triangulate how you're seeing the rest of the year with some corporate in there.
Michael Hug (CFO)
Yeah. Good morning, Joe. And thanks for the question. On the variable compensation, as you would expect, the biggest impact is going to be at the Travel and Membership segment because they were the ones that, as compared to our regional expectations, didn't quite meet to the level that we set out. The second most significant impact would be at the consolidated level, Travel and Membership, I'm sorry, Travel + Leisure, because we're confident Travel + Leisure based on the consolidated NAD. And then, as Michael Brown touched on, Wyndham Destinations basically performed well for the year, so their impact is going to be the smallest. In terms of the cadence of that throughout the year, pretty much evenly spread in Q2 through fourth quarter.
Obviously, as you're getting later in the year, you get July, and you kind of see how things are going, and that's when you start to make those adjustments if there are any adjustments to be made. So in your models, you can think about that coming through pretty much evenly in Q2 through Q4. As far as the year-over-year growth rate, you're exactly right that the two big headwinds we have are the $30 million interest expense headwind that we've talked about and then the variable compensation, which obviously we mentioned today. If you take those two out of the picture, you're basically looking at 4%-6% growth year-over-year. When we think about the long term, the reason we believe over the long term we can get back up to high single-digit growth is we do expect interest rates to subside. We're already seeing that.
What happens on the ABS transactions, they have about a 3.5-year life. So the less expensive ones that we did, which really ended in the middle of 2022, will finally kind of be all rolled off by the middle of 2025. So that interest headwind should basically be neutral in 2025 and then start to become a tailwind in 2026 as the more expensive transactions that we put in place in late 2022 and throughout 2023 start to roll off. So you factor that into the growth that we're able to generate even covering some of that headwind. And that's really the big item to get us back to long-term growth of high single digits over the next several years.
Joe Greff (Managing Director)
Got it. And then my final question is: Buyback slowed fairly substantially from the fourth quarter versus earlier in the year. It slowed down from the 3Q, which was slower than what it was in the 2Q and 1Q. What's driving that lower activity?
Michael Hug (CFO)
Really, when we look at our total capital allocation strategy, we've talked about if the right opportunity presents itself to invest in the business, we're going to make that decision to help drive, once again, that high-digit long-term growth that we talked about. So what we looked at, obviously, as we got into the second half of the year, was we had the opportunity to invest $41 million in Sports Illustrated, a great opportunity that we're very excited about. And as we talk about all these things, when we look at M&A, it's really the marketing opportunity that presents to us. And that's what we think the Sports Illustrated brand, as well as the relationships with the universities that we'll be working with, offers that opportunity.
So when we think about how we use our free cash flow, obviously, the dividend is very important to us, as demonstrated, where we increased it again this year. And then we'll look at M&A and absent M&A or the ability to invest in the long-term growth of the business, the difference goes to share repurchases. So that's why you see share repurchases being down in the second half of the year was because, right, we had executed on the Sports Illustrated opportunity. And then you'll really see the same thing in the first quarter this year where the acquisition of Accor, which we're very excited about for just under $50 million, will come out of our free cash flow and as part of our capital allocation strategy.
Joe Greff (Managing Director)
Great. Thank you.
Michael Hug (CFO)
Sure. Thank you.
Operator (participant)
Our next question is from David Katz with Jefferies. Please proceed.
David Katz (Managing Director)
Hi. Good morning, everyone. Thanks for taking my question. I wanted to just go back to the capital allocation choices. In view of what is obviously enthusiasm for some of the new brands and channels, I just wanted to make sure to sort of capture your philosophies about capital returns, obviously, with repurchases and dividends being paramount for the story for many years. Any change in the philosophy about those policies or strategies near-term given some of these new initiatives?
Michael Brown (President and CEO)
Good morning, David. There's no change in our capital allocation strategy. I think for the last 5 years, we've said dividends are the foundation, and then you're consistently choosing between strategic M&A opportunities and share repurchases. We'll only act on anything M&A as it relates to what we think has the right IRR and also fits into our long-term strategy. Sports Illustrated does exactly that. For the ability to grow with a brand of that quality, with the marketing capabilities that come along with it, which is lifestyle, leisure, in the hospitality space, combined with a world-class hospitality brand like Accor, which really strategically decided to put on pause its sales effort in the Asia-Pacific region post-pandemic, the opportunity to get an existing operation of 30,000 members with a brand to the quality of Accor, made complete sense to us.
As Mike mentioned, we returned 15% of our capital through dividends and share repurchases last year on top of pretty much the same the year prior. And when we saw these two opportunities to invest in the long-term growth of this business to support our long-term initiatives of being high single digits, it was really an easy choice for us, and we couldn't be more excited about it.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Understood. Just to follow up, I think the essence of the question is whether something Accor or others like it are consumers of capital in ways that alter the path. It sounds like it's no. I just want to make sure.
Michael Brown (President and CEO)
No. Look, we're in the business of leisure vacations in the vacation ownership space. And I think our 2023 execution against that shows that our business model performs extremely well. And if we have the opportunity to invest in the long-term success of our business look, Accor is more immediate because it's an existing operation of size, of relatively decent size as far as their owner-based resort system. And to build something like Sports Illustrated from ground up, it is an investment in what we do well, which is leisure vacations and vacation ownership. And in the absence of those opportunities going forward, we'll use our free cash flow to keep plowing into share repurchases and paying an increased dividend.
Michael Hug (CFO)
And David, on the use of capital, it would be our intent on both the Accor and Sports Illustrated to have delivery inventory delivered on a just-in-time basis. So we'll work with our partners to make sure that inventory comes in when the revenue starts to come in.
David Katz (Managing Director)
Noted. Thank you.
Michael Hug (CFO)
Sure. Thank you.
Operator (participant)
Our next question is from Patrick Scholes with Truist Securities. Please proceed.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Hi. Good morning, Michael and Mike.
Michael Brown (President and CEO)
Good morning, Patrick.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Morning. Could you talk a little bit about expectations for growth rates for tours? It looked like, at least versus street consensus numbers, VPG was a little bit lighter but implied in there because it grows DOI sales in line. Maybe your expectations for tours a little bit better than us analysts. First, yeah, talk about that, please. Thank you.
Michael Brown (President and CEO)
Yeah. Very important sort of strategic direction for the next few years is our growth this year will be tour-led. As I mentioned, we had 18% growth last year. We'd expected our tour growth this year to be over 10%, which is a combination of a number of factors. We mentioned that our owner room nights are already projecting up versus 2023. That results in incremental owner tours. We have a great relationship with the Wyndham Hotels & Resorts that, for the first time, broke $100 million in sales last year. We expect that to grow as that relationship remains very strong and productive. And then lastly, back to Chris's question is, our regional teams continue to grow incrementally good, profitable local marketing channels. As it relates to the volume per guest, we are projecting at the high end of our long-term guidance range.
And that, with our tour growth, is an important dynamic to look at because, with our expected new owner growth this year, this will put us over 35% of our transactions being new owners. And for those of you familiar with our story, we said once we get to 35%, we are set up for the long haul to be stabilized, and we can start making decisions on a year-on-year basis as to if we want to grow that number or not. So that implies that as we get beyond 2024, the decisions on you should have less of an impact on VPG related to a misadjustment unless we proactively make that choice beyond this year.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Okay. Thank you. I have another question here, and then I'll hop back in the queue. The B2B, B2C business, would you say that's fully on the cost side, fully right size or where you want it to be at this point?
Michael Brown (President and CEO)
I do. It's never easy to make changes. And I think the industry has evolved dramatically over the last 12 years. And at some point, the nature of the structure of the industry changes, and therefore, you have to change the structure of your business. Our teams continue to deliver great exchanges with over 3.5 million members in that space. But you recognize structurally where the exchange business is, which, as we shared, will be low single-digit growth this year. And you have to make those changes, which is what we did. Still love the business, high margin, high free cash flow, and think that this sets us up for a very clear line of sight to our performance in 2024, which, candidly, was a constant conversation that we had on these calls.
That change, along with our clear line of sight to this year's performance, should hopefully result in a lot of calls this year where people are nodding their heads because we're hitting those expectations and achieving the goals we laid out on this call.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Okay. Good to hear. I'll jump back in the queue. Thank you.
Michael Brown (President and CEO)
Thank you, Patrick.
Operator (participant)
Our next question is from Brandt Montour with Barclays. Please proceed.
Brandt Montour (Director of Equity Research Analyst)
Good morning, everybody, and thanks for taking my question. I'm curious, on Accor, if you could give us a sort of sense for the run rate EBITDA for this asset at the time of purchase, if you've put anything in your 2024 guidance, I'm assuming no. But also, help us understand sort of if there's synergies that you see in that asset and if there's a fee to Accor and how that well, I'm sure there is, but how that fee's structured with them so that they're incentivized to sort of help you with their database.
Michael Brown (President and CEO)
Absolutely. So their run rate EBITDA is approximately $6-$8 million. As I mentioned previously, they had really stalled their sales efforts coming out of the pandemic to decide exactly how they wanted to take the business forward. So as we look at this year, we should be closing this deal at the end of Q1, which means we have three-fourths of the year, which means very immaterial even for this year, $2-$3 million. But our investment and real focus this year will be the reramping and growth of the sales efforts related to the Accor Vacation Club. There's no one on this call that doesn't know the brand and know the quality of it. And having the level of resorts in the region 24, the Accor team is excited about it. The Travel + Leisure team is excited.
Very similar, it's a license fee arrangement, so they're incented for us to grow their member count, their top line, and ultimately leading to more resorts at more Accor destinations.
Brandt Montour (Director of Equity Research Analyst)
That all sounds great. I guess just one quick follow-up. Is your expectation that that could be accretive to VPGs when you guys get everything running the way you want it to?
Michael Brown (President and CEO)
The short answer is yes. The more detailed answer is materially against $2.2 billion of sales, it's not going to move a VPG needle. But the Accor Vacation Club is an up-upscale brand, which tends to bring with it slightly higher VPGs.
Brandt Montour (Director of Equity Research Analyst)
Great. Thanks, everyone.
Operator (participant)
Our next question is from Dany Assad with Bank of America. Please proceed.
Dany Asad (Research Analyst)
Hi. Good morning, everybody. My first question is on margins, just kind of with the implied VOI segment and kind of what we've talked about so far. Where would you expect VOI margins to shake out in 2024 compared to 2023? And how much would you quantify, if you could, the impact of remixing new owners and kind of driving that tour flow for 2024?
Michael Hug (CFO)
Yeah. As you'd expect, I mean, our margins for next year for the VO business will be down a little bit. The $30 million interest headwind, obviously, is what's most impactful in terms of what's driving that margin down a little bit. We finished on a consolidated basis, 24.2% this year. We'll be down just a little bit once again because of that interest headwind. And then to your point on the new owner generation, that does have about $10 million in pressure on EBITDA as we move up to the 35%. So the consolidated drop in margin that I've talked about is primarily at the VOI level.
And if you think about, too, the comment I made earlier about how are we confident in that long-term growth getting back up to high single digits in addition to the variable confidence interest headwinds that we have in 2024, we do have this continued investment in the new owner mix. So as Michael touched on, as we get up to 35%-36% new owner mix, and if we decide to settle in there, that's a headwind that we no longer have as far as the potential VPG pressure or the higher marketing costs.
Dany Asad (Research Analyst)
Got it. Thank you. For my follow-up, as we keep driving tour flow, do you ever see kind of yourself running into any capacity limitations on tour growth? Or I know we're still kind of a ways off from 2019 levels, but just kind of curious, is there any kind of capacity issues that you can see?
Michael Brown (President and CEO)
I don't see, Dany, any physical capacity issues. We have sufficient sales space. People are the key to success in this industry, and we're very focused on retaining and bringing in new talent. So I think physical capacity and human capacity are the most important. Along with the third leg of that stool is, in today's world, data is key. So it's one of the reasons that we love the relationship with Wyndham Hotels and are excited about their growth and their loyalty program. As well as the reason we're excited about the additions to Sports Illustrated and Accor is they bring new databases, untapped databases to a certain degree, and give us the ability to grow our marketing component.
If I could just swing back to add one comment to Mike Hug's earlier on margins, I think in a year like 2023 where we had challenges in our travel memberships that met high margin and the rapid rise of interest rates, I just want to say I'm very proud of our team. Yes, we organically executed two of our vacation ownership plans that we laid out at the beginning of 2023, and I think that was a great accomplishment. But also, the overall margin of the business with some headwinds against high-margin business shows once again that our team, when faced with challenges, finds a way to deliver against expectations and, in the case of 2023, actually improve our margins slightly.
Dany Asad (Research Analyst)
Thank you very much.
Michael Brown (President and CEO)
Thanks, Danny.
Operator (participant)
Our next question is from Ian Zaffino with Oppenheimer & Company. Please proceed.
Isaac Sellhausen (Director of Equity Research)
Hey. Good morning. This is Isaac Sellhausen on for Ian. Thanks for taking the questions. First, just a follow-up on Travel and Membership. How should we think about maybe top-line recovery of that business as we move through the year? And what are the expectations maybe around members and exchange transaction growth? Should we still expect some headwinds on exchange transactions and then maybe modest growth in members?
Michael Hug (CFO)
Yeah. Good morning, and this is Mike Hug. Thanks for the question. When we look at the travel membership business on the exchange side, we do expect the exchange members to continue to grow. We are seeing, across the industry, continued new owner generation and increases in new owner generation just like we're doing in 2024 compared to 2023. So member count, we expect it to continue to go up. The one challenge we have that we've talked about is most of that growth is coming in the clubs, which obviously have a lower propensity to exchange. So when we look at the expectation for exchange transactions, we do expect them to be down a little bit. Like we did in 2023, we'll try to make up for that with some pricing.
As it relates to the travel clubs, we do expect increase in transactions out of the travel clubs. Overall, for this segment, you'll see revenue growth in the mid-single digits. As we mentioned, EBITDA growth will be in the low single digits. The reason for that difference is the revenue that comes on the travel club side of business does come with a lower margin as compared to the RCI exchanges.
Isaac Sellhausen (Director of Equity Research)
Okay. Very helpful. Then just as a follow-up, you mentioned for resort bookings, excuse me, we're ahead of 2023 levels. I'm not sure how specific you can get, but maybe how far ahead are we? Then maybe you could touch on regions that are performing particularly well.
Michael Brown (President and CEO)
I can. For the first half of the year, the two primary destinations are where you would expect: Las Vegas and Orlando are leading the charge. I expect this year that you'll see a return to U.S. travel. I think we all know that Europe was the hot market last year in cruise. I think the second half of the year blending into the first part of this year remains hot. I'm not sure how they fell through the year. But our bookings are ahead 5% on room nights for the full year and yeah, 5% for the full year.
Isaac Sellhausen (Director of Equity Research)
Okay. Perfect. Thanks so much.
Michael Brown (President and CEO)
Just one more quick thing to add to that is, post-pandemic, there's been a tendency for longer length of stay. We're seeing that longer length of stay continue, which really sort of validates this work-from-anywhere environment that continues to persist even into 2024 related to our owner bookings.
Operator (participant)
As a reminder, to star one on your telephone keypad if you would like to ask a question. Our next question is a follow-up from Patrick Scholes with Truist Securities. Please proceed.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Okay. Thank you. Yeah, I do have a couple of follow-up questions. Mike, can you talk about expectations for loan loss provision going forward? I think the long-term, you've talked about in the past around 18%-19%. And then related to that, have you? I assume no changes to your credit standards? Let me know if there have been any. And then just if you also could provide a little bit of color on anything you've noticed since last earnings on customers' propensity to pay their loans. Thank you.
Michael Hug (CFO)
Yeah. And thanks again for the questions, Patrick. First of all, on the provision, we've been consistent in terms of that being in the 18%-19% range. Obviously, we ended up the year 2023 at the lower end of that range demonstrating rather good performance in the portfolio. We continue to be very happy with portfolio performance and obviously driven in large part by the move up to minimum 645.0. Our new originations are coming in at 739 in 2023. That's up from 736 in 2022. So we're very, very happy with the credit quality, and I don't see us changing that in the near term. I just couldn't be happier with the way our consumer is performing when we look at delinquencies. Very happy with the level of delinquencies.
Obviously, you see more pressure on the lower end of the FICOs than the higher end, but nothing that is out of the ordinary or outside of our expectations. That's another reason we continue to have confidence in great execution on the ABS transactions, right? Those things are something that we do very regularly, and our quality portfolio makes it an easy decision for investors in those notes to jump in three times a year when we go to the market. Very happy with credit quality, very happy where the provision's at. I would say that if it does end up at the high end of the range in 2024, it'd be because of the conscious decision that we make to sometimes try to generate more financing from those good quality FICOs.
We do want to get that interest income growing again, doing everything we can to offset the interest expense headwinds. Don't read us coming in at the high end of that range in 2024. If we do, a quality issue, make sure you listen to what we say as it relates to the level of originations we have and obviously the long-term earnings growth that drives.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Okay. Thank you. Then just shifting gears a little bit here. Michael, I know you folks have a little bit of Hawaii exposure, certainly far less than some of your peers. But could you talk about recent trends in Hawaii visitation, etc.? And then if you have any granularity on how that might break out, say, versus Oahu versus Maui. Thank you.
Michael Brown (President and CEO)
So we have significant Hawaii exposure in Oahu, Maui, and the Big Island, and Kauai. We only have one resort in Maui. And what I would say for our 2023 performance, there was no material change from what we performed in that market from 2022. And as it relates to 2024 bookings, they look very similar to what they were in 2023 and 2022. So for us, we really didn't see any material variability in performance, both sales or occupancy for the year between the three years, 2022, 2023, and 2024. And again, we only have the one resort on the island of Maui.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Right. Right. Okay. And then just shifting gears in the sort of the South Pacific or Australia, it seems like Accor's properties are in that region. Any plans for expansion or growth perhaps down the road to take that to other destinations outside of where it's currently based? Thank you.
Michael Brown (President and CEO)
So the key to expansion is good execution. So our first priority would be to make sure we execute against the plan we put forward. But the short answer to your future expansion question is yes. We want to establish the relationship, build a good one with Accor just like we have with Wyndham Hotels, which has proved to be highly successful. And then from there, gain the mutual respect and alignment economically to grow and do more locations, countries, and regions of the world.
Patrick Scholes (Managing Director of Lodging and Leisure Equity Research)
Okay. I'm all set. Thank you.
Michael Hug (CFO)
Thanks, Patrick.
Operator (participant)
We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.
Michael Brown (President and CEO)
Well, thank you, Sherry. We were very pleased with our fourth quarter and full-year performance, particularly in our core business, Vacation Ownership. We are effectively leveraging leisure travel momentum, which we expect to continue in 2024. As indicated by our announcement of the Accor agreement, we have great traction in executing our multi-brand strategy. We are excited by the opportunities ahead to drive earnings and Adjusted Free Cash Flow and to deliver value to our shareholders. I want to thank our teams who work tirelessly every day to put the world on vacation. Thank you for participating. Have a great day, everyone.
Operator (participant)
Thank you. This will conclude today's conference. You may now disconnect. Thank you for your participation.