Hilton Grand Vacations Inc. Q2 FY2020 Earnings Call

Good morning and welcome to the Hilton Grand Vacations Second Quarter 2020 Earnings Conference Call. A telephone replay will be available for seven days following the call. The dial-in number is 844-512-2921 and enter PIN number 13697042. At this time, all participant lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. I would now like to turn the call over to Mark Melnyk, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Hilton Grand Vacations' second quarter 2020 earnings call. Before we get started, please note that we have prepared slides that are available to download from a link on our webcast and also on the main page of our website at investors.hgv.com. We may refer to these slides during the course of our call or question-and-answer session. As a reminder, our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements and these statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our 10-K, as well as similar sections of our 10-Q, which we expect to file soon after the conclusion of this call and in any other applicable SEC filings. We will also be referring to certain non-GAAP financial measures. You can find definitions and components of such non-GAAP numbers, as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release and on our website at investors.hgv.com. As a reminder, our reported results for both periods in 2020 and 2019 reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we are required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses until the period when construction is completed. To help you make more meaningful period-to-period comparisons, you can find details of our current and historical deferrals and recognitions in table T1 in our earnings release. For ease of comparability and to simplify our discussion today, our comments on adjusted EBITDA and our real estate results will refer to results excluding the net impact of construction-related deferrals and recognitions for all reporting periods. Finally, unless otherwise noted, results discussed today refer to second quarter 2020 and all comparisons are accordingly against the second quarter of 2019. In a moment, Mark Wang, our President and Chief Executive Officer, will provide highlights from the quarter in addition to an update of our current operations and company strategy. After Mark's comments, our Chief Financial Officer, Dan Mathewes, will go through the financial details for the quarter. Mark and Dan will then make themselves available for your questions. With that let me turn the call over to our President and CEO, Mark Wang.

Morning everyone. Earlier today, we released our second quarter results. Over the past several months, we acted decisively to respond to the global pandemic with an emphasis on protecting our owners, guests, and team members along with making critical decisions to support our business model. We've reopened many of our properties and are beginning to see positive signs that our customers are responding favorably as evidenced by recent conversion trends. Our contractual recurring revenue streams continue to generate meaningful income and while we're cautiously optimistic, we're being prudent in our evaluation of the travel environment and the fact that it will take time to fully recover. We're prepared to sustain the business during this period of uncertainty by effectively managing our cost structure to ensure we're protecting cash flow and by taking necessary actions to preserve our liquidity, and we kept an eye on the long-term to make sure we're well-positioned to lead the travel industry out of the crisis and return to a path to sustainable growth in cash generation. First, I'd like to cover the status of our resorts and sales centers along with some of the initial results that we've seen since opening. We reopened our first major resorts on May 21 welcoming guests back to our properties in South Carolina, Orlando in Utah and subsequently opened their on-site sales centers in the weeks that followed. We heard great feedback on our HGV enhanced care initiative and our guests were overwhelmingly positive that the guidelines made them feel safe without feeling constrained during their vacation. We saw solid levels of occupancy at our South Carolina and Utah resorts, particularly over the Memorial Day and 4th of July holidays. Our South Carolina occupancy levels have consistently held in the 70% to 90% range since we reopened, and Utah has been in the 85% to 95% range. Orlando occupancy levels have remained in the 30% to 40% range down from prior year levels due to some popular tourist attractions either remaining closed or running at reduced capacity. In mid-June, we opened our Las Vegas properties and sales centers where we also saw occupancies in the 30% range. However, similar to Orlando, many casino destinations are currently operating with significant capacity constraints. We expect that we'll see improved trends in these markets as restrictions are lifted and utilization rates improve. As of today, approximately three quarters of our resorts have resumed operations. We continue to monitor the situation in Hawaii, New York City, and Chicago and anticipate rolling openings of our sales centers in those markets based on factors including government restrictions and more normal levels of travel demand. Overall, since we began reopening, we've seen our members returning and our occupancies improving, and we've got a robust pipeline of over 400,000 marketing packages that we sold to potential new buyers and that we've recently started to activate. Ultimately increases in occupancy will lead to more tours, which in turn drives our sales cycle. In the weeks following our resorts reopening, we also resumed operations at several of our sales centers, although they've initially been running at lower levels of utilization as we re-engage our marketing efforts. We will continue to ramp our sales operations in response to tour flow levels, and we believe the process improvements we've made over the past few months will enable us to service the same level of tours as we did in 2019 with a leaner and more efficient team. Yet despite lower tour flow, our sales execution in this challenging environment has been commendable. Our close rates improved significantly for both owners and new buyers driving a mid-teens improvement in our new buyer VPG and a nearly 20% gain in our owner VPG for the quarter. Those improvements in close rates combined with a mix shift to owners drove overall VPG up 41% to over $4700. As a result of these efforts during the month of June, our teams were able to generate contract sales at 21% of last year's levels on only 40% of last year's tour flow. We anticipate our VPG to trend toward more historical levels as we add back additional tours and sales staff, although the process and organizational changes we made as part of our strategic priorities should result in a sustained improvement in our efficiencies. The defensive characteristics of our business model were also evident this quarter. The EBITDA of our financing business was relatively flat despite carrying a lower receivable balance, and our cost savings program allowed us to grow our E-Club and Resort EBITDA despite a revenue headwind from lower transaction-related fees. These stable sources of EBITDA are one of the key differentiating factors of our business model. So, there were some nice positive trends, but there are also clearly challenges that remain outside of our control that drag on our tour volume. Travel restrictions remain in place in a number of markets and others have various limitations on businesses that appeal to travelers. New York and Hawaii for instance, accounted for over a quarter of our tour flow last year and we'll likely see limitations on travel through the rest of the year. Nearly half of our tour flow was generated in Las Vegas and Orlando, which are still experiencing capacity limitations on their key tourist attractions. We've recently seen upticks in COVID cases in several key markets including Florida, South Carolina, and Nevada, and the news cycles continue to focus on hotspots in various areas of the country. While we'll continue to do our utmost to provide a safe environment for our guests and team members, we think that consumers will continue to show varying levels of comfort with travel particularly among new buyers. We do believe that as we progress through the pandemic, we'll see our KPIs return to normal run rate levels although the timing remains uncertain. With that said, our strategic priorities have guided our approach, leading up to and during our opening process. While there is more work to be done, adhering to these priorities as we navigate through this crisis will set us up for strength as we complete our property reopening and proceed through the period of recovery. The first priority is to safeguard our owners, guests, and team members. We've been extremely focused here and along with social distancing and personal protective equipment for our guests, we've rolled out our enhanced care program in alignment with Hilton's own clean stay initiative. The program further elevates our already rigorous cleaning and hygiene processes in a way that is thorough, visible, and continuous. As I mentioned earlier, we saw great feedback from our guests about these enhancements. The second priority is to streamline our operating and capital spending. Last quarter, we shared the steps we took to bolster our balance sheet and provide 22 months of available liquidity and we made further strides this quarter with a credit facility amendment and securitization as Dan will share with you shortly. Turning to our operating expenses, we've been laser-focused on controlling cost and reducing our cash burn to a minimum. We were nearly breakeven on an EBITDA basis in June, despite contract sales being only a fraction of last year's levels. We're in the process of identifying additional permanent cost savings. As I indicated earlier, we won't be able to fully optimize our expense structure until we return to more normalized operations, but we do know that we will come back even more efficient than we were prior to the crisis bolstering our historical record of margin outperformance. Our capital spending plans on inventory, development, and technology have also been revamped to strike an optimal balance between returning to growth and preserving capital. The third priority is to protect our recurring revenue and embedded value. Our teams have been working tirelessly with our member base to assist them in reworking or changing their vacation plans this year, and we've ensured that none of our members lose any of their point values due to travel disruption related to COVID-19. We began to reengage our members with special offers and highlighted our enhanced care guidelines to promote a return to travel, particularly at the 70% of our locations that are drive-to. The results of these initiatives are that the attrition rate within our owner base remains low. All of these efforts support our fourth and final priority, which is of course to grow our business. We've introduced several new projects thus far in 2020 starting with Ocean Tower Phase II and The Quin followed by Maui in June and our Cabo project in the coming months. As we reopened our resorts, we've begun to activate packages from our marketing pipeline to drive new buyer tour flow. As I just mentioned, we're working with our owners to preserve their ability to travel when they're able to do so. We carry these efforts with promotional offerings and enhanced value to encourage upgrades and new sales. At the same time, we've embraced the evolution of the timeshare business model during this pandemic, having successfully expanded our virtual sales process and transitioned some of our staff to a more efficient work from home model. We continue to evaluate distressed opportunities with a number of new and familiar fee partners, although it's still too early in the cycle to see compelling assets hit the market. Focusing on our strategic priorities has enabled us to concentrate our efforts during this unique time by giving a shorter-term objective and guidelines as we navigate our way through the recovery. To sum up, I'm proud of our teams and our execution to date. While Q2 likely marked the bottom, the path to truly unrestricted travel and increased consumer comfort remains uncertain and will require patience to return to our prior run rates. As we've seen in past crises, it's not a matter of if our owners and guests will return, but when. In addition, our customers have a strong affinity for the HGV brand and our owners, 70% of whom own their intervals outright, have a prepaid vacation waiting for them. We continue to see a desire and willingness to travel under the right circumstances, as evidenced by our booking data. While our bookings are down just 9% compared to last year and first-quarter bookings for 2021 are actually ahead of where they were at the same time a year ago. While not necessarily indicative of future occupancy, these trends give me confidence that our owners and guests are eager to return, and we're better positioned than any other time in our history to withstand the current environment and lead the travel industry on the path to recovery. As I mentioned earlier, we have more than 400,000 packages in our pipeline, the most we've had in our history, and the vast majority of these package holders have not yet booked vacations. We have nearly 330,000 owners, an all-time high that is a result of decades of focusing on new owner growth. Ultimately this means we have three quarters of a million opportunities to engage and win new business in the coming quarters as travelers return. In the meantime, we've shown that we can operate efficiently and approach breakeven in a low volume environment. We've also proven that we can flex our business quickly to respond to different levels of demand. In closing, my conviction in our operating model is as strong as it has ever been, led by our multi-channel marketing strategy, embedded owner base, and strategic competitive advantage of our Hilton relationship. I’ll now turn the call over to Dan.

Thank you, Mark, and good morning everyone. As Mark mentioned in his introduction to our call, our results for the quarter included $4 million in sales deferrals impacting reported revenue, and net deferrals of $3 million impacting both adjusted EBITDA and net income. All references to the consolidated net income, adjusted EBITDA, and real estate segment results on this call for the current and prior periods will exclude the impact of deferrals and recognitions. A complete accounting of our historical deferrals and recognition activity can be found in self-format on the financial reporting section of our Investor Relations site. Let's review the results for the quarter. Total second quarter revenue dropped to $127 million, reflecting declines in our real estate, resort, club, rental, and ancillary segments, while the finance business was flat year-over-year. This decline in revenue was due to the result of having our resorts closed for the majority of the quarter due to the COVID-19 pandemic. Q2 adjusted EBITDA was a loss of $16 million as we incurred fixed operating expenses with little associated revenue in our real estate and rental divisions, as a result of the closures. Our EBITDA was also impacted by $5 million of one-time charges, primarily due to restructuring and COVID-related expenses during the period. Additionally, as we laid out in our press release, there were another $3 million of COVID-related charges that were not added back to EBITDA including $8 million of payroll costs and $1 million of member fee refunds, offset by a $6 million benefit of payroll tax credits under the CARES Act. Net income was a loss of $45 million, and diluted earnings per share was a loss of $0.53, compared to net income of $57 million and diluted earnings per share of $0.63 in the second quarter of 2019. Within real estate Q2 contract sales were $35 million or 10% of prior year reflecting roughly one month of domestic sales operations and a limited number of sales centers. For the quarter, tours were down 94% partially offset by a gain in VPG of 41%. Looking specifically at June, our contract sales were down 79% driven by an 86% decline in our tours volume. This was partially offset by VPG growth of 37% year-over-year reflecting a 21% close rate during the month. Our close rates were up for both owners and new buyers during the month and the quarter. Our fee-for-service mix for the quarter was 54%. On the consumer lending side, our provision for bad debt was $8 million and our overall allowance on the balance sheet was $210 million or 16.6% of gross financing receivables. Selling, general and administrative was $57 million, which largely reflects the fixed expenses absorbed during our period of shutdown, offset by a portion of the cost reductions that we referenced in our first-quarter call. Real estate margin was a loss of $43 million. In our financing business, second-quarter margin was $30 million with a margin percentage of 69.8% versus a margin of $31 million and the margin percentage of 72.1% last year. The gross receivables balance was stable at just under $1.3 billion. Our average down payment year-to-date is 12.2% and our average interest income rate increased to 12.6% from 12.4% last year. Over the past three months, we've seen an expected increase in our delinquency rate to 3.5% of our receivables portfolio versus 3.2% at the end of the first quarter. Additionally, we have begun to see an uptick in our annualized rate of defaults at 5.5% versus 5.3% at the end of the first quarter, and 5.1% at the end of 2019. These increases are currently consistent with our expectation to see upward pressure on both our delinquencies and defaults over the near term as the cycle progresses. As we detailed in our first-quarter call, we took a conservative approach to our portfolio risk provisioning given the unprecedented nature of this pandemic, and we believe we are adequately reserved at this time. With respect to requests for payment deferral in early April as large mortgage lenders announced forbearance programs, we also saw an uptick in our inbound call volume inquiries about payment relief. We worked with our owners on an individual basis, providing borrowers with relief in cases where it was appropriate. As we progressed through the quarter and the new cycles about mortgage forbearance subsided, the number of calls we received also declined and is down 88% across our platform from the peak in mid-April. Roughly one-third of our members carry a loan balance with us, and to-date we've extended deferrals to 1.4% of these members. This represents just over $27 million of our $1.3 billion portfolio balance which remained stable today. Turning to our resort and club business, net owner growth was 3.2% at the end of Q2, revenue of $39 million was down 9.3% from the prior year driven by lower transaction fees from reduced activity through the resort closures, as well as certain refunds to members whose travel was impacted by COVID-19. EBITDA for Q2 was $33 million with margins of 84.6% versus EBITDA of $31 million and margins of 72.1% last year. The increase in margins this quarter was driven by cost reductions as part of the company's recent cost-saving initiatives. Rental and ancillary revenues were $5 million for the quarter. Expenses in the quarter were $24 million as we incurred fixed costs primarily developer maintenance fees with no associated revenues during the closure period. Our EBITDA was a loss of $19 million. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, second-quarter corporate G&A was $15 million, down $7 million or 32% versus the prior year, reflecting our cost savings programs. License fees were $6 million and EBITDA from joint ventures was $1 million. On the balance sheet front, we had two significant revisions to our lender agreements this quarter that further mitigate the potential risk of a prolonged downturn. The first is an update to the terms of a warehouse facility enabling us to repurchase any delinquent loans from our warehouse after passing 60 days rather than waiting for a full charge-off after 120 days. Historically, a high percentage of loans that passed the 60-day delinquency mark tend to ultimately charge off, but our prior agreement required that we wait another 60 days before repurchasing them back from the warehouse. The terms of the new agreement provide us with the ability to begin that process sooner, mitigating any impact on triggers from a spike in delinquencies thus preserving the revolving characteristics of the facility and maximizing our flexibility. The second change was an update to our credit agreement that gives us additional security from near-term COVID-related risks, as well as providing us with additional flexibility over the long term. In the near term, our first lien net leverage covenant ratio has been expanded to 3.5 times for the rest of this year from the prior two times threshold. Starting in the fourth quarter of 2020, we are also able to utilize an annualized EBITDA calculation versus the trailing twelve months calculation that would be significantly penalized by this quarter's shutdown-related performance. We also maintain the flexibility to continue investing in our business and structurally amended the regular first lien net leverage test to three times, positioning us to be opportunistic coming out of the pandemic. Finally, we completed a $300 million term securitization last month. Admittedly, this ABS transaction reopened the timeshare ABS public credit market and we are thrilled with the execution on the deal. We received a 91% advance rate on the triple class structure against our receivables with an overall cost of funds of 3.66%. The offering was 14 times oversubscribed allowing us to improve our initial rate and indicating a strong level of demand in the term market for our high-quality timeshare paper. A portion of the funds were used to pay down our warehouse line, which is now fully undrawn. We also continue to receive inbound interest from private securitization investors, which gives us additional options as we seek to maximize our financial flexibility. As of June 30, our liquidity position consisted of $733 million of unrestricted cash, $39 million of availability under our revolving credit facility, and $450 million of capacity on the warehouse. We currently have $63 million in timeshare receivables available for collateralization in the warehouse. On the debt front, we have corporate debt of $1.3 billion and non-recourse debt balance of $926 million factoring in our recent securitization. Turning to our credit metrics, at the end of Q2, our net leverage and first lien net leverage for covenant compliance purposes stood at 1.53 times and 0.69 times respectively. Our interest coverage ratio for the covenant compliance purposes at the end of the quarter was 8.54 times. We will now turn the call over to the operator and look forward to your questions.

Our first question comes from Jared Shojaian with Wolfe Research. Please go ahead with your question.

Dan, I appreciate the commentary on the June trend that was helpful. Do you have the same data you can share for July on tours VPG and contract sales?

Yes, so Jared, this is Mark. Directionally, things are improving in July and we continue to build off the early success we had in June and that momentum is - I think as we look at ebb and flow on a market-by-market basis with some choppiness around the cases that are out there in the news flow and restrictions and obviously, consumer perception around the risk to travel, but overall, I think the pace of recovery appears to be really correlated to travel trends right now. We're in a really good position because we've got all this built-in demand that we talked about in our prepared remarks. Our owners want to travel. They're booking forward. We're activating new buyers. All in all, I think we continue to see things improve as we go through July, and it's going to be a bit choppy, but the demand is there, and people want to travel. We've been very, very pleased with our conversion rates. I talked about those in my prepared remarks, which are up - our PPG if you exclude any direct sales, which is virtual sales, were up 41% and we're seeing those trends. It's a mix between closing percentage and a mix between owner and new buyers. We're seeing more owners in our mix, but both our new buyers and our owners are closing at much higher rates. We're really pleased with how the consumers are behaving.

And obviously, the second quarter is kind of a throwaway quarter here, just given the circumstances, but contract sales were actually a little bit better than your peers. I think that comes as a surprise to a lot of people. There was a view that you were maybe a little bit more disadvantaged with your Hawaii exposure, maybe the deeded weak based model and Japan is another thing? Can you maybe talk about that, I guess maybe what you're seeing with cancellations or pricing or intra Japan maybe performing a little bit better? Anything you can speak to you on that?

Yes, let me cover off on Japan first. Japan is actually recovering very well. We're pacing about 50% of last year's level. We actually never shut down in Japan, though there was a period of time where the business had dropped off considerably. The pandemic's impact in Japan has not been to the same extent as we've had here in the U.S. They've been able to control it a lot better. A couple of other advantages we have in Japan is most of our sales are off-site, and what I mean by that, they are not on a property. We have 12 different sales centers there and we can attract regional travel, and so we're not relying on people having to travel to one of our properties. We've brought our sales operations to the market and we can cater locally to them. So very pleased with the engagement there, as it relates to Hawaii. Interestingly enough, Hawaii made up 35% of all the inventory we sold from April through July, and we were not even open in Hawaii, so a lot of that has been sold out of Japan, and we're also selling that out of a number of our U.S. mainland operations. So all in all, pleased with initial results for Japan.

Our next question comes from the line of Brandt Montour with JPMorgan. Please proceed with your question.

And I appreciate all the color today. So Mark, you talked about the large basket of unbooked packages that you have and I think you mentioned that you're starting to activate those. Can you just add some color here? How big of a priority is it to activate them? Is it more efficient to wait until people are on the road and traveling more? We also know that you have a very non-exhausted owner base that you can tap instead. So I guess the question is, how big of a focus is that?

Yes, look, it's a big focus for us, and we've talked about our pipeline being very healthy. We've got over 400,000 customers who have committed to a future vacation with us to take a tour with us. As you can imagine, sales of new packages went down considerably; they went down probably 95%. But today our marketing engines are all up and running, and we continue to invest in this tour pipeline and our pace is now up to around 60% of the pre-COVID level, so we're really, really happy about how receptive the customers have been out there. In this environment, subsidized packages at discounted vacation are important and I think in this recovery stage. The value proposition is playing out well. So, we're very focused on the activation part of it. Obviously, we're being very sensitive about activation. We understand that with all the restrictions and mobility issues out there today, fewer people are going to be traveling right now. So we're trying to be very strategic in how we activate. We're looking at how we're out there promoting using Hilton additional cell non-points Hawaiian airline points to create some additional motivation to travel. We're really focusing our efforts around the drive-to markets and we're going out and activating within a reasonable driving time. So all in all, very pleased with our marketing team's efforts; I think they're executing at a high level. We really benefit from this relationship with Hilton and as Hilton's business continues to ramp up, we're starting to see better and better results there.

And then just maybe dig in a little bit deeper on the owner arrivals data that you provided. It looks like, and I don't know if I'm splitting hairs, but it looks like the fourth quarter pace fell below the pace you were at as of three months ago. Obviously, your first-quarter next year pace is really strong. So I guess, I think you made a note that part - so half of that was from New York and Hawaii. Are these cancellations that have accelerated for those two markets? Have they - are those what's we booking were part of why Q1 was so strong and what's the other 50% I guess in terms of the adjustment?

Yes, look, certainly, we're very encouraged by the booking data particularly against the backdrop of everything that's going on right now. I think this really indicates the underlying demand that we have for travel, and with our base of owners in Q4 of 2020 and Q1 of 2021. Bookings are running about 90% of prior level and as you mentioned Q1 is actually 30% up over last year. If you actually go back and you do the math, I think net-net, we have actually in the fourth quarter net bookings have gone up. We had to take out a lot of reservations. Hawaii accounted for half of our cancellations since we last reported, and 95% of that travel was planned for 2020. Hawaii is a destination and a market that people book further in advance because of the airline lift required to get to Hawaii. Consequently, we took a big hit mainly this quarter in the third quarter and to a certain extent in the fourth quarter, but we're getting pickup in other markets. For us, it's less about cancellation and it's more about people pushing their vacations forward.

Our next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.

When you think about the better close rates on new owners, I guess what do you think has been the primary driver there? Is it just better filtering the funnel, changes in sales practice, a change in consumer behavior where there is a change in preference for the product? And how does it change maybe your own thought process as we come out of this in terms of maybe being more efficient?

Yes, no, great question. First of all, we are really, really pleased with the execution and what's happening in that part of the business. Obviously, this business starts with tour flow and then you've got to convert. The conversion part is going well. I think it's interesting; I think as we think about it, we believe the value proposition is really showing well in this environment and, when 90% of our units have kitchens, we have spacious one- and two-bedroom units. These are units that are very desirable to travel in this environment. I think the value proposition is playing out. Our customers can see that they feel comfortable staying in the rooms and eating at home in this environment. That helps. Clearly, I talked about the mix shift; we were historically running around 50% sales to owners 50% sales to new buyers and that's shifted to 70/30, 70% to owners. Our owners are coming back. I think our owners are coming back quicker because they've got a higher-level commitment with the prepaid aspect of the business, but they're just - they've bought into the brand. They feel safe with that. I'd also echo what some of our competitors have said. We've brought back our best team members, and the teams are just doing a great job executing. Yes, look, I think obviously the impact of this pandemic on travel and lodging and resort condos is going to be significant. My prediction is that, obviously we're building a number of properties right now. My prediction is over the next 10 years, we won't have to build anything; there is going to be a plentiful amount of inventory that's going to be repurposed. I think the highest and best use in a number of cases are going to be timeshare. We've got a good slate of inventory, and we've got a good balance of inventory. We're getting ready to complete a number of deals right now that are not new deals, but deals that have been in the pipeline that we're finishing up. These things take time, but I believe our industry as a whole will benefit unfortunately from the dislocation that's going to occur from this pandemic.

Our next question comes from David Katz with Jefferies. Please go ahead with your question.

You covered obviously quite a bit of detail. I wanted to just go back to the amount of tour flow involved. I recognize that there are a number of factors that may cause yours to differ from what we've seen some of the other publics talk about so far. The tour flow was a bit slow. Would you mind just revisiting that matter and talk about what sort of went into the tour flow in the quarter?

Yes, look I think David covered off on the fact that our owners are making up a bigger percentage of the tour flow than we have historically seen in the past. We're cautiously optimistic that this tour flow will continue to improve over time, although it's going to be choppy and it's going to depend somewhat on mobility, especially on people's willingness to get on planes. We've got a strong pipeline and we talked about how we're working to activate. It's interesting; we're seeing bookings in arrivals vary by market. We have a couple of markets that are performing at 75% of historical levels and other markets are performing at 20% of historical levels. Of course, we’ve talked about Hawaii, New York, and Chicago; those are still not open at this point. Where we're performing better, it’s really around in markets that are perceived to be safer and are not as crowded. Beach resorts, our mountain resorts are all performing well; Orlando and Vegas where we rely on entertainment to the theme parks or the entertainment that Vegas provides. Those markets are coming back, but they came back around 30% to 40% and it's kind of stabilized at that level right now. I think as we move forward, these will improve as conditions improve. Once Hawaii opens, I believe there will be relatively strong demand.

Thank you. We have no further questions at this time. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mr. Wang?

Yes again, thank you for joining us this morning and I want to add - I've got a special thanks and call out to our team members who have been working so hard over the last few months. I’m very proud of the way you all have navigated the change and the uncertainty while continuing to focus on what’s most important, and that’s the safety and well-being of our owners, guests, and of course one another. We look forward to speaking to you over the coming weeks and updating you on our next call. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.