Wyndham Destinations, Inc. (WYND) Q4 2020 Earnings Call Transcript

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Wyndham Destinations, Inc. (TNL -1.19%)
Q4 2020 Earnings Call
Feb 24, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the 4th Quarter and Full Year 2020 Earnings Conference Call for Travel & Leisure Co. formerly Wyndham Destinations. [Operator Instructions].

I would now like to turn the call over to Chris Agnew, please go ahead.

Christopher Agnew -- Senior Vice President, Investor Relations

Thank you, Ashley. Good morning and welcome to Travel & Leisure's 4th Quarter and Full Year 2020 Earnings Conference Call.

Before we begin, we'd like to remind you that our discussion this morning 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 you can find a reconciliation of the non-GAAP financial measures discussed in today's call. In our earnings press release available on our website at investor.travelandleisureco.com. This morning Michael Brown, our President and Chief Executive Officer, will provide an overview of our 4th quarter and 2020 full-year results and Mike Hug our Chief Financial Officer will then provide greater detail on the quarter, our balance sheet and liquidity position. Following these remarks, we'll be available to respond to your questions.

With that, I'm pleased to turn the call over to Michael Brown.

Michael D. Brown -- President and Chief Executive Officer

Thank you, Chris. Good morning and welcome to our first earnings call as Travel & Leisure. Earlier this morning, we were pleased to report 4th quarter adjusted EBITDA of $148 million and adjusted EPS of $032 last year was full of unprecedented challenges for the travel industry yet the strength of leisure travel demand combined with our resilient business model enabled us to achieve positive adjusted free cash flow for the full year. Indeed after reopening at the end of the second quarter, we were able to deliver a strong second half of 2020 with adjusted EBITDA margins over 20%. A combination of our recurring of earning streams, the resilience of our owners, our competitive resort footprint and the early actions we took to reduce costs and maximize cash flows all contributed to our strong performance in 2020.

Let me transition to some of the highlights from last year. For the full year, we generated revenue of $2.2 billion and adjusted EBITDA of $259 million. As a reminder, adjusted EBITDA includes a $157 million negative impact for increased defaults due to COVID. The end of the first quarter and the majority of the second quarter were significantly impacted by suspended resort operations due to stay home orders in 42 states. By the end of June, 85% of our US resorts and 56% of our sales locations have reopened. As we look ahead to the eventual rebound in leisure travel, we made a number of operational changes to put us in a stronger position for the recovery. In the Vacation Ownership business, we elevated the FICO qualification threshold from 600 to 640, improving to a quality, which results in better performance in the portfolio.

We also pared back underperforming marketing locations and programs. We reimagined our check in process, innovated the onsite experience with RFID wristbands to increase engagement with our guests and went live with our new clubwyndham website in May. We also launched virtual sales and virtual contract closings. Both have been well received and we plan to expand both programs in 2021. Cost savings helped to buffer a softer top line in our travel and membership segment. This segment, which is primarily RCI achieve 40% adjusted EBITDA margins in the second half compared to 37% in the prior year. Revenue per member also improved in both the 3rd and 4th quarters down just 19% and 13% over the prior year, which were noteworthy improvements compared to the second quarter, which was down 37% over the prior year. And on a consolidated basis, we reduced our annualized 2020 operating cost base by approximately $225 million, $60 million of which will become permanent G&A savings and we reduced inventory and operating capital expenditure by over $125 million.

In a year with many global lodging and leisure companies were net users of cash, we maintained a strong balance sheet as we generated positive adjusted free cash flow of $35 million for the full year. We had $1.6 billion of liquidity at year-end and finished the year with $3 billion of corporate debt. We were also able to maintain a quarterly dividend, which is currently $0.30 per share demonstrating our confidence in the resilience of our business. The strength of our balance sheet and our business allowed us to be productive and execute several strategic initiatives toward achieving our goal to expand into the broader leisure travel market. We successfully unveiled Panorama mid year and we acquired the Travel and Leisure Brand in the early 2021. We are excited about both of these businesses and the momentum they will drive in the 2021 and beyond.

Let me share with you the rationale behind our acquisition of the Travel and Leisure Brand and content and its existing businesses. First, our mission is to put the world on vacation and by renaming our corporate entity, it allows us to demonstrate an increased breadth of marketing services we will provide going forward. The acquisition of Travel and Leisure allows us to express that direction with one of the most trusted and iconic names in the leisure travel space.

Second, it reinforces our strategic direction to expand beyond the timeshare space. The overall North American leisure market is more than tenfold larger than the timeshare market. The Travel and Leisure acquisition fueled by our technology platform allows us to expand by offering new products and services to a much larger market. As part of the acquisition, we acquired 2 subscription travel clubs with a combined 50,000 members. We plan to grow these travel clubs as we launch new products this summer. Third, this facilitates our ability to offer timeshare services to other travel brands in addition to Wyndham. Our strength lies in sales and marketing, hospitality, and our ability to access the financial markets to support consumer lending. We believe there are strong travel brands that could operate under their name for benefit from more services. The renaming of our corporate entity will reduce the obstacle of overcoming issues of brand complex.

To recap, our Company now has 3 business lines, Wyndham Destinations, our core timeshare business which is committed to the Wyndham brand and growing our relationship with Wyndham Hotels and the Wyndham Rewards program, Panorama including the RCI exchange business and the ARN Technology platform, focused on growing B2B travel solutions with partners, and the Travel and Leisure Group, which will focus on its booking platform, subscription based travel services and its licensing business. We look forward to sharing more with you in the coming quarters and at an Investor Day we are planning whether in person or virtually for September 10th in New York City.

Let me now move to our outlook. We are already seeing the positive trends in 2021, providing us with optimism about a strong recovery in leisure travel. Post pandemic, consumer travel sentiment is back to the high last seen in October and as daily infections continue to decrease, we only see this trend improving. With that said, we remain mindful of uncertainties in the first half of the year. The state of the pandemic and the success of the vaccine rollout remain critical to consumer travel sentiments and the easing of travel restrictions. COVID daily infections were still elevated in January and our performance in January with California still closed was very much like December. January is normally a seasonally slow month, so the impact will be less pronounced. February has seen some improvement and we anticipate that momentum will continue into March. Although it is our intention to return to full year guidance in the short term we will be providing quarterly guidance. For the first quarter, we expect tours to be down 56% to 58% from the prior year. Gross VOI sales to be approximately $210 million to $220 million and VPG to be 30% above the prior year. Overall, we anticipate adjusted EBITDA in the range of $95 million to $110 million in the first quarter.

With that, I would like to hand the call over to our Chief Financial Officer, Mike Hug. Mike?

Michael Hug -- Executive Vice President, Chief Financial Officer

Thanks, Michael. Good morning to everyone and thank you for joining us today.

I will discuss our 4th quarter results and provide you with more color on our balance sheet, liquidity position, and cash flow. My comments will be primarily focused on our adjusted results and year-over-year comparisons. We reported 4th quarter adjusted EBITDA of $148 million and adjusted earnings per share of $0.32 compared to adjusted EBITDA of $265 million and adjusted EPS of $1.58 one year ago. During the quarter, $20 million of COVID related charges were added back to total company adjusted EBITDA with the largest of that being $12 million of lease-related restructuring charges. In the 4th quarter Vacation Ownership reported revenue of $512 million with Gross VOI Sales $281 million and adjusted EBITDA of $115 million. Tours declined 54% in the quarter compared to the prior year with travel restrictions in California and Hawaii, a headwind to our previous expectations.

New owner tours were down more sharply as these two resources are expected to recover more slowly than existing owner tours, which were 48% lower than the prior year. VPG increased 24% to $2,938 benefiting from improved new owner tour rates and a higher mix of sales to existing owners. Our underlying portfolio continues to perform well with delinquencies lower year-over-year, driven in part by deferral programs, a more mature portfolio from reduced originations and improved quality of new originations through the changes we made in our underwriting standards.

Requests for deferrals have continued to trend down since the second quarter and now active deferments represent just 1% of loans outstanding, down from 6% at the peak. As we have noted previously, as owners come off deferrals, we are seeing the majority of them return to making payments. In the 4th quarter, we released $20 million of the $225 million receivable reserve, we took back in the first quarter due to continued strong performance of the portfolio resulting in a $13 million benefit adjusted EBITDA.

We remain comfortable with the overall allowance on our receivables portfolio, considering the continued uncertainty around the pandemic and its economic impact. Revenue in our travel membership segment, which includes Panorama as well as Travel & Leisure group starting in the first quarter of 2021 was $135 million in the 4th quarter compared to $181 million in the prior year. Travel and membership 4th quarter adjusted EBITDA was $49 million down just a 11% compared to $55 million in the prior year. Strong cost control and a sequential improvement in revenue per member trends helped margin improve to 36% up from 30% in the prior year as number of members in the segment decreased 6% and we expect that trend to continue in 2021. We do feel our sales for the industry, particularly in new owner channels are not generating enough new owners to offset the normal churn of members. We expect this decline to moderate in the back half of 2021. As travel and membership continues to evolve beyond the traditional focus on the timeshare industry and into servicing the broader travel market, the exchange focused KPIs we had previously been reporting will become less relevant to the overall business. As such, in 2021 we will disclose new transaction based drivers.

Net transactions for the segment declined 29% in the 4th quarter due to an increase in cancellations and lower gross booking profits at ARN, which has a shorter booking window than the exchange business. However, we are continuing to see positive travels trends in exchange as December's gross bookings were in line with the prior year. The different gross booking patterns and Exchange and ARN are good indicator of how our members feel about travel right now. Although they are cautious in the short term, they are looking to return to travel in the near future.

Turning to our balance sheet, as of December 31st, we had $1.2 billion of cash and cash equivalents with corporate debt at $4.2 billion, which excluded $2.2 billion of non-recourse debt related to our securitized receivables. Our net leverage for covenant purposes at the end of the quarter was 5.4 times, 2 turns below our 7.5 times covenant. We paid our 4th quarter dividend of $0.30 per share on December 30th, and we will recommend our first-quarter dividend of $0.30 per share for approval by our Board of Directors in March as we remain committed to returning capital to shareholders.

As Michael mentioned, we acquired the Travel and Leisure Brand in early January. We paid $35 million in cash at closing and the trailing payments of $65 million will be completed by June 2024. The acquisition is expected to be neutral to earnings in the first year as we invest in marketing programs to grow the business and accretive in the second year. As noted previously, we are not providing full year guidance at this time. However, we do want to share some thoughts on our outlook for full year free cash flow. We expect 2021 free cash flow to be below our historic free cash flow conversion range between 50% and 60% of adjusted EBITDA. Reduced net interest income, pure unsecured type receivables, our balance sheet as of January 31, 2021 combined with higher corporate interest expense as a percent of adjusted EBITDA as well as the [Phonetic]timing of working capital items are behind a temporary reduction. We expect 2022 free cash flow to move closer to our historical levels.

First quarter free cash flow will be a significant use of cash with the timing of inventory spending and working capital payments as well as pure eligible receivables for our first ABS transaction of the year that has historically been the case due to the lower level of VOI sales in the second half of 2020. In summary, we are pleased with our results for the 4th quarter and full year 2020 and look forward to the continued recovery of leisure travel throughout 2021.

With that Ashley, can you please open up the call to take questions.

Questions and Answers:

Operator

[Operator Instructions] We will take our first question from Joe Greff with JP Morgan. Please go ahead.

Joseph Greff -- JPMorgan Chase & Co. -- Analyst

Hi, good morning guys. Glad to hear your voice. My first question is on the Travel and Leisure acquisition. When you kind of think about the investment this year and looking at the next year and beyond, year or two following the acquisition. Mike, how do you think about sort of the incremental revenue and EBITDA growth that P&L would contribute on a segment basis to the travel and membership segment basis.

Michael D. Brown -- President and Chief Executive Officer

Good morning, Joe. We're really, really excited about this acquisition because more than anything it strategically opens a number of doors for us and as Mike just mentioned, we believe it will be neutral earnings this year and accretive next year. Our plan as we move through this year, is that we've already launched a booktandl.com, our online booking platform to really just start to leverage the brand but secondly and more importantly and really the core of the acquisition was to begin to offer a product a lower entry price point and for shorter duration. With that, we bought 2 travel clubs with that 60,000 members and we expect to be launching new clubs that allow us to really move up and down the demographics scale both age and economically and from that we will take those learnings and then start launching more subscription based clubs into 2022. With that said, I know the question was specifically about revenue segment. That's our strategy and as that unfolds throughout this year that's why we wanted to organize our Investor Day for the 3rd quarter to really lay out in more detail the economics associated with that plan with 6 months of learning under our belt.

Joseph Greff -- JPMorgan Chase & Co. -- Analyst

Okay, great. And then, appreciate the first quarter guidance, can you talk about, we have gross VOI sales targeted at $210 million to #220 million. Well, how much of that is in the bank through the first 55 days of the quarter. And when you think about gross VOI sales in 1Q, how much of that is to existing owners versus new and then lastly with respect to what you have incorporated into your 1Q guidance, how much of another reserve release is baked into that $95 million to $110 million of EBITDA.

Michael D. Brown -- President and Chief Executive Officer

Okay. Let me start on the VOI sales and then I'll hand over the provision question to Mike. Just, as you traditionally look at the first quarter, what you tend to get, Joe is that about-about 50% of your gross VOI sales come in the month of March and given the fact that January was slower because California was closed, which has knock-on effects of both California -- sorry both Hawaii and Las Vegas January was slower than we expected when the year started we didn't think that the closure would last through the end of January. And as you look into the remainder of this quarter, I think we we've already released our January -- sorry we released our December number, but we expect that about 50% of our sales would be in the month of March of this year. Given where we're seeing on booking trends, we feel pretty good about the number as we are seeing definitely positive trends in overall bookings and arrivals to our resorts.

Michael Hug -- Executive Vice President, Chief Financial Officer

Joe as regards to new owner sales and the provision, we would expect the new owner sales for the first quarter to be in the low to mid 20s and the provision, our guidance that we put out there does not include or assume any additional benefit from the provision. We're very happy with the way the portfolio performing. And as I mentioned, delinquencies are actually down year-over-year so that is a result of the great team jobs and [Phonetic] servicing portfolio as well as we've mentioned higher underwriting standards as it relates to new originations. So for the full year, we would expect the provision to be just south of that 19% remains kind of what we saw in the 3rd quarter, we were at 18.8, but we are not assuming in our first quarter guidance any additional provisions benefit.

Michael D. Brown -- President and Chief Executive Officer

Joe, let me just add back, I did not answer one of your questions, about 3 quarters of our sales will be tour owners.

Joseph Greff -- JPMorgan Chase & Co. -- Analyst

Thank you very much guys.

Michael D. Brown -- President and Chief Executive Officer

Thanks, Jeff.

Operator

We will take our next question from Patrick Scholes with Truist Securities, please go ahead.

Patrick Scholes -- Truist Securities -- Analyst

Hi, good morning everyone.

Michael D. Brown -- President and Chief Executive Officer

Good morning, Patrick.

Patrick Scholes -- Truist Securities -- Analyst

A couple of questions just concerning the name change and it sounds like a little bit of shift in direction here, when you talk about new --, new club products, could you give us a little more granularity what exactly -- what that look like. What exactly is that.

Michael D. Brown -- President and Chief Executive Officer

Absolutely. So let me just come back to your first comment about change in direction. This is about expansion. It's not about a shift of core strategy, we're as committed as ever to the VOI business work and we're committed as ever to grow the Wyndham name and the relationship with the Wyndham Hotel Group, it's been our success for years and it will continue to be as we stay committed to that growth. But we do see an opportunity in the leisure travel market in North America it represents over 100 million households and those people go on vacation and simply the type of products that we're offering would be a lower entry price point, a subscription-based price point somewhere to $10 to $20 a month with a shorter duration. You can take as many subscription models, whether they be Peloton, Netflix, Costco, just to name a few is, they want to be part of something that is exclusively new unique and with the exclusive content that we now own related to travel and leisure, you're going to be able to take the inspiration that you -- that's created in the travel and leisure publishing side of the arm and activate that with fulfillment through your subscription club again for a subscription base fee with exclusive content and unique value -- better value than you might be able to get on the open market. So that's the plan. We've talked many times over the years about our focus on middle America. We remain committed to that to our VOI brand but this allows us to start testing other demographics both agent economics to supply vacations to a broader leisure market.

Patrick Scholes -- Truist Securities -- Analyst

Okay. Thank you, does this acquisition and those new plans, does that -- does that shift your focus at all from spending on development for timeshare and also are you out there still looking for perhaps some tuck-in types of acquisitions on the timeshare side.

Michael D. Brown -- President and Chief Executive Officer

So this doesn't change at all our perspective on vacation ownership. We believe that we can continue to grow that business as we always have, more committed to this ever and from a development standpoint if there is an either an M&A or resort opportunity that we see that's out there we would absolutely pursue it. What I would -- what I would say related to that is, as it relates to individual projects, as the industry and we declined our VOI sales, our balance sheet affords us a bit more time with our existing inventory, so we will definitely be constrained on our individual project spend because we want to maintain a strong balance sheet. But to your tuck-in question, absolutely we will be out there looking. I do want to take your question and just add to it on the subscription business side is that our acquisition of the technology platform, the ARN nearly 2 years ago really laid the foundation for not only the Panorama travel solutions, but also these travel and leisure subscription clubs. So as it relates to incremental capital investment, there is nothing material that's required for us to go out and grow that business going forward.

Patrick Scholes -- Truist Securities -- Analyst

Okay, thank you very much. I have a couple other questions, but I'll hop back in queue. Thank you.

Michael D. Brown -- President and Chief Executive Officer

Thank you, Patrick.

Operator

You can take the next question from Brian Dobson with Jefferies. Please go ahead.

Brian Dobson -- Jefferies -- Analyst

Hi, good morning. I was wondering if you could provide just a little bit more color on areas of geographic strength or weakness that you're seeing within your portfolio and how you expect those to evolve over the next, call it year as consumer start to travel more.

Michael D. Brown -- President and Chief Executive Officer

Absolutely grown. I appreciate the question and let me start a little broader and then I'll get into the specific geographies because the question out there today seems to be around what are you seeing with the consumer. So let me share just a few points of information that I think everyone will find interesting. I'm going to first talk about pacing -- the booking pacing at our resorts, if we were to look back at early January -- the first and second week of January, our pacing rate was about 35% below what it was at the same time in 2020, it's now the 3rd week of February and are pacing as flat to what it was in 2020 and I think that's a good demonstration of the momentum we're starting to see with the leisure travel in the last 60 days. Second point of references are on the books for the second half of 2021 if you look at where we are today and the number of reservations that we have on the books for the second half of 2021 that is 99% what we, of the position we were in 2019 at exactly the same point. So comparing second half 2021 to second half of 2019 on the books were at 99% of where we were in 2021. So I think that's a really good indication that the overall leisure demand is-A, has momentum; and B, is starting to look like it did in '19. What we are watching for most closely is rate of cancellation that has been the elevated component and that typically will decline once infection stay at a reduced rate for a longer period of time. And I'm sorry for that long wind up to your geographic question, but I think that context is important. On where we're seeing the most geographic demand, number one -- and a distant number one is the Carolinas, beach location in the summertime drive to market. We're seeing a lot of demand for the Carolinas. Second is Arizona, you would argue there again drive to destinations from our West Coast market, a lot of demand in Arizona and about 6 months ago, we mentioned that Orlando was a laggard as far as reservations, most people want the beach locations, then we talked about it being moving up to the number 1 destinations and now we're looking at that being up to prior year, so I would highlight the Carolina, Arizona and Central Florida as key demand destinations going forward.

Brian Dobson -- Jefferies -- Analyst

Thank you. That's very helpful. And then within Panorama, a lot of exciting stuff going on there. Do you think you could give us some examples of the type of B2B business that you're, that you're hunting down for that, for that unit.

Michael D. Brown -- President and Chief Executive Officer

It's, it is an exciting time in that side of the business and one that we've spoken about, but the new brand is in probably is caught everyone's attention, but the team and the Panorama is really working with a wide variety of businesses. I know in the leisure travel space, but the reality is, whether there are corporations that are looking to develop programs for their employees or whether they are leisure companies that are looking to white label a travel benefit for their club but they don't have the scale it is ranging from one -- one side being leisure companies, all the way to corporations looking for loyalty. I would say that when you look at -- look at the development pipeline for those businesses, it's grown in a very positive way since the last time we had been on the call. So I'd expect as we roll through this year, we'll start rolling through a number of names that we've been able to contract, but very, very encouraged by what we're seeing in the pipeline of future business for the Panorama travel solutions.

Brian Dobson -- Jefferies -- Analyst

Thank you very much.

Michael D. Brown -- President and Chief Executive Officer

Thanks, Brian.

Operator

We take our next question from Chris Woronka with Deutsche Bank. Please go ahead.

Chris Woronka -- Deutsche Bank -- Analyst

Hey, good morning guys. So if you think about how 2021 going to unfold. There is a lot of variables to consumer, but in addition to getting more comfortable traveling again right, we think a lot of them in your demographic are sitting in a better financial position with stock market gains and savings and then we potentially have stimulus. So the question is have you guys thought about maybe how that plays out in terms of propensity to buy, but also perhaps was propensity to finance and kind of what some of the offsets might be there from a bigger picture perspective and how you're going to might change your marketing approach to that.

Michael D. Brown -- President and Chief Executive Officer

Sure. Let me take a stab at it first and if Michael can [Phonetic]heat up again. So we think it was in a very important shift that we made to our marketing standards in the pandemic. The move to 640 FICOs we believe has already shown signs of strength in our portfolio. We're pleased with how that has progressed and it's been a conversation that we've had with each of you over the last few years. So we think that is the right move. We also know that as we discussed tour flow being down there is going to be a natural increase of tour flow not only for the owner base as we -- as we continue to see momentum in the owner bookings, but the decisions are going to come as to the way the strength of the recovery occurs, we'll determine the speed at which we reopen some of our open marketing channels. This is going to be a little bit of a transition year because summer will be here Memorial Day and we're going to start to need to make some of those summertime decisions in the next 60 days. So I think that's from a tactical direction the decisions will make over which type of marketing programs will go with for the remainder of 2021. We want to grow back in a very margin rich environment and with a very strong portfolio both in which I think we're already proving out.

We do, we are generally positive about the consumer, I think if you look at savings rates, with stimulus still coming. I think people's ability to to maybe make purchases and to get back on leisure travel is definitely going to be there. We don't see the consumer as especially-our observation is that they're very liquid and I would, I would pass this to Mike but I think he would also say that generally our financing rates, so that cash downs typically between 20% and 25% and neither of us would predict a very material change to that irrespective of whoever the consumer is.

Michael Hug -- Executive Vice President, Chief Financial Officer

Yeah I think when we think about the propensity to finance to Mike's point we would expect on finance sales to be in that 20% to 25% cash down, I think there is the potential there. And as you know with higher savings rates, the actual number of contracts that do take financing could go down. So we're definitely watching that, keep in mind that it also provides the opportunity for either improvement in close rates because more people buy or larger transaction size. So it's a fair point. We definitely are excited about the strength of the consumer. We see it coming through loud and clear in terms of the current portfolio performance and as we learn more, as we continue to increase our sales levels will adjust accordingly. But definitely watching the percent of sales finance very closely.

Chris Woronka -- Deutsche Bank -- Analyst

Okay, very helpful. And then second question is, Mike just heard your comments about you really more about growth not changing or shifting strategy and also the last question was about potential M&A or acquisitions. But as we think about there potentially being some distressed hotel inventory out there especially in urban markets where you guys put a little bit more focus kind of pre-COVID, what's the appetite for potentially getting some inventory in some of these urban markets with the pricing is right.

Michael Hug -- Executive Vice President, Chief Financial Officer

Yeah, this is Mike. I will pick that one. So as we've talked about will be very disciplined as it relates to our cash spend. We do expect that our inventory spending over the next several years average less than $200 million. So, as Michael noted previously, in one of the answers to the questions, we do have sufficient inventory on our balance sheet to carry us for a while, along with that what we have in the pipeline. So we'll be very selective, if a great opportunity comes our way, we'll take advantage of that, I would say, generating free cash flow gain that leverage rate back down is more important than one additional dollar in the [Phonetic] map. We're very happy with the resort locations we have, I think the results that we driven in the second half of the year point to the benefit of the geographic diversity we have, but I think right now, inventory spending is pretty far down the list as it relates to how we want to spend our dollars and those are just [Phonetic]incredible and there is no rush either as we saw back in 2018-2019 inventory opportunities are going to be available to us for several years now, so it's not like, if we don't jump on one in 2021, we won't have a chance in the future. So we'll be very disciplined and that said more focused on that leverage rate and using cash to and growing EBITDA to keep leverage rate down OK.

Chris Woronka -- Deutsche Bank -- Analyst

Very helpful guys. Thanks.

Operator

Next question is from with Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling -- Goldman Sachs Group -- Analyst

Hi, thanks. I know you want to disclose more at the Analyst Day. But perhaps is a basic question on the travel and leisure acquisition in the travel and membership segment, how does that business similar or different to an online travel agent and could it become more of an OTA long term within some of the clubs you referenced. And as a related follow-up, is there any impact, I think through from the Travel and Leisure Brand acquisition on the VOI segment long-term.

Michael D. Brown -- President and Chief Executive Officer

So let me hit the OTA first. Stephen It's not our intention to get into the OTA business that the [Phonetic] rental of nightly inventory is a component that we have been able to do as a byproduct of our VOI business and I would view it as a byproduct of our travel and leisure acquisition. If you look at the continuum of the way people travel the one side of the spectrum is the way we just mentioned which is heavy at [Phonetic] FEO and spend to get in IT, travel and then the other end of the spectrum is vacation ownership, which is where we specialized and we will continue to specialize. We do think there is an opportunity in between to combine a few things that we think there is a macro trend around subscription number one and number 2, we think there is the overall trend that people want to travel with a name that they can trust that they know that when they book their vacation, they're going to know what to expect on the other end of that vacation and when you combine the content and the relationships, the travel and leisure has to its publishing arm, but don't necessarily have to be Wyndham combining those with an ultimate fulfillment obligation we think it could be very attractive. I had a discussion with the editor of travel and leisure and I'm sharing with her that I was reading about -- reading one of her articles about great US national parks to visit and I kept looking for the book to book this trip now and that's really what it is and being the owner of Travel and Leisure its content and having that relationship with Meredith Group and ultimately Travel and Leisure Publishing arm, it allows us to provide a product that is not simply on price even though we think we're going to provide tremendous value, but also making it with tremendous content and with the trust that people are looking to travel today and that sort of sits in the middle of the spectrum with that subscription-based model.

Michael Hug -- Executive Vice President, Chief Financial Officer

And then I think as it relates to your question on the impact on the VOI segment, I mean we obviously are still very high on the Vacation Ownership business and we expect to continue to drive growth there. I wouldn't say we did the T&L transaction in order to improve on that segment. We think we've got plenty of upside there. Down the road, there might be opportunities there but I think as Michael mentioned in his comments the primary reason for it was to start to broaden our offerings to a wider group of leisure travel.

Stephen Grambling -- Goldman Sachs Group -- Analyst

Great, thanks for that color.

Michael D. Brown -- President and Chief Executive Officer

Thanks Stephen.

Operator

You can take the next question from Ben Chaiken with Credit Suisse. Please go ahead.

Ben Chaiken -- Credit Suisse -- Analyst

Hey, hello and thanks for taking the question and not to belabor the topic, but I guess on the T&L booking website booktandl.com, yeah, I guess is the intention for it to be a B2C travel booking website for single use meaning I'm flipping through T&L on Instagram and get a lead and book a trip that looks appealing and I could be anyone on that Instagram page and example or the intention to be more subscription route. Just trying to just kind of close the loop on number one. Then with the intention that that one side of visibility for subscribers and then it also looks like you can get flights on, here rent cars, hotels etc. bundle and save. So but you described it not as an OTA, so just kind of close the loop on kind of like the intention who is exactly.

Michael D. Brown -- President and Chief Executive Officer

Right. So it's a great question. It is an online booking platform for primarily single use the intention is that what we wanted to do is we wanted to get that website up and running it to begin having transactions for the single-use. Ultimately the end objective is to that's just being one source of lead into what, what would be an ultimate subscription business, our intention is not to compete in the OTA space, we've got an online booking platform. We're going to work with a number of different providers including all the ones you mentioned, but that is, again a byproduct that will ultimately feed into a more regular and recurring revenue stream, which is the subscription business, which will have more curated content and entry price [Technical Issues] purely timeshare company. I think the RCI component, which is recurring revenue, highly predictable streams, 30% of our EBITDA. That hasn't always got the credit that it deserves as it relates to its recurring revenue nature. This is further in that strategy of getting into asset light recurring revenue streams. Again, not so much focused on the single transaction, but that is a lead source into our subscription business, which is where we want to focus and we're not, this strategy is to be in building a diversified EBITDA generation and support improved growth and we're not, we don't need or want to come out with a big bang in 2021 with this, we want to learn the right curation of the subscription model, we're really well curated with great content. And then, and then have next year for it to be really start to be accretive to our overall earnings platform.

Ben Chaiken -- Credit Suisse -- Analyst

Got you. That makes sense, I don't know. It seems like a great opportunity, there is not that many places that people go to single use vacation so Travel and Leisure Brand plus your timeshare inventory. I mean it seems like a great opportunity. Thanks for the question.

Operator

[Operator Instructions] We will go to David Katz with Jefferies. Please go ahead.

David Katz -- Jefferies -- Analyst

Hi, everyone. Thanks for including me and I know we've asked a couple of other questions. But I wanted to circle back on something hopefully, you have not already touched on but with respect to the loan loss right, which came in adjusted at 17 unchanged, but I think you're guiding us toward a just under 19 level if we're hearing correctly, what happened specifically to get you to that 17, was that a low volume COVID trend, what's sort of going on between that 17, 19 level.

Michael Hug -- Executive Vice President, Chief Financial Officer

Yeah, David, this is Mike. I appreciate the question. I think if you look at the trend over the last couple of years our 4th quarter has always been the last quarter as far as the provision. If you look at the quality to consume and it's coming in, you see a little bit higher quality consumer, little bit less percent of sale finance and things like that. So the 17.3 would be just follow the trend of Q3 and Q4, from 2019 and 2018 as well as far as the lower 4th quarter rate. You all know that the rate can move by quarter, which is really why when we talked about 2021, the limited guidance, we are giving as it relates to the provision when we talked about the full year rate of just under 19, lets us say in 18.8 range, so nothing unusual in the 4th quarter as follows with historical trends of the demographic of the consumer that we see is a little bit higher quality and the provision obviously is reflective of that. So

David Katz -- Jefferies -- Analyst

So what we are effectively doing is bringing the seasonal arc, call it down by about 100 basis points from what you would sort of been guiding sub 20 and bring it down over time, is that a fair way to think about it.

Michael Hug -- Executive Vice President, Chief Financial Officer

Yes, that's probably better.

David Katz -- Jefferies -- Analyst

Great, thank you very much.

Michael Hug -- Executive Vice President, Chief Financial Officer

Sure. Thank you.

Michael D. Brown -- President and Chief Executive Officer

Thank you Dave.

Operator

We can go next to Ian Zaffino with Oppenheimer. Please go ahead.

Ian Zaffino -- Oppenheimer -- Analyst

Hi, thanks. Just on the T&L deal. One other question would be, is there any intention to maybe brought in that T&L brand introduce maybe a new VO product under that brand and maybe grow that a little bit or no that's going to be clearly separate from the VO business.

Michael D. Brown -- President and Chief Executive Officer

Good morning, Ian. Our intention is to grow the T&L brand under its subscription-based business. We think that's, we think our VOI business at it stands today Wyndham only has a great trajectory around it, we think the Travel and Leisure Brand is a great opportunity for us to start a new and build a new business and create some diversified earnings streams. What I will come back to is, I do think and it ties into the earlier question on distressed assets or other companies, we do think there are travel brands out there outside of hospitality that could benefit from our timeshare services. So I think when you look at where our opportunity lies in the VOI space, it would be partnering with another travel brand to try to grow a vacation club inside of their travel brand to make more efficient their assets -- to better utilize their assets. So I think there is a lot of opportunities we still have in the VO business. We love the core business, we think there are more opportunities, but I would say, the more likely scenario is with the rebranding of the company another travel company might come to us and say, hey, I'm interested in the VO business for our brand and that we would be open to and think it actually could make a lot of sense.

Ian Zaffino -- Oppenheimer -- Analyst

All right now. Thank you very much.

Michael D. Brown -- President and Chief Executive Officer

Thank you Ian.

Operator

We will go to Patrick Scholes with Truist Securities, please go ahead.

Patrick Scholes -- Truist Securities -- Analyst

Just a couple of quick follow-up questions. I wonder if you can just remind us how many years of unsold inventory you have and then second question is if you could give us an update on progress in trajectory with the Blue Thread initiative. Thank you.

Michael Hug -- Executive Vice President, Chief Financial Officer

Yes, I'll take the inventory one and then I'll let Mike update everyone as it relates to Blue Thread. On the inventory we have over 2 years once again with slowdown in sales in 2020 that exceeded our inventory a little bit further, so over two years of inventory, which is why I once again we'll be very selective as it relates to, if the opportunities come our way execute on those no rush. We've got plenty of inventory and to take things that are a rather higher priority as it relates to use of cash.

Michael D. Brown -- President and Chief Executive Officer

And as far as the Blue Thread, just a reminder, we were on our way to 100 million last year before COVID hit that was our projection. We expect that Blue Thread will be one of the first items to return 13% of our new owner sales in 4th quarter [Phonetic] were probably flat. So very bullish on our ability to grow Blue Thread quicker than in the rest of the open market channels or we project to grow it back faster than the rest of the open market channels.

Patrick Scholes -- Truist Securities -- Analyst

Okay, thank you.

Michael D. Brown -- President and Chief Executive Officer

Thanks, Patrick.

Operator

That concludes our question-and-answer period. I would now like to turn the call back over to Michael Brown for closing remarks.

Michael D. Brown -- President and Chief Executive Officer

Great, thank you and thanks for the many questions. It is very good to be able to get out and share our story on both the Travel and Leisure acquisition and our strong 2020 but as we look back on last year we have a lot to be proud of. Thanks to the hard work of our associates around the world. In the midst of the pandemic, we made significant progress on our efforts to begin the transformation of our company beyond timeshare while staying laser focused on delivering strong results in our current existing business lines.

We look forward to updating you on our progress on our next call in approximately 60 days. Thank you and have a great day.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Christopher Agnew -- Senior Vice President, Investor Relations

Michael D. Brown -- President and Chief Executive Officer

Michael Hug -- Executive Vice President, Chief Financial Officer

Joseph Greff -- JPMorgan Chase & Co. -- Analyst

Patrick Scholes -- Truist Securities -- Analyst

Brian Dobson -- Jefferies -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

Stephen Grambling -- Goldman Sachs Group -- Analyst

Ben Chaiken -- Credit Suisse -- Analyst

David Katz -- Jefferies -- Analyst

Ian Zaffino -- Oppenheimer -- Analyst

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