Travel + Leisure Co. (TNL) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the First Quarter 2021 Earnings Conference Call for Travel + Leisure Co. formerly Wyndham Destinations. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference call is being recorded. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Chris Agnew. Please go ahead.

Thank you very much. Good morning, and welcome. Before we begin, we'd like to remind you that our discussions 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 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 first quarter 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 will be available to respond to your questions. With that, I'm pleased to turn the call over to Michael Brown.

Thank you, Chris. Good morning, everyone, and thank you for joining us today. One year ago, we recognized the uncertainty ahead. And in response, we took swift action. We made significant tactical and long-term strategic decisions, which allowed us to manage our short-term cash flow and has powered our return to normalized profitability, setting us up to execute on our recovery as the world gets back on vacation. 2021 is off to a great start. Earlier this morning, we reported first quarter adjusted EBITDA of $129 million and adjusted EPS of $0.39. Operating performance strengthened significantly in March with sequential improvement in our key operating metrics. Increased consumer confidence, reduced domestic travel restrictions and the faster-than-anticipated vaccine rollout have all helped to accelerate leisure travel demands. As we reflect on our March results and booking trends, the data clearly reflects an inflection in travel sentiment, which we believe will lead to a strong summer travel recovery. Let me share some data points that give us confidence in the recovery in leisure travel for the remainder of the year. First, March vacation ownership bookings for 2021 arrivals finished up 15% compared to 2019, and bookings for RCI North America were up 21%. This is a marked change from January, February, where bookings were down double digits for both. The positive trends that were realized in March have continued in April. Second, we are seeing booking lead times lengthening for the summer and fall. The inflection in lead times is a healthy leading indicator of increasing consumer confidence. Another positive indicator is the improvement in demand for key leisure destinations. Nevada, California and Hawaii, all experienced large positive swings in momentum from the beginning of the year and based on April net confirmations, Las Vegas is back to being a top 3 destination with Orlando leading the way. Last, we are seeing increased demand to fly to destinations, indicating not only increased demand for travel but increased confidence to travel. Let me now transition to provide an overview of the first quarter. Our vacation ownership and travel and membership businesses both finished the quarter on an upswing. Vacation ownership had gross VOI sales of $236 million, ahead of our guidance range of $210 million to $220 million. This reflects strong sequential improvement throughout the quarter. Let me share a few highlights. Close rates improved meaningfully in the first quarter and were 150 basis points better than 2019, a sign of both pent-up demand and a strong consumer. New owner sales transactions were above expectations at 32% of total transactions due to a higher mix of new owner tours. In Blue Thread, our strategic partnership with Wyndham Hotels and its Wyndham Rewards loyalty program accounted for 9% of new owner sales transactions. Transitioning to our travel and membership segment. First quarter results were strong with transactions up 28% year-over-year. Our North American exchange business led the improvement with a robust March that saw transactions at their highest monthly level in 2 years. This was an impressive turnaround from the first 2 months of the quarter, where they were down 15%. Also, during the quarter, RCI announced a new affiliation agreement with Capital Vacations Club. Capital Vacations manages nearly 70 associations, including over 45 vacation club locations in the U.S. and the Caribbean. This relationship brings 32,000 additional members into our membership base. For the company overall, Travel + Leisure adjusted EBITDA margin of 20.5% was higher than anticipated, driven by the favorable revenue trends as well as a combination of actions taken early last year. These actions include a focus on higher credit quality tours and cost savings that will result in $60 million of permanent G&A savings. The strong first quarter margin was achieved despite a $22 million net interest income headwind due to our reduced consumer finance portfolio. If we equalize the 2021 portfolio size to 2019, adjusted EBITDA margin would have been approximately 23% compared to the 22% margin in the first quarter of 2019 and 20.5% this year. On the strategic front, the first quarter was notable as we started the year with the acquisition of the Travel + Leisure brand and its 2 travel clubs. In February, we renamed our company, Travel + Leisure, and launched BookTandL.com, an online vacation booking platform. The team has been working on the integration and transition of the business and is planning to launch a new Travel + Leisure subscription club this summer. We are also developing licensing opportunities to allow travel and consumer product companies to leverage the Travel + Leisure brand. As it relates to our outlook, we will eventually return to full year guidance. But for now, we will provide guidance for the second quarter only. For the second quarter, we expect tours of 118,000 to 123,00, VPG around $2,800, and gross VOI sales of approximately $355 million to $365 million. Second quarter VOI sales represents a 50% to 55% sequential increase from the first quarter. Overall, we anticipate adjusted EBITDA in the range of $160 million to $170 million in the second quarter. With that, I would like to hand the call over to our Chief Financial Officer, Mike Hug. Mike?

Thanks, Michael. Good morning to everyone, and thank you for joining us today. I will discuss our first 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. We reported total company first quarter adjusted EBITDA of $129 million and adjusted earnings per share of $0.39, compared to negative adjusted EBITDA of $44 million and adjusted loss per share of $0.98 1 year ago. In the first quarter, the Vacation Ownership segment reported revenue of $449 million, gross VOI sales of $236 million, and adjusted EBITDA of $66 million. VPG of $2,847 was 18% higher than the first quarter of 2019, benefiting from owner mix and improved credit quality. Tours were 60% lower than 2019, driven by weaker leisure travel trends in January and February and our decision to focus our new owner marketing efforts on only the best quality tours. These efforts resulted in a new owner VPG increase in the first quarter of 2021 compared to 2019 and were contributing factors to our strong first quarter margin. Our underlying portfolio continues to perform well with delinquencies lower year-over-year, driven by a more mature portfolio from reduced originations and improved quality of new originations. The provision for loan loss as a percentage of gross VOI sales was 18.1% in the first quarter, and we expect to stay below 19% for the remainder of the year. We are comfortable with the overall allowance on our receivables portfolio, considering the continued uncertainty around the pandemic and its economic impact. The allowance as a percentage of gross Vacation Ownership contract receivables was 21% at the end of the quarter, compared to 25% at the end of the first quarter of last year. Revenue in our Travel and Membership segment, which includes Panorama as well as the Travel + Leisure group, was $183 million in the first quarter, compared to $159 million in the prior year. Travel and Membership first quarter adjusted EBITDA was $75 million, an increase of 70% compared to last year's $44 million. As previewed last quarter, Travel and Membership updated its key operational drivers to reflect expanded focus on servicing the broader travel club market. These new drivers, transaction and revenue transaction, provide a more inclusive view of our business by encompassing our exchange business as well as our expanded focus on new travel subscription markets. Travel and Membership net transaction in the first quarter were $513,000 up 28% compared to the same period last year, with transaction growth clearly benefiting from pent-up travel demand. RCI transactions in North America were up 66% above the same period last year, driven by demand for domestic locations, increased bookings for near-term arrivals around Easter, and spring break and lower cancellations. Based on the seasonality within the quarter, it is clear that the big rebound in March recovered transactions that would normally have been booked in January and February. Nonexchange transactions, which consists of ARN and Travel + Leisure group, represented 31% of segment's transactions in the first quarter of this year. Strength of domestic demand for both RCI and ARN more than offset continued challenges in our international markets due to cross-border travel restrictions. Turning to our balance sheet. In the first quarter, we used cash on hand to fully pay down our revolving credit facility and $250 million of secured notes. Our corporate net debt at the end of March was $3.1 billion and our leverage rate at the end of March was 5.4x, comfortably below our 7.5x covenant. The first quarter leverage rate is expected to be our highest and then decline for the rest of the year. We continue to stagger leverage between 2.25 and 3x over the long term. During March, we executed our first ABS term transaction of the year. Tremendous demand allow us to upsize the transaction to $500 million and still get a 98% advance rate and a 1.6% interest rate. This coupon is the lowest we have ever achieved in over 20 years in the ABS market. We were also able to call the notes issued in the private ABS transaction that we closed in April of 2020, and include that collateral in this transaction, resulting in an interest rate going from what would have been 5% starting in April of this year to the 1.6% we achieved in the March 2021 transaction. As a result of the upsizing of this most recent transaction, we will likely execute only one more ABS transaction this year. We remain committed to returning capital to our shareholders. We paid our first quarter dividend of $0.30 per share on March 31st and will recommend a second quarter dividend of $0.30 per share for approval by our Board of Directors in May. As Michael noted, we are not providing full year guidance at this time. However, we do want to update our thoughts on the outlook for full year free cash flow. We still expect 2021 free cash flow to be below our historic free cash flow conversion range of 50% to 60% of adjusted EBITDA. The temporary reduction is due to reduced net interest income from consumer financing, higher corporate interest expense as a percentage of EBITDA and the timing of working capital. We expect 2022 free cash flow conversion to move closer to our historical levels. With respect to the timing of this year's free cash flow, we expect the upsizing of the first quarter ABS transaction to result in a use of cash in the second quarter. In summary, we are pleased with our first quarter results 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?

[Operator Instructions]. And we'll take the first question from Stephen Grambling with Goldman Sachs.

I may have missed this in some of the opening remarks. But on the Travel and Membership side, I guess, we still get questions from investors on how to think about the long-term opportunity from that segment and perhaps you'll have more to say in the future. But I guess, can you just talk a little bit more about how your view on that opportunity has evolved as you've been integrating the business? And then also, any color you can provide on the seasonality of revenues and margin structure of that segment.

Absolutely, Stephen. This is Michael. Let me first talk about the opportunity and Travel and Membership, and then I'll hand it to Mike to talk about margins and seasonality. We love the core business of Vacation Exchange, our traditional RCI business. We continue to see the nature of that business be successful, which is high recurring revenue with very low capital investment and a high generation of free cash flow. We've always seen that growth rate to be 0% to 2%, and we would expect that to remain -- however, our opportunity in Travel and Membership is the addition of 2 new business lines that are meant to be incremental, not replacing the exchange business, and we view those as additive and approaching a new addressable market that's out there today. And what those 2 markets really are under the Panorama umbrella, the B2B travel service providing under what we've been calling the Panorama travel solutions. We announced the launch of that business last fall, where we're providing white-label travel services to both timeshare companies and nontimeshare companies and have signed our first few deals, the most recent one being this week. So we view that as an expansion of our ability to provide travel benefits and services to the broader B2B market. The second business line, which you mentioned in the remarks, were around a travel subscription business. We view the U.S. market that we do not currently address today to be roughly 90 million households that, obviously, go on vacation. And we believe through a Travel + Leisure subscription-based service that we can offer as well, travel benefits to grow our addressable market, do it in a free cash flow generation basis with very low capital intensity. So the goal in this travel and membership space is to add to a great business, RCI, with travel and benefits -- travel services and benefits to outside the timeshare market, both on a B2B and a B2C basis.

And then as a follow-up, any color you can provide on seasonality. And should we be anticipating -- in that segment, and should we be anticipating any kind of ramp in advertising or other investments to accelerate the growth there?

Stephen, this is Mike Hug. As it relates to seasonality and margins, historically, the first quarter has been one of the biggest quarters for the Panorama business. And so we would expect that to continue this year. Therefore, when we think about the remainder of the year and margins, we wouldn't expect the margins to stay at Q1 levels that would probably mirror closer to 2019 levels that, that segment ran.

And we'll take our next question from Joe Greff with JPMorgan.

This is actually Brandt Montour on for Joe. In the Vacation Ownership segment and business to a growth guidance for the 2Q in and around sort of 50% of 2019 levels. As you continue to build that back, how should we think about cadence beyond 2Q? So is it achievable to get us to, say -- or to get back to sort of 70% of '19 levels in 3Q or, let's say, 80% in the 4Q? And with the goal, I guess, obviously, of getting to 100% run rate next year, how should we think about that?

And when you say 70% to 80%, can you just clarify, were you referring to exactly what? Brandt?

Yes, sure. As a percentage of '19 tour flow levels in the back half of this year.

So the way we're looking at tour flow levels, you have to really bifurcate it between owners and new owners. With what we're seeing generally on arrivals for the second half of this year, they're starting to approach 2019 levels. And as such, although there's some modifications we can get into, arrival levels back to 2019 should result in tour flow coming back on the owner side close to 2019 as well. So the continued momentum that we're seeing in bookings and ultimately, arrivals is very important for driving our owner tour flow in the second half of this year. As it relates to new owners, it's a slightly different perspective. We're looking at roughly just over 50% reduced tour flow as it relates to new owners in the second half of this year. And that's really a matter of a strategic decision that we made during COVID that we wanted to do 2 things: First of all is to drive higher credit quality purchases of our ownership. And I think you've seen that already play through, both in our portfolio and ultimately, we believe that's going to drive us back to margins at historic levels faster than if we were to pursue credit quality at the pre-COVID levels. The second reason that we expect the new owner tours to ramp back slower is we made as well decisions to close down marketing channels that were -- that required scale in order to drive to profitability. And in order to build those back, we're going to need scale to return to the markets that we operate the open market channels in. The great news is, places like Las Vegas, California and even Hawaii are ramping back faster than we anticipated. So we will be more proactive to grow back our new owner tour this summer and into the fall. But again, owner and new owner are looking very differently as we head into the second half of the year.

Okay. That's helpful. And then a follow-on to maybe that, but also Stephen's question earlier, high level, thinking about the 2 major segments and the EBITDA you put up in the 1Q, obviously, sort of skews more towards -- skewed more towards Travel and Membership versus the more normalized levels in, let's say, '19, which was heavily skewed the other way to vacation club. So I guess going forward, what's the way to think about -- you mentioned Travel and Membership, margins might fall back a little bit, and then you're, obviously, building back tours. So I mean what is the way to think about -- do we think that, that skew is going to continue into the 2Q or is that going to dissipate throughout the year?

No. Brandt, this is Mike Hug. When we look at the second quarter, you're right about the first quarter where Travel and Membership made up a larger percentage of the EBITDA. And that's not unusual in the first quarter when you think about that being the largest quarter report Travel and Membership and historically the smallest quarter for Vacation Ownership. When we look at Q2, we think it will move back to historical trends where Vacation Ownership represents about 2/3 of the EBITDA, and Travel and Membership represents about 1/3.

We'll take our next question from Ben Chaiken with Credit Suisse.

You provided some very strong booking comments, which sounded like they continued into April. Just high level, when travelers show up on property early on, what is their propensity to buy? Do they want a tour or stay inside due to the unique environment we're in? Just any color there would be helpful.

Absolutely, Ben. There is -- I shared it before, but I'll go a little deeper on this call is our biggest concern coming out of the reopening phase last summer and into last fall is how would the consumers change their behavior. And one of our pleasant surprises was that really buying behavior didn't change. But what we've seen in the last quarter with -- for the first time, and I think you've heard it on many other calls, is that second week of March, you really saw a -- it's almost as if a light went on and people were ready to travel again. We've seen that also play out at the sales table. As I mentioned in my remarks, our closing rate was up 150 basis points. And we've been at this a while and closing rates are very difficult to move. And I think it's a real credit to our sales and marketing operation and our people that they've been very focused, really following protocols on health and safety, that's giving people comfort and combine that with what I would say is a really excited consumer base to get back on travel, and also improving consumers' balance sheets that the fact that close rates have moved up 150 basis points is a real good sign of consumer behavior and an endorsement of the product.

Got you. That's helpful. And then do you think -- is there any -- may be tough to say, but do you think the higher close rate is a function of consumers just wanting to get back to travel and making purchases or do you think it's a function of maybe some -- the salesmen and women who are currently operating?

I think it's both of those, for sure. I would also say, one of the most challenging elements of this business in the industry is new owner marketing, especially to a nonaffinity-based, and our teams have delivered historic highs of VPG on new owners. And that's a credit to the people. It's a credit to, I think, consumer strengthen and their pent-up demand and the strength of their balance sheet. But I also think it's enough to change that we decided to make last year in COVID, and to narrow our focus and really look at our marketing qualifications. And you put all of that together and what you end up with is historic highs on VPG, really driven by close rates.

And we'll take our next question from Ian Zaffino with Oppenheimer.

Great. Can you guys maybe give us maybe a general comment on kind of what's going on with stimulus and unemployment benefits, et cetera. Maybe how is it helping stimulus? Is it helping WVO sales, number one? And then how does that kind of factor into like loan loss provisions? And then finally, how would that impact hiring, your ability to get people, wages, et cetera? I know there's kind of a lot packed in there, but if you could kind of just touch on that, that would be helpful and then I have a follow-up.

Ian, this is Mike Hug. Thanks for the question. I'll talk a little bit about the consumer and how that's impacting our business, and then I'll let Mike talk about -- a little bit about the employment and how that's impacting our business. But as it relates to the consumer, obviously, they're very strong. When you look at savings rates, when you look at all the metrics related to, then there's no doubt that there's a benefit coming to us as it relates to both the close rate and the portfolio. We're very happy with the way the portfolio has performed even on the new originations, you see that 18.1%. And it's important to point out too that, that 18.1% is a true provision associated with new originations. We did not take any benefit this quarter from the COVID reserve we put up for the portfolio. So we do see a consumer that's very strong. And what we believe will happen over time is these consumers will continue to buy more of the product. And if you think about how they want to travel now, they love the space. And so once they experience the space, we're confident that, that will continue to lead to future upgrades. So we're very happy with the strength of the consumer, and we think that, that leads to good things going forward, especially when you see the new owner close rates, that's a great pipeline that will provide upgrades in the future. So all signs are positive now, and we expect that to continue.

And Ian, I'll just add to that on the sort of stimulus inflation and employment side of the equation. Let's just start on what the hot topic is now on inflation, is I actually think that's a net positive for us. When you look at the nature of our product, people are locking in their future vacations at today's prices. And again, as I mentioned in my answer with Ben, savings rates are up. And I think when you get a consumer in front of you that can see that they're going to lock in their future vacations with today's prices and they have a good personal balance sheet, it's a good sign for our sales tables going forward. As it relates to employment, I don't think we're too different from most of the service industries. It's safe to say that most people are having to work extra hard to bring in our frontline associates and things like housekeeping and marketing associates and front desk staff. They're the frontline of the hospitality industry. I think it's somewhat mitigated in our industry because of the length of stay, the lack of sort of full-service restaurants and things of that nature. So I do anticipate employment to be a challenge through the summertime, not an obstacle, but just it's -- we're going to have to work a little bit harder. But I think there are some elements of our business that mitigate the risk for us. As we get through the busy summer period, as there is a change, potentially in unemployment benefits at that point, there could be an inflection in September, where the labor market eats us to a certain degree.

Perfect. And then just a quick question as far as capital allocation, dividend share repurchases, what are we thinking here as it relates to returning cash to shareholders?

Sure. So on capital allocation, obviously, we demonstrated our commitment to returning capital to shareholders through the continued payment of the dividend even through the pandemic and as the company grows, consistent with what we were doing pre COVID, we'll look to grow that dividend. On share repurchases, we're still over the 404x levered. So the first thing we need to do, and we're very happy with our leverage rate being to over 6%. We expect it to come down from here but until we get under 4.25%, we can't opt out from under our amended covenant that we have in order to do share repurchases. So when we think about share repurchases, to get out from under the amendment, have a clear line of sight to kind of that a little bit below 3x levered and then start to think about share repurchases, which means share repurchase probably won't occur before the end of this year.

We will take our next question from David Katz from Jefferies.

Covered a lot of ground. But I would just wanted to ask if there's any insight you can give us around the demand and helping us parse it out between demand that was latent throughout COVID and reactivated versus some incremental new demand that's happened very recently. I realize that's sort of a broad general question, but I think it's important.

David, let me start with a little bit of detail, and then I'll get to the more general question because not all demand has been -- has returned equitably in these first 3 months. So let me share how we're looking at it. Markets like Florida, South Carolina, Tennessee, Arizona, we were up from 2019 in January in those markets as far as demand. And that's only accelerated in March and in April. And then there's a second set of markets, and I'm sort of defining them as the reopening trade that were significantly down in January. California, down 44%. Now it's up 27% in April. Nevada, down 27% in January and February. Now it's up 16%. Hawaii, down 40%. Now up 33%. And to me, the nature of those big swings in momentum is meaning people are not only confident to travel, but they're starting to get on planes. And they're confident enough to be booking. And for those of you who've traveled, I think, we've all seen full planes. So I think detail-wise, there is a cadence to how consumers are starting to travel again. As it relates to incremental demand, we're starting -- we are seeing that on the rental side of our business. We knew the owners would come back. They've come back very quickly. The last time we were on a call at the end of -- for our Q4 call, we were a little unsure as to how quick, it was a week later and our owners returned. But the rental side of our business has shown an incredible amount of demand. So I do think that we are pulling incremental -- the incremental leisure travel into our system, not only through timeshare, but also through our rental platforms, both on the timeshare side and our new BookTandL.com. It's a little hard to quantify how much is incremental, but just the across-the-board momentum gain makes me think that there is some extra demand that's coming in there that we would not have normally seen.

Okay. That's helpful. And fair to classify it as the incremental is noticeable and material in some way.

It is. And with the balance that we will have for the remainder of this year is occupancy was down versus '19 in March. It's flat in April. And our objective to second half of this year is for owner occupancy to be above '19 levels and hopefully, significantly because that's our core business. So we might lose out a little bit on the rental, but the benefit is much clearer when we get our owners back on vacation.

And we'll take our next question from Patrick Scholes Truist Securities.

A couple of questions on the T&L acquisition. What's your latest expectations on when you will be able to start selling vacation packages to the T&L readers?

So just our time line there is -- our first objective was to transition the 50,000-plus T&L subscription numbers over to our platform. We are almost complete with that. Secondly, we wanted to launch our online booking platform, which we did in February. We're really growing the organic search there. And then the third point of the time line is to launch a subscription business this summer, that includes approaching its travel magazine -- the Travel + Leisure's magazine holders for marketing at that point. So this summertime, we'll be launching our first new subscription offering, and that will include the marketing to that database that we've referred to in the past.

Okay. And what's your latest expectation for 2021 EBITDA contribution from this acquisition?

Well, it's going to be pretty minimal. As we talked about on the last call, we acquired $4 million to $5 million in EBITDA, but we are investing in the business this year, whether it's creating the packages, developing relationships with the providers of the fulfillment or excursions and things like that. So when we think about the Travel + Leisure group this year, I wouldn't expect the EBITDA contribution to be anything material.

[Operator Instructions]. And we'll take our next question from Chris Woronka with Deutsche Bank.

I know you probably won't want to get too specific on numbers just yet. But when we kind of think about that vacation club subscription service longer term, as you grow the various membership basis, is there any way to kind of directionally think about a revenue-per-member metric or anything like that, anything we can compare it to that you already operate? Just trying to get a real broad sense for the opportunity there longer term.

So Chris, I mean, you're right that we don't want to get into those metrics today. But let me just frame up how we're thinking about that subscription business. We think there -- and I'll give you some numbers. We think there is a clear market for a travel subscription service that is lower entry and shorter duration, as we've spoken about in the past. We think our initial offering will be something in the range of $10 a month. You can look at some competitors out there that are also launching that. And that is around that range as far as total annual cost. Our hope is that the benefit will be -- let's just start with $10 per month per membership along with revenue that comes with the individual transactions once they're part of the membership. Because ultimately, we want that subscription club to be unique in the Travel + Leisure brand. If you think of the most iconic travel brand out there, it's been an advocate for leisure travel for decades. The Travel + Leisure name brings exclusive content. It brings unique perspectives on how to travel. And also, what we want to provide in addition to that is a lot of value in your travel subscription. So I would say $10 per month plus transactions, what we don't have history today on is the level of transactions that we would expect from a member per year.

Okay. That is helpful. And I appreciate that detail. My second question is kind of on the urban strategy. You guys had gotten more active there kind of in the last 5 years before COVID. And I'm curious as to whether that's something you might look back to and whether maybe it's just different markets, right? Is it maybe in Austin and in Nashville and in Charleston instead of a New York, San Francisco? Or if you have an opportunity to source inventory in some of those more traditional urban markets, would you do that?

So at this stage, we're very pleased with the deals that we did in the urban markets. We did often Nashville, Portland. The occupancies at those resorts are returning. They're lagging a little bit, obviously, from the sunbelt destinations. We're super excited about the new resort we have coming up in Atlanta, Georgia. But the reality is, when COVID hit and our sales declined, it made the inventory that we have on our balance sheet, that much more. It gave us a few -- another year, basically, of inventory. And therefore, as part of our cash strategy and allocating our capital, there's not really a need for us to be proactive in the development of projects. It doesn't mean we won't do anything, but we've definitely constrained our capital spend, which has no constraint whatsoever on our business. It just -- it's just a better use of our capital toward other means. And some of those other means are going to be -- whether it's dividend or potential M&A or investment back in the new owner side of the equation, we think those are better use of our cash today than going out and doing more projects that we'll ultimately sell on the balance sheet for 1.5 years to 2.5 years.

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

Thank you, Ashley. We're excited about our future as Travel + Leisure. And as we begin to look forward to the rollout of new travel services later this year, it's safe to say the last 12 months had its challenges, but our team rose to the occasion. We took swift actions early on to protect and ultimately strengthen our business, and we have already seen some of the benefits. As the world gets back on vacation, we are squarely focused on being on the leading edge of the recovery. As always, I have our team to thank for their service to our owners, members and guests as we embark on what is turning out to be a very busy spring season. Thank you, everyone, and have a great day.

Thank you, and that concludes Travel + Leisure's First Quarter 2021 Earnings Conference Call. You may now disconnect your line at this time, and have a wonderful day.