Inspirato Incorporated (NASDAQ:ISPO) Q4 2022 Earnings Call Transcript

Jed Kelly: Hey, great. Thanks for taking my question. Just circling back, Brent, you just mentioned how your customers, their travel patterns are changing. Can you just talk about how you view experiences and some of the Inspirato experiences that you can plug in and how that can impact travel revenue this year? And then, just can you talk to — just give us a little more clarity around like just the supply ramp and where you are on supply? I realize you’re scaling some of it back. But can you talk? And then, do you ever think about doing it where basically renting out your vacation rentals on — to non-subscribers or anything like that? Thank you.

Brent Handler: Great, yes. Great question. Just in terms of the portfolio expansion, we are very moderated in our growth this year. We do have some incredible new opportunities like in downtown Charleston, we have an opportunity to have some one-of-a-kind condominiums that will be coming into the platform. But I would say overall — excuse me, overall, we’re not in a great expansion mode. As we had mentioned, we’ve essentially doubled the portfolio in two years. So, there’s a tremendous array of availability and opportunities for our members to travel. And in actuality, a big part of the story of what’s going on is we underestimated the time that would take to fill in that availability to near capacity or capacity. And that’s what’s leaving us with all of this excess supply.

As we had mentioned, we’re going to be running, call it, close to 70%, as per plan, that drives this negative 10% to negative 20% in EBITDA. Just getting to 80%, which is still less than the last two years, even at 30% less ADR compared to what’s on the books right now, that would get us to EBITDA positive. That just kind of shows the leverage that we have that’s in the portfolio. So, right now, the goal is to use that capacity and grow into that capacity in an economically feasible way. The good news for our members is this just means more availability for them and better opportunities for the club to provide more value to them, things like loyalty programs and reward programs that we’ve never done in the past. We’re going to start to offer these to our members.

We’re going to start to offer incentives for them to extend their stays. I think we had mentioned on the call even one more day per subscriber would bring over $20 million of high-margin in-year revenue to us. To address your last question, which is about would we ever consider taking supply out, we have done that in the past and we do plan on doing that. Where we have excess supply, we can use proven third-party distribution channels like a Vrbo and Airbnb, strip out the Inspirato service, strip out Inspirato planning, strip out Inspirato housekeeping, strip out the Inspirato amenities in the home, and essentially take this hard work and all of the expense that we had to acquire those homes, put them into somewhat of a holding pattern while we’re able to monetize that excess capacity and then bring it in when we need to.

And that’s something proven we’ve actually been able to do that before, and we expect to do that somewhat as we build into this newly found capacity. We also have a lot of demand drivers that are incremental to the plan, Saks being one of them. So, what’s nice about having already secured the supply is that we can be flexible either providing more value for members with things like loyalty, things like rewards, or pulling out supply and waiting for this to catch up. Essentially, what happened is, we grew a little too fast. We paid the expense to bring in all of that inventory. And sometimes in a business like ours, it takes a little time to get it right. Sometimes you don’t have enough supply, sometimes you have a little excess supply. And what we’ve done here is we’ve managed to get that excess supply and we have a great opportunity to monetize it over time and grow into it.

Thank you for the question.