Michael Brown: Right.
Brandt Montour: Okay. Thank you very much.
Michael Brown: Thank you.
Operator: Thank you. Next question is from Patrick Scholes from Truist Securities. Your line is now live.
Patrick Scholes: Hi, good morning, Michael and Mike.
Michael Brown: Good morning, Patrick.
Patrick Scholes: A follow up – follow up question on the hypothetical combination of choice plus Wyndham, it sounds like there wouldn’t be any downside, but could there be potential upside from that certainly Choice as a massive guest reward system and I believe their primary color is yellow. So would it be the Blue Thread plus the potentially plus the yellow thread at that point? Or would you just be, or would you be just limited to the legacy Wyndham Hotels?
Michael Brown: Well, let me comment a bit more broadly because I’m not a party to those discussions. What I would say is something very similar to what I said to David earlier is that the key to growing Vacation Ownership in general is to gain more and more access to new customers and create partnerships that allow you to open up your marketing universe, not being party to any of those discussions. If that were the case, then that’s beneficial. But whether it was that question or one related to any partnership, the key to growth in this space is marketing and data and new customer opportunities. So, my answer broadly is anytime that occurs in the Vacation Ownership space, it has possibilities to be a positive to our BO business and…
Patrick Scholes: Okay, okay. So fair to think that you would, fair to think you would hope that you get access to it. But again, no guarantees and certainly there’s blue green in their existing contracts. So a lot of devil in the details possibly to be worked out here. And then, taking a step back, just Michael, on sort of the high level macro question, your average household income is I recall 90 for a Vacation Ownership buyer, $90,000 to $100,000. Any discernable changes in propensity of that customer to purchase or use your products that you’ve noticed? Thank you.
Michael Brown: Yeah. And I really appreciate that question because in a quarter like this, I think it’s really important to reground ourselves on what’s happening in our business. And we raised our credit quality throughout COVID. Our FICO score of 738 matches anyone in the industry. The portfolio which I’m going to ask Mike to speak about in just a second is performing extremely well. And it’s very important in my opinion to take away from this quarter on the Vacation Ownership business. BPGs are strong at or above the high end of our range. We raised our guidance. Our portfolio remains strong and our forward bookings are ahead of last year. The core, the primary driver of our business for our consumer is continuing to perform consistently well, and is not showing signs of weakness.
Our household income is actually around $100,000 now, and I don’t want the noise of the quarter related to our overall guidance to distract from the foundation of our overall travel leisure business, which is an extremely consistent and well-performing VO business. That did not in Q3 shows signs of change in its performance or its metrics. And as we sit here, almost through the month of October, nothing that’s happened in the first three weeks of October would indicate that that commentary has changed.
Patrick Scholes: And then, just touching on the portfolio a little more, first of all, a few things. We talked about the provision our guidance for the quarter was over 19% and it came under 19%, which I think once again, shows a good performance on the portfolio. You’ll notice delinquencies moved out in Q2 to Q3, but that’s always the case.
Michael Brown: What was positive about that, in my opinion is, if you look at the movement from Q2 to Q3, as far as increase, there was a lot of increase we’ve seen since 2016 except for in 2021 when the portfolio wasn’t growing. So, when you look at that increase, it’s a very magical increase one that was actually better than we expected. And then finally, I always appreciate the securitization is done because we’d love the free cash flow it generates, but just as importantly for me, it’s a proof that others also believe in the confidence of the portfolio, because in essence that’s what they’re purchasing with the – they purchase with the ABS transaction. So, overall couldn’t be happier with the portfolio performance and, the big move to move from 600 to 640.
And most importantly sticking with that move when a lot of other industries had dropped down to below 640 even subprime if you will that really has allowed us to have confidence in our portfolio and see the results that we’re seeing throughout this year’s harsh performance.
Patrick Scholes: Okay. Thank you. Very thorough answer.
Michael Brown: Sure. Thank you.
Operator: Thank you. Next question today is coming from Chris Woronka from Deutsche Bank. Your line is now live.
Chris Woronka: Hey, good morning guys. Thanks for all the details so far. I guess, the first one for you is, Michael, I think you mentioned in the prepared comments that you that stimulate these new owner tours you’re going back to some of these open market channels and package sales. And I wonder if you can kind of maybe compare and contrast, I know in the past though those we’re not always the best and they weren’t always the most efficient or cost effective. Can you talk about why some of them might be better today than they’ve been historically?
Michael Brown: Yeah, absolutely. And we have we have stepped back into locations that we can ensure profitability in those channels. We’ve been very selective when your FICO band starts at 640. You need to make sure that your open market channels are performing from really day one. But also, some commentary we didn’t want to get too far into it today. But there is, there is a investment that we are making into our overall package pipeline. Wyndham has traditionally been in on the week tour generator and we will remain that. It is one of the distinguishing key characteristics of our marketing model in the space. But that doesn’t prevent us from starting to lean in more toward a little bit more to create diversification on a package pipeline that gives us visibility as well, 12 to 18 to 18 months out.
So it’s really being selective and what we’re going into on the open marketing and starting to diversify and create incremental to workflow opportunity through the investment in our, in our package pipeline. And we’ve already seen early signs of success in doing exactly that.
Chris Woronka: Okay. Very helpful think. Thanks, Michael. And then, just so I’m not going to ask you for ‘24 guidance and you’ve already shared with us the headwind on interest. And I guess though the question is, and there’s a lot of puts and takes obviously that’ll impact, what happens. But it’s if we kind of revisit just the free cash flow generation. I mean, whatever somebody might come up with for an EBITDA estimate, you’ve said, inventory is below, spend is going to continue to be below $100 million per year. I mean, is there any reason why the free cash flow conversion wouldn’t be at least where it is this year, if not higher. I guess what I’m asking is, is there any – anything in your, you know, current thinking in terms of a placeholder for an acquisition or anything like that?
