Patrick Scholes: Yes. Just sort of give us some high-level thoughts about summer. Certainly as we look sort of at different vacation types of products, it really — it looks like to be a mixed bag — if we look at sort of traditional domestic resort hotel occupancy for the summer house tracking it’s kind of soft whereas we look at other types of vacations, notably take cruise lines Royal Caribbean reported this morning extremely strong results and looking good for the rest of the year. How do you see vacation ownership demand for the summer sort of fitting into that travel plans? Thank you.
John Geller: Yeah Patrick. All our forward bookings are as strong as they’ve ever been right from a historical basis as we look into the summer. I think where you’re seeing some uptick to for us is internationally on Asia Pacific as we talked about. It’s a fairly low number last year in the first quarter in terms of occupancy at our Asia Pacific resorts, but we’re up about 30 points in occupancy in the first quarter and I expect those trends to continue. And I think coming into the US, you’ve got more international travel Hawaii is recovering a little bit with some of the pound, but still has a ways to go to get back to those levels. So we feel good about the summer. I think all the kind of forward-looking channels look very strong for us.
Patrick Scholes: Okay. Thank you. Good to hear.
Operator: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.
Chris Woronka: Hey, good morning, guys.
John Geller: Good morning.
Chris Woronka: Morning. So I guess the first question would be have you seen any — if you drill down into kind of your customer base? And whether we’re talking towards or maybe contract sales whatever the right metric is any delineation in kind of trends or performance kind of West Coast versus East Coast of the US? And not just specifically asking about the Silicon Valley Bank stuff. But in general with some of the tech pressure out there. Is there anything you can at all that you see in the data that would indicate a difference in geography?
John Geller: Yes. Chris for the first quarter not really very strong. Some of the things notwithstanding our growth in contract sales for us where we’ve underperformed in the first quarter on the sales side is really the transitions we’ve been making, whether it’s the Marriott Abound program right and started and we’ve talked about this in the past we start to transition to sell the new product from say the old Westin or Sheraton Flex product. And that transition right can be bumpy at times. So we see it more in that. Same thing on the Hyatt and Welk side because you’re aligning business models compensation leadership you have to educate the existing owners who are your big buyers right on the new product get them comfortable and all that.
So if we’ve seen any softness, and like I said with contract sales were up 10% it’s actually around some of those call them self-inflicted transitions that that’s opportunity, right? Going forward, we’re going to get those back to where they need to be. But as you go through it as we’ve always said you get a little bit of bumpiness. I’d say as you get — as we got into April, to your question not that we can put our finger exactly on it. We did see some softness if you look in the desert out in California. So you talked West, but it wasn’t — it wasn’t across all our West, right? Like so the — there were pockets there some — a little bit in Hawaii just in terms of the performance. But nothing pervasive across in the East on a relative basis yes continued to perform very well as well as Florida Caribbean et cetera.
So nothing concerning. But like I said our bigger things we’re working through are things that are within our control right not macroeconomic.
Chris Woronka: Yeah. Yeah. Understood. Thanks for the detail, John. And then as a follow-up you guys talked about higher propensity to finance. And I know that some of that is because I guess prices are higher and you’re also getting a higher mix of first-time buyers. But is there anything further to kind of explain it. And maybe the better question, would be if we look at first-time buyers today versus say 2019 are they also — are those first-time buyers more of them opting to finance or finance at higher levels? Just trying to get a little color on what’s driving that given that rates are up and it’s a little bit more expensive to finance?
John Geller: Yes. Well if you think about it Chris, the way we offer our financing while our average lending rate, I think if you look at the securitization we just did versus the one we did last year was 30, 40 basis points higher. As we’ve talked about the financing, we provide is really just to help in terms of ease for the consumer that’s buying. So we haven’t moved our rates on a relative basis the same as what you’ve seen in the broader interest rate market if you will. So — but you’re right, you’re seeing slightly higher propensity and some of that’s mix as we talked about we did have more first-time buyers, historically, first-time buyers because they buy a little bit more than owners that are buying more. And it could just be — there’s obviously coming out of COVID with a lot of excess cash out there.
Maybe some of the buyers don’t have as much excess cash. So they’re opting for the convenience of the financing. But we haven’t seen any — I don’t know if Tony has anything to add but I’m not aware of any different trends. We clearly haven’t changed our underwriting standards or done anything that is different in the first quarter than we were doing last year.
Tony Terry: Yeah, you’re absolutely right John and Chris. John hit it on the mark when you talked about the cost of our financing it’s not that much more right now. We’ve probably raised rates maybe 25 basis points. We don’t go in lockstep with the broader environment — economic environment. We didn’t take rates down point-for-point, when interest rates were dropping we’re not taking them up point for point, while they’re going up. I mean we did see higher financing propensity in Q1 than the previous year. We’re probably at 54% Q1 this year versus 50% last year. However, we’re not back to where we were back in 2019. And if you look pre-COVID, we’re in that lower 60s. So we hope to be trending back towards that level.
Chris Woronka: Okay. Very helpful. Thanks guys.
John Geller: Thanks, Chris.
Operator: Thank you. Our next question comes from the line of Brandt Montour with Barclays. Please proceed with your question.
Brandt Montour: Thanks. Thanks everybody. I appreciate all the color. So John, I was hoping maybe you could give us a little bit more color on the cadence of tours this year. Just through the lens of repeat owner tours or a little bit more shorter lead time and you guys have to plan for new owners well in advance and build that pipeline up. So I think you guys have pretty good visibility on how you think new orders are going to layer in throughout the year. And just sort of talk about that setup in relation to how you guys manage for optimal VPGs and optimal margins?
John Geller: Yeah. Yeah, hi, Brandt. Yeah, I think you hit the key components: one our package pipeline which we talked about is at all-time highs, right? So we’ve got a strong package people that are prepaid for their vacation that are going to come and take a tour. And as you look out for the balance of the year, we expect those packages to be higher than last year, right? So that’s going to continue to drive tours through the balance of the year. A lot of it is in terms of getting those packages to where they want to go, that’s where there can be some lead time because our occupancies are so high. So we continue to try and get and build the package pipeline at the same time, but we continue to try and get those customers on vacation and on a tour to drive the sales flow.
And then on the owner side same thing. It’s — to your point we don’t have as much visibility but we’ve got a lot of history. And as we talked about earlier with the Abound program and more so with some of the Hyatt stuff that we’re going to be launching later this year you can usually drive your what we call our owner tour penetration much higher and that’s what we saw in the first quarter versus last year because owners want to come in and they want to talk about the new program, understand new vacation options and things that come either with Abound or later this year with the Hyatt Beyond program. So we’re always trying to maximize tour flow. You saw a great tour flow growth in the first quarter. And the balance on all that and this is where we continue to drive some of our digital marketing and getting our marketing costs down per tour because as you drive those stores, you are sometimes opening up some of your higher cost channels, right?
So the balance right is to continue to drive your VPG at the same time manage our marketing and sales costs. And as Tony talked about, the third component is our product costs which we continue to expect to be very low going forward. But that is going to get us that 30%, 31% development margin, similar to what we got last year if you will on VPGs that haven’t grown that much but on significant higher costs in total around tours, right? So the more we can drive revenues and leverage some of our fixed marketing and sales costs and get our variable costs down that’s the goal.
