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Greetings, and welcome to the Travel + Leisure Second Quarter 2025 Earnings Conference Call Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Erik Hoag, Chief Financial Officer. Please go ahead, sir.

Thank you, Kevin. Good morning to everyone. Before we begin, we would like to remind you that our discussions today 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 in our press release accompanying the earnings call. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on the Investor Relations website. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of the second quarter results and our longer-term growth strategy. And then I'll provide greater detail on the quarter, our balance sheet and outlook for the rest of the year. Following our prepared remarks, we'll open up the call for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.

Good morning, and thanks for joining us. Travel + Leisure delivered another solid quarter of revenue and adjusted EBITDA growth. Our strong adjusted EBITDA or free cash flow allowed us to return $107 million of capital to shareholders in the quarter. This performance underscores the strength of our brands, the resilience of leisure travel and our owner base, and the disciplined execution of our strategy. Against the dynamic macroeconomic backdrop, our teams remain focused on driving growth, managing costs and delivering exceptional experiences to our owners, members and guests. In the quarter, we generated over $1 billion in revenue, $250 million in adjusted EBITDA and $1.65 in adjusted earnings per share, all up year-over-year. Our results were driven by continued strength in our Vacation Ownership business, which more than offset softer performance in travel and membership. We saw a healthy year-over-year growth in VOI sales, with gains in both tour flow and volume per guest. Notably, volume per guest of $3,251 was above the high end of our guidance range and adjusted EBITDA margin remained consistent with the prior year at 25%. These results support the core foundation of our business, a resilient customer base built around leisure travel, a compelling value proposition and consistent returns to our shareholders. Demand remained strong across our core timeshare business. We see encouraging engagement from consumers as tour growth improved sequentially from the first quarter and 3% compared to 2024. The resilience of our platform is directly related to the quality of our customers. There's been plenty of noise around the economy, but from where we sit, our consumers are healthy and prioritizing travel. Spending on leisure travel is expected to grow mid-single digits per year over the next 5 years. Our business is built on recurring behavior and less so on short-term trends, making us less sensitive to the macro economy as we benefit from a highly visible recurring revenue base. More than 75% of our revenue is tied to predictable sources like owner upgrades, financing and management fees, which leads to a nearly $20 billion pipeline of future potential revenue over 10 years. We see our strategy play out through our bookings, sales tours and owner engagement metrics. Our owners are traveling, supporting what we've long believed that vacations are not discretionary, they're essential. We have seen no significant change in buyer behavior related to booking pace, VPG and portfolio performance. Booking pace is relatively consistent to the prior year. And with a 109-day average booking window, we have clear visibility into the remainder of the year. VPG performance continues to be strong, and our portfolio remains stable. Our owners know what they are getting. They've already planned for it and 80% of them have fully paid for their ownership. Today, we serve more than 800,000 owner families with an average tenure of 17 years. Here are some key characteristics of our owner base. The average household income for our owners is approximately $118,000. The average FICO score of our $3 billion portfolio is above 720. Since 2020, we have seen sub-640 FICO loans declined 4 points as a percentage of the overall portfolio. The average FICO score of new originations is 746. This is an over 20-point increase since we updated our credit quality standards. Our owners take an average of 4 to 5 vacations annually with more than 50% of their vacation time being utilized through their ownership. We are seeing consistent interest from younger generations with over 65% of new buyers coming from Gen-X, millennial and Gen-

Thanks, Michael, and good morning. Let me start by saying how excited I am to be part of Travel + Leisure. This is a company with a strong leadership team, a highly recognizable brand portfolio and a resilient business model that delivers dependable cash flow and long-term value creation. In my first few months, I've been especially impressed by the financial discipline and operational focus embedded across the organization. This came through clearly in our second quarter results with strong revenue and adjusted EBITDA growth, alongside robust adjusted free cash flow. I'll walk through the quarter's key drivers and highlight how we're deploying capital to drive shareholder value. Revenue for the quarter was $1.02 billion, up 3% year-over-year, driven by strong VOI volume and VPGs that exceeded our expectation. Adjusted EBITDA was $250 million, up 2% over the prior year and at the midpoint of our guidance range. This translates to a 4% adjusted EBITDA growth for the first half of the year. Adjusted earnings per share grew 9% in the quarter, driven by strong performance in vacation ownership and the benefit from ongoing share repurchases. Turning to the Vacation Ownership segment, our core growth engine. The business delivered accelerating revenue, rising tour flow, historically high VPGs and double-digit growth in average transaction size. Revenue grew 6% to $853 million for the quarter, driven by a 3% increase in tours and VPG of $3,251, up 7% from last year. The increase in average transaction size reflects strong consumer demand, effective upsell strategies and continued sales force productivity across our resorts. Adjusted EBITDA grew 6%, with margin performance remaining steady, underscoring the health and the consistency of the platform. We are also making disciplined progress with our inventory pipeline with several key resort projects underway to support future growth, while maintaining our capital light mix. Our loan loss provision and delinquencies were in line with expectations, and we remain on track to deliver a full year provision of 21%. Credit quality remained strong in the quarter with new origination FICO scores above 740, which reflects our consistent and disciplined underwriting approach. Our second quarter delinquency trends moderated after the uptick we noted last quarter. With no signs of material deterioration we're confident in the portfolio's strength. Our provision has historically ranged from the high teens to the low 20s as a percentage of VOI sales, and we see potential for this to trend below 20% over time, enhancing capital efficiency and supporting durable free cash flow. In our Travel and Membership segment, revenue was $166 million for the quarter, down 6% year-over-year and adjusted EBITDA declined 11% to $55 million. The exchange business continues to face industry consolidation headwinds. Additionally, recent M&A activity disrupted transaction volumes from certain affiliates and was not anticipated in our original guidance. While not the sole driver of the underperformance, the impact was meaningful, and we remain focused on maximizing cash flow and operational flexibility with an emphasis on long-term shareholder value. Turning to cash generation and capital deployment. We generated $123 million in adjusted free cash flow and $353 million in operating cash flow in the first 6 months of the year, supported by strong sales efficiency, capital-efficient sales execution, and the ongoing contribution of our consumer finance portfolio. These factors, alongside both our highly recurring revenue mix and capital-light development strategy drive consistent and dependable cash generation even in a complex macroeconomic and political environment. During the quarter, we returned $107 million of our adjusted free cash flow to shareholders, $37 million through dividends and $70 million in share repurchases, retiring more than 2% of our shares outstanding in the quarter. Our capital allocation strategy remains unchanged; reinvest in high-return growth, maintain a resilient balance sheet and return excess cash to shareholders, all while preserving financial flexibility. We continue to evaluate reinvestment returns vigorously, prioritizing initiatives where we see strong IRRs, capital efficiency and clear pathways to shareholder value. Our liquidity position remains strong. We ended the quarter with over $800 million, including $212 million of cash and cash equivalents and $596 million available on our revolver. We ended the quarter at 3.4x levered and with normal seasonality, we expect our leverage rate to slightly increase in the third quarter and then end the year below 3.4x. During the quarter, we amended our $1 billion revolving credit facility with improved terms. And yesterday, we completed our second ABS transaction of the year, raising $300 million at a 98% advance rate and a 5.1% coupon, the lowest we've seen since 2022. We continue to actively manage maturities and expect to refinance the $350 million note coming due in the fourth quarter. Looking ahead, we continue to expect full year adjusted EBITDA to be in line with our prior guidance, supported by the strength of our vacation ownership business. We expect travel and membership to remain challenged through year-end. That said, we are committed to executing on our core business, launching new brands, delivering strong free cash flow and allocating capital in ways that enhance shareholder value. For the third quarter, we expect travel and leisure adjusted EBITDA to be in the range of $250 million to $260 million. Vacation Ownership gross VOI sales are expected to be in the range of $650 million to $680 million with VPGs in the range of $3,200 to $3,250. For the full year, we continue to expect adjusted EBITDA to be in the range of $955 million to $985 million, gross VOI sales between $2.4 billion to $2.5 billion and VPGs in the range of 3,200 to $3,250, an increase from our prior range of $3,050 to $3,150. Please refer to our earnings material for full details and underlying assumptions by segment. Thank you for your time and continued interest in Travel + Leisure. I look forward to connecting with many of you in the weeks ahead. Kevin, we can now open the line for questions.

[Operator Instructions] Our first question is coming from Chris Woronka from Deutsche Bank.

Erik, welcome. We're looking forward to working with you. So I guess, Michael, maybe start with the kind of the more obvious question this quarter on the travel and membership side. I know you mentioned that there was some M&A impact with partnerships. But do you feel like visibility of that segment is declining. It used to be very stable and predictable within $1 million or so? And if so, how confident are you that you can turn this around? Or are you in some ways, possibly considering something more strategic with that segment?

Chris, let me recap Q1 or the first half of the year. So we recognize the 2 components of the Travel and Membership decline. In the organic side of the business, yes, we saw a decline as it relates to exchange transactions, a conversation we've been having on this call for several years now. That side of the business remains challenged through consolidation and the fact that the way bigger clubs are doing business has changed. And we've done a pretty significant job over the last few years stemming the tide of that. In fact, if you remember, last year, we actually had growth in this segment. Over 50% of the decline in the first half of the year was based on this component of the business. The other piece, which Erik mentioned was, there was consolidation in the space and that impacted those related to affiliates of ours, and that obviously was an unforecasted impact in the first half of this year. As we digest that and look at new alternatives on how to address and mitigate the impact of a, that transaction, but b, just the general trend of what's happening on exchange, external exchange transactions, there's a number of measures we continue to take. We want to grow the Travel Club business, which grew 7% in Q2 as far as transactions. We continue to look at innovative ways to deploy our inventory and to grow revenue on that side of the equation. And then obviously, we manage costs associated with where our top line goes. I think we've been very clear that we understand the structural challenges of the space. But we've been very proactive over the past few years, and we will continue to look at smart strategic investments or alternatives to make sure that we're doing the right thing for this business. And creating our objective to get back to a growth trajectory over time here.

Just as a follow-up. I think you mentioned a double-digit increase in average size of transaction in the quarter. A question on that is kind of in the context of financing? And how does that play into when you think about transactions getting bigger, propensity to finance in the context of a lot of wealth effect that's being generated with the stock market, and maybe other forms of real estate. Does that change the calculus at all for your, I guess, your average customer in terms of that propensity to finance or what's driving that larger transaction size?

Well, we haven't really seen any change to our propensity to finance. Those statistics are very consistent. I think what you've seen in the first or the second quarter -- and the reference was really a combination of 2 components. First is we continue to take measured price increases over time and that results in some component of the average transaction price increasing. The other piece is -- and we mentioned it a number of times in our prepared remarks related to experiences and greater owner engagement. We're starting to see, we believe, some of the -- those elements come into play and the fact that people continue to buy more, 4 to 5 vacations a year through their ownership with us, about 50% of their vacation time being dedicated to us at Wyndham. That means people are buying more, and that's only because they're satisfied. And they're enjoying their ownership. So I think it is a combination of price increases and people just continuing to be loyal and committed to this type of leisure travel.

Next question today is coming from Lizzie Dove from Goldman Sachs.

First one just on -- you raised the VPG guidance, obviously, a really strong number in 2Q but you didn't take up gross VOI sales number. Is the assumption that maybe tour growth is a little lower or something. I know telesales was a little lower in 2Q than expected. Just curious kind of what factored into that.

Really, really the factor is we wanted to recognize the very strong VPG performance in the first half of the year, and that led to our raise for the full year. I think what that really says, Lizzie, is that we have greater confidence that our gross VOI is going to be at the mid to maybe the top end of that range. So at this point, being halfway through the year, knowing that we're entering July being one of the biggest months of the year and same with August with summer travel, we thought we were better off to simply be more confident in the top half of the range at this point, and we'll see where we are in Q3, at the end of Q3. But what I would say is both tours being up 3% in Q2, 2% for the first half. That's showing sequential acceleration. We were quite pleased with our Q2 tour performance, and we think that tour increase will continue in the second half. And obviously, our VPG raise of guidance reflects what we're already seeing and that we don't see the consumer weakening in the second half of the year.

Got it. And then on the delinquency side, I think last quarter, you said March ticked up a little bit, but then you saw an improvement in April. Curious how that's been tracking over the last few months and into July. And you mentioned there may be some opportunity for the provision to kind of trend below 20% over time. Just curious, these kind of steps to get that timing would be helpful to know.

Lizzie, it's Erik Hoag. You are right. So early in the year, we saw elevated delinquencies in the first quarter. However, they did moderate near the end of the first quarter. And we saw that moderation persist through the second quarter. And frankly, we've seen that moderation persist through the first half of July as well. So we have got a full year provision of 21%. We feel like we are in a good spot with that 21% provision. In terms of the longer-range comments associated with getting back into the teens from a provision perspective, there's a couple of things that I would say about that. First, we've got disciplined underwriting quality with FICO scores above 740 and we consistently have seen improvement associated with the credit quality that's coming through the front door. And then the second piece is the adoption of our app. As we continue to focus on the usability of our products, the adoption increase that we're seeing from our customers, making it easier for customers to actually get on to vacation. And maybe one other comment associated with the provision 60 days in. One of the meaningful Aha's that I've had, Lizzie, coming into the seat, is that -- and Mike mentioned, I've had roughly 50 investor conferences or touch points in the last 2 months. We've got a really robust, efficient and effective inventory recovery process. So as delinquencies occur, we have a way to get the inventory back. We're able to reprice the inventory. We repriced the inventory at favorable rates with a cost of sales rate that's under 10%, a very effective way for us to get that back.

Our next question is coming from Patrick Scholes from Truist Securities.

Welcome, Erik. Michael, I'll start off with a question for you. You touched briefly about the health of your consumer. I'm wondering if you can dig down a little bit more. You talked about average household income of about 120,000. But I'm sure within the average, you probably have some, say, 80,000 and some 150,000 and above. Talk about sort of at the various ends of the spectrum, what are the behaviors and propensity strengths and weaknesses, any noticeable differences between the lower end and the upper end within your customer network and potential customer network?

Absolutely, Patrick. I'll hit this in a few different ways. And I think most simply, we get a good read on performance of our household incomes via FICOs and through our default curves. And it's one of the reasons that as we came out of COVID, we thought the most efficient way to reestablish our foundation was by raising our FICOs to 640. That move, as you heard, has brought our average FICOs up to 746. And there's clear stratification with higher performance at higher household incomes and clearly, higher delinquencies on the lower end. I think interestingly enough, there's an odd phenomenon there, one maybe not so odd is that the higher the income, the more likely there is for prepayment of the loans. So there's always this sort of balance of -- you love to hire FICO sales, and you definitely want people to pay off and get using their ownership. But you do have a drop off with the higher FICOs in the first year of ownership. Let me hit it this the second way of really how I look at it is the bifurcation between owners and new owners. In an economy like this with uncertainty and if the economy accelerates or decelerates, the first place you tend to see that is on the new owner side. As we talked about in our prepared remarks, the first half of the year was super strong for our owner base, high engagement, value what they own, continue to buy more at very high rates. Our new owner business continues to be strong as well. We were very pleased with our tour flow. But I think, specifically related to your question, when we look back to pre-COVID 2019, our close rates, our VPGs and our transaction size, all related to new owners are meaningfully up from pre-COVID, and that's really a reflection to your question about the performance of all strata of household incomes and looking at a different perspective of new owners and owners because I think most people are looking for weakness to show up in our new owner segment as a sign that the economy is weakening. And we could say after the first 6 months, if that's not the case.

And then I do have a follow-up question for Erik. Erik, with the VPG expectation going up, what are your expectations for the buyer mix in that expectations for closing rates versus your prior guidance for VPG. And I think on the last earnings call, you had expected the new owner mix or Mike has expected new owner mix still to be around towards to be around 35%.

So we do expect in our financial forecast to see acceleration of the new owner mix, not -- so the long-range target remains 35% from a new owner mix perspective. We sat at 30% here in the second quarter. Our forecast does expect some improvement in that in the back half of the year.

The next question today is coming from Stephen Grambling from Morgan Stanley.

Just a follow-up on the new owner mix improvement. I guess are there any things that you're doing and that you're thinking about to help drive some of the incremental new owners or anything that you're thinking about in terms of trying to improve the conversion rate on new owners as we think about initiatives going into the back half of this year or even into next year?

Yes. So just add on to what Erik was saying was, we've always communicated this percentage. And I just want to make sure everyone's got the context of it. We had an incredible first half of the year on our owner side of the business, which is naturally going to push down our percentage of new owner percentage. We had a really good first half of the year as it relates to newer business. It just happens when you perform so well on the owner side, our target of 35% naturally, it's further away from 35%. And we're going to continue to get to. Our long-term target, our short-term target is 35%. And if quarter-by-quarter, we have strength in one segment, it will fluctuate. Remember, I believe it was first quarter last year, maybe it was second that we were at 38%, 37%, and that was just a quarter. So related to some things we're doing as it relates to driving new owners, there's a lot feathered throughout the script related to that. But I really want to focus on: Number one, we continue to focus on getting the right partners. We were pleased with the announcement in Q2 of one such partner in Hornblower. We also believe that the addition of these new brands, Margaritaville, which we're reinvigorating up double digits in sales year-on-year, the addition of a core up double digits in sales year-on-year, sports Illustrated launching new sales later in the year. All of these are going to be bringing new owners to our overall ecosystem. And lastly, just in addition to all of that, we have 6 regions, and each single one of them is out doing smaller partnerships in their region that are more pertinent to their region. And all that put together, I do just want to put a stamp on, I think you mentioned something about performance of new owners. I think our close rates are up roughly 11 percentage points from pre-COVID level. So our teams are performing well above where they were pre-COVID. And I think it's a combination of having a great team, very focused on execution and raising our marketing standards.

[Operator Instructions] Our next question is coming from David Katz from Jefferies.

Thanks for all the commentary so far. I noticed that the Accor brand seems to be more of an international play. And I wonder if you could give us some updated thoughts on what you think the international opportunity or TAM really is? And at what point does it become an increasingly meaningful driver of the enterprise in total?

Well, there's 2 sides to that story. First of all, Accor is if my stats are right, the largest international operator of hospitality outside the United States. The brand is powerful. It's impactful. It's got a multitude of brands and its TAM is on par with the best hospitality companies -- in the largest hospitality companies in the world. That's all the positive. And the second, if I could add a second positive is the integration with their teams in the Asia Pacific region and considerations in other regions has been super supportive to help us grow, and that's meaningful in the assistance of growth, which has led us to announcing our first resort since having the brand about 14 months after the acquisition. The flip side of that coin is Timeshare is by far globally strongest in the United States. We've got an accepted product in after 30 years of operation, the industry has evolved to be primarily hospitality branded companies. People are highly loyal to Wyndham, to Hilton, to Marriott to Disney, to Holiday Inn just to name a few. At our Margaritaville brand, and the industry is over 80% hospitality branded. The regulatory environment protects consumers and gives them avenues for their ownership and comfort that their purchase is protected. So we remain super bullish about the U.S. market. We remain super bullish about our Wyndham brand. We have incremental opportunity outside the U.S. with the core. And we view most of these new brands, whether it's a core, sports illustrated and you go down the line to be sort of $200 million to $400 million of sales brands. But you stack 4 or 5 those together and you can start to look at a growth trajectory over 5 to 7 years that allows for us to maintain our current growth rate over time.

Understood. And just to follow that up. When we think about international sales, maybe $1 of sales or $100 of sales, should we think about the economic intensity in terms of what you earn being similar, better, worse than what you have here in the U.S.?

I would expect it to be similar as far as profitability margins. I would also expect it to be similar 3 years from now what it is today as far as the mix, we do about 90% of our revenue in the U.S. and about 10% internationally. So I wouldn't expect any significant trajectory or incremental risk for currency fluctuation as a result of our expansion. Our objective back to Stephen's question and tying in your's is we want to look for new customers geographically, database wise and the core provides us both those avenues.

Your next question today is coming from Ben Chaiken from Mizuho.

Maybe to start off, as you think about the remainder of the year, can you help remind us the different variables influencing the back half -- if I'm not mistaken, I believe you began selling SI in 3Q, 4Q. Maybe help us with the timing and magnitude of that and any other considerations. I guess the premise of the question is, I think prior to today, there was an implied acceleration in contract sales in the back half. And I just want to maybe dive into what those considerations are next? And then one follow-up.

Of course, Ben. And the implication that you're reading through is correct. The anticipation on the back half of the year is that we would be lapping tough comps in the first half of the year on tour flow. So year-on-year, tour flow increases in the latter half of this year. You combine that acceleration to an increase of VPG guidance, diving back into Lizzie's question there is that you start to see a lot more confidence on the high end of the VOI range, which, in turn, gives us confidence that continued softness on the Travel and Membership segment can be covered, ultimately leading us to confirmation of our guidance range on adjusted EBITDA. So you should expect to see continued strength on the VOI side, covering off any weakness we see on the travel and membership side. And albeit only 3 weeks into July, I think it's safe to say that the trends that we've seen in Q2 on consumer resilience, key KPIs that led to a good Q2 portfolio performance, VPG, booking patterns, trends we saw in travel membership. All of those have remained consistent in the first 3 weeks of July, a reminder, our largest month of the year, those trends are consistent that we saw in Q2.

Got it. And then anything from a -- just to touch on SI, doesn't that start to hit in '25 as well, helping you out in the back half?

Yes and no. Yes. We will open in the spring of 2026. We expect to start sales at the end of 2025, so we can, pun intended, put our first points on the board. And -- but as far as meaningful bottom line, not at all. Continuing to grow Accor this year, continuing to grow Margaritaville and continued excellent execution on Club Wyndham will be the determinant of how we end the year and where in our guidance range we will finish.

Understood. And then for my follow-up, maybe just stepping back a little bit on some of these new projects. Maybe you could help us understand the importance and why you're excited about new Margaritaville in Orlando, opening in '27 as well as the SI in Nashville, whether it's strategically or geographically why it's important to the network?

Yes. Ultimately, I zoom way out and just look at how hospitality is transitioning where people are attaching their individual lifestyle to the way they want to spend their leisure time. I don't know exactly the year. I probably should, but Margaritaville was a song and a drink a decade ago. And today, it's a hospitality company with dozens of hotels. Why? Because people love to listen to music and have a drink in their hand on the beach. And leisure travel has become an expression of that lifestyle and you transition that across just what's illustrated in the affiliation excitement and passion people have for college sports, and we're simply meeting consumers where they are today. And I -- and most importantly for our business, especially being direct marketing is, we need to constantly be finding incremental database, incremental addressable markets that we can't reach otherwise. And that's why we have aspirations on each of these not to become the behemoth that Wyndham is today, which will continue to grow. We -- that's where our strength is. But adding $200 million to $400 million of sales with an individual brand that has a unique database that we otherwise wouldn't reach. That's why I'm excited. And a year ago, we shared with you our aspirations. It's a year later. We -- I mentioned it in one of my last answers, we're double-digit growth in Margaritaville, we are double-digit growth in Accor. And with Sports Illustrated coming, that -- those are all going to have outsized growth to our total VOI sales projections that we have today.

Your next question is coming from Brandt Montour from Barclays.

So just a more nuanced version of a question you heard earlier about the 2Q and the new owner sales. I think when we went back -- if we go back to March, April, when you were exiting the first quarter, you highlighted like slightly soft, I don't want to put words in your mouth, new owner sales trends. It sounds like it came out pretty well for you and those sort of held up in the 2Q. But with the sort of lowering in the mix in the 2Q, I wonder -- and the question is you guys have levers, right, in terms of what kind of tour flow you want new owner versus repeat. Did you sort of tactically move toward repeat in the 2Q and that kind of helps keep a higher-quality new owner tour coming in and keeping those metrics high, that makes sense?

So let me go back to my commentary at the end of Q1. We've just gone through Liberation Day. I think everyone was super nervous around the uncertainty in the macro economy. We've now gone 3 months through the quarter and there's not really been a change. We've not changed what we're trying to do. We're not trying to force any issue. I'm not going to ask my team to force the 35%. We're going to do -- we're going to execute against our business. If we didn't bring up 35% to you all, we wouldn't even discuss it because the industry sits, there are companies in 30%, there's companies at 40%. And in that range, you can run a highly successful timeshare business. So we're going to stay consistent to the way we generate new owners. And if there's fluctuation down to 30%, up to 40%, we are North Star for this business long term and the second half of this year will be 35%, but it will be no sweat if we hit 32%, 33%, and I'm not going to get overly excited at 37%, 38%. The normal cadence of adding marketing, taking it away, refining the business means we will end up over time at 35%. And keeping a highly executing sales and marketing team without dropping in changes in the middle of quarters inorganically or unnaturally doesn't help the overall enterprise. So this is -- our percentage in Q2 was natural. We didn't do anything unique to drive or decelerate the number and the performance specifically a new owner, the KPIs, as I mentioned in Stephen's question, are really strong and set up well for the long term.

That's super helpful and crystal clear. This is, I guess, then a follow-up to that and maybe more of a mathematical question then is -- and I know that there's no hard target on the back half for new owners. But if you are looking for a sequential improvement, what gives you confidence you can get a sequential improvement while also keeping VPGs in line sequentially while tour flow grows, right? I would think like the logic or the math would tell me that you'd have -- if you did improve a new owner mix throughout the back half, you would see sequential pressure on VPG. So maybe I'm missing something.

Yes. So again, let me just come back to -- I'm going to worry less about the percentage, and I'm going to spend more energy and our team spend more energy of are we growing our tour mix? Are we lapping our harder comps? Are we executing against our new partnerships? And are we opening on time, the new channels and the new in-house opportunities that we have? What we're seeing is that first 3 weeks of July is our marketing teams on the new owner side are executing extremely well. They're executing against new partnerships. They're activating in the regions in a high new owner period being in July. So percentage aside, the new owner channel is growing the way we wanted to. And yes, there needs to be acceleration in Q3 from the 3% in Q2 growth and 2% first half of the year, year-on-year growth. So yes, we expect acceleration. Early indications are we're going to get that acceleration. And the key now is we raised our full year VPG guidance, but the big win in the second half of the year is if we accelerate tour flow and maintain VPGs where they were in Q2, but it is a balance. And right now, our team is balancing it extremely well.

Our next question is a follow-up from Patrick Scholes from Truist Securities.

Great. Just a quick follow-up question on the Sports Illustrated brand. Just give us an update on when you expect Alabama to open? It sounds like Nashville will be next year, but where do you stand with Alabama? And then specifically on Nashville. How is that being financed? Is that asset light? Or is that something that you're putting perhaps partially or fully on balance sheet?

So let me hit each of the markets one by one. So Nashville is a conversion property. It will be just in time inventory to match revenue to sales, 185 units opening in the spring of 2026 and expectation is to start sales at some point in Q4 this year. Tuscaloosa is a purpose-built project, which we've gone through the permitting process, which put us about a quarter behind from our original expectations. So it's going to be early '27 for delivery. I would expect the -- to sort of split those 2 goalposts is that we will do another announcement this year on a third Sports Illustrated resort more than likely to be conversion, but more to come on that. We told you on the last call, we'd announced by this call, we did. I'd expect that we'd do one more announcement this year for our third location, which, again, I'd expect to be just in time, and I'd expect to be conversion as well.

We reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thanks, Kevin, and thanks again for joining us today. We're proud of what our team has accomplished so far this year and are excited about what's ahead. We remain focused on executing our strategy, driving long-term value and navigating the market with discipline and agility. As we look forward, we're confident in the strength of our business, the resilience of our model and our future opportunities. We appreciate your time today and look forward to keeping you updated on our progress in the quarters to come. Thanks. Have a great day.