Executive Summary / Key Takeaways

• Travel + Leisure Co. (TNL) demonstrates robust financial performance, driven by its Vacation Ownership segment, which achieved a 6% revenue increase and 14% Adjusted EBITDA growth in Q3 2025, alongside an impressive Volume Per Guest (VPG) of $3,304.
• The company is strategically expanding its brand portfolio with new offerings like Sports Illustrated Resorts and Eddie Bauer Adventure Club, aiming to broaden its addressable market and diversify revenue streams, with each new brand expected to generate between $200 million and $400 million in sales.
• TNL is leveraging digital innovation, including the Club Wyndham app (215,000 downloads, 28% of bookings, 71% search-to-book conversion) and the newly launched WorldMark app, to enhance owner engagement and streamline the vacation planning experience.
• Despite macroeconomic uncertainties and structural headwinds in its Travel and Membership segment, TNL maintains a strong liquidity position of nearly $1.1 billion and a disciplined capital allocation strategy, including consistent share repurchases and a 12% increased dividend.
• The company's outlook for FY2025 projects Adjusted EBITDA between $965 million and $985 million and Gross VOI Sales between $2.45 billion and $2.50 billion, underpinned by a resilient consumer base and strategic operational efficiencies.

TNL's Evolving Leisure Empire: A Foundation for Growth

Travel + Leisure Co. (TNL) has transformed from its origins as Wyndham Destinations, Inc., rebranding in February 2021 and strategically focusing its operations on two core segments: Vacation Ownership and Travel and Membership. This evolution, initiated by the spin-off of Wyndham Hotels & Resorts (WYND) in 2018 and the divestiture of its European vacation rentals, has positioned TNL as a global provider of hospitality services and travel products. The company's overarching strategy centers on delivering exceptional vacation experiences, expanding its brand reach, and leveraging data-driven marketing and digital innovation to create lasting shareholder value.

The leisure travel industry continues to exhibit robust demand, with vacations remaining a high priority for consumers. This trend is particularly evident in periods of inflation, where TNL's product offerings demonstrate a compelling value proposition. The company’s diversified portfolio and strategic initiatives are designed to capitalize on this sustained consumer appetite for travel.

Technological Edge: Enhancing the Vacation Experience

TNL's commitment to digital innovation is a cornerstone of its strategy, providing a significant competitive differentiator. The company has invested in advanced digital and AI tools aimed at making vacation planning seamless and personalizing the guest experience. These technological advancements are not merely incremental improvements but are designed to drive deeper engagement, repeat usage, and ultimately, greater lifetime value from its customer base.

A prime example is the Club Wyndham app, which has achieved 215,000 downloads, with a notable 28% of all bookings now originating through the platform. This app boasts a 71% search-to-book conversion rate, representing a 22% increase compared to the owner website, underscoring its effectiveness in streamlining the booking process. The recent launch of the WorldMark app in Q3 2025, alongside plans to revamp the WorldMark by Wyndham website, aims to replicate this success for its second-largest club member base. These digital platforms offer tangible benefits by reducing friction in the booking process, improving owner satisfaction, and enhancing operational efficiency. The integration of AI tools further aims to personalize experiences and optimize booking, contributing directly to TNL's competitive moat by fostering stronger customer loyalty and driving higher conversion rates.

Vacation Ownership: The Resilient Core

The Vacation Ownership segment remains TNL's primary growth engine, consistently delivering strong financial and operational results. In the third quarter of 2025, the segment reported net revenues of $876 million, a 6% increase year-over-year, and Adjusted EBITDA grew 14% to $231 million. This performance translated into an Adjusted EBITDA margin of 26.37%. Gross VOI sales accelerated to $682 million, supported by a 2% increase in tour flow and a Volume Per Guest (VPG) of $3,304, which was up 10% year-over-year and exceeded guidance expectations. This marks the 18th consecutive quarter with VPGs above $3,000, a testament to the enduring value proposition of TNL's products.

The strength of this segment is underpinned by a resilient customer base, characterized by an average owner age of 59, a household income exceeding $110,000, and an average tenure of 17 years. Notably, 80% of owners have fully paid off their ownership, indicating a stable and committed customer base. New buyers, with 65% coming from Gen X, millennial, and Gen Z households, reflect the product's appeal across generations. The consumer finance portfolio remains stable, with new originations maintaining weighted average FICO scores above 740, and the full-year loan loss provision is expected to remain at 21%. Management anticipates the longer-term provision rate to settle in the upper teens, reflecting continued strong underwriting standards.

Strategic brand expansion is a key initiative for this segment. The acquisition of Accor (ACCYY)'s vacation ownership business in March 2024 expanded TNL's international presence, particularly in Asia Pacific, and has exceeded initial expectations. New brands like Sports Illustrated Resorts, with locations planned for Nashville (Spring 2027) and Chicago (late 2026), and the recently launched Eddie Bauer Adventure Club (first resort in Moab, Utah, by early 2026), are designed to broaden the addressable market and attract diverse traveler profiles. Each of these new brands is expected to generate between $200 million and $400 million in top-line revenue, initially focusing on new owner acquisition before transitioning to an owner upgrade model.

Travel & Membership: Adapting to Industry Shifts

The Travel and Membership segment, comprising vacation exchange brands and travel clubs, booked 422,000 transactions in Q3 2025, facilitating vacations for over 1 million customers. While this segment contributes approximately 20% of consolidated revenue, it remains a vital source of cash flow. In Q3 2025, net revenues increased a modest 1% year-over-year to $169 million, but Adjusted EBITDA decreased 6% to $58 million, reflecting a shift in transaction mix.

The segment continues to face structural headwinds from industry consolidation, which has led to a migration from external to internal exchanges, pressuring the traditional exchange business. Despite these challenges, the Travel Club business has shown significant growth, with transactions increasing 30% year-over-year in Q3 2025. Although Travel Club revenue per transaction decreased by 12%, the acceleration in transaction volume is contributing to overall revenue growth for this part of the business. Management is focused on optimizing profitability and cash generation within this segment, aiming to mitigate the impacts of the declining exchange business through strategic growth in Travel Clubs and tight cost management.

Capital Allocation & Financial Fortitude

TNL's financial strength is evident in its robust liquidity and disciplined capital allocation. As of September 30, 2025, the company maintained a strong liquidity position nearing $1.1 billion, including $240 million in cash and cash equivalents and $815 million available on its revolving credit facility. Adjusted free cash flow grew 23% year-over-year through the third quarter, with expectations to generate approximately $500 million for the full year, converting about half of its Adjusted EBITDA into cash.

The company's net leverage stood at 3.3x at the end of Q3 2025, down from 3.4x a year prior, and is projected to be below 3.3x by year-end. TNL has actively managed its debt, issuing $500 million in new bonds at 6.125% due 2033 to refinance $350 million of 6.60% secured notes due October 2025, achieving slightly more favorable pricing. Furthermore, the company completed a $300 million term securitization at a weighted average coupon of 4.78%, marking its most efficient ABS execution of the year. The revolving credit facility was also refinanced and extended to June 2030, with pricing spreads reduced by 25 basis points. These actions underscore TNL's ability to access capital markets efficiently and maintain financial flexibility.

Shareholder returns remain a priority, with $106 million returned to shareholders in Q3 2025, comprising $36 million in dividends and $70 million in share repurchases. Through the first nine months of 2025, TNL repurchased $210 million of stock, representing 6% of its beginning share count. The company's dividend was increased by 12% in Q1 2025 to $0.56 per share, and management intends to recommend this rate for the fourth quarter. Inventory spend and capital investments remained disciplined in 2024, with inventory spend less than half of pre-COVID levels and capital investments stable at approximately $100 million annually.

Competitive Landscape: Positioning for Growth

TNL operates in a competitive leisure travel market, facing both direct and indirect rivals. Direct competitors include Marriott Vacations Worldwide (VAC), Hilton Grand Vacations (HGV), Wyndham Hotels & Resorts (WYND), and Expedia Group (EXPE). TNL differentiates itself through its diversified offerings, encompassing vacation ownership, travel clubs, and direct-to-consumer rentals, providing a broader ecosystem of services compared to some peers.

Compared to Marriott Vacations Worldwide (VAC) and Hilton Grand Vacations (HGV), TNL's strength lies in its extensive global resort network and its ability to attract a broad customer base through varied entry points. While VAC and HGV often leverage their luxury brand affiliations for premium experiences, TNL's strategy focuses on a wider array of travel memberships and property management services, potentially offering greater operational flexibility. TNL's digital innovations, such as its highly effective Club Wyndham app, enhance customer engagement and streamline bookings, providing a competitive edge in user experience that rivals may not match as seamlessly within their specific ownership models.

Against Wyndham Hotels & Resorts (WYND), its former parent, TNL has carved out a specialized niche in integrated travel memberships and property management for vacation interests. TNL's direct-to-consumer model and focus on tailored vacation services can lead to efficient customer retention and potentially superior cash flow generation from its core segments. While WYND benefits from a vast franchise network and scalability, TNL's specialized approach allows for a deeper focus on the ownership experience.

When compared to Expedia Group (EXPE), a pure travel technology player, TNL's travel membership segment competes in the broader booking space. TNL's integrated ownership services provide a unique value proposition, allowing for personalized travel experiences tied to ownership. While EXPE excels in technological reach and platform breadth, TNL's investments in AI and digital tools aim to enhance its own platforms, improving booking efficiency and loyalty program implementation.

TNL's competitive advantages, or "moats," include its strong brand loyalty within vacation ownership, which translates into recurring revenue and potentially higher margins. Its unique distribution channels, particularly direct-to-consumer rentals, offer broader market access and potentially faster innovation cycles. However, TNL faces vulnerabilities such as market saturation risks in resort-dependent segments and the need for continuous technological innovation to keep pace with pure tech rivals.

Outlook & Risks: Charting the Course Ahead

TNL's management has provided an optimistic outlook for the remainder of 2025, underpinned by strong Q3 performance and confidence in its strategic initiatives. The company raised the midpoint of its full-year 2025 Adjusted EBITDA guidance to $975 million, with a new range of $965 million to $985 million. Gross VOI Sales are projected to be between $2.45 billion and $2.50 billion, with VPG expected to range from $3,250 to $3,275. The full-year loan loss provision is anticipated to remain at 21%, with management expecting Q4 2025 to be the low watermark for the year, and a long-term target of settling in the upper teens. Net leverage is expected to be below 3.3x by year-end 2025.

Despite this positive outlook, several risks warrant investor attention. The broader macroeconomic environment, characterized by sustained inflationary pressures, high interest rates, and the risk of recession, continues to introduce uncertainty into business trends and consumer behavior. While TNL's loan portfolio has shown resilience, delinquencies remain elevated compared to historical levels, posing a potential risk. The strategic resort restructuring initiative, which involves optimizing fourteen resorts, carries risks related to obtaining necessary HOA, member, and court approvals, and could result in additional inventory impairment charges of approximately $22 million if all remaining actions are approved. Furthermore, the availability and terms of surety bonds, crucial for the Vacation Ownership business, are subject to market conditions and the company's credit rating. The implementation of OECD's Pillar Two rules, introducing a global minimum tax, has impacted the effective tax rate in some jurisdictions, though the overall financial impact was not material as of Q3 2025. Foreign currency volatility is also noted as a potential factor influencing results in 2025.

Conclusion

Travel + Leisure Co. stands as a compelling investment in the leisure travel sector, demonstrating remarkable resilience and strategic foresight. Its core Vacation Ownership business continues to be a powerhouse, driven by strong consumer demand, effective digital engagement through platforms like the Club Wyndham app, and a disciplined approach to credit quality. The strategic expansion into new brands such as Sports Illustrated Resorts and Eddie Bauer Adventure Club is set to broaden its market reach and diversify revenue streams, laying the groundwork for sustained long-term growth.

While the Travel and Membership segment faces ongoing structural challenges from industry consolidation, TNL's proactive efforts to grow its Travel Club business and manage costs effectively are mitigating these headwinds. The company's robust financial health, characterized by strong free cash flow generation, efficient debt management, and a consistent commitment to shareholder returns through dividends and share repurchases, reinforces its investment thesis. Despite macroeconomic uncertainties and operational risks, TNL's strategic focus on digital innovation, brand diversification, and disciplined execution positions it favorably to capitalize on the enduring consumer prioritization of travel, making it a noteworthy consideration for discerning investors.