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Executives

Jeff Hansen

Stephen P. Weisz - Chief Executive Officer, President and Director

John E. Geller - Chief Financial Officer and Executive Vice President

Analysts

Robert Higginbotham - SunTrust Robinson Humphrey, Inc., Research Division

Anto Savarirajan - Goldman Sachs Group Inc., Research Division

Christopher Agnew - MKM Partners LLC, Research Division

Robert A. LaFleur - JMP Securities LLC, Research Division

Stephen Altebrando - Sidoti & Company, LLC

Marriott Vacations Worldwide (VAC) Q4 2013 Earnings Call February 27, 2014 10:00 AM ET

Operator

Ladies and gentlemen, welcome to the Marriott Vacations Worldwide Fourth Quarter and Fiscal Year 2013 Conference Call held on the 27th of February 2014. [Operator Instructions] I would now like to turn the conference over to your host, Jeff Hansen. Please go ahead, sir.

Jeff Hansen

Thank you, Mark, and welcome to the Marriott Vacations Worldwide Fourth Quarter 2013 Earnings Conference Call. I'm joined today by Steve Weisz, President and CEO; and John Geller, Executive Vice President and CFO. I do need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our comments on this call, are effective only today, February 27, 2014, and will not be updated as actual events unfold.

Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release, as well as the Investor Relations page on our website at ir.mvwc.com.

I will now turn the call over to Steve Weisz, President and CEO of Marriott Vacations Worldwide.

Stephen P. Weisz

Thanks, Jeff. Good morning, everyone, and thank you for joining our fourth quarter earnings call. This morning, I'll walk you through our 2013 fourth quarter and full year results, and we'll also share our guidance for 2014. I'll then turn the call over to John, who will provide more detailed review of our 2013 performance. We'll then open up the line for your questions.

Let me remind everyone as we discuss our results that due to our reporting calendar, 2013 financial results include 1 extra week. Even taking into account the impact of the extra week, 2013 was a solid year as $38 million of adjusted EBITDA in the fourth quarter contributed to full-year adjusted EBITDA of $175 million, up nearly 27% over 2012, and at the high end of our guidance range.

Company-wide contract sales of our vacation ownership products increased over 6% in the quarter to $206 million led by our North America segment, which increased 9.9% over the fourth quarter of 2012, or $179 million. The impact of the additional week approximated $9 million of contract sales for the company, virtually all of which occurred in our North America segment.

For the full year 2013, total company contract sales improved slightly to $694 million. In our key North America segment, contract sales increased 6.9% over the full year 2012 within our guidance range of 4% to 8%. Excluding residential sales, North America contract sales were up 4.5%, also within our guidance range of 3% to 5%. This was due to continued improvement in VPG, which was up 8% on a full-year basis over last year to $3,200. This increase was even more impressive, given that 2012 was up 18% over 2011. The increase in VPG was driven by almost one full point of improvement in closing efficiencies for the full year of 2013.

While slower sales in our Europe and Asia-Pacific segment offset our improvement in North America, it is important to remember that we are selling out of our European developer-owned inventory. And in our Asia-Pacific segment, we intentionally shut down certain underperforming off-site sales galleries in the fourth quarter of 2012. We are repositioning ourselves in this segment for future growth by seeking out new destinations that will provide strong on-site sales distribution.

In North America, tours increased in the fourth quarter by just over 1%. However, this was due to the 53rd week I mentioned earlier. Adjusting for the extra week in the quarter, tours were, as expected, down approximately 4.5% compared to the fourth quarter of 2012. To that end, we expect tour flow trends to improve sequentially during the first half of 2014 with year-over-year growth beginning in the second half of the year as we continue to implement new programs to drive tour growth. Remember, as it relates to first-time buyers, there's typically a window of time before these tours occur.

Turning to our other lines of business, for the full year, our rental results were strong delivering $11 million compared to breakeven results in 2012. This improvement reflected an approximate 2.6 percentage point increase in transient occupancy and a 9% increase in transient rate. If you recall, on the third quarter call, we said we expected full year rental results to be between $13 million and $17 million, but cautioned that redemption costs associated with our Marriott Rewards pre-spin liability could be higher. In fact, during the quarter, we've recorded $4 million of additional charges for this lability. Adjusting for the impact of these higher costs, our full year rental result would have been $15 million, in line with our third quarter expectations.

Our resort management and other services results have adjusted improved by $4 million over the fourth quarter of 2012 to $23 million. For the full year, adjusted results improved $15 million to $17 million. These results were driven by increased club dues and additional management fees, as well as improvements in our ancillary operations.

Shifting to G&A. Cost increased $6 million in the quarter over the fourth quarter of 2012 due to an additional $3 million of legal fees related to ongoing litigation, $3 million of salary and wages and $1 million of cost related to the 53rd week. These results were offset by an additional $1 million of savings from our organization and separation-related efforts. For the full year, G&A costs have increased $13 million over 2012, including $8 million of legal costs, $8 million of salaries and wages and $1 million of cost related to the 53rd week. This was offset by $4 million of savings from our organization and separation-related efforts.

Turning to our average dispose of excess land and built inventory, I'm pleased to announce that subsequent to the end of the year, we completed the sale of the golf course and adjacent land here in Orlando for $22 million of net cash proceeds, resulting in an estimated gain of approximately $2 million. With this sale, we have now disposed of nearly $40 million of excess land and inventory that was built, including last year's sale of our golf course in Jupiter, Florida, home ownership residences in the Florida panhandle and residential loss in St. Thomas. This is good progress, but we have more to sell, primarily in Hawaii, Cancun and the Bahamas, as well as several smaller portions located in North America and Europe. Our remaining excess land and built inventory is expected to generate net cash proceeds of $120 million to $160 million.

As we closed out another year as a public company, I'd like reflect on our accomplishments over the last couple of years. Just over 2 years removed from our Spin-Off, I am very proud of what we've been able to achieve it. Since 2011, VPG has improved almost 30%. North America owned contract sales are up 17%. Adjusted development margin has grown from 7.4% to 19.8%. Our rental program has gone from the loss of $8 million to generating $11 million of positive results, and we have generated over $300 million in adjusted free cash flow. In addition, we have disposed of almost $40 million of excess land and build inventory and began our program to return capital to shareholders, all while working diligently to complete our separation from various different actions. To put it simply, I couldn't be happier with the progress we have made.

While we must remain focused on these areas to achieve our company goals moving forward, we want as much also broaden our focus, including adding new destinations. Future top-line management, top-line improvement will depend, in part, on planning inventory and exciting new locations with strong on-site sales distribution. In support of this effort, our teams are actively seeking out asset-light opportunities in our key growth segments of North America and Asia-Pacific. We must also grow our pipeline of first-time buyers, while being mindful of our continuing goal of improving developing our margins and bottom line results.

Now let me transition to our outlook for 2014. We have had 2 strong years of performance as a public company, and we expect 2014 to be no different. We've established our adjusted EBITDA guidance to be between $185 million and $200 million. Total company contract sales growth between 5% and 8% and adjusted free cash flow between $135 million and $160 million.

Lastly, while we do not provide quarterly guidance, let me provide a little color on what we've seen so far this year. Business results remains strong. However, as you can imagine, we have seen some impacts from the weather and heavy snowfall in the Midwest and Northeast had stoked for some travelers to remain at home, while snowfall has come late to many ski destinations out West. In addition, the 53rd week in 2013 may have a nominal effect on our first quarter comparability as that is typically a higher-than-average week for contract sales due to the inclusion of the New Year holiday. So while these headwinds may have some marginal impact on our first quarter year-over-year growth, we remain confident in our 2014 full-year outlook and look forward to reporting on our performance as we progress through the year.

With that, I'll turn the call over to John, who will provide a more detailed look at our 2013 results and our 2014 outlook. John?

John E. Geller

Thank you, Steve, and good morning to everyone joining us on the call. We ended 2013 with a solid fourth quarter, continuing our trend of improved VPG and increased development margin. Our North America segment, once again, is a large contributor, with contract sales increasing $22 million over the fourth quarter of 2012 to $186 million. This was due to an increase of $6 million from residential sales as we continue to sell-through our remaining excess built inventory, and $16 million of additional timeshare sales, approximately $9 million of which related to the 53rd week.

Total company reported development margin was $47 million, an increase of $7 million over the fourth quarter of 2012. Year-over-year improvements at product cost and marketing and sales spend more than offset a tough prior year comp, which had benefited from $11 million of favorable revenue reportability and $4 million of favorable of product cost true-up activity. The fourth quarter development margin percentage improved 450 basis points over the fourth quarter of 2012 to 23.3%.

In North America, reported development margin increased 180 basis points over the fourth quarter of 2012 to 26%. After adjusting both quarters for the impact of reportability, adjusted development margin improved roughly 600 basis points to 25.4%. This improvement was driven by a 320-basis-point reduction in product costs, primarily due to the success of our inventory repurchase program. We repurchased roughly $47 million of inventory in 2013 and expect to repurchase over $50 million this year, as we continue to buy back inventory at less than replacement cost. We expect continued improvement in product costs, with 2014 total company product cost rate between 31% and 32%.

Additionally, marketing and sales costs improved over the fourth quarter of 2012 by 290 basis points, to 48%. This was driven by over 0.05 point improvement in closing efficiency over the fourth quarter of 2012, resulting in a 6.8% increase in VPG.

Full-year company adjusted development margin continues to move toward our goal of 20%, ending the year at 19.8%. North America was, again, the key driver with an adjusted development margin of 21.8%.

Looking at our rental business, rental revenues in the fourth quarter were $69 million, $11 million higher than the fourth quarter of 2012, driven primarily from higher occupancy on increased availability of inventory to rent. Rental revenue net of expenses, however, was a loss of $13 million compared to a loss of $9 million in the fourth quarter of 2012. $1 million of this additional loss is due to higher charges related to the Marriott Rewards pre-spin liability as redemption cost came in higher than expected. Remember, this liability will be paid down over the next couple of years and will be fully paid off in 2016. The remaining loss in the fourth quarter was due primarily to additional costs associated with more inventory available to rent in a softer demand period. As we have discussed on prior calls, because of seasonality, our rental business does well in the first 3 quarters of the year, but the fourth quarter is our shoulder season and we typically incur a loss. This trend is evident in our 2013 results, in which rental revenues, after expenses, were $24 million through the end of the third quarter. This compares to $9 million through the first 3 quarters of 2012. So while higher inventory availability allowed us to drive significant improvement in the first 3 quarters of the year, the opposite was true in the fourth quarter. However, for the full year 2013, results showed significant improvement, with profits of $11 million versus breakeven last year.

In our resort management and other services business, revenue, net of expenses, improved $5 million to $23 million in the quarter. These results reflect higher annual club dues earned in connection with our North America points product, higher management fees and improved ancillary results.

Turning to our Asia-Pacific segment. Results were $3 million, an improvement of $3 million over the fourth quarter of last year due to reduced marketing and sales spend from the closure of underperforming, off-site sales centers late in 2012. These closures also drove full year results higher by $4 million to $8 million in 2013.

Moving to Europe. Adjusted segment results were $3 million in the fourth quarter, flat year-over-year, and full year adjusted segment results were $14 million, a $5 million improvement over 2012. This was due to improved rental results and reduced marketing and sales costs, as we are optimizing our structure in the region to align with our strategy to sell out our remaining developer inventory.

In our financing business revenue, net of financing expenses in consumer financing interest expense, was flat compared to the fourth quarter of 2012, as lower interest income was offset by lower interest expense.

As of the end of 2013, the weighted average interest rate of our securitization debt is 3.5%. Our notes receivable balance continues to decline as prior year notes are burning off faster than we are originating new notes. We expect this trend to reverse itself in 2015.

As an update on our organization and separation plan, we have successfully completed the majority of our separation from Marriott and expect to complete the full implementation of our remaining organizational changes by the end of 2014. In 2013, we spent approximately $19 million on these efforts, $8 million of which was incurred in the fourth quarter. We had achieved $10 million of cumulative cost savings to date and expect to achieve $3 million to $5 million of additional ongoing savings by the end of this year, with the balance of savings occurring in 2015.

Turning to our balance sheet and liquidity position since the end of 2012. Real estate inventory balances declined $17 million to $864 million, which is comprised of $369 million of finished goods, $151 million of work-in-process and $344 million of land and infrastructure. The company's debt outstanding was $718 million, flat until the end of 2012, including $674 million in non-recourse debt associated with our securitized notes, and $40 million of mandatorily redeemable preferred stock of the subsidiary.

Our 2013 full-year adjusted free cash flow was $175 million, within the guidance range of $170 million to $185 million. At the end of 2013, cash and cash equivalents totaled $200 million, and we had $78 million of notes receivable eligible for securitization. We also had $199 million in available capacity under our $200 million revolving credit facility.

Turning to our share repurchase program that we implemented at the beginning of the fourth quarter of 2013, we have repurchased over 1,035,000 shares through yesterday at an average price of $50.19 per share, representing nearly 1/3 of the authorization that was approved by our board in October.

Now let me take a minute to discuss our outlook for 2014. We have seen tremendous improvements in our business over the last couple of years. Adjusted development margins have improved almost threefold. Our rental results have improved considerably and are contributing positively to our earnings, and our financing business has benefited from record-low borrowing rates. We expect 2014 adjusted EBITDA to be between $185 million and $200 million. We expect total company contract sales, excluding residential sales, to grow between 5% and 8%, with North America contract sales to grow between 4% and 7%. Adjusted company development margin is expected to be between 20% and 21%, led by North America, with adjusted development margin of 22% to 23%. We expect adjusted fully diluted earnings per share to be between $2.41 and $2.67 per share, excluding the impact of any future share repurchases. And lastly, adjusted free cash flow is expected to be between $135 million and $160 million for the year, as our 2014 forecasted cash flows should approximate a more normalized run rate. As we have previously discussed, we expect to benefit from lower cash income taxes and inventory spending, which will offset higher spending associated with the pay down of our Marriott Rewards pre-spin liability.

So let me close by echoing what you heard from Steve. We have achieved great success in our first 2 years as a public company, and our strategies have not changed. We will continue to focus on driving profitable growth, improving margins and generating strong free cash flow.

I look forward to reporting on that progress in future quarters. As always, we appreciate your interest in Marriott Vacations Worldwide. And with that, I will now open up the call for Q&A. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And the first question comes from Robert Higginbotham from the company SunTrust.

Robert Higginbotham - SunTrust Robinson Humphrey, Inc., Research Division

So a quick question on contract sales, your outlook for 2014, it looks like your total company contract sales is a point or so above your outlook for North America. I imagine some of that has to do with your new property in Asia coming on line, maybe less of a drag in Europe, and maybe if you could just clarify that and get some more color on these 2 pieces.

John E. Geller

Yes, you're right, Robert. The additional growth is in both places, Europe, where we expect to see slightly higher contract sales year-over-year that we have been experiencing, given just some changes we've made there on the sales side, as well as Asia with the changes we made in 2012. We've stabilized, if you will, you still had some year-over-year declines. Now we expect that to start growing more closely with what we expect here in North America.

Robert Higginbotham - SunTrust Robinson Humphrey, Inc., Research Division

Got it. And on the rental business, you've made some solid improvement in terms of profitability there. Looking forward in how you think what's embedded in your guidance, how should we think about that business? Is there still room to go there? And what would be the sources?

John E. Geller

Yes, I'll add a few comments on it. You still have a couple of things. We've made progress, as we've talked about, on the Luxury side, and some of the unsold maintenance fees there. But you still have a fair amount of unsold maintenance fees as we sell through that remaining Luxury inventory that we've talked about as a little bit of a drag. The other thing is, as the points program continues to develop and people exchange and go to different places as you've seen in 2013, we have more inventory available to rent. And typically, as we've said, we were able to monetize that, make a little bit of money on it. So while we don't know what inventory available to rent will be year-over-year yet, that's still evolving, we would expect to see some continued growth there.

Operator

And the next question comes from Steven Kent from the company Goldman Sachs.

Anto Savarirajan - Goldman Sachs Group Inc., Research Division

This is actually Anto Savarirajan for Steve Kent. On your outlook for land sales, can you talk about the bidding process here? And are that inbound inquiries? What time frame should we expect the $120 million to $150 million getting realized?

Stephen P. Weisz

Well, I think the -- there is no specific timetable. Obviously, some of these larger partials that we're talking that remain, you have to go through a variety of different people that express interest and go through a qualification process to see if, in fact, they're there and they're real. And it takes a while to get some of these things negotiated. Obviously, we would like to move them sooner, rather than later. But as we've said before, we're not going to fire scale these things. We think this is a great property and it's at the -- and what we are listing them for and everything else is out of the appropriate value for land in the marketplace. So as we have more to share with you, we certainly would be excited to do that, but it's just going to take a little time.

Anto Savarirajan - Goldman Sachs Group Inc., Research Division

Got it. For my follow-up, you put a lot of initiatives on the sales and marketing side, and you've been running a tighter ship there. Have they largely ran the costs? And have you caught up with peers? How should we think about more efficiencies being realized over '14 and '15?

Stephen P. Weisz

Yes, well, we'll continue to push on every front in terms of higher levels of VPG which, obviously, give you a better sales and marketing cost. We continued to evolve our sales process. It is always a work in progress, always has been. Trying to imagine the very best way to project the project as part of the possibilities of vacation ownership through the new prospect. I would expect that you'll still see improvement in the marketing sales costs. It is often times difficult to project exactly what that will be. Now let me say in the same breath that, as we've indicated, we are certainly going to try to move towards more first-time buyers. And with that, as you begin to open up new sales channels, there are typically some investment costs that you have to make in order to open up those new channels. And in return, then you'll start to get the yield out of these channels at a later date. Because the way that timeshare accounting works, it has to make all of the expenses for that in the front end and then it gets better at the back end. So while despite some timing differences, we obviously think that it's the right move. We're certainly going to stay focused on trying to lower sales and marketing costs but at the same time, driving top line. And at the end of the day, development margin is really how we're going to measure our success.

Operator

And the next question comes from Chris Agnew from MKM Partners.

Christopher Agnew - MKM Partners LLC, Research Division

Can you expand upon your commentary on asset-light opportunities? Am I correct in thinking it changed a little bit from someday, maybe to actually looking at some real potential opportunities there?

Stephen P. Weisz

Yes, I think that's a fair characterization, Chris. When we first started talking about asset light, I think we would have to be fair in admitting the fact that we haven't done much exploration in that space. We have spent a fair amount of time talking to a variety of potential partners on asset light. We think there is a real possibility there. And that clearly is what we think is not only an appropriate way to think about the growth of the business in terms of new projects, but also in some places, particularly if you get overseas, it really makes a lot of sense because, oftentimes, your asset-light partner will also be very familiar with doing real estate development in countries that are less familiar to us.

Christopher Agnew - MKM Partners LLC, Research Division

Got it. And are there also opportunities closer to home? And I'm thinking -- you've talked before, I think, about location, I mean, New York and I know Hilton reported today the strong timeshare results, they do very well in New York. Are there sort of, by now, what you'd call, like, urban resorts? Are those opportunities you're looking at as well?

Stephen P. Weisz

Absolutely. And we remain very interested in the New York opportunity. And early indications are that if should we find something in New York that meets our investment metrics and calls to the attractive addition to the portfolio, that we may well be able to get an asset-light partner involved in a transaction of that nature.

Christopher Agnew - MKM Partners LLC, Research Division

Got you. Switching to Europe, any indication on time frame on when you'll be able to sell out? And have you seen -- are you tracking ahead of your expectations there?

Stephen P. Weisz

No, I think, probably, 2016 is when we think Europe, for the most part, will be sold out of developer inventory. Obviously, there, every day brings kind of new and invigorating news from what's going on in that marketplace, and Europe is no different than the United States in many respects, and the fact that people are looking at a vacation ownership purchase in the context of their broader life and their financial circumstances. and everything else. But we're about on track to where we thought we're going to be. And unless there's a significant bump in the road, I think we'll get there.

Christopher Agnew - MKM Partners LLC, Research Division

Excellent. And one more sort of detail question, just on SG&A. You highlighted $3 million of ongoing litigation. Assuming it's ongoing, it's -- you're going to be experiencing that sort of level of cost in every quarter? And then the salary and wages, is that bonus -- year-end bonus related? Or, again, is that more of a step-change, ongoing?

Stephen P. Weisz

Well, the litigation costs, I mean, we have spent them as they come through, and so there is some lumpiness there. Obviously, we want to try to get this litigation behind us as quickly as possible. So we would anticipate that as soon as we're able to put these things to that, the related litigation costs will, in fact, go away and not be present in our results. As far as the SG&A, I think there's a couple of things that were driving that number. Don't forget there was that $1 million roughly of impact because of that 53rd week. We do have -- as because of our coming in at the upper hand of our guidance, we did have a slightly higher bonus accrual that we put in place in the fourth quarter of 2013, the growth coming back. And then, as we continued to set ourselves correctly as it relates to our organizational structure and everything else, we've made a few little additional changes, but nothing of any material nature. We're going to continue to be very focused on SG&A and make sure we try to vanish those costs down as much as we can, plus we'll have the benefit of the organization and separation-related efforts that will yield some additional savings to offset any increases.

Operator

[Operator Instructions] The last question in queue currently comes from Robert LaFleur from JMP Securities.

Robert A. LaFleur - JMP Securities LLC, Research Division

Question on the golf course and land sales that you've accomplished to date. Where does the pricing come out on those relative to your initial expectations? Have they been higher? Lower? About as expected? And the revised guidance for the remaining stuff, has the pricing expectations on that changed at all?

Stephen P. Weisz

Yes, I think you'll recall that when we did the Jupiter sale in 2012, my recollection is that it was a about roughly $5-million gain and, against our book, and this sale is about a $2-million gain against our book, so slightly higher. I don't know if you could -- if that's a read through, the only other real estate. Obviously, if we thought that there was additional value to be gained from some of these partials we'd have from mark-to-market, we can take that book up. We haven't seen evidence of that across the board here so far. Ultimately, we're going to have a little bit more that we have on the book but I don't think you should assume that we'd take a very slight in percentage increase and assume that, that's going to be the case.

Robert A. LaFleur - JMP Securities LLC, Research Division

Okay. And a different topic, John, so the close rates were up 50 basis points in the quarter. Can you refresh our memory as to kind of where close rates are relative to peak? And how long you think annual current trajectory is going to take you to get back to peak? And how much upside above peak is? Where do you think once that happens?

Stephen P. Weisz

Well, let me answer the last part first, how high is high. We don't know. Our peak was, call it, mid-teens in the '06, '07 time frame. We're getting close there. We're not quite there yet. We're getting close. But keep in mind, '06, '07 was -- we were selling a weeks-based product now than points-based product. So again, I think we're going to continue to try to push for higher closing rates at every opportunity and do it in a balanced fashion. Obviously, we don't want to give up sales just to get a higher closing percentage. So we want to try to drive both top line and closing rate simultaneously. And so I think you should think about it as a work in progress, and we're going to continue working on it, and we'll keep reporting on it.

Robert A. LaFleur - JMP Securities LLC, Research Division

How much of the increase in close rate do you think is a function of having the ability to sell something that's less than a full week's worth of points? How much would you say that's contributing to your close rate now under the points program versus the prior week's program?

Stephen P. Weisz

Clearly, it's a part of it. It is virtually impossible to discern all the 0.5 point in the fourth quarter, as an example, what percentage of that was because we can sell something less than a full week versus everything else. Keep in mind, and certainly you know that, as you think about the total VPG's metric, if we sold at a higher close rate to those people that were buying less than the full week's equivalent, it would take that average volume for sale down. Therefore, you'd have a little more headwind going into the VPG calculation. So the fact that we were able to drive 8% of VPG improvement in the year, on top of 18% in the prior year, I think that says that we're doing a pretty good job.

Robert A. LaFleur - JMP Securities LLC, Research Division

Do you have any metric that looks at what percentage of transactions are for less than a week's worth of points, just to give us some sense of how the sales break out between sort of topping of the tank customers versus initial full complement of the points for a week's worth of usage?

Stephen P. Weisz

I'm sure our sales organization has those things. I mean, we track every single sale, obviously. To be honest, it's not something that we spent a great deal of time looking at it and kind of our level, Jonathan's line. But why we do this? Maybe Jeff can dig something up, and on the subsequent call, maybe you and he can discuss that further.

Robert A. LaFleur - JMP Securities LLC, Research Division

Okay. And one last one on a different topic with -- had you have done more homework on the asset-light potential out there? And obviously, there's several different iterations that asset-light can take. And maybe if you could talk about sort of which iterations seem to make the most sense for you as you survey the landscape over the past year or so?

Stephen P. Weisz

I think there are 2.5 different things that is the most obvious. One is pretty much turnkey stuff where a developer would, in fact, develop it on their balance sheet. We take it off our hands, hopefully, on a percentage basis as we keep the inventory to keep the trust. The second would be where we would acquire an asset working with a third-party, who would actually become the owner of the asset, where we then again will begin to bring more of that inventory back into the trust over time. The third one that I'd refer to, which is kind of a half of one, is some land of that where you might do something, kind of a joint venture with somebody where you'd put in some money, they'd put in some money and find a way to do that. I would think the first 2 would be the most obvious things that we would talk about and probably the ones where the most opportunity is. The third one is just something that's maybe out there on an occasional basis.

Robert A. LaFleur - JMP Securities LLC, Research Division

Are these opportunities more co-located with the existing resort properties? Or do they tend to be more standalone projects?

Stephen P. Weisz

They can come in both flavors. And it's really market-by-market driven, where it makes sense to do that, for instance. I mean, we've talked about New York. Should we do something in New York? I think it would be more than likely that it would be an existing property or a to-be-built property that some developer would probably do if we take it out over time, probably not affiliated directly with the Marriott Hotel. However, there well may be some other stuff where you got an opportunity to do something on the same campus, or even within the same physical structure of an existing Marriott Hotel. So I think you'll see it in both event, in both forms.

Operator

And your next question comes from Steve Altebrando.

Stephen Altebrando - Sidoti & Company, LLC

It looks like your sales reserve continues to decline. Where has that historically been?

John E. Geller

In terms of the overall reserve? Or just, you're just talking about our provision for reserve?

Stephen Altebrando - Sidoti & Company, LLC

For provision.

John E. Geller

Yes, it was -- it came down slightly year-over-year. We've started to see the improvements in collections and all that, probably gotten back to pre-downturn levels. So subject to something more catastrophic to the economy, where it could put impact on collections, I would expect there's probably still maybe some marginal improvement, but not that much.

Operator

There seem to be no further questions. Please go ahead with any concluding remarks.

Stephen P. Weisz

Sure. Well, first of all, I want to once again thank you for your time today. As you've heard from both me and John, 2013 was a very successful year. We look forward to similar success in 2014, particularly, as we celebrate our 30th anniversary. And thank you, again, for your participation and your continued interest. And finally, to everybody on the call and to your families, enjoy your next vacation. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, that does conclude the conference call for today. Thank you for your participation, and you may now disconnect.

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