This excerpt taken from the WYN 10-Q filed Nov 14, 2006.
Vacation Exchange and Rental
Revenues increased $20 million (2%) and EBITDA decreased $32 million (13%) in the nine months ended September 30, 2006 compared with the same period in 2005, primarily reflecting a $17 million increase in net revenues from rental transactions and an $11 million increase in annual dues and exchange revenues, partially offset in EBITDA by a $52 million increase in expenses, as discussed below, and an $8 million decline in ancillary revenues.
Net revenues generated from rental transactions and related services increased $17 million (5%) during the nine months ended September 30, 2006 driven by a 3% increase in rental transaction volume, partially offset by a 1% decrease in the average price per rental. Despite the reduction in the average price per rental, we realized an overall 2% increase in average revenue per rental due to a greater mix of properties rented that generated higher commission rates and incremental service fees per rental. The growth in rental transaction volume was primarily driven by an increase of approximately 24,900 weeks (11%) in arrivals at our Landal GreenParks vacation sites. The increase in net revenues from rental transactions and the average price per rental includes the translation effects of foreign exchange movements, which unfavorably impacted rental revenues by $1 million and accounted for the 1% reduction in the average price per rental.
Annual dues and exchange revenues increased $11 million (3%) during the nine months ended September 30, 2006 as compared with the same period in 2005 due to a 4% increase in the average number of members, partially offset by a 1% reduction in the average annual dues and exchange revenues generated per member. Points-based transactions represented 19% of the total exchange transactions during the nine months ended September 30, 2006 as compared with 17% during the nine months ended September 30, 2005. Although exchange transactions per member remained relatively constant period-over-period, there has been a shift to a greater amount of points-based members and related points-based transactions from the standard one-week for one-week exchange members and transactions in our legacy RCI Weeks exchange program, which resulted in an increase in our overall member base and exchange transaction volume. Since points are exchangeable for various travel-related products and services, as well as for vacation stays for various lengths of time, points-based exchange activity will generally result in higher transaction volumes with lower average fees as compared with the RCI Weeks exchange program.
Ancillary revenues declined $8 million during the nine months ended September 30, 2006 compared to the same period in 2005 primarily due to a reduction in travel fee revenues as a result of lower rates in 2006 relating to an outsourcing agreement to provide services to third-party travel club members.
EBITDA further reflects an increase in expenses of $52 million (9%) primarily driven by (i) a $21 million charge in the second quarter of 2006 related to local taxes payable to certain foreign jurisdictions, (ii) a $14 million increase in volume-related expenses, which was substantially comprised of higher reservation call center staffing costs to support member growth and increased call volumes, (iii) $8 million of incremental expenses incurred for future revenue generation, including increased marketing campaigns, timing of certain other marketing expenses, expansion of property recruitment efforts and investment in our consulting and international activities, (iv) $4 million of costs primarily related to higher corporate overhead allocations, (v) $4 million of higher cost of sales on rentals of vacation stay intervals and (vi) $3 million of costs related to our separation from Cendant. These increases were partially offset by (i) a $5 million reduction in
employee incentive program expenses during 2006 and (ii) $5 million of cost savings due to efficiencies realized in 2006 resulting from restructuring activities in 2005.
This excerpt taken from the WYN 8-K filed Jul 19, 2006.
Vacation Exchange and Rental
As a provider of vacation exchange services, the Company enters into affiliation agreements with developers of vacation ownership properties to allow owners of intervals to trade their intervals for certain other intervals within the Companys vacation exchange business and, for some members, for other leisure-related products and services. Additionally, as a marketer of vacation rental properties, generally the Company enters into contracts for exclusive periods of time with property owners to market the rental of such properties to rental customers. The Companys vacation exchange business derives a majority of its revenues from annual membership dues and exchange fees from members trading their intervals. Annual dues revenue represents the annual membership fees from members who participate in the Companys vacation exchange business. For additional fees, such participants are entitled to exchange intervals for intervals at other properties affiliated with our vacation exchange business. In addition, certain participants may exchange intervals for other leisure-related products and services. The Company records revenue from annual membership dues as deferred income on the Companys Combined Balance Sheets and recognizes it on a straight-line basis over the membership period during which delivery of publications, if applicable, and other services are provided to the members. Exchange fees are generated when members exchange their intervals for equivalent values of rights and services, which may include intervals at other properties within the Companys vacation exchange business or other leisure-related products and services. Exchange fees are recognized as revenue when the exchange requests have been confirmed to the member. The Companys vacation rental business derives its revenue principally from fees, which generally range from approximately 25% to 50% of the gross rent charged to rental customers. The
majority of the time, we act on behalf of the owners of the rental properties to generate our fees. We provide reservation services to the independent property owners and receive the agreed-upon fee for the service provided. We remit the gross rental fee received from the renter to the independent property owner, net of our agreed-upon fee. Revenue from such fees is recognized in the period that the rental reservation is made, net of expected cancellations. Upon confirmation of the rental reservation, the rental customer and property owner generally have a direct relationship for additional services to be performed. Cancellations for 2005 and 2004 totaled approximately 2% of rental transactions booked. Our revenue is earned when evidence of an arrangement exists, delivery has occurred or the services have been rendered, the sellers price to the buyer is fixed or determinable, and collectibility is reasonably assured. We also earn rental fees in connection with properties we own or lease under capital leases and such fees are recognized when the rental customers stay occurs, as this is the point at which the service is rendered.