VACATION OWNERSHIP NOTES RECEIVABLE

6 Months Ended

Jun. 30, 2023

Receivables [Abstract]

VACATION OWNERSHIP NOTES RECEIVABLE

6. VACATION OWNERSHIP NOTES RECEIVABLE

The following table shows the composition of our vacation ownership notes receivable balances, net of reserves.

	June 30, 2023						December 31, 2022
($ in millions)	Originated		Acquired		Total		Originated		Acquired		Total
Securitized	$	1,682	$	181	$	1,863	$	1,571	$	221	$	1,792
Non-securitized
Eligible for securitization(1)	51		1		52		63		—		63
Not eligible for securitization(1)	335		22		357		322		21		343
Subtotal	386		23		409		385		21		406
	$	2,068	$	204	$	2,272	$	1,956	$	242	$	2,198
(1)Refer to Footnote 7 “Financial Instruments” for discussion of eligibility of our vacation ownership notes receivable for securitization.

We reflect interest income associated with vacation ownership notes receivable in our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable.

	Three Months Ended				Six Months Ended
($ in millions)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Interest income associated with vacation ownership notes receivable — securitized	$	68	$	60	$	135	$	119
Interest income associated with vacation ownership notes receivable — non-securitized	8		9		17		19
Total interest income associated with vacation ownership notes receivable	$	76	$	69	$	152	$	138

Credit Quality Indicators - Vacation Ownership Notes Receivable

We use the origination of vacation ownership notes receivable and the FICO scores of the customer by brand as the primary credit quality indicators, as historical performance indicates that there is a relationship between the default behavior of borrowers by FICO and the brand associated with the vacation ownership interest (“VOI”) they have acquired. We use the term “Combined Marriott” to refer to our Marriott-, Sheraton-, and Westin-brands.

The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 722 and 721, at June 30, 2023 and December 31, 2022, respectively, based on the FICO score of the borrower at the time of origination.

Acquired Vacation Ownership Notes Receivable

Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition and the Welk Acquisition. The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at June 30, 2023.

	Acquired Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total
2023, remaining	$	3	$	17	$	20
2024	3		34		37
2025	3		32		35
2026	3		28		31
2027	3		23		26
Thereafter	8		47		55
Balance at June 30, 2023	$	23	$	181	$	204
Weighted average stated interest rate	14.0%		14.2%		14.2%
Range of stated interest rates	0.0% to 21.9%		0.0% to 21.9%		0.0% to 21.9%

The following table summarizes activity related to our acquired vacation ownership notes receivable reserve.

	Acquired Vacation Ownership Notes Receivable Reserve
($ in millions)	Non-Securitized		Securitized		Total
Balance at December 31, 2022	$	11	$	18	$	29
Securitizations	(2)		2		—
Clean-up call	2		(2)		—
Write-offs	(14)		—		(14)
Recoveries	8		—		8
Defaulted vacation ownership notes receivable repurchase activity(1)	10		(10)		—
(Decrease) increase in vacation ownership notes receivable reserve	(7)		4		(3)
Balance at June 30, 2023	$	8	$	12	$	20
(1)Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchased securitized vacation ownership notes receivable.

The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and FICO score.

	Acquired Vacation Ownership Notes Receivable as of June 30, 2023
($ in millions)	700+		600 - 699		< 600		No Score		Total
Combined Marriott	$	56	$	38	$	5	$	13	$	112
Hyatt and Welk	65		45		1		1		112
	$	121	$	83	$	6	$	14	$	224

	Acquired Vacation Ownership Notes Receivable as of December 31, 2022
($ in millions)	700+		600 - 699		< 600		No Score		Total
Combined Marriott	$	67	$	47	$	6	$	16	$	136
Hyatt and Welk	80		53		1		1		135
	$	147	$	100	$	7	$	17	$	271

The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and FICO score as of June 30, 2023, and gross write-offs by brand for the first half of 2023.

	Acquired Vacation Ownership Notes Receivable - Combined Marriott
($ in millions)	2021		2020		2019 & Prior		Total
700 +	$	—	$	—	$	56	$	56
600 - 699	—		—		38		38
< 600	—		—		5		5
No Score	—		—		13		13
	$	—	$	—	$	112	$	112
Gross write-offs	$	—	$	—	$	8	$	8

	Acquired Vacation Ownership Notes Receivable - Hyatt and Welk
($ in millions)	2021		2020		2019 & Prior		Total
700 +	$	5	$	13	$	47	$	65
600 - 699	3		7		35		45
< 600	—		1		—		1
No Score	—		—		1		1
	$	8	$	21	$	83	$	112
Gross write-offs	$	—	$	2	$	4	$	6

Originated Vacation Ownership Notes Receivable

Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at June 30, 2023.

	Originated Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total
2023, remaining	$	22	$	68	$	90
2024	43		140		183
2025	35		146		181
2026	34		154		188
2027	36		161		197
Thereafter	216		1,013		1,229
Balance at June 30, 2023	$	386	$	1,682	$	2,068
Weighted average stated interest rate	12.1%		13.2%		13.0%
Range of stated interest rates	0.0% to 20.9%		0.0% to 19.9%		0.0% to 20.9%

For originated vacation ownership notes receivable, we record the difference between the vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our vacation ownership notes receivable. The following table summarizes the activity related to our originated vacation ownership notes receivable reserve.

	Originated Vacation Ownership Notes Receivable Reserve
($ in millions)	Non-Securitized		Securitized		Total
Balance at December 31, 2022	$	149	$	213	$	362
Increase in vacation ownership notes receivable reserve	70		11		81
Securitizations	(99)		99		—
Clean-up call	43		(43)		—
Write-offs	(61)		—		(61)
Defaulted vacation ownership notes receivable repurchase activity(1)	48		(48)		—
Balance at June 30, 2023	$	150	$	232	$	382
(1)Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchased securitized vacation ownership notes receivable.

The following tables show originated vacation ownership notes receivable, before reserves, by brand and FICO score.

	Originated Vacation Ownership Notes Receivable as of June 30, 2023
($ in millions)	700 +		600 - 699		< 600		No Score		Total
Combined Marriott	$	1,280	$	572	$	54	$	302	$	2,208
Hyatt and Welk	169		68		2		3		242
	$	1,449	$	640	$	56	$	305	$	2,450

	Originated Vacation Ownership Notes Receivable as of December 31, 2022
($ in millions)	700 +		600 - 699		< 600		No Score		Total
Combined Marriott	$	1,210	$	549	$	55	$	278	2,092
Hyatt and Welk	157		64		3		2		226
	$	1,367	$	613	$	58	$	280	$	2,318

The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and FICO score as of June 30, 2023, and gross write-offs by brand for the first half of 2023.

	Originated Vacation Ownership Notes Receivable - Combined Marriott
($ in millions)	2023		2022		2021		2020		2019 & Prior		Total
700 +	$	243	$	434	$	250	$	84	$	269	$	1,280
600 - 699	84		181		123		46		138		572
< 600	6		17		13		5		13		54
No Score	85		88		32		21		76		302
	$	418	$	720	$	418	$	156	$	496	$	2,208
Gross write-offs	$	1	$	9	$	17	$	7	$	20	$	54

	Originated Vacation Ownership Notes Receivable - Hyatt and Welk
($ in millions)	2023		2022		2021		2020		2019 & Prior		Total
700 +	$	49	$	80	$	35	$	2	$	3	$	169
600 - 699	16		34		15		1		2		68
< 600	—		1		1		—		—		2
No Score	2		1		—		—		—		3
	$	67	$	116	$	51	$	3	$	5	$	242
Gross write-offs	$	—	$	3	$	4	$	—	$	—	$	7

Vacation Ownership Notes Receivable on Non-Accrual Status

For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rates of 11.30% as of June 30, 2023 and 11.62% as of December 31, 2022. A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $13 million as of June 30, 2023 and $12 million as of December 31, 2022.

The following table shows our recorded investment in non-accrual vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.

	Vacation Ownership Notes Receivable
($ in millions)	Non-Securitized		Securitized		Total
Investment in vacation ownership notes receivable on non-accrual status at June 30, 2023	$	134	$	22	$	156
Investment in vacation ownership notes receivable on non-accrual status at December 31, 2022	$	126	$	24	$	150

The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of June 30, 2023 and December 31, 2022.

	As of June 30, 2023						As of December 31, 2022
($ in millions)	Non-Securitized		Securitized		Total		Non-Securitized		Securitized		Total
31 – 90 days past due	$	18	$	51	$	69	$	25	$	56	$	81
91 – 120 days past due	6		13		19		7		16		23
Greater than 120 days past due	128		9		137		119		8		127
Total past due	152		73		225		151		80		231
Current	415		2,034		2,449		415		1,943		2,358
Total vacation ownership notes receivable	$	567	$	2,107	$	2,674	$	566	$	2,023	$	2,589