10q10k10q10k.net

What changed in Hilton Grand Vacations Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Hilton Grand Vacations Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+472 added−420 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in Hilton Grand Vacations Inc.'s 2023 10-K

472 paragraphs added · 420 removed · 317 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

93 edited+26 added−10 removed109 unchanged
Biggest changeWe are required to indemnify, defend and hold harmless Hilton from and against any claim or liability resulting from: (i) third-party claims based on (a) our breach of the license agreement; (b) the operation of our vacation ownership properties; (c) any use of the Hilton IP or Hilton Data in violation of the license agreement and (d) any use of any content provided to us pursuant to the license agreement; or (ii) claims based on any security breach of our systems and/or unauthorized use or disclosure of Hilton Data. 12 Table of Contents This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated License Agreement, which was filed as Exhibit 10.2 to HGV’s Current Report on Form 8-K filed with the SEC on March 11, 2021, and the First Amendment to Amended and Restated License Agreement, which was filed as Exhibit 10.1 to HGV’s Current Report on Form 8-K filed with the SEC on April 7, 2022.
Biggest changeWe are required to indemnify, defend and hold harmless Hilton from and against any claim or liability resulting from: (i) third-party claims based on (a) our breach of the License Agreement; (b) the operation of our vacation ownership properties; (c) any use of the Hilton IP or Hilton Data in violation of the License Agreement and (d) any use of any content provided to us pursuant to the License Agreement; or (ii) claims based on any security breach of our systems and/or unauthorized use or disclosure of Hilton Data.
In general, purchasers of VOI in a Collection do not acquire a direct ownership interest in the resort properties in the Collection.
In general, purchasers of a VOI in a Collection do not acquire a direct ownership interest in the resort properties in the Collection.
Other Restrictions The license agreement imposes various other restrictions and requirements that pertain to, without limitation, co-sponsoring credit cards and other payment alternatives, engaging in any lodging business, confidentiality and data security, and strict maintenance of, and compliance with, separation operations that do not use any of Hilton IP or Hilton Data.
Other Restrictions The License Agreement imposes various other restrictions and requirements that pertain to, without limitation, co-sponsoring credit cards and other payment alternatives, engaging in any lodging business, confidentiality and data security, and strict maintenance of, and compliance with, separation of operations that do not use any of Hilton IP or Hilton Data.
When we sell VOIs, including non-U.S. jurisdictions such as Mexico and Canada, local law grants the purchaser of a VOI the right to cancel a purchase contract during a specified rescission period following the later of the date the contract was signed or the date the purchaser received the last of the documents required to be provided by us.
When we sell VOIs, including in non-U.S. jurisdictions such as Mexico and Canada, local law grants the purchaser of a VOI the right to cancel a purchase contract during a specified rescission period following the later of the date the contract was signed or the date the purchaser received the last of the documents required to be provided by us.
Brand Standards; Additional Properties or Projects We are required to comply with the Hilton brand standards applicable to the Licensed Business (which includes any part of the Diamond business that becomes part of the Licensed Business). The conversion of any Diamond property into our branded property is subject to an approval process by Hilton.
Brand Standards; Additional Properties or Projects We are required to comply with the Hilton brand standards applicable to the Licensed Business (which includes any part of the Diamond business or Bluegreen business that becomes part of the Licensed Business). The conversion of any Diamond property or Bluegreen property into our branded property is subject to an approval process by Hilton.
We also generate fee revenue from servicing the loans provided by third-party developers to purchasers of their VOIs. See “—Financing Activities” below for information regarding our consumer financing activities.
We also generate fee revenue from servicing the loans provided by third-party developers to purchasers of their VOIs. See “—Financing Activities” below for additional information regarding our consumer financing activities.
We reserve for all loans based on our static pool method. When a loan associated with a product is more than 120 days past due, it is reserved at 100%. Arrangements are then made to recover the interval through various processes depending on the type of inventory and regulatory requirements which could include a deed-in-lieu of foreclosure or foreclosure.
We reserve for all loans based on our static pool method. When a loan associated with a product is more than 121 days past due, it is reserved at 100%. Arrangements are then made to recover the interval through various processes depending on the type of inventory and regulatory requirements which could include a deed-in-lieu of foreclosure or foreclosure.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the stockholders agreement, which was filed as Exhibit 10.1 to HGV’s Current Report on Form 8-K filed with the SEC on August 3, 2021. Where You Can Find More Information Our website address is www.hgv.com.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the stockholder's agreement, which was filed as Exhibit 10.1 to HGV’s Current Report on Form 8-K filed with the SEC on August 3, 2021. Where You Can Find More Information Our website address is www.hgv.com.
Under these fee-for-service agreements, we earn commission fees based on a percentage of total interval sales. See “—Inventory and Development Activities” and “—Marketing and Sales Activities” below for further information. • Financing —We provide consumer financing, which includes interest income generated from the origination of consumer loans to members to finance their purchase of VOIs owned by us.
Under these fee-for-service agreements, we earn commission fees based on a percentage of total interval sales. See “—Inventory and Development Activities” and “—Marketing and Sales Activities” below for additional information. • Financing —We provide consumer financing, which includes interest income generated from the origination of consumer loans to members to finance their purchase of VOIs owned by us.
Such “exclusivity” and “non-competition” period may be extended for additional 10-year terms if we achieve certain revenue targets in the last year of the exclusivity term or any subsequent renewal term, as applicable, or, if we do not achieve such 10 Table of Contents applicable revenue target, by making a payment equal to 5% of the difference between certain revenue actually achieved and the applicable certain revenue target to cover such shortfall.
Such “exclusivity” and “non-competition” period may be extended for additional 10-year terms if we achieve certain revenue targets in the last year of the exclusivity term or any subsequent renewal term, as applicable, or, if we do not achieve such applicable revenue target, by making a payment equal to 5% of the difference between revenue actually achieved and the applicable revenue target to cover such shortfall.
By using our websites, Hilton’s websites and other direct booking channels to rent available inventory, we are able to reach potential new members that may already have an affinity for and loyalty to the Hilton brands and introduce them to our products. Inventory rentals allow us to utilize otherwise unoccupied inventory to generate additional revenues and provision of ancillary services.
By using our websites, Hilton’s websites and other direct booking channels to rent available inventory, we are able to reach potential new members that may already have an affinity for and loyalty to our brands and introduce them to our products. Inventory rentals allow us to utilize otherwise unoccupied inventory to generate additional revenues and provision of ancillary services.
These laws and regulations, some of which contain exceptions applicable to the timeshare industry, may include, among others, the Real Estate Settlement Procedures Act and Regulation X, the Truth In Lending Act and Regulation Z, the Federal Trade Commission Act, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Fair Housing Act and implementing regulations, the Fair Debt Collection Practices Act, the Electronic Funds Transfer Act and Regulation E, unfair, deceptive or abusive acts or practices regulations and the Credit Practices rules, the USA PATRIOT Act, the Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, the Servicemember’s Civil Relief Act and the Bank Secrecy Act.
These laws and regulations, some of which contain exceptions applicable to the timeshare industry, may include, among others, the Real Estate Settlement Procedures Act and Regulation X, the Truth In Lending Act and Regulation Z, the Federal Trade Commission Act, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Fair Housing Act and implementing regulations, the Fair Debt Collection Practices Act, the Electronic Funds Transfer Act and Regulation E, unfair, deceptive or abusive acts or practices regulations and the Credit Practices rules, the USA PATRIOT Act, the Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, the Service member’s Civil Relief Act and the Bank Secrecy Act.
If our Board increases its size, for every three additional directors added, the Apollo Investors have the right to appoint the third such director so long as the Apollo Investors (or their affiliates who have executed a joinder agreement to become party to the stockholders 13 Table of Contents agreement) retain 23,935,707 of the aggregate number of shares of our common stock that the Apollo Investors received in the Diamond Acquisition (such shares, the “Apollo Closing Shares”).
If our Board increases its size, for every three additional directors added, the Apollo Investors have the right to appoint the third such director so long as the Apollo Investors (or their affiliates who have executed a joinder agreement to become party to the stockholders agreement) retain 23,935,707 of the aggregate number of shares of our common stock that the Apollo Investors received in the Diamond Acquisition (such shares, the “Apollo Closing Shares”).
Higher credit scores equate to lower collection risk and lower credit scores equate to higher collection risk. Over the last three years, the weighted-average FICO score for loans to U.S. and Canadian borrowers at the time of origination was 736 (out of a maximum potential score of 850).
Higher credit scores equate to lower collection risk and lower credit scores equate to higher collection risk. Over the last three years, the weighted-average FICO score for loans to U.S. and Canadian borrowers at the time of origination was 737 (out of a maximum potential score of 850).
Our resort operations and club management segment primarily generates revenue from: • Resort Management —Our resort management services primarily consist of operating properties under management agreements for the benefit of homeowners’ associations (“HOA”s) of VOI owners at both our resorts and those developed by third parties.
Our resort operations and club management segment primarily generates revenue from: • Resort Management —Our resort management services primarily consist of operating properties under management agreements for the benefit of homeowners’ associations (“HOAs”) of VOI owners at both our resorts and those developed by third parties.
However, we do face competition from financial institutions providing other forms of consumer credit, which may lead to full or partial prepayment of our timeshare financing receivables. Seasonality and Cyclicality We experience modest seasonality in timeshare sales at certain resorts, with stronger revenue generation during traditional vacation periods for those locations.
However, we do face competition from financial institutions providing other forms of consumer credit, which may lead to full or partial prepayment of our timeshare financing receivables. 7 Table of Contents Seasonality and Cyclicality We experience modest seasonality in timeshare sales at certain resorts, with stronger revenue generation during traditional vacation periods for those locations.
We target securitizations that range in size from $250 million to $350 million and we expect the timing of future securitizations will depend on our anticipated sales volume, financing propensity and capital needs. 5 Table of Contents The strong performance of our outstanding loan securitizations demonstrates that loans originated by us are well regarded for their performance in the securitization market.
We target securitizations that range in size from $250 million to $350 million and we expect the timing of future securitizations will depend on our anticipated sales volume, financing propensity and capital needs. The strong performance of our outstanding loan securitizations demonstrates that loans originated by us are well regarded for their performance in the securitization market.
Our services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including, reports, budgets and projections, arranging for annual audits and maintenance fee billing and collections and personal employment training and oversight.
Our services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including, reports, budgets and projections, arranging for annual audits and maintenance fee billing and collections and personnel employment training and oversight.
In connection with the spinoff, we entered into agreements with Hilton and other third parties, including licenses to use the Hilton Grand Vacations brand. For more information regarding these agreements, see “— Business—Key Agreements with Hilton Worldwide Holdings. ” On August 2, 2021, we completed the acquisition of Dakota Holdings, Inc.
In connection with the spin-off, we entered into agreements with Hilton and other third parties, including licenses to use the Hilton Grand Vacations brand. For more information regarding these agreements, see “— Business—Key Agreements with Hilton Worldwide Holdings. ” On August 2, 2021, we completed the acquisition of Dakota Holdings, Inc.
The Apollo Investors are not permitted to “buy back” into the right to designate any Apollo Designees to our Board by acquiring shares of our common stock in the future. Transfer Restrictions The Apollo Investors were subject to a 160-day lock-up period that expired on January 9, 2022.
The Apollo Investors are 14 Table of Contents not permitted to “buy back” into the right to designate any Apollo Designees to our Board by acquiring shares of our common stock in the future. Transfer Restrictions The Apollo Investors were subject to a 160-day lock-up period that expired on January 9, 2022.
Our primary Legacy-Diamond VOI product, which we acquired in the Diamond Acquisition, that we market and sell is a beneficial interest in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection.
Our trust VOI product, which we acquired in the Diamond Acquisition, that we market and sell is a beneficial interest in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection.
Termination The stockholders agreement will terminate when the Apollo Investors no longer own at least 5,983,927 of the Apollo Closing Shares; provided, that certain provisions have different termination dates.
Termination The stockholder's agreement will terminate when the Apollo Investors no longer own at least 5,983,927 of the Apollo Closing Shares; provided, that certain provisions have different termination dates.
While we continue to be subject to telemarketing risks and potential liability, we believe that our exposure to adverse effects from telemarketing legislation and enforcement is mitigated in some instances by the use of permission-based marketing in which we obtain permission to contact prospective purchasers in the future.
While we continue to be subject to telemarketing risks and potential liability, we believe that our exposure to adverse effects from telemarketing legislation and enforcement is mitigated in some instances by the use of permission-based marketing in which we obtain permission to contact prospective purchasers in the 8 Table of Contents future.
Rather, for each Collection, one or more 3 Table of Contents trustees hold legal title to the deeded fee simple real estate interests or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements.
Rather, for each Collection, one or more trustees hold legal title to the deeded fee simple real estate interests or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements.
However, we may acquire control of a business that is not a vacation ownership business or a lodging business without Hilton’s consent, but we are required to operate such business as a “separate operation” that does not use the Hilton IP or Hilton Data unless Hilton consents to such use.
However, we may acquire control of a business that is not a vacation ownership business or a 12 Table of Contents lodging business without Hilton’s consent, but we are required to operate such business as a “separate operation” that does not use the Hilton IP or Hilton Data unless Hilton consents to such use.
Copies of these reports are available free of charge on our website as soon as reasonably practicable after we file the reports with the SEC. 14 Table of Contents
Copies of these reports are available free of charge on our website as soon as reasonably practicable after we file the reports with the SEC. 15 Table of Contents
Through a variety of delivery methods, we offer over 1,500 training and development courses to all of our team members focused on a variety of core competencies, including: leadership, diversity and inclusion, skills training, business acumen, culture and personal growth.
Through a variety of delivery methods, we offer over 390 training and development courses to all of our team members focused on a variety of core competencies, including: leadership, diversity and inclusion, skills training, business acumen, culture and personal growth.
If a VOI owner defaults on payment of its maintenance fees and there is no lien against the mortgage note or contract, the HOA has the right to recover the defaulting owner’s VOI.
If a VOI owner defaults on payment of its 6 Table of Contents maintenance fees and there is no lien against the mortgage note or contract, the HOA has the right to recover the defaulting owner’s VOI.
For the years ended December 31, 2022, 2021 and 2020, we paid Hilton $68 million, $43 million and $41 million, respectively, for Hilton Honors points. We have entered into a separate agreement with Hilton that governs the transfer of calls from Hilton to us and other related telemarketing services.
For the years ended December 31, 2023, 2022 and 2021, we paid Hilton $53 million, $68 million and $43 million, respectively, for Hilton Honors points. We have entered into a separate agreement with Hilton that governs the transfer of calls from Hilton to us and other related telemarketing services.
These agreements enable us to generate fees from the marketing and sale of Hilton-branded VOIs and Legacy-HGV Club memberships and from the management of the timeshare properties without requiring us to fund up-front acquisition and construction costs or incur unsold inventory maintenance costs.
These agreements enable us to generate fees from the marketing and sale of VOIs and Club memberships and from the management of the timeshare properties without requiring us to fund up-front acquisition and construction costs or incur unsold inventory maintenance costs.
We 9 Table of Contents strive to ensure a common inclusion that we believe is reflected in our programs and initiatives, and we regularly seek team member feedback through our monthly pulse-checks, our annual engagement survey and ongoing discussions with our TMRG’s.
We strive to ensure a common inclusion that we believe is reflected in our programs and initiatives, and we regularly seek team member feedback through our monthly pulse-checks, our annual engagement survey and ongoing discussions with our TMRG’s.
As of December 31, 2022, approximately 9% of our employees were covered by various collective bargaining agreements, generally addressing pay rates, working hours, other terms and conditions of employment, certain employee benefits and orderly settlement of labor disputes.
As of December 31, 2023, approximately 12% of our employees were covered by various collective bargaining agreements, generally addressing pay rates, working hours, other terms and conditions of employment, certain employee benefits and orderly settlement of labor disputes.
For U.S. and Canadian purchasers seeking financing, which represented approximately 90% of the individuals we provided financing to over the last three years, we apply the credit evaluation score methodology developed by the Fair Isaac Corporation (“FICO”) to credit files compiled and maintained by Experian and Equifax.
For U.S. and Canadian purchasers seeking financing, which represented 5 Table of Contents approximately 85% of the individuals we provided financing to over the last three years, we apply the credit evaluation score methodology developed by the Fair Isaac Corporation (“FICO”) to credit files compiled and maintained by Experian and Equifax.
In April 2022, we and Hilton further amended the license agreement to define, among other things, (a) a 5-year plan for rebranding and integrating a majority of the Diamond properties into our branded properties, along with minimum room conversion requirements, (b) converting all of the Diamond sales centers into our branded sales centers, and (c) the new licensed marks, “HGV Max” and “Hilton Vacation Club” (which new licensed marks are part of the Hilton Marks).
In April 2022, we and Hilton entered into the first amendment to the License Agreement (the “First Amendment”) to define, among other things, (a) a 5-year plan for rebranding and integrating a majority of the Diamond properties into our branded properties, along with minimum room conversion requirements, (b) converting all of the Diamond sales centers into our branded sales centers, and (c) the new licensed marks, “HGV Max” and “Hilton Vacation Club” (which new licensed marks are part of the Hilton Marks).
As of December 31, 2022, we had over 150 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada, and Japan. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia. As of December 31, 2022, we had approximately 519,000 members across our club offerings.
As of December 31, 2023, we had over 150 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada, and Asia. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia. As of December 31, 2023, we had approximately 529,000 members across our club offerings.
Pending the rebranding, and so long as they remain non-Hilton licensed branded properties, the Diamond properties are required to be operated as a separate operation in accordance with the license agreement.
Pending the rebranding, and so long as they remain non-Hilton licensed branded properties, the Diamond properties and Bluegreen properties are required to be operated as separate operations in accordance with the License Agreement.
We refer to fee-for-service transactions and just-in-time sales as “capital-efficient transactions.” Over time, these capital-efficient transactions have evolved from sourcing inventory from distressed properties to sourcing from new construction projects. For the year ended December 31, 2022, sales from fee-for-service and just-in-time inventory were 29% and 15% of contract sales, respectively.
We refer to fee-for-service transactions and just-in-time sales as “capital-efficient transactions.” Over time, these capital-efficient transactions have evolved from sourcing inventory from distressed properties to sourcing from new construction projects. For the year ended December 31, 2023, sales from fee-for-service and just-in-time inventory were 28% and 19% of contract sales, respectively.
The interest rate on our loans is determined by, among other factors, the amount of the down payment, the borrower’s credit profile and the loan term. As of December 31, 2022, the average loan outstanding was approximately $23,000 with a weighted average interest rate of 14.7%. Prepayment is permitted without penalty.
The interest rate on our loans is determined by, among other factors, the amount of the down payment, the borrower’s credit profile and the loan term. As of December 31, 2023, the average loan outstanding was approximately $24,000 with a weighted average interest rate of 14.8%. Prepayment is permitted without penalty.
Tour flow quality impacts key metrics such as close rate and VPG, defined in “Key Business and Financial Metrics and Terms Used by Management—Real Estate Sales Metrics.” Additionally, the quality of tour flows impacts sales revenue and the collectability of our timeshare financing receivables.
Tour flow quality impacts key metrics such as close rate and VPG, defined in “Key Business and Financial Metrics—Real Estate Sales Operating Metrics.” Additionally, the quality of tour flows impacts sales revenue and the collectability of our timeshare financing receivables.
There is also significant competition for talent at all levels within the industry, in particular for sales and management. Our primary competitors in the timeshare space include Marriott Vacations Worldwide, Travel + Leisure Co., Disney Vacation Club, Holiday Inn Club Vacations, Westgate Resorts and Bluegreen Vacations.
There is also significant competition for talent at all levels within the industry, in particular for sales and management. Our primary competitors in the timeshare space include Marriott Vacations Worldwide, Travel + Leisure Co., Disney Vacation Club, Holiday Inn Club Vacations, Westgate Resorts and Bluegreen Vacations, which we acquired on January 17, 2024.
The estimated contract sales value related to our inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future upon registration, delivery or construction is approximately $11 billion at current pricing. Capital-efficient arrangements represent approximately 39% of that supply.
The estimated contract sales value related to our inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future upon registration, delivery or construction is approximately $11 billion at current pricing.
For the year ended December 31, 2022, 71% of our contract sales were to our existing owners. 4 Table of Contents We sell our vacation ownership products through our distribution network of both in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe and Japan.
For the year ended December 31, 2023, 70% of our contract sales were to our existing owners, compared to 71% for the year ended December 31, 2022. We sell our vacation ownership products through our distribution network of both in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe and Asia.
For the years ended December 31, 2022, 2021 and 2020, we paid Hilton $12 million, $9 million and $6 million, respectively, for such call transfers.
For the years ended December 31, 2023, 2022 and 2021, we paid Hilton $11 million, $12 million and $9 million, respectively, for such call transfers.
Because our VOI owners generally purchase only the vacation time they intend to use each year, they are able to efficiently split the full cost of owning and maintaining a vacation residence with other owners. Our customers also benefit from the amenities and service at our Hilton-branded resorts and Diamond resorts.
Our compelling VOI product allows customers to advance purchase a lifetime of vacations. Because our VOI owners generally purchase only the vacation time they intend to use each year, they are able to efficiently split the full cost of owning and maintaining a vacation residence with other owners. Our customers also benefit from the amenities and service at our resorts.
Without Hilton’s prior consent, we may not assign our rights under the license agreement, except to one of our affiliates as part of an internal reorganization for tax or administrative purposes.
As previously disclosed, we obtained Hilton's consent under the License Agreement for the Diamond Acquisition and the Bluegreen Acquisition. Without Hilton’s prior consent, we may not assign our rights under the License Agreement, except to one of our affiliates as part of an internal reorganization for tax or administrative purposes.
Purchasers of a Legacy-Diamond VOI are also offered the opportunity to become members of a Legacy-Diamond Club through which they can exchange their points for a number of vacation options. In addition to an annual membership fee, members pay transaction fees depending upon the exchange or service options they choose.
Purchasers of a trust VOI are offered the opportunity to become members of a Club through which they can exchange their points for a number of vacation options. In addition to an annual membership fee, members pay transaction fees depending upon the exchange or service options they choose. Our club membership offering is HGV Max.
We are required to obtain Hilton’s consent to develop or operate any additional vacation ownership properties under the Hilton Marks (including on our own undeveloped parcels). 11 Table of Contents Deflagging of Properties Hilton has the right to “deflag” (prevent use of any Hilton IP or Hilton Data at) any property in our Licensed Business in certain circumstances, including if (i) a $10 million or more final judgment is assessed against such property or a foreclosure suit is initiated against such property and not vacated; (ii) an ongoing threat or danger to public health or safety occurs at such property; (iii) such property fails to meet certain quality assurance system performance thresholds; or (iv) such property is not operated in compliance with the license agreement or Hilton’s other standards and agreements, and such breaches are not cured in accordance with the license agreement.
Deflagging of Properties Hilton has the right to “deflag” (prevent use of any Hilton IP or Hilton Data at) any property in our Licensed Business in certain circumstances, including if (i) a $10 million or more final judgment is assessed against such property or a foreclosure suit is initiated against such property and not vacated; (ii) an ongoing threat or danger to public health or safety occurs at such property; (iii) such property fails to meet certain quality assurance system performance thresholds; or (iv) such property is not operated in compliance with the License Agreement or Hilton’s other standards and agreements, and such breaches are not cured in accordance with the License Agreement.
As of December 31, 2022, our entire portfolio consists of originated loans and loans that were acquired as part of the Diamond Acquisition, which are referred to as acquired loans. As of December 31, 2022, the entire portfolio had a gross balance of approximately $2,468 million derived from approximately 107,000 loans.
As of December 31, 2023, our entire portfolio consists of originated loans and loans that were acquired as part of the Diamond Acquisition and the Grand Islander Acquisition, which are referred to as acquired loans. As of December 31, 2023, the entire portfolio had a gross balance of approximately $2,861 million derived from approximately 120,000 loans.
Legacy-HGV Club members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations Club resort or any property in the Hilton system of 19 industry-leading brands across approximately 7,000 properties, as well as numerous experiential vacation options, such as cruises and guided tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program.
Based on the type of Club membership, members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations resort, any property in the Hilton system of 22 industry-leading brands across approximately 7,500 properties, or affiliated properties, as well as numerous experiential vacation options, such as cruises and guided tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program, including travel services options.
We use targeted direct marketing to reach potential members who are identified as having the financial ability to pay for our products, are frequent leisure travelers and have an affinity with our brands.
Marketing and Sales Activities Our marketing and sales activities are based on targeted direct marketing and a highly personalized sales approach. We use targeted direct marketing to reach potential members who are identified as having the financial ability to pay for our products, are frequent leisure travelers and have an affinity with our brands.
This allows us to utilize otherwise unoccupied inventory to generate additional revenues. We also earn fee revenue from the rental of inventory owned by third parties as well as revenue from retail, spa and other outlets at our timeshare properties. See “—Resort and Club Management Activities” below for further information.
We also earn fee revenue from the rental of inventory owned by third parties as well as revenue from retail, spa and other outlets at our timeshare properties. See “—Resort and Club Management Activities” below for additional information.
As discussed above, we are not permitted to use any Hilton IP or Hilton Data for such non-Hilton branded properties, and, accordingly, no license fees are owed to Hilton in connection with revenues associated with such properties and unbranded operations.
As discussed above, we are not permitted to use any Hilton IP or Hilton Data for such non-Hilton branded properties, and, accordingly, no license fees are generally owed to Hilton in connection with revenues associated with such properties and unbranded operations, except as may be required pursuant to the Second Amendment and the Third Amendment.
In addition, the Diamond properties rebranding and conversions are subject to an additional fire and life safety review process by Hilton. Hilton also has the right to enter our vacation ownership properties at any time without notice and additional permission from us in order to verify that we are complying with the license agreement and Hilton’s standards and guidelines.
Hilton also has the right to enter our vacation ownership properties at any time without notice and additional permission from us in order to verify that we are complying with the License Agreement and Hilton’s standards and guidelines.
ITEM 1. Business Our History On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton”) completed a tax-free spin-off of each of HGV and Park Hotels & Resorts Inc. (“Park”).
ITEM 1. Business Our History On January 3, 2017, HGV became an independent publicly traded company as a result of Hilton Worldwide Holdings Inc.'s (“Hilton”) tax-free spin-off of each of HGV and Park Hotels & Resorts Inc. (“Park”).
These fees represent each owner’s allocable share of the management fee and the costs of operating and maintaining the resorts, which generally includes personnel, property taxes, insurance, a capital asset reserve to fund refurbishment and other related costs.
Because these funds are generally collected early in the year, we have substantial visibility of collection. These fees represent each owner’s allocable share of the management fee and the costs of operating and maintaining the resorts, which generally includes personnel, property taxes, insurance, a capital asset reserve to fund refurbishment and other related costs.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Distribution Agreement, which was filed as Exhibit 2.1 to HGV’s Current Report on Form 8-K filed with the SEC on January 4, 2017.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Distribution Agreement, which is filed as Exhibit 2.1 to this Annual Report on Form 10-K.
Under the license agreement, our right to use the Hilton Marks as a trade, corporate, d/b/a or similar name will automatically terminate if: (i) the aggregate number of units of accommodation in our Licensed Business falls below two-thirds of the total number of units of accommodation in our entire vacation ownership business; (ii) we merge with or acquire control of the assets of certain Hilton competitors and we or they use their brands in any business after such acquisition; or (iii) we become an affiliate of another Hilton competitor.
Risk-Factors—Risks Related to the Integration of Bluegreen— We may not be able to integrate successfully and many of the anticipated benefits of combining us and Bluegreen may not be realized.” Our right to use the Hilton Marks as a trade, corporate, d/b/a or similar name under the License Agreement will automatically terminate if: (i) the aggregate number of units of accommodation in our Licensed Business falls below two-thirds of the total number of units of accommodation in our entire vacation ownership business (subject to certain limited exceptions related to the integration periods for the Diamond Acquisition and Bluegreen Acquisition); (ii) we merge with or acquire control of the assets of certain Hilton competitors and we or they use their brands in any business after such acquisition; or (iii) we become an affiliate of another Hilton competitor.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Tax Matters Agreement, which was filed as Exhibit 10.2 to HGV’s Current Report on Form 8-K filed with the SEC on January 4, 2017.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Tax Matters Agreement, which is filed as Exhibit 10.1 to this Annual Report on Form 10-K.
We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. We have approximately 50 sales distribution centers in various domestic and international locations. A phased rebranding of the Legacy-Diamond acquired sales centers began in late 2021.
We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. We have over 60 sales distribution centers in various domestic and international locations.
See “—Resort and Club Management Activities” below for information regarding our resort management activities. • Club Management —We operate and manage the Clubs and receive annual membership fees as well as incremental fees depending on exchanges and transactions members choose for other vacation products and services within the Club system. • Rental of Available Inventory —We generate rental revenue from unit rentals of unsold inventory and inventory made available due to ownership exchanges through our Clubs programs.
See “—Resort and Club Management Activities” below for additional information regarding our resort management activities. • Club Management —We operate and manage the Clubs and receive annual membership fees as well as incremental fees depending on exchanges and transactions members choose for other vacation products and services within the Club system.
We focus on hiring practices that are reflective of our values and seek customer-centric individuals that embody a spirit of service towards our owners, guests and fellow team members. We believe hiring people with different backgrounds, cultures and perspectives leads to increased creativity and innovation.
We focus on hiring practices that are reflective of our values and seek customer-centric individuals that embody a spirit of service towards our owners, guests and fellow team members.
In 2022, team members had approximately 140,000 course completions totaling 77,000 training hours, of which over 40,000 course completions and 31,000 training hours were dedicated to compliance training. Approximately 71% of our team members are enrolled in our health and well-being programs.
In 2023, team members had approximately 150,000 course completions totaling 92,000 training hours, of which over 117,000 course completions and 74,000 training hours were dedicated to compliance training. Approximately 70% of our team members are enrolled in our health and well-being programs.
Distribution Agreement We entered into a Distribution Agreement with Hilton and Park (the “Distribution Agreement”) in connection with the spin-off. The Distribution Agreement provided for certain transfers of assets and assumptions of liabilities by each of Hilton, HGV and Park and the settlement or extinguishment of certain liabilities and other obligations among Hilton, HGV and Park.
The Distribution Agreement provided for certain transfers of assets and assumptions of liabilities by each of Hilton, HGV and Park and the settlement or extinguishment of certain liabilities and other obligations among Hilton, HGV and Park.
Purchasers of a Legacy-HGV VOI also become members of a Legacy-HGV Club which allows the member to exchange their points for a number of vacation options. In addition to an annual membership fee, members pay incremental fees depending on exchange or services they choose.
When owners purchase a VOI, they are generally enrolled in a Club which allows the member to exchange their points for a number of vacation options. In addition to an annual membership fee, Club members pay incremental fees depending on exchanges they choose within the Club system.
Our Business We are a global timeshare company engaged in developing, marketing, selling, managing and operating timeshare resorts, timeshare plans and ancillary reservation services, primarily under the Hilton Grand Vacations brand. Our Company also owns and operates Legacy-Diamond resorts and sales centers that have been acquired through the Diamond Acquisition, which are undergoing rebranding.
Our Business We are a global timeshare company engaged in developing, marketing, selling, managing and operating timeshare resorts, timeshare plans and ancillary reservation services, primarily under the Hilton Grand Vacations brand.
Our operations primarily consist of: selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs”, “VOI”) for us and third parties; financing and servicing loans provided to consumers for their timeshare purchases; operating resorts and timeshare plans; and managing both our points-based Hilton Grand Vacations Club and Hilton Club exchange program (collectively the “Legacy-HGV Club”) and the Diamond points-based multi-resort timeshare plans and exchange programs (the “Legacy-Diamond Clubs”).
Our operations primarily consist of: selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs” or “VOI”) for us and third parties; financing and servicing loans provided to consumers for their VOI purchases; operating resorts and timeshare plans; and managing our clubs and exchange programs.
(“Diamond”), the parent of Diamond Resorts International (the “Diamond Acquisition”), by exchanging 100% of the outstanding equity interests of Diamond for shares of HGV common stock. Pre-existing HGV shareholders owned approximately 72% of the combined company immediately after giving effect to the Diamond Acquisition, with certain funds controlled by Apollo Global Management Inc.
(“Diamond”), the parent of Diamond Resorts International (the “Diamond Acquisition”), by exchanging 100% of the outstanding equity interests of Diamond for shares of HGV common stock. As a result of the Diamond Acquisition, certain funds controlled by Apollo Global Management Inc.
While the license agreement permits us to operate certain businesses that do not conflict with Hilton’s business, including non-Hilton branded vacation ownership business, we are not permitted to use any Hilton IP or Hilton Data for such non-Hilton branded portions of our businesses without Hilton’s prior consent.
While the license agreement permits us to operate certain businesses that do not conflict with Hilton’s business, including non-Hilton branded vacation ownership business, we are not permitted to use any Hilton IP or Hilton Data for such non-Hilton branded portions of our businesses without Hilton’s prior consent. 10 Table of Contents In March 2021, in connection with entering into a definitive agreement for the Diamond Acquisition, we and Hilton amended and restated the license agreement (which we refer to hereinafter, as amended, as the “License Agreement”) to account for integrating the Diamond business and properties.
For more information regarding our segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in Item 7, and Note 22: Business Segments in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Other than the United States, there were no countries that individually represented more than 10% of total revenues for the year ended December 31, 2023. 3 Table of Contents For more information regarding our segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in Item 7, and Note 22: Business Segments in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Our lending and related activities are also subject to the laws and regulations of other jurisdictions, including, among others, laws and regulations related to consumer loans, retail installment contracts, mortgage lending, fair debt collection and credit reporting practices, loan servicing, consumer debt collection practices, mortgage disclosure, lender or mortgage loan originator licensing and registration and anti-money laundering. 8 Table of Contents Resort and Club Management Regulation Our resort management activities are subject to laws and regulations regarding community association management, public lodging, food and beverage services, liquor licensing, labor, employment, health care, health and safety, accessibility, discrimination, immigration, gaming and the environment (including climate change).
Our lending and related activities are also subject to the laws and regulations of other jurisdictions, including, among others, laws and regulations related to consumer loans, retail installment contracts, mortgage lending, fair debt collection and credit reporting practices, loan servicing, consumer debt collection practices, mortgage disclosure, lender or mortgage loan originator licensing and registration and anti-money laundering.
Our fee-for-service sales generally improve returns on invested capital and liquidity, while sales of owned inventory, including just-in-time inventory, typically result in a greater contribution to the profitability of our real estate sales and financing segment. Owners can generally offer their VOIs for resale on the secondary market, which can create pricing pressure on the sale of developer inventory.
Capital-efficient arrangements 4 Table of Contents represent approximately 35% of that supply. Our fee-for-service sales generally improve returns on invested capital and liquidity, while sales of owned inventory, including just-in-time inventory, typically result in a greater contribution to the profitability of our real estate sales and financing segment.
These programs reward and highlight milestones, recognize the exceptional service standards of our diverse team member population, and promote our values. Additionally, we make it a priority to appreciate and recognize team member milestones throughout their journey with HGV. We offer flexible recognition programs that support leaders to create meaningful and impactful moments for their teams.
We focus on employee retention initiatives and have designed purposeful programs to nourish every aspect of the team member experience. These programs reward and highlight milestones, recognize the exceptional service standards of our diverse team member population, and promote our values. Additionally, we make it a priority to appreciate and recognize team member milestones throughout their journey with HGV.
We will continue to be subject to applicable new legislation, rules and regulations that have been proposed, or may be proposed, by federal, state and local authorities relating to the origination, servicing and securitization of mortgage loans. 7 Table of Contents Real Estate Development Regulation Our real estate development activities are regulated under a number of different timeshare, condominium and land sales disclosure statutes in many jurisdictions.
We will continue to be subject to applicable new legislation, rules and regulations that have been proposed, or may be proposed, by federal, state and local authorities relating to the origination, servicing and securitization of mortgage loans.
As previously noted, under the license agreement, we are required to operate the Diamond business as a separate operation, pending the conversion of any Diamond properties to our branded property in accordance with the rebrand plan, which must be approved by Hilton. As previously disclosed, we obtained Hilton's consent under the license agreement for the Diamond Acquisition.
As previously noted, under the License Agreement, we are required to operate the Diamond business and the Bluegreen business as separate operations. We have established with Hilton rebrand plans for various Diamond properties and Bluegreen properties. Any conversion of properties must be approved by Hilton.
All purchasers will be responsible for paying applicable maintenance fees, property taxes and any assessments that are levied by the relevant HOA. While we do not have an obligation to repurchase intervals previously sold, most of our VOIs provide us with a right of first refusal on secondary market sales.
While we do not have an obligation to repurchase intervals previously sold, most of our VOIs provide us with a right of first refusal on secondary market sales. We monitor sales that occur in the secondary market and exercise our right of first refusal in certain cases.
In 2022, HOAs collected approximately $1,016 million in maintenance fees, including our applicable management fees, which is net of our contributions to the HOAs for unsold VOIs that we own. Because these funds are collected early in the year, we have substantial visibility of collection.
To fund resort operations, owners are assessed an annual maintenance fee, which includes our management fee. In 2023, HOAs collected approximately $1,092 million in maintenance fees, including our applicable management fees, which is net of our contributions to the HOAs for unsold VOIs that we own.
For the years ended December 31, 2022, 2021 and 2020, we incurred license fee expense of $124 million, $80 million, and $51 million, respectively. During the term of the license agreement, we are required to participate in Hilton’s loyalty program, currently known as the Hilton Honors program.
During the term of the License Agreement, we are required to participate in Hilton’s loyalty program, currently known as the Hilton Honors program.
Key Agreements with Hilton Worldwide Holdings On January 3, 2017, in connection with the completion of the spin-off, each of us, Hilton and Park Hotels & Resorts Inc. became a separate and independently traded company. In connection with the spin-off, we entered into various agreements with Hilton and Park. Certain of such agreements have been fully performed.
Key Agreements with Hilton Worldwide Holdings On January 3, 2017, in connection with the completion of the spin-off, we entered into various agreements with Hilton. Certain of such agreements have been fully performed. However, several agreements continue to govern certain key transactions and arrangements between the parties, in particular between us and Hilton, including our license agreement.
Given the structure of our Legacy-HGV products, purchasers of Legacy-HGV VOIs on the secondary market will generally become a Legacy-HGV Club member. Purchasers of a Legacy-Diamond VOI on the secondary market may elect to join a Legacy-Diamond Club. Once a member of the Clubs, the member will be responsible for paying annual fees.
Purchasers of a Legacy-Diamond VOI on the secondary market may elect to join a Legacy-Diamond Club. Once a member of the Clubs, the member will be responsible for paying annual fees. All purchasers will be responsible for paying applicable maintenance fees, property taxes and any assessments that are levied by the relevant HOA.
In addition, we believe that multiple perspectives generate better solutions and relatability with our diverse base of customers and consumers.
Each group is sponsored by a senior executive who provides leadership and helps drive initiatives across the business. In addition, we believe that multiple perspectives generate better solutions and relatability with our diverse base of customers and consumers.

… 49 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

101 edited+83 added−29 removed316 unchanged
Biggest changeThese risks include, but are not limited to, the following: • Macroeconomic and other factors beyond our control; • Contraction in the global economy or low levels of economic growth; • Risks inherent to the timeshare and hospitality industry, including reliance on tourism and travel, and competition within the industry; • The COVID-19 pandemic, other epidemics or pandemics, and related events, including the various measures implemented or adopted to respond to the pandemic; • Material harm to our business if we breach our license agreement with Hilton or the agreement is terminated; • Our ability to use the Hilton brands and trademarks and rebrand the acquired Diamond business and properties; • The quality and reputation of the Hilton brands and affiliation with the Hilton Honors loyalty program; • The ability of our critical marketing programs and activities to generate tour flow and contract sales and increase our revenues; • Financial and operational risks related to acquisitions and business ventures, including partnerships or joint ventures; • Our dependence on development activities and risks related to our real estate investments; • The geographic concentration of properties we manage; • Our current operations and future expansion outside of the United States; • Our ability to hire, retain and motivate key personnel and our reliance on the services of our management team and employees; • Third-party reservation channels affecting our bookings for room rental revenue; • Impairment losses that could adversely affect our results of operations; • Our insurance policies not covering all potential losses; • Our ability to remediate an identified material weakness and maintain effective internal controls over financial reporting and disclosure controls and procedures; • A decline in developed or acquired VOI inventory or failure to enter into and maintain fee-for service agreements or inability to source VOI inventory or finance sales if we or third-party developers are unable to access capital; • The sales of VOIs in the secondary market; • Our limited underwriting standards and a possible decline in the default rates or other credit metrics underlying our timeshare financing receivables; • The expiration, termination or renegotiation of our management agreements; • Disagreements with VOI owners or HOAs or the failure of HOA boards to collect sufficient fees or increases in maintenance fees at our resorts; • Failure to keep pace with developments in technology; • Lack of awareness or understanding of and failure to effectively manage our social media; • Cyber-attacks or our failure to maintain the security and integrity of company, employee, customer or third-party data; • Our ability to comply with a wide variety of laws, regulations and policies, including those applicable to our international operations; 15 Table of Contents • Changes in privacy laws, environmental laws, tax laws or accounting rules or regulations; • Failure to comply with laws and regulations applicable to our international operations; • Our substantial indebtedness and other contractual obligations, restrictions imposed on us by certain of our debt agreements and instruments and our variable rate indebtedness which subjects us to interest rate risk; • Failure to comply with agreements relating to our outstanding indebtedness; • Our ability, or the ability of our subsidiaries, to generate sufficient cash to meet our needs and service our indebtedness; • Potential liabilities related to our spin-off from Hilton, including U.S. federal income tax liabilities, liabilities arising out of state and federal fraudulent conveyance laws and the possible assumption of responsibilities for obligations allocated to Hilton or Park; • The sufficiency of any indemnity Hilton or Park is required to provide us and the amount of any indemnity we may be required to provide Hilton or Park related to the period prior to the spin-off; • The ability of our board of directors to change corporate policies without stockholder approval; • Anti-takeover provisions in our organizational documents and Delaware law and consent requirements in our license agreement with Hilton that may deter a potential business combination transaction; • Fluctuation in the market price and trading volume of our common stock; • Our ability to repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term shareholder value.
Biggest changeThese risks include, but are not limited to, the following: • Macroeconomic and other factors beyond our control; • Contraction in the global economy or low levels of economic growth; • Risks inherent to the timeshare and hospitality industry, including reliance on tourism and travel, and competition within the industry; • Pandemics, epidemics and related events, including the various measures implemented or adopted to respond to such events; • Material harm to our business if we breach our license agreement with Hilton and Hilton exercises any of its remedies thereunder, which may include the loss of certain rights (such as exclusivity in the timeshare business) that we have or the termination of the license agreement; • Our ability to use the Hilton brands and trademarks and rebrand the acquired Diamond and Bluegreen business and properties, and any potential consequences under the license agreement if we fail to do so; • The quality and reputation of the Hilton brands and affiliation with the Hilton Honors loyalty program; • The ability of our critical marketing programs and activities to generate tour flow and contract sales and increase our revenues; • Financial and operational risks related to acquisitions and business ventures, including partnerships or joint ventures; • Our dependence on development activities and risks related to our real estate investments; • The geographic concentration of properties we manage; • Our current operations and future expansion outside of the United States; • Our ability to hire, retain and motivate key personnel and our reliance on the services of our management team and employees; • Third-party reservation channels affecting our bookings for room rental revenue; • Impairment losses that could adversely affect our results of operations; • Our insurance policies not covering all potential losses; • Our ability to remediate an identified material weakness and maintain effective internal controls over financial reporting and disclosure controls and procedures; • A decline in developed or acquired VOI inventory or failure to enter into and maintain fee-for service agreements or inability to source VOI inventory or finance sales if we or third-party developers are unable to access capital; • The sales of VOIs in the secondary market; • Our limited underwriting standards and a possible decline in the default rates or other credit metrics underlying our timeshare financing receivables; • The expiration, termination or renegotiation of our management agreements; • Disagreements with VOI owners or HOAs or the failure of HOA boards to collect sufficient fees or increases in maintenance fees at our resorts; • Failure to keep pace with developments in technology; • Lack of awareness or understanding of and failure to effectively manage our social media; • Cyber-attacks or our failure to maintain the security and integrity of company, employee, customer or third-party data; 16 Table of Contents • Our ability to comply with a wide variety of laws, regulations and policies, including those applicable to our international operations; • Changes in privacy laws, environmental laws, tax laws or accounting rules or regulations; • Failure to comply with laws and regulations applicable to our international operations; • Our substantial indebtedness and other contractual obligations, restrictions imposed on us by certain of our debt agreements and instruments and our variable rate indebtedness which subjects us to interest rate risk; • Failure to comply with agreements relating to our outstanding indebtedness; • Our ability, or the ability of our subsidiaries, to generate sufficient cash to meet our needs and service our indebtedness; • Potential liabilities related to our spin-off from Hilton, including U.S. federal income tax liabilities, liabilities arising out of state and federal fraudulent conveyance laws and the possible assumption of responsibilities for obligations allocated to Hilton or Park; • The sufficiency of any indemnity Hilton or Park is required to provide us and the amount of any indemnity we may be required to provide Hilton or Park related to the period prior to the spin-off; • The ability of our board of directors to change corporate policies without stockholder approval; • Anti-takeover provisions in our organizational documents and Delaware law and consent requirements in our license agreement with Hilton that may deter a potential business combination transaction; • Fluctuation in the market price and trading volume of our common stock; • Our ability to repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term shareholder value.
The Hilton brands we use compete with the timeshare brands affiliated with major hotel chains in national and international venues, and we compete generally with the vacation rental options generally offered by the lodging and travel industry (e.g., hotels, resorts, home and apartment sharing services, and condominium rentals) and other options such as cruises. 18 Table of Contents We also compete with other timeshare developers for sales of VOIs based principally on location, quality of accommodations, price, service levels and amenities, financing terms, quality of service, terms of property use, reservation systems, flexibility for VOI owners to exchange into time at other timeshare properties, or other travel rewards, including access to hotel loyalty programs, as well as brand name recognition and reputation.
The Hilton brands we use compete with the timeshare brands affiliated with major hotel chains in national and international venues, and we compete generally with the vacation rental options generally offered by the lodging and travel industry (e.g., hotels, resorts, home and apartment sharing services, and condominium rentals) and other options such as cruises. 19 Table of Contents We also compete with other timeshare developers for sales of VOIs based principally on location, quality of accommodations, price, service levels and amenities, financing terms, quality of service, terms of property use, reservation systems, flexibility for VOI owners to exchange into time at other timeshare properties, or other travel rewards, including access to hotel loyalty programs, as well as brand name recognition and reputation.
Further, we could remain obligated under guarantees or other financial obligations related to the property despite the loss of product inventory, and our members could be required to contribute toward deductibles to help cover losses. We have identified a material weakness in our internal control over financial reporting related to Diamond.
Further, we could remain obligated under guarantees or other financial obligations related to the property despite the loss of product inventory, and our members could be required to contribute toward deductibles to help cover losses. We have identified a material weakness in our internal control over financial reporting.
In addition, our credit ratings will impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings will reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet our debt obligations on a combined basis with Diamond.
In addition, our credit ratings will impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings will reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet our debt obligations on a combined basis with Diamond and Bluegreen.
The interests of certain of our stockholders may conflict with ours or yours in the future . We have entered into a stockholders agreement with Apollo that, among other things, provides Apollo the right, under certain circumstances, to designate a certain number of directors to our board of directors.
The interests of certain of our stockholders may conflict with ours or yours in the future . We have entered into a stockholder's agreement with Apollo that, among other things, provides Apollo the right, under certain circumstances, to designate a certain number of directors to our board of directors.
Apollo and its affiliates engage in a broad spectrum of activities, including investments in real estate generally and in the hospitality industry in particular]. In the ordinary course of Apollo’s business activities, Apollo and its affiliates may engage in activities where their interests conflict with our interests or those of our stockholders.
Apollo and its affiliates engage in a broad spectrum of activities, including investments in real estate generally and in the hospitality industry in particular. In the ordinary course of Apollo’s business activities, Apollo and its affiliates may engage in activities where their interests' conflict with our interests or those of our stockholders.
Currently, our Legacy HGV products and services are offered under the Hilton brand names and affiliated with the Hilton Honors loyalty program, and we intend to continue to develop and offer products and services under the Hilton brands and affiliated with the Hilton Honors loyalty program in the future, including the products acquired in the Diamond Acquisition.
Currently, our Legacy HGV products and services are offered under the Hilton brand names and affiliated with the Hilton Honors loyalty program, and we intend to continue to develop and offer products and services under the Hilton brands and affiliated with the Hilton Honors loyalty program in the future, including the products acquired in the Diamond Acquisition and the Bluegreen Acquisition.
Among other things: • these provisions allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may 38 Table of Contents be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • these provisions prohibit stockholder action by written consent unless such action is recommended by all directors then in office; • these provisions provide that our board of directors is expressly authorized to make, alter or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all the outstanding shares of our capital stock entitled to vote; and • these provisions establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Among other things: • these provisions allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • these provisions prohibit stockholder action by written consent unless such action is recommended by all directors then in office; • these provisions provide that our board of directors is expressly authorized to make, alter or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 80% or more of all the outstanding shares of our capital stock entitled to vote; and • these provisions establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
In addition, the transactions in which we have securitized timeshare financing receivables in the capital markets contain certain portfolio performance requirements related to default, delinquency and recovery rates, which, if not met, would result in loss or disruption of cash flow until portfolio performance sufficiently improves to satisfy the requirements. 27 Table of Contents If the default rates or other credit metrics underlying our timeshare financing receivables deteriorate, our timeshare financing receivable securitization program could be adversely affected.
In addition, the transactions in which we have securitized timeshare financing receivables in the capital markets contain certain portfolio performance requirements related to default, delinquency and recovery rates, which, if not met, would result in loss or disruption of cash flow until portfolio performance sufficiently improves to satisfy the requirements. 28 Table of Contents If the default rates or other credit metrics underlying our timeshare financing receivables deteriorate, our timeshare financing receivable securitization program could be adversely affected.
If any such litigation results in a significant adverse judgment, settlement, or court order, we could suffer significant losses, our profits could be reduced, our reputation could be harmed and our future ability to operate our business could be constrained. 28 Table of Contents Failure of HOA boards to levy sufficient fees, or the failure of members to pay those fees, could lead to inadequate funds to maintain or improve the properties we manage.
If any such litigation results in a significant adverse judgment, settlement, or court order, we could suffer significant losses, our profits could be reduced, our reputation could be harmed and our future ability to operate our business could be constrained. 29 Table of Contents Failure of HOA boards to levy sufficient fees, or the failure of members to pay those fees, could lead to inadequate funds to maintain or improve the properties we manage.
During a period of overall economic weakness, if we are unable to meaningfully decrease these costs as demand for our products and services decreases, our business operations and financial performance may be adversely affected. 17 Table of Contents We are subject to business, financial and operating risks inherent to the timeshare and hospitality industry, any of which could reduce our revenues and limit opportunities for growth.
During a period of overall economic weakness, if we are unable to meaningfully decrease these costs as demand for our products and services decreases, our business operations and financial performance may be adversely affected. 18 Table of Contents We are subject to business, financial and operating risks inherent to the timeshare and hospitality industry, any of which could reduce our revenues and limit opportunities for growth.
We have limited underwriting standards due to the real-time nature of industry sales practices, and do not include traditional ability-to-pay factors such as income verification which may affect loan default rates. If purchasers default on the loans that we provide to finance their VOI purchases, our revenues, cash flows and profits could be reduced.
We have limited underwriting standards due to the real-time nature of industry sales practices, and do not include traditional ability-to-pay factors such as income verification which may affect loan default rates. If purchasers' default on the loans that we provide to finance their VOI purchases, our revenues, cash flows and profits could be reduced.
These and other risks are discussed more fully in the section entitled “Risk Factors” in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K. 16 Table of Contents Risk Factors We are subject to various risks that could materially and adversely affect our business, financial condition, results of operations, liquidity and stock price.
These and other risks are discussed more fully in the section entitled “Risk Factors” in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K. 17 Table of Contents Risk Factors We are subject to various risks that could materially and adversely affect our business, financial condition, results of operations, liquidity and stock price.
If we and Hilton are unable to reach agreements on any such amendments and/or modifications, our integration and conversion plans may be delayed and/or may not comport to the current terms and conditions of the license agreement, which will adversely affect our business and operations. For additional information see “Item 1.
If we and Hilton are unable to reach agreements on any such amendments and/or modifications, our integration and rebranding plans may be delayed and/or may not comport to the current terms and conditions of the license agreement, which will adversely affect our business and operations. For additional information see “Item 1.
Current and future international operations expose us to a number of additional challenges and risks that may not be inherent in operating solely in the U.S., including, for example, the following: • rapid changes in governmental, economic, legislative or political policy; • political or civil unrest, acts of terrorism or the threat of international boycotts or U.S. anti-boycott legislation; • negative impact on governmental relationships between those countries in which we currently operate or have future expansion plans, on one hand, and the U.S., on the other hand, which may result in undesirable trade, travel or similar regulations, thereby negatively affecting the tourism industry generally, and the timeshare and leisure industry specifically; • increases in anti-American sentiment and the identification of the Hilton brands as American brands; • recessionary trends or economic instability in international markets; • changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate; • the effect of disruptions caused by severe weather, natural disasters, outbreaks of disease or other events that make travel to a particular region less attractive or more difficult; • the presence and acceptance of varying levels of business corruption in international markets and the effect of various anti-corruption and other laws; • the imposition of restrictions on currency conversion or the transfer of funds; • the ability to comply with or effect of complying with complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, increases in taxes paid and other changes in applicable tax laws; • uncertain, unfamiliar and/or unpredictable regulatory environment that may adversely affect the acquisition, development, management, marketing, sales, financings, and related activities that affect the lodging, real estate, and travel industries, and, more specifically, to the timeshare industry, such as zoning laws, real estate development regulations, and consumer privacy; • exposure to litigation in foreign jurisdictions, including the expense and time necessary to litigate and the potential of adverse outcomes: 23 Table of Contents • consequences of the United Kingdom’s exit from the European Union, including new or different regulations; • uncertainties as to local laws regarding, and enforcement of, contract and intellectual property rights; • forced nationalization of resort properties by local, state or national governments; • different social or cultural norms and practices that are not customary in the U.S.; and • the difficulties involved in managing an organization doing business in different countries.
Current and future international operations expose us to a number of additional challenges and risks that may not be inherent in operating solely in the U.S., including, for example, the following: • rapid changes in governmental, economic, legislative or political policy; • political or civil unrest, acts of terrorism or the threat of international boycotts or U.S. anti-boycott legislation; • negative impact on governmental relationships between those countries in which we currently operate or have future expansion plans, on one hand, and the U.S., on the other hand, which may result in undesirable trade, travel or similar regulations, thereby negatively affecting the tourism industry generally, and the timeshare and leisure industry specifically; • increases in anti-American sentiment and the identification of the Hilton brands as American brands; • recessionary trends or economic instability in international markets; • changes in foreign currency exchange rates or currency restructurings and hyperinflation or deflation in the countries in which we operate; • the effect of disruptions caused by severe weather, natural disasters, outbreaks of disease or other events that make travel to a particular region less attractive or more difficult; • the presence and acceptance of varying levels of business corruption in international markets and the effect of various anti-corruption and other laws; • the imposition of restrictions on currency conversion or the transfer of funds; • the ability to comply with or effect of complying with complex and changing laws, regulations and policies of foreign governments that may affect investments or operations, including foreign ownership restrictions, import and export controls, tariffs, embargoes, increases in taxes paid and other changes in applicable tax laws; • uncertain, unfamiliar and/or unpredictable regulatory environment that may adversely affect the acquisition, development, management, marketing, sales, financings, and related activities that affect the lodging, real estate, and travel industries, and, more specifically, to the timeshare industry, such as zoning laws, real estate development regulations, and consumer privacy; • exposure to litigation in foreign jurisdictions, including the expense and time necessary to litigate and the potential of adverse outcomes; • uncertainties as to local laws regarding, and enforcement of, contract and intellectual property rights; • forced nationalization of resort properties by local, state or national governments; • different social or cultural norms and practices that are not customary in the U.S.; and 24 Table of Contents • the difficulties involved in managing an organization doing business in different countries.
Our current operations and future expansion outside of the United States make us susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits or disrupt our business. We currently have timeshare properties located in the United States, Europe, Mexico, the Caribbean, Canada and Japan.
Our current operations and future expansion outside of the United States make us susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits or disrupt our business. We currently have timeshare properties located in the United States, Europe, Mexico, the Caribbean, Canada and Asia.
In addition, any non-compliance with the separation operations provision may give rise to Hilton’s ability to terminate the license agreement. Any of the foregoing and other factors that lead to Hilton’s termination of the license agreement will have a material and irreparable adverse impact on our business. See “Item 1.
In addition, any non-compliance with the separate operations provision may give rise to Hilton’s ability to terminate the license agreement. Any of the foregoing and other factors that lead to Hilton’s termination of the license agreement will have a material and irreparable adverse impact on our business. See “Item 1.
Additionally, if the distribution of our common stock and/or the distribution of Park common stock do not qualify as tax-free under Section 355 of the Code, Hilton stockholders will be treated as having received a taxable dividend to the extent 36 Table of Contents of Hilton’s current and accumulated earnings and profits, would have a tax-free basis recovery up to the amount of their tax basis in their shares, and would have taxable gain from the sale or exchange of the shares to the extent of any excess.
Additionally, if the distribution of our common stock and/or the distribution of Park common stock do not qualify as tax-free under Section 355 of the Code, Hilton stockholders will be treated as having received a taxable dividend to the extent of Hilton’s current and accumulated earnings and profits, would have a tax-free basis recovery up to the amount of their tax basis in their shares, and would have taxable gain from the sale or exchange of the shares to the extent of any excess.
Furthermore, various laws govern our resort management activities, including laws and regulations regarding community association management, public lodging, food and beverage services, liquor licensing, labor, employment, health care, health and safety, accessibility, discrimination, immigration, gaming and the environment (including climate change).
Furthermore, various laws govern our resort management activities, including laws and regulations regarding community association management, public lodging, food and beverage services, liquor licensing, labor, employment, health care, health and safety, accessibility, discrimination, immigration, gaming and the environment.
Pursuant to the stockholders agreement, two members of our board of directors are Apollo designees, and for so long as Apollo and its affiliates continue to own specified percentages of our common stock, Apollo will be able to maintain representation on our board of directors.
Pursuant to the stockholder's agreement, two members of our board of directors are Apollo designees, and for so long as Apollo and its affiliates continue to own specified percentages of our common stock, Apollo will be able to maintain representation on our board of directors.
In addition to the Shared Contingent Liabilities pursuant to the Distribution Agreement, the Tax Matters Agreement governs the respective obligations of Hilton, Park and us after the 37 Table of Contents spin-off with respect to tax liabilities and benefits, tax attributes, tax contests, liability resulting from tax audits and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.
In addition to the Shared Contingent Liabilities pursuant to the Distribution Agreement, the Tax Matters Agreement governs the respective obligations of Hilton, Park and us after the spin-off with respect to tax liabilities and benefits, tax attributes, tax contests, liability resulting from tax audits and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.
Complaints or litigation brought by existing owners following the completion of the Diamond Acquisition could harm our reputation, discourage potential new owners and adversely impact our results of operations. 42 Table of Contents Interests in the acquired Diamond resorts are offered through a trust system, which is subject to a number of regulatory and other requirements.
Complaints or litigation brought by existing owners following the completion of the Diamond Acquisition could harm our reputation, discourage potential new owners and adversely impact our results of operations. Interests in the acquired Diamond resorts are offered through a trust system, which is subject to a number of regulatory and other requirements.
In addition, each of Hilton and Park agreed to indemnify us with respect to such parties’ assumed or retained liabilities pursuant to the Distribution Agreement and breaches of the Distribution Agreement or other agreements related to the spin-offs.
In addition, each of Hilton and Park agreed to indemnify us with respect to such parties assumed or retained liabilities pursuant to the Distribution Agreement and breaches of the Distribution Agreement or other agreements related to the spin-offs.
The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to: • shifts in our investor base; • our quarterly and annual earnings, or those of comparable companies; • actual or anticipated fluctuations in our operating results; • our ability to obtain financing as needed; • changes in laws and regulations affecting our business; • changes in accounting standards, policies, guidance, interpretations or principles; • announcements by us or our competitors of significant investments, acquisitions or dispositions; • the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating performance and stock price of comparable companies; • overall market fluctuations; • a decline in the real estate markets; and • general economic conditions and other external factors. 39 Table of Contents Future issuances of common stock by us may cause the market price of our common stock to decline.
The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to: • shifts in our investor base; • our quarterly and annual earnings, or those of comparable companies; • actual or anticipated fluctuations in our operating results; • our ability to obtain financing as needed; • changes in laws and regulations affecting our business; • changes in accounting standards, policies, guidance, interpretations or principles; • announcements by us or our competitors of significant investments, acquisitions or dispositions; • the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating performance and stock price of comparable companies; • overall market fluctuations; • a decline in the real estate markets; and • general economic conditions and other external factors.
Our systems and the systems operated by our service providers may be unable to satisfy changing regulatory requirements and customer and employee expectations and/or may require significant additional investments or time to do so. The steps we take to deter and mitigate risks related to cyber-security may not provide the intended level of protection.
Our systems and the systems operated by our service providers may be unable to satisfy changing regulatory requirements and customer and employee expectations and/or may require significant additional investments or time to do so. The steps we take to deter and mitigate risks related to cybersecurity may not provide the intended level of protection.
In some instances, 21 Table of Contents partners or co-venturers may have competing interests in our markets that could create conflict of interest issues. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers from focusing their time and effort on our business.
In some instances, partners or co-venturers may have competing interests in our markets that could create conflict of interest issues. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers from focusing their time and effort on our business.
Failure to obtain required consents and comply with other provisions in these agreements could discourage, materially delay or prevent a transaction that otherwise may be in the best interests of our stockholders. The market price and trading volume of our common stock may fluctuate widely.
Failure to obtain required consents and comply with other provisions in these agreements could discourage, materially delay or prevent a transaction that otherwise may be in the best interests of our stockholders. 45 Table of Contents The market price and trading volume of our common stock may fluctuate widely.
Consequently, actions by or disputes with partners or co-venturers might result in subjecting assets owned by the partnership or joint venture, and to the extent of any guarantee our assets, to additional risk. In addition, we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
Consequently, actions by or disputes with partners or co- 22 Table of Contents venturers might result in subjecting assets owned by the partnership or joint venture, and to the extent of any guarantee our assets, to additional risk. In addition, we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
If we are not able to use Hilton’s marketing databases and corporate-level advertising channels to reach potential members and guests, including Hilton’s internet address as a channel through which to market available inventory, our member growth would be adversely affected and our revenue would materially decline, and it is unlikely that we would be able to replace the revenue associated with those channels.
If we are not able to use Hilton’s marketing databases and corporate-level advertising channels to reach potential members and guests, including Hilton’s internet address as a channel through which to market available inventory, our member growth would be 20 Table of Contents adversely affected and our revenue would materially decline, and it is unlikely that we would be able to replace the revenue associated with those channels.
Any requirements to obtain Hilton’s consent to our expansion plans, including the ongoing conversion of the acquired Diamond resorts to Hilton branded properties, or the need to identify and secure alternative expansion opportunities because Hilton does not allow us to use its trademarks with proposed new projects, may delay implementation of our expansion plans, cause us to incur additional expense or reduce the financial viability of our projects.
Any requirements to obtain Hilton’s consent to our expansion plans, including the ongoing rebranding of the acquired Diamond resorts and planned rebranding of the acquired Bluegreen resorts to Hilton branded properties, or the need to identify and secure alternative expansion opportunities because Hilton does not allow us to use its trademarks with proposed new projects, may delay implementation of our expansion plans, cause us to incur additional expense or reduce the financial viability of our projects.
If we fail to develop timeshare properties, acquire inventory or are unsuccessful in entering into new agreements with third-party developers, we may experience a decline in VOI supply, which could result in a decrease in our revenues. Approximately 44% of our contract sales were from capital-efficient sources for the year ended December 31, 2022.
If we fail to develop timeshare properties, acquire inventory or are unsuccessful in entering into new agreements with third-party developers, we may experience a decline in VOI supply, which could result in a decrease in our revenues. Approximately 47% of our contract sales were from capital-efficient sources for the year ended December 31, 2023.
The existence of the Repurchase Program could cause our stock price to be higher than it would be in the absence of such a program. Additionally, the Repurchase Program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities.
The existence of the Repurchase Program could cause our stock price to be higher than it would be in the absence of such a program. Additionally, the Repurchase Program could diminish our cash reserves, which may impact our 46 Table of Contents ability to finance future growth and to pursue possible future strategic opportunities.
We may conclude that it is necessary to enter into future amendments and/or modifications to the license agreement that may be necessary in connection with the integration and conversion plans.
We may conclude that it is necessary to enter into future amendments and/or modifications to the license agreement that may be necessary in connection with the integration and rebranding plans.
Our license agreement or other agreements with Hilton may require us to incur unexpected costs required to cause our properties to comply with applicable standards and policies. In recent years, our financial results have been positively impacted by a lower interest rate environment.
Our license agreement or other agreements with Hilton may require us to incur unexpected costs required to cause our properties to comply with applicable standards and policies. Our financial results have been positively impacted by a lower interest rate environment.
Our disclosure controls and procedures, as may be updated to include additional controls and processes, and enhanced to revise the design of existing financial reporting and information technology controls and procedures as previously discussed, are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act and applicable rules and regulations is recorded, processed, summarized and reported within the time periods specified in such rules and forms, and that such required information is accumulated and communicated to our management in a timely manner.
Our disclosure controls and procedures, as may be updated to include additional enhancements to the design of existing financial reporting and information technology controls and procedures, as well as adding additional controls and processes, as previously discussed, are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act and applicable rules and regulations is recorded, processed, summarized and reported within the time periods specified in such rules and forms, and that such required information is accumulated and communicated to our management in a timely manner.
Extreme weather events and adverse weather conditions, including hurricanes, flooding and forest fires, that impact the areas in which our properties are concentrated may increase in frequency and severity as a result of climate change.
Extreme weather events and adverse weather conditions, including hurricanes, flooding and forest fires, that impact the areas in which our properties are concentrated may increase in 23 Table of Contents frequency and severity as a result of climate change.
However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
However, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these 26 Table of Contents controls are operating effectively.
Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While limitations on our subsidiaries restrict their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions.
Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While limitations on our subsidiaries restrict their ability to pay dividends or make other intercompany payments to us, these 36 Table of Contents limitations are subject to certain qualifications and exceptions.
Although we carry cyber/privacy liability insurance that is designed to protect us against certain losses related to cyber-security risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in connection with cyber-attacks, security breaches, and other related breaches.
Although we carry cyber/privacy liability insurance that is designed to protect us against certain losses related to 31 Table of Contents cybersecurity risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in connection with cyber-attacks, security breaches, and other related breaches.
Failure to comply with applicable laws, regulations and policies could also render sales contracts for our products void or voidable, subject us to fines or other sanctions, and increase our exposure to litigation. Changes in privacy law could adversely affect our ability to market our products effectively.
Failure to comply with applicable laws, regulations and policies could also render sales contracts for our products void or voidable, subject us to fines or other sanctions, and increase our exposure to litigation. 32 Table of Contents Changes in privacy law could adversely affect our ability to market our products effectively.
Any noncompliance with any of these provision may result in the termination of the license agreement, either automatically or at Hilton’s election.
Any noncompliance with any of these provisions may result in the termination of the license agreement, either automatically or at Hilton’s election.
Any indebtedness we incur, including 26 Table of Contents indebtedness under these facilities, may adversely affect our ability to obtain any additional financing necessary to develop or acquire additional VOI inventory, to make other investments in our business, or to repurchase VOIs on the secondary market.
Any indebtedness we incur, including indebtedness under these facilities, may adversely affect our ability to obtain any additional financing necessary to develop or acquire additional VOI inventory, to make other investments in our business, or to repurchase VOIs on the secondary market.
Accordingly, during that period of time, Apollo may have influence with respect to our management, business plans and policies, including the appointment and removal of our officers.
Accordingly, during that period of time, Apollo may have influence with respect to our management, 44 Table of Contents business plans and policies, including the appointment and removal of our officers.
In addition, we may be required to devote significant resources to social media management programs, which could result in increased costs to us. 29 Table of Contents Our increasing reliance on information technology and other systems subjects us to risks associated with cyber-security.
In addition, we may be required to devote significant resources to social media management programs, which could result in increased costs to us. 30 Table of Contents Our increasing reliance on information technology and other systems subjects us to risks associated with cybersecurity.
There has been an increase in the number and sophistication of criminal cyber-security attacks against companies where customer and other sensitive information has been compromised.
There has been an increase in the number and sophistication of criminal cybersecurity attacks against companies where customer and other sensitive information has been compromised.
Instability in the financial markets could also affect the timing and volume of any securitizations we undertake, as well as the financial terms of such securitizations.
Instability in the financial markets could also affect the timing and volume of any 27 Table of Contents securitizations we undertake, as well as the financial terms of such securitizations.
If we are unable to successfully integrate and manage the trust system our results of operations or reputation may suffer. 43 Table of Contents
If we are unable to successfully integrate and manage the trust system our results of operations or reputation may suffer.
Providing secured financing to some purchasers of VOIs subjects us to the risk of purchaser default. As of December 31, 2022, our consumer loan portfolio had a balance of approximately $2.5 billion and experienced default rates of 7.92%, 8.93% and 6.34% for the fiscal years ended December 31, 2022, 2021 and 2020, respectively.
Providing secured financing to some purchasers of VOIs subjects us to the risk of purchaser default. As of December 31, 2023, our consumer loan portfolio had a balance of approximately $2.9 billion and experienced default rates of 8.56%, 7.92% and 8.93% for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.
The license agreement was amended and restated in connection with the Diamond Acquisition to facilitate our integration of the Diamond business and create a license fee structure related to the integration.
The license agreement was amended and restated in connection with the Diamond Acquisition and the Bluegreen Acquisition to facilitate our integration of the Diamond and Bluegreen businesses and create a license fee structure related to the integrations.
The License Agreement Amendment sets forth certain annual and cumulative target room conversions. The License Agreement Amendment provides for the offer and sale by HGV of its “HGV Max” branded product that provides access across legacy HGV and both converted and unconverted Diamond properties, subject to certain conditions.
The License Agreement Amendment provides for the offer and sale by HGV of its “HGV Max” branded product that provides access across legacy HGV and both converted and unconverted Diamond properties, subject to certain conditions.
In addition, the properties we manage are subject to the effects of adverse acts of natural or man-made 22 Table of Contents disasters, including earthquakes, windstorms, tornadoes, hurricanes, typhoons, tsunamis, volcanic eruptions, floods, drought, fires, oil spills and nuclear incidents.
In addition, our properties are subject to the effects of adverse acts of natural or man-made disasters, including earthquakes, windstorms, tornadoes, hurricanes, typhoons, tsunamis, volcanic eruptions, floods, drought, climate changes, fires, oil spills and nuclear incidents.
In fact, we are required to comply with various requirements to operate such business and properties as “separate operation.” However, if any such non-Hilton branded vacation ownership properties and related units exceed certain thresholds, we may lose certain rights to use the Hilton trademark, including our “Hilton Grand Vacations” corporate name.
In fact, we are required to comply with various requirements to operate such business and properties as separate operations. However, if any such non-Hilton branded vacation ownership properties and related units and revenues exceed certain thresholds, we may lose certain rights, including the right related to our use of Hilton-branded trademarks, including our “Hilton Grand Vacations” corporate name.
As a result, interest rates on our revolving credit facility or other variable rate debt offerings could be higher than current levels. As of December 31, 2022, we had approximately $1,428 million of notional variable rate debt, representing 37% of our total indebtedness.
As a result, interest rates on our revolving credit facility or other variable rate debt offerings could be higher than current levels. As of December 31, 2023, we had approximately $2.2 billion of notional variable rate debt, representing 49% of our total indebtedness.
We are taking, and will continue to take, steps to enhance the risk assessment process and design and implementation of internal controls over financial reporting with respect to Diamond, including incorporating additional 25 Table of Contents controls and processes, and enhancing and revising the design of our existing financial reporting and information technology controls and procedures.
We have commenced taking, and will continue to take, steps to enhance the risk assessment process and design and implementation of internal controls over financial reporting with respect to the user access matter, including enhancing and revising the design of our existing financial reporting and information technology controls and procedures, and incorporating additional controls and processes.
In addition, exit companies may target HGV owners to a greater extent than they already do in light of the Diamond Acquisition. Disagreements with VOI owners, HOAs and other third parties may result in litigation and/or loss of management contracts.
In addition, exit companies may target HGV’s owners (including Bluegreen’s and Diamond’s owners) to a greater extent than they already do in light of the larger, combined company following the Diamond Acquisition and Bluegreen Acquisition. Disagreements with VOI owners, HOAs and other third parties may result in litigation and/or loss of management contracts.
If we fail to comply with the requirements of the GDPR, we could face significant administrative and monetary sanctions, which could materially adversely impact our results of operations and financial condition. Changes to accounting rules or regulations may adversely affect our reported financial condition and results of operations.
If we fail to comply with the requirements of the GDPR, we could face significant administrative and monetary sanctions, which could materially adversely impact our results of operations and financial condition.
As of December 31, 2022, our total indebtedness was approximately $3.8 billion, of which approximately $1.1 billion was non-recourse debt. We significantly increased our level of indebtedness in connection with financing the Diamond Acquisition.
As of December 31, 2023, our total indebtedness was approximately $4.5 billion, of which approximately $1.5 billion was non-recourse debt. We significantly increased our level of indebtedness in connection with financing the Diamond Acquisition and the Bluegreen Acquisition.
These restrictions limit our ability and/or the ability of our restricted subsidiaries to, among other things: • incur or guarantee additional debt or issue disqualified stock or preferred stock; • pay dividends (including to us) and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; 34 Table of Contents • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to us; • designate restricted subsidiaries as unrestricted subsidiaries; and • transfer or sell assets.
These restrictions limit our ability and/or the ability of our restricted subsidiaries to, among other things: • incur or guarantee additional debt or issue disqualified stock or preferred stock; • pay dividends (including to us) and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to us; • designate restricted subsidiaries as unrestricted subsidiaries; and • transfer or sell assets. 35 Table of Contents In addition, our credit agreement related to our senior secured credit facilities contains affirmative covenants that will require us to be in compliance with certain leverage and financial ratios.
In addition, our ability to pay dividends is limited by our credit agreement related to our senior secured credit facilities. Our ability to pay dividends may also be limited by covenants of other indebtedness that we or our subsidiaries incur in the future. Our business could be negatively impacted as a result of actions by activist stockholders or others.
In addition, our ability to pay dividends is limited by our credit agreement related to our senior secured credit facilities. Our ability to pay dividends may also be limited by covenants of other indebtedness that we or our subsidiaries incur in the future.
Share repurchases could also increase the volatility of the price of our common stock and diminish our cash reserves. • The actions of activist stockholders; • Our ability to integrate the Diamond business successfully or realize the anticipated cost savings, synergies and growth in operating results; and • Our ability to effectively manage our expanded operations resulting from the Diamond Acquisition, including the trust system associated with the Diamond business.
Share repurchases could also increase the volatility of the price of our common stock and diminish our cash reserves; • Our ability to integrate the Diamond and the Bluegreen businesses successfully or realize the anticipated cost savings, synergies and growth in operating results with each such acquisition, as well as integrate strategic partnerships assumed in the Bluegreen Acquisition; and • Our ability to effectively manage our expanded operations resulting from both the Diamond Acquisition and the Bluegreen Acquisition, including the respective trust systems associated with such businesses.
See “Our ability to integrate the acquired Diamond business could be harmed if Hilton does not consent to the use of their trademarks in connection with the conversion of Diamond resorts” and “Item 1.
See “Risks Related to the Integration of Diamond—Our ability to integrate the acquired Diamond business could be harmed if Hilton does not consent to the use of its trademarks in connection with the rebranding of Diamond resorts ,” “Risks Related to the Integration of Bluegreen—Our ability to integrate the acquired Bluegreen business could be harmed if Hilton does not consent to the use of its trademarks in connection with the rebranding of Bluegreen resorts” and “Item 1.
Risks Related to the Operation of Our Business We do not own the Hilton brands and our business will be materially harmed if we breach our license agreement with Hilton or it is terminated.
Risks Related to the Operation of Our Business We do not own the Hilton brands and our business will be materially harmed if we breach our license agreement with Hilton or it is terminated. Following the spin-off, Hilton retained ownership of the Hilton-branded trademarks, tradenames and certain related intellectual property used in the operation of our business.
As of December 31, 2022, an aggregate of 3,102,210 shares have been issued, and an additional 4,416,258 shares were underlying outstanding awards pursuant to the Omnibus Incentive Plan.
As of December 31, 2023, an aggregate of 4,339,887 shares have been issued, and an additional 4,122,738 shares were underlying outstanding awards pursuant to the Omnibus Incentive Plan.
We completed the Diamond Acquisition with the expectation that it will result in various benefits and synergies, including, among other things, operating efficiencies, and opportunities to potentially increase our revenue, sales, EBITDA, owners, and cost savings.
Any of these factors could have a material adverse effect on our business, financial condition and results of operations. We completed the Diamond Acquisition with the expectation that it will result in various benefits and synergies, including, among other things, operating efficiencies, and opportunities to potentially increase our revenue, sales, EBITDA, owners, and cost savings.
Under the Non-Employee Director Stock Plan, 134,262 shares had been issued, and there were an additional 23,268 shares underlying outstanding awards granted as of December 31, 2022. Under the Employee Stock Purchase Plan, a total of 388,800 shares were issued as of December 31, 2022.
Under the Non-Employee Director Stock Plan, 157,530 shares had been issued, and there were an additional 26,052 shares underlying outstanding awards granted as of December 31, 2023. Under the Employee Stock Purchase Plan, a total of 566,972 shares were issued as of December 31, 2023.
We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements.
We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt arrangements may restrict us from effecting any of these alternatives.
The COVID-19 pandemic and related events have had, and may from time to time continue to have, a material adverse effect on our business, financial condition and results of operations.
Any pandemic, epidemic and related events may have a material adverse effect on our business, financial condition and results of operations.
As discussed in Part II, Item 9A of this Annual Report on Form 10-K, in connection with our year-end assessment of internal control over financial reporting, our management determined that, as of December 31, 2022, we did not maintain effective internal control over financial reporting due to a material weakness in internal control over financial reporting related to Diamond, which we acquired on August 2, 2021.
As previously disclosed, in connection with our year-end assessment of internal control over financial reporting, our management determined that, as of December 31, 2022, we had not maintained effective internal control over financial reporting due to a material weakness in internal control over financial reporting related to Diamond, which we acquired in August 2021.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations. 32 Table of Contents In addition, we are subject to ongoing and periodic tax audits and disputes in U.S. federal and various state, local and foreign jurisdictions.
Any changes in enacted tax laws, rules or regulatory or judicial interpretations or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and results of operations.
Although we do not expect to be liable for any obligations that were not allocated to us under the Distribution Agreement, a court could disregard the allocation agreed to among the parties, and require that we assume responsibility for obligations allocated to Hilton or Park (for example, tax and/or environmental liabilities), particularly if Hilton or Park were to refuse or were unable to pay or perform the allocated obligations.
Although we do not expect to be liable for any obligations that were not allocated to us under the Distribution Agreement, a court could disregard the allocation agreed to among the parties, and require that we assume responsibility for obligations allocated to Hilton or Park (for example, tax and/or environmental liabilities), particularly if Hilton or Park were to refuse or were unable to pay or perform the allocated obligations. 43 Table of Contents In addition, losses in respect of certain Shared Contingent Liabilities, which generally are not specifically attributable to any of the timeshare business, the Park business or the retained business of Hilton, were determined on or prior to the date on which the Distribution Agreement was entered.
There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the transaction. In addition, there will be increased compliance and regulatory risk as a result of the expanded size of our business.
There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the transaction.
If the license agreement is terminated, we could lose the right to use one or more of such new brands. 19 Table of Contents The termination of the license agreement or exercise of other remedies would materially harm our business and results of operations and impair our ability to market and sell our products and maintain our competitive position.
The termination of the license agreement or exercise of other remedies would materially harm our business and results of operations and impair our ability to market and sell our products and maintain our competitive position.
If these 20 Table of Contents brands or program deteriorate or materially change in an adverse manner, or the reputation of these brands or program declines, our market share, reputation, business, financial condition or results of operations could be materially adversely affected.
If these brands or program deteriorate or materially change in an adverse manner, or the reputation of these brands or program declines, our market share, reputation, business, financial condition or results of operations could be materially adversely affected. 21 Table of Contents We rely on several critical marketing programs and activities to generate tour flow and contract sales and increase our revenues.
On May 4, 2022, our Board of Directors authorized a share repurchase program (the “Repurchase Program”), pursuant to which we may repurchase up to $500 million of our common stock over a two-year period through any combination of open market repurchases, accelerated share repurchases or privately negotiated transactions .
Share repurchases could also increase the volatility of the price of our common stock and diminish our cash reserves. Our Board of Directors has authorized a share repurchase program (the “Repurchase Program”) pursuant to which we may repurchase our common stock through any combination of open market repurchases, accelerated share repurchases or privately negotiated transactions .
Ultimately, the integration process is subject to a number of uncertainties, and no assurance can be given that our integration efforts will be successful.
The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization.
In addition, the license agreement requires Hilton’s approval in connection with our anticipated conversion of the Diamond properties into our branded HGV Max properties and/or another new brand of properties. Hilton also has the right to review our sales, reservation and marketing activities related to HGV Max and review and approve our rebranded sales centers.
In addition, the license agreement requires Hilton’s approval in connection with our anticipated rebranding of the Diamond properties into our branded HGV Max properties and/or another new brand of properties.
We have agreed with Hilton to operate the Diamond properties and business as a separate operation, pending the rebranding and conversion plan, after which we expect to continue to operate certain Diamond properties that are not rebranded as a separate operation.
Hilton also has the right to review our sales, reservation and marketing activities related to HGV Max and review and approve our rebranded sales centers. 37 Table of Contents We have agreed with Hilton to operate the Diamond properties and business as a separate operation, pending the rebranding and rebranding plan, after which we expect to continue to operate certain Diamond properties that are not rebranded as a separate operation.
In addition, the terms of our existing or future debt arrangements may restrict us from effecting any of these alternatives. 35 Table of Contents Our failure to comply with the agreements relating to our outstanding indebtedness could result in an event of default that could materially and adversely affect our results of operations and our financial condition.
Our failure to comply with the agreements relating to our outstanding indebtedness could result in an event of default that could materially and adversely affect our results of operations and our financial condition.
Pursuant to the license agreement, Hilton would be the sole owner of certain licensed marks related to any new brands associated with the Diamond portfolio that are developed by us.
Pursuant to the license agreement, Hilton would be the sole owner of certain licensed marks related to any new brands associated with the Diamond portfolio that we developed or may develop. If the license agreement is terminated, we could lose the right to use one or more of such new brands.
In addition, the third party service providers on which we rely face cyber-security risks, some of which may be different than the risks we face, and we do not directly control any of such service providers’ information security operations, including the efforts that they may take to mitigate risks or the level of cyber/privacy liability insurance that they may carry. 30 Table of Contents Risks Related to Legal and Regulatory Requirements Our business is regulated under a wide variety of laws, regulations and policies in the United States and abroad, and failure to comply with these regulations could adversely affect our business.
In addition, the third party service providers and partners on which we rely (including those that may be in possession of our sensitive information) face cybersecurity risks, some of which may be different than the risks we face, and we do not directly control any of such service providers’ information security operations, including the efforts that they may take to mitigate risks or the level of cyber/privacy liability insurance that they may carry.

… 133 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

6 edited+0 added−0 removed1 unchanged
Biggest changeCorporate Headquarters Our main corporate headquarters are located at 6355 MetroWest Boulevard, Suite 180, Orlando, Florida 32835. The lease for this property expires in 2026 with two additional five-year renewal periods. We also have additional corporate headquarters that are located at 5323 and 5337 Millenia Lakes Boulevard, Orlando, Florida, 32839. The lease for these properties expires in 2034.
Biggest changeOur call centers are located in Orlando, Las Vegas, Virginia Beach and the United Kingdom. 48 Table of Contents Corporate Headquarters Our main corporate headquarters are located at 6355 MetroWest Boulevard, Suite 180, Orlando, Florida 32835. The lease for this property expires in 2026 with two additional five-year renewal periods.
ITEM 2. Properties Timeshare Properties As of December 31, 2022, we had over 150 properties open and operating, including properties not yet fully developed but in which VOIs were being sold. Most of our properties and units are located in vacation destinations such as Florida, Europe, Hawaii, California, Arizona, Nevada, and Virginia.
ITEM 2. Properties Timeshare Properties As of December 31, 2023, we had over 150 properties open and operating, including properties not yet fully developed but in which VOIs were being sold. Most of our properties and units are located in vacation destinations such as Florida, Europe, Hawaii, California, Arizona, Nevada, and Virginia.
Sales and Marketing Locations As of December 31, 2022, we had sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. Our products are for sale throughout the United States, Japan, Canada, Mexico, and Europe.
Sales and Marketing Locations As of December 31, 2023, we had sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership. Our products are for sale throughout the United States, Mexico, Canada, Europe and Asia.
These units and properties include those developed by us or by third-party developers with whom we have entered into fee-for-service arrangements. As of December 31, 2022, we owned approximately 62% of all unsold intervals including 100% of all unsold points-based intervals.
These units and properties include those developed by us or by third-party developers with whom we have entered into fee-for-service arrangements. As of December 31, 2023, we owned approximately 64% of all unsold intervals including 100% of all unsold points-based intervals.
We have approximately 50 sales distribution centers in various domestic and international locations. Our distribution centers and sales galleries are operated through leased and owned properties. Additionally, we have 7 call centers that are leased. Our call centers are located in Orlando, Las Vegas, Costa Mesa and the United Kingdom.
We have over 60 sales distribution centers in various domestic and international locations. Our distribution centers and sales galleries are operated through leased and owned properties. Additionally, we have 6 call centers that are leased.
We believe that our existing office properties are in good condition and are sufficient and suitable for the conduct of our business.
We also have additional corporate headquarters that are located at 5323 and 5337 Millenia Lakes Boulevard, Orlando, Florida, 32839. The lease for these properties expires in 2034. We believe that our existing office properties are in good condition and are sufficient and suitable for the conduct of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+4 added−3 removed1 unchanged
Biggest changeThe timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and regulatory requirements and other market and economic conditions. The shares are retired upon repurchase. The stock repurchase program may be suspended or discontinued at any time and will automatically expire at the end of the two-year term.
Biggest changeThe repurchases can be made through any combination of open market purchases, accelerated share repurchases or privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors, including the stock price, corporate and 50 Table of Contents regulatory requirements and other market and economic conditions. The shares are retired upon repurchase.
The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2017, and that all dividends and other distributions were reinvested.
The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2018, and that all dividends and other distributions were reinvested.
Dividends Although we may return capital to stockholders through dividends or otherwise in the future, we have no current plans to pay dividends on our common stock.
Holders of Record The number of stockholders of record of our common stock as of February 22, 2024, was 366. Dividends Although we may return capital to stockholders through dividends or otherwise in the future, we have no current plans to pay dividends on our common stock.
Performance Graph The following graph compares cumulative total stockholder return of our common stock with the Russell 2500 (“R2500”) Index and the Dow Jones US Travel & Leisure Total Return Index GICS Level 2 (“DJUSGCT”)* over a five-year period ended on December 31, 2022.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HGV.” Performance Graph The following graph compares cumulative total stockholder return of our common stock with the S&P MidCap 400 (“MidCap 400”)* Index and the Dow Jones US Travel & Leisure Total Return Index GICS Level 2 (“DJUSGCT”) over a five-year period ended on December 31, 2023.
In addition, our senior secured credit facilities and certain of our non-recourse debt include provisions limiting our ability to make restricted payments, including dividends. 45 Table of Contents Issuer Purchases of Equity Securities On May 4, 2022, our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period through any combination of open market repurchases, accelerated share repurchases or privately negotiated transactions .
Issuer Purchases of Equity Securities On May 4, 2022, our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period (the "2022 Repurchase Plan").
The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. * We have determined that the appropriate index to use going forward is DJUSCGT, which includes reinvestments of dividends.
The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. * As of March 2023, our company has been included in the S&P MidCap 400.
During the three-month period ended December 31, 2022, we repurchased the following shares: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan October 1 – October 31, 2022 1,048,218 $ 35.88 1,048,218 $ 290,289,095 November 1 – November 30, 2022 873,204 43.04 873,204 252,710,441 December 1 – December 31, 2022 584,269 42.34 584,269 227,969,722 Total 2,505,691 $ 39.88 2,505,691
During the three-month period ended December 31, 2023, we repurchased the following shares: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan October 1 – October 31, 2023 727,931 $ 37.44 727,931 $ 431,374,901 November 1 – November 30, 2023 939,687 35.43 939,687 398,078,432 December 1 – December 31, 2023 985,449 38.81 985,449 359,828,593 Total 2,653,067 $ 37.24 2,653,067 From January 1, 2024, through February 23, 2024, we repurchased approximately 1.7 million shares for $71 million.
Removed
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HGV.” In connection with the closing of the Diamond Acquisition, on August 2, 2021, HGV issued an aggregate of 33,925,901 shares of HGV's common stock as substantially all of the consideration to the former stockholders of Diamond.
Added
In addition, our senior secured credit facilities and certain of our non-recourse debt include provisions limiting our ability to make restricted payments, including dividends.
Removed
The shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended and/or Rule 506 under the Securities Act.
Added
On May 3, 2023, our Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an aggregate of $500 million of its outstanding shares of common stock over a two-year period (the "2023 Repurchase Plan") which is in addition to the 2022 Repurchase Plan.
Removed
Previously, we had used DJUSTLE, a tracker index of DJUSCGT, which was not a published industry index and also did not include reinvestment of dividends. Holders of Record The number of stockholders of record of our common stock as of February 24, 2023 was 330.
Added
The stock repurchase programs may be suspended or discontinued at any time and will automatically expire at the end of the respective plan terms.
Added
As of February 23, 2024, we had $289 million of remaining availability under the 2023 Repurchase Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

103 edited+42 added−61 removed81 unchanged
Biggest changeResort Operations and Club Management Segment Resort and Club Management Year Ended December 31, 2022 vs 2021 (1) 2021 vs 2020 (1) ($ in millions) 2022 2021 2020 $ % $ % Club management revenue $ 227 $ 168 $ 96 $ 59 35.1 $ 72 75.0 Resort management revenue 307 172 70 135 78.5 102 NM Resort and club management revenues 534 340 166 194 57.1 174 NM Club management expense 42 28 24 14 50.0 4 16.7 Resort management expense 119 52 12 67 NM 40 NM Resort and club management expenses 161 80 36 81 NM 44 NM Resort and club management profit $ 373 $ 260 $ 130 $ 113 43.5 $ 130 100.0 Resort and club management profit margin 69.9 % 76.5 % 78.3 % (1) Fluctuation in terms of percentage change is not meaningful.
Biggest changeFinancing expense decreased by $4 million due to a decrease in bank fees partially offset by higher compensation costs due to increased headcount. 64 Table of Contents Resort Operations and Club Management Segment Resort and Club Management Year Ended December 31, 2023 vs 2022 Variance ($ in millions) 2023 2022 2021 $ % Club management revenue $ 240 $ 227 $ 168 $ 13 5.7 Resort management revenue 329 307 172 22 7.2 Resort and club management revenues 569 534 340 35 6.6 Club management expense 60 42 28 18 42.9 Resort management expense 117 119 52 (2) (1.7) Resort and club management expenses 177 161 80 16 9.9 Resort and club management profit $ 392 $ 373 $ 260 $ 19 5.1 Resort and club management profit margin 68.9 % 69.9 % 76.5 % Resort and club management profit increased by $19 million for the year ended December 31, 2023, compared to the same period in 2022, driven by an increase of $35 million in resort and club management revenue and partially offset by an increase of $16 million in resort and club management expenses.
In general, purchasers of VOI in a collection do not acquire a direct ownership interest in the resort properties in the Collection.
In general, purchasers of a VOI in a collection do not acquire a direct ownership interest in the resort properties in the Collection.
When owners purchase VOI, they are generally enrolled in a Club which allows the member to exchange their points for a number of vacation options. In addition to an annual membership fee, Club members pay incremental fees depending on exchanges they choose within the Club system.
When owners purchase a VOI, they are generally enrolled in a Club which allows the member to exchange their points for a number of vacation options. In addition to an annual membership fee, Club members pay incremental fees depending on exchanges they choose within the Club system.
General and administrative also includes costs for services provided to us by Hilton. • Depreciation and amortization are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings and leasehold improvements and furniture and equipment at our sales centers, corporate offices, and assets purchased for future conversion to inventory, as well as amortization of our trade names, management agreement contracts, club member relationship intangibles and capitalized software. • License fee expense represents the royalty fee paid to Hilton under a license agreement for the exclusive right to use the Hilton Grand Vacations mark, which is generally based on a percentage of gross sales volume, of certain revenue streams. • Acquisition and integration-related expense represents direct expenses for the Diamond Acquisition including integration costs, legal and other professional fees.
General and administrative also includes costs for services provided to us by Hilton. • Depreciation and amortization are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings and leasehold improvements and furniture and equipment at our sales centers, corporate offices, and assets purchased for future conversion to inventory, as well as amortization of our trade names, management agreement contracts, club member relationship intangibles and capitalized software. • License fee expense represents the royalty fee paid to Hilton under a license agreement for the exclusive right to use the Hilton Grand Vacations mark, which is generally based on a percentage of gross sales volume of certain revenue streams. • Acquisition and integration-related expense represents direct expenses for the Diamond Acquisition and the Bluegreen Acquisition, including integration costs, legal and other professional fees.
EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
The estimated contract sales value related to our inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future upon registration, delivery or construction is approximately $11 billion at current pricing.
The estimated contract sales value related to our inventory that is currently available for sale at open or soon-to-be open projects and inventory at new or existing projects that will become available for sale in the future upon registration, delivery or construction is approximately $11.3 billion at current pricing.
Principal Components of Expenses • Cost of VOI sales represents the costs attributable to the sales of owned VOIs recognized, as well as charges incurred related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects. • Sales and marketing represents costs incurred to sell and market VOIs, including costs incurred relating to marketing and incentive programs, costs for tours, rental expense and wages and sales commissions. • Financing represents consumer financing interest expense related to our debt securitized by gross timeshare financing receivables (“Securitized Debt”) and Timeshare Facility, amortization of the related deferred loan costs and other expenses incurred in providing consumer financing and servicing loans. • Resort and club management represents costs incurred to manage resorts and the Clubs, including payroll and related costs and other administrative costs. • Rental and ancillary services include payroll and related costs, costs incurred from participating in the Hilton Honors loyalty program, retail, food and beverage costs and maintenance fees on unsold inventory. • General and administrative consists primarily of compensation expense for our corporate staff and personnel supporting our business segments, professional fees (including consulting, audit and legal fees), administrative and related expenses.
Principal Components of Expenses • Cost of VOI sales represents the costs attributable to the sales of owned VOIs recognized, as well as charges incurred related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects. • Sales and marketing represents costs incurred to sell and market VOIs, including costs incurred relating to marketing and incentive programs, costs for tours, rental expense and wages and sales commissions. • Financing represents consumer financing interest expense related to our debt securitized by gross timeshare financing receivables (“Securitized Debt”) and Timeshare Facility, amortization of the related deferred loan costs and other expenses incurred in providing consumer financing and servicing loans. • Resort and club management represents costs incurred to manage resorts and the Clubs, including payroll and related costs and other administrative costs. 55 Table of Contents • Rental and ancillary services include payroll and related costs, costs incurred from participating in the Hilton Honors loyalty program, retail, food and beverage costs and maintenance fees on unsold inventory. • General and administrative consists primarily of compensation expense for our corporate staff and personnel supporting our business segments, professional fees (including consulting, audit and legal fees), administrative and related expenses.
Rather, for each Collection, one or more trustees hold legal title either to the deeded fee simple real estate interests, the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements.
Rather, for each Collection, one or more trustees hold legal title to the deeded fee simple real estate interests, or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Collection’s association members in accordance with the applicable agreements.
EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under U.S. GAAP.
EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income, cash flow or other methods of analyzing our results as reported under U.S. GAAP.
Discussions of our financial condition and results of operations for the year ended December 31, 2021 compared to December 31, 2020 that have been omitted under this item can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021 , which was filed with the Securities and Exchange Commission on March 1, 2022.
Discussions of our financial condition and results of operations for the year ended December 31, 2022 compared to December 31, 2021 that have been omitted under this item can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022 , which was filed with the Securities and Exchange Commission on March 1, 2023.
Some of these limitations are: • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA and Adjusted EBITDA do not reflect our interest expense (excluding interest expense on non-recourse debt), or the cash requirements necessary to service interest or principal payments on our indebtedness; • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; • EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; • EBITDA and Adjusted EBITDA do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized; and • EBITDA and Adjusted EBITDA may be calculated differently from other companies in our industry limiting their usefulness as comparative measures.
Some of these limitations are: • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA and Adjusted EBITDA do not reflect our interest expense (excluding interest expense on non-recourse debt), or the cash requirements necessary to service interest or principal payments on our indebtedness; • EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes; 57 Table of Contents • EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; • EBITDA and Adjusted EBITDA do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized; and • EBITDA and Adjusted EBITDA may be calculated differently from other companies in our industry limiting their usefulness as comparative measures.
Capital-efficient arrangements, comprised of our fee-for-service and just-in-time inventory, represented approximately 39% of that supply. We believe that the visibility into our long-term supply allows us to efficiently manage inventory to meet predicted sales, reduce capital investments, minimize our exposure to the cyclicality of the real estate market and mitigate the risks of entering into new markets.
Capital-efficient arrangements, comprised of our fee-for-service and just-in-time inventory, represented approximately 35% of that supply. We believe that the visibility into our long-term supply allows us to efficiently manage inventory to meet predicted sales, reduce capital investments, minimize our exposure to the cyclicality of the real estate market and mitigate the risks of entering into new markets.
We sell our vacation ownership products primarily through our distribution network of both-in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe, and Japan. We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership.
We sell our vacation ownership products primarily through our distribution network of both-in-market and off-site sales centers. Our products are currently marketed for sale throughout the United States, Mexico, Canada, Europe and Asia. We operate sales distribution centers in major markets and popular leisure destinations with year-round demand and a history of being a friendly environment for vacation ownership.
Also included in Sales, marketing, brand and other fees are revenues from marketing and incentive programs, including redemption of prepaid vacation packages and Club bonus points for stays at HGV properties, which are included in Rental and ancillary services . • Financing represents revenue from the financing of sales of our owned intervals, which includes interest income and fees from servicing loans.
Also included in Sales, marketing, brand and other fees are revenues from marketing and incentive programs, except for redemption of prepaid vacation packages and Club bonus points for stays at HGV properties, which are included in Rental and ancillary services . • Financing represents revenue from the financing of sales of our owned intervals, which includes interest income and fees from servicing loans.
In determining the fair values of assets acquired and liabilities assumed, we use various recognized valuation methods including the income, cost and sales and market approaches, which also include certain valuation techniques such as discount rates, and the amount and timing of future cash flows.
In determining the fair values of assets acquired and liabilities assumed, we use various recognized valuation methods including the income, cost and sales and market approaches, which also include certain valuation assumptions such as discount rates, and the amount and timing of future cash flows.
The weighted-average FICO score for loans to U.S. and Canadian borrowers at the time of origination were as follows: Year Ended December 31, 2022 2021 2020 Weighted-average FICO score 735 734 734 Prepayment is permitted without penalty. When a member defaults, we ultimately return their VOI to inventory for resale and that member no longer participates in our Clubs.
The weighted-average FICO score for loans to U.S. and Canadian borrowers at the time of origination were as follows: Year Ended December 31, 2023 2022 2021 Weighted-average FICO score 737 735 734 Prepayment is permitted without penalty. When a member defaults, we ultimately return their VOI to inventory for resale and that member no longer participates in our Clubs.
Segment Results The following tables present our revenues by segment for the year ended December 31, 2022 compared to the years ended December 31, 2021, and 2020. We do not include equity in earnings from unconsolidated affiliates in our measures of segment revenues.
Segment Results The following tables present our revenues by segment for the year ended December 31, 2023, compared to the years ended December 31, 2022, and 2021. We do not include equity in earnings from unconsolidated affiliates in our measures of segment revenues.
Furthermore, construction delays, zoning and other local, state or federal governmental approvals, particularly in new geographic areas with which we are unfamiliar, cost overruns, lender financial 51 Table of Contents defaults, or natural or man-made disasters, as well as failure by third-party contractors to perform for any reason, could lead to an adverse effect on our cash flows, margins and profits. • Sales and marketing expense .
Furthermore, construction delays, zoning and other local, state or federal governmental approvals, particularly in new geographic areas with which we are unfamiliar, cost overruns, lender financial defaults, or natural or man-made disasters, as well as failure by third-party contractors to perform for any reason, could lead to an adverse effect on our cash flows, margins and profits. • Sales and marketing expense .
We compete with other hotel and resort timeshare operators for sales of VOIs based principally on location, quality of accommodations, price, service levels and amenities, financing terms, 50 Table of Contents quality of service, terms of property use, reservation systems and flexibility for VOI owners to exchange into time at other timeshare properties or other travel rewards.
We compete with other hotel and resort timeshare operators for sales of VOIs based principally on location, quality of accommodations, price, service levels and amenities, financing terms, quality of service, terms of property use, reservation systems and flexibility for VOI owners to exchange into time at other timeshare properties or other travel rewards.
We also earn fees from the rental of inventory owned by third parties. Ancillary revenues include food and beverage, retail, spa offerings and other guest services provided to resort guests. 49 Table of Contents • Cost reimbursements include costs that HOAs and developers reimburse to us.
We also earn fees from the rental of inventory owned by third parties. Ancillary revenues include food and beverage, retail, spa offerings and other guest services provided to resort guests. • Cost reimbursements include costs that HOAs and developers reimburse to us.
We estimate stand-alone selling price for Collections contracts based on historical information, including expected breakage in contracts with multiple performance obligations, and allocate the remainder of the transaction price to the sale of points-based VOIs due to the variability in observable historical prices for traditional VOI sales.
We estimate stand-alone selling price for trust products based on historical information, including expected breakage in contracts with multiple performance obligations, and allocate the remainder of the transaction price to the sale of points-based VOIs due to the variability in observable historical prices for traditional VOI sales.
For a discussion of our definition of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key Business and Financial Metrics and Terms Used by Management—EBITDA and Adjusted EBITDA.” The following table reconciles net income, our most comparable U.S.
For a discussion of our definition of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key Business and Financial Metrics—EBITDA and Adjusted EBITDA.” The following table reconciles net income, our most comparable U.S.
(2) Includes expense related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects of $9 million, $7 million and $9 million recorded in Costs of VOI sales for the years ended December 31, 2022, 2021 and 2020, respectively.
(2) Includes expense related to granting credit to customers for their existing ownership when upgrading into fee-for-service projects of $12 million, $9 million and $7 million recorded in Costs of VOI sales for the years ended December 31, 2023, 2022 and 2021, respectively.
In these securitization transactions, 48 Table of Contents special purpose entities are established to issue various classes of debt securities which are generally collateralized by a single pool of assets, consisting of timeshare financing receivables that we service and related cash deposits.
In these securitization transactions, special purpose entities are established to issue various classes of debt securities which are generally collateralized by a single pool of assets, consisting of timeshare financing receivables that we service and related cash deposits.
As of December 31, 2022, we had over 150 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada and Japan. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia and feature spacious, condominium-style accommodations with superior amenities and quality service.
As of December 31, 2023, we had over 150 properties located in the United States (“U.S.”), Europe, Mexico, the Caribbean, Canada and Asia. A significant number of our properties and VOIs are concentrated in Florida, Europe, Hawaii, California, Arizona, Nevada and Virginia and feature spacious, condominium-style accommodations with superior amenities and quality service.
(2) Represents contract sales from fee-for-service properties on which we earn commissions and brand fees. (3) Represents the net impact of deferred revenues related to the Sales of VOIs under construction that are recognized when construction is complete.
(2) Represents contract sales from fee-for-service properties on which we earn Fee-for-service commissions and brand fees. (3) Represents the net recognition of revenues related to the Sales of VOIs under construction that are recognized when construction is complete.
Historical default rates, which represent annual defaults as a percentage of each year’s beginning gross timeshare financing receivables balance, were as follows: Year Ended December 31, 2022 2021 2020 Historical default rates (1) 7.92 % 8.93 % 6.34 % (1) A loan is considered to be in default if it is equal to or greater than 121 days past due as of the prior month end.
Historical default rates, which represent annual defaults as a percentage of each year’s beginning gross timeshare financing receivables balance, were as follows: Year Ended December 31, 2023 2022 2021 Historical default rates (1) 8.56 % 7.92 % 8.93 % (1) A loan is considered to be in default if it is equal to or greater than 121 days past due as of the prior month end.
Our primary Legacy Diamond VOI product, which we acquired in the Diamond Acquisition, is the marketing and selling of beneficial interests in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection.
Our primary trust VOI product, which we acquired in the Diamond Acquisition, includes the marketing and selling of beneficial interests in one of our Collections, which are represented by an annual or biennial allotment of points that can be utilized for vacations at any of the resorts in that Collection.
We have approximately 50 sales distribution centers in various domestic and international locations. A phased rebranding of sales centers that were acquired as part of the Diamond Acquisition began in late 2021. Our marketing and sales activities are based on targeted direct marketing and a highly personalized sales approach.
We have over 60 sales distribution centers in various domestic and international locations. A phased rebranding of sales centers that were acquired as part of the Diamond Acquisition began in late 2021. Our marketing and sales activities are based on targeted direct marketing and a highly personalized sales approach.
In recent years, we have entered into fee-for-service and just-in-time agreements to sell VOIs on behalf of or acquired from third-party developers. The success and sustainability of our capital-efficient business model depends on our ability to maintain good relationships with third-party developers.
We have entered into fee-for-service and just-in-time agreements to sell VOIs on behalf of or acquire VOIs from third-party developers. The success and sustainability of our capital-efficient business model depends on our ability to maintain good relationships with third-party developers.
Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, inventory-related purchase commitments and costs associated with potential acquisitions and development projects. Our primary source of funding to satisfy these requirements is derived from sales and financing of vacation ownership intervals, management of our resorts and Clubs, and rentals of available inventory. See Item 1.
Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, inventory-related purchase commitments and costs associated with potential acquisitions and development projects, including rebranding. Our primary source of funding to satisfy these requirements is derived from sales and financing of vacation ownership intervals, management of our resorts and Clubs, and rentals of available inventory.
Cash flows 60 Table of Contents used in operating activities primarily include spending for the purchase and development of real estate for future conversion to inventory and funding our working capital needs.
Cash flows used in operating activities primarily include spending for the purchase and development of real estate for future conversion to inventory and funding our working capital needs.
Financial assets that were acquired with evidence of such credit deterioration are referred to as purchased 65 Table of Contents credit deteriorated (“PCD”) assets and reflect the acquirer’s assessment at the acquisition date. The evaluation of PCD assets is a qualitative assessment requiring significant management judgment.
Financial assets that were acquired with evidence of such credit deterioration are referred to as purchased credit deteriorated (“PCD”) assets and reflect the acquirer’s assessment at the acquisition date. The evaluation of PCD assets is a qualitative assessment requiring management judgment.
Of this amount, we have $279 million of mortgage notes that are available to be securitized, and another $338 million of mortgage notes that we expect will become eligible as soon as they meet typical milestones including receipt of first payment, deeding, or recording.
Of this amount, we have $155 million of mortgage notes that are available to be securitized, and another $317 million of mortgage notes that we expect will become eligible as soon as they meet typical milestones including receipt of first payment, deeding, or recording.
The following table exhibits our VOI inventory spending for the years ended December 31, 2022, 2021 and 2020.
The following table exhibits our VOI inventory spending for the years ended December 31, 2023, 2022 and 2021.
Our timeshare financing receivables are collateralized by the underlying VOIs and are generally structured as 10-year, fully-amortizing loans that bear a fixed interest rate ranging from 2.5% to 25% per annum. Financing propensity was 62% and 74% for the year ended December 31, 2022 and 2021, respectively.
Our timeshare financing receivables are collateralized by the underlying VOIs and are generally structured as 10-year, fully amortizing loans that bear a fixed interest rate typically ranging from 2.5% to 25% per annum. Financing propensity was 63% and 62% for the years ended December 31, 2023, and 2022, respectively.
In addition, we compete based on brand name recognition and reputation. Our primary branded competitors in the timeshare space include Marriott Vacations Worldwide, Travel + Leisure Co., Disney Vacation Club, Holiday Inn Club Vacations, Westgate Resorts, and Bluegreen Vacations.
In addition, we compete based on brand name recognition and reputation. Our primary branded competitors in the timeshare space include Marriott Vacations Worldwide, Travel + Leisure Co., Disney Vacation Club, Holiday Inn Club Vacations, Westgate Resorts, and Bluegreen Vacations, which we acquired on January 17, 2024.
Year Ended December 31, ($ in millions) 2022 2021 2020 VOI spending - owned properties (1) $ 161 $ 200 $ 106 VOI spending - fee-for-service upgrades (2) 13 10 13 Purchases and development of real estate for future conversion to inventory 8 33 36 Total VOI inventory spending $ 182 $ 243 $ 155 (1) For the years ended December 31, 2022, 2021, and 2020, our VOI inventory spending on owned properties relates to properties that are classified as Inventory on our consolidated balance sheets.
Year Ended December 31, ($ in millions) 2023 2022 2021 VOI spending - owned properties (1) $ 243 $ 161 $ 200 VOI spending - fee-for-service upgrades (2) 16 13 10 Purchases and development of real estate for future conversion to inventory 39 8 33 Total VOI inventory spending $ 298 $ 182 $ 243 (1) For the years ended December 31, 2023, 2022, and 2021, our VOI inventory spending on owned properties relates to properties that are classified as Inventory on our consolidated balance sheets.
Tour flow quality impacts key metrics such as close rate and VPG, defined in “ Key Business and Financial Metrics and Terms Used by Management—Real Estate Sales Metrics .” Additionally, the quality of tour flow impacts sales revenue and the collectability of our timeshare financing receivables.
Tour flow quality impacts key metrics such as close rate and VPG, defined in “ Key Business and Financial Metrics—Real Estate Sales Operating Metrics .” Additionally, the quality of tour flow impacts sales revenue and the collectability of our timeshare financing receivables.
Contractual Obligations Our commitments primarily relate to agreements with developers to purchase or construct vacation ownership units, operating leases and obligations associated with our debt, non-recourse debt and the related interest. As of December 31, 2022, we were committed to $4,961 million in contractual obligations over 9 years, $601 million of which will be fulfilled in 2023.
Contractual Obligations Our commitments primarily relate to agreements with developers to purchase or construct vacation ownership units, operating leases and obligations associated with our debt, non-recourse debt and the related interest. As of December 31, 2023, we were committed to $5,790 million in contractual obligations over 9 years, $563 million of which will be fulfilled in 2024.
These relationships exist with a diverse group of developers and are not significantly concentrated with any particular third party. • Construction activities . In recent years, we have entered into agreements with third parties to acquire both completed VOIs and property.
These relationships exist with a diverse group of developers and are not significantly concentrated with any particular third party. 54 Table of Contents • Construction activities . We have entered into agreements with third parties to acquire both completed VOIs and property.
This amount includes $826 million of interest on our debt and non-recourse debt, of which $144 million will be incurred in 2023. The ultimate amount and timing of certain commitments is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances.
This amount includes $1,074 million of interest on our debt and non-recourse debt, of which $224 million will be incurred in 2024. The ultimate amount and timing of certain commitments is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances.
Legacy-HGV Club members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations Club resort or any property in the Hilton system of 19 industry-leading brands across approximately 7,000 properties, as well as numerous experiential vacation options, such as cruises and guided tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program.
Based on the type of Club membership, members have the flexibility to exchange their VOIs for stays at any Hilton Grand Vacations resort, any property in the Hilton system of 22 industry-leading brands across approximately 7,500 properties, or affiliated properties, as well as numerous experiential vacation options, such as cruises and guided tours, or they have the option to exchange their VOI for various other timeshare resorts throughout the world through an external exchange program.
We have commitments from surety providers in the amount of $327 million as of December 31, 2022, which primarily consist of escrow and subsidy related bonds.
We have commitments from surety providers in the amount of $454 million as of December 31, 2023, which primarily consist of escrow, construction and subsidy related bonds.
We have commitments from surety providers in the amount of $327 million as of December 31, 2022, which primarily consist of escrow and subsidy related bonds.
We have commitments from surety providers in the amount of $454 million as of December 31, 2023, which primarily consist of escrow, construction and subsidy related bonds.
We have made commitments with developers to purchase vacation ownership units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of December 31, 2022, our inventory-related purchase commitments totaled $195 million over 2 years.
We have made commitments with developers to purchase vacation ownership units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of December 31, 2023, our inventory-related purchase commitments totaled $37 million over 1 year.
Changes to these assumptions and estimates can lead to an additional income tax (expense) benefit, which can materially change our consolidated financial statements. Legal Contingencies We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty.
Assumptions and estimates are used to determine the more-likely-than-not designation. Changes to these assumptions and estimates can lead to an additional income tax expense or benefit, which can materially change our consolidated financial statements. Legal Contingencies We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty.
Resort operations and club management segment Adjusted EBITDA increased $110 million for the year ended December 31, 2022 compared to the same period in 2021, primarily due to the increase in resort and club management and rental revenues described above, partially offset by an increase in resort and club management expenses due to personnel-related costs incurred to service increased arrivals and transaction activity along with the launch of new club features and programs.
Resort operations and club management segment Adjusted EBITDA increased $41 million for the year ended December 31, 2023 compared to the same period in 2022, primarily due to the increase in resort and club management and rental revenues described above, partially offset by an increase in resort and club management expenses due to personnel-related costs incurred to service increased arrivals and transaction activity.
The original term of our management agreements typically ranges from three to five years and the agreements are subject to periodic renewal for one- to three-year periods. Many of these agreements renew automatically unless either party provides advance notice of termination before the expiration of the term.
The original terms of our management agreements typically range from three to five years and the agreements are subject to periodic renewal for one- to three-year periods. Many of these agreements renew automatically unless either party provides advance notice of termination before the expiration of the term. We also manage and operate the Clubs and exchange programs.
For the year ended December 31, 2022, 71% of our contract sales were to our existing owners. We provide financing for members purchasing our developed and acquired inventory and generate interest income.
For the years ended December 31, 2023, 2022 and 2021, 70%, 71% and 70% of our contract sales were to our existing owners, respectively. We provide financing for members purchasing our developed and acquired inventory and generate interest income on the loans.
Real estate margin percentage is calculated by dividing real estate margin by sales revenue.
Real estate margin is calculated as a percentage by dividing real estate profit by sales revenue.
Sources and Uses of Our Cash The following table summarizes our net cash flows and key metrics related to our liquidity: Year Ended December 31, 2022 vs 2021 2021 vs 2020 ($ in millions) 2022 2021 2020 $ $ Net cash provided by (used in): Operating activities $ 747 $ 168 $ 79 $ 579 $ 89 Investing activities (97) (1,631) (33) 1,534 (1,598) Financing activities (782) 1,636 328 (2,418) 1,308 Operating Activities Cash flow provided by operating activities is primarily generated from (1) sales and financing of VOIs and (2) net cash generated from managing our resorts, Club operations and providing related rental and ancillary services.
Sources and Uses of Our Cash The following table summarizes our net cash flows and key metrics related to our liquidity: Year Ended December 31, 2023 vs 2022 ($ in millions) 2023 2022 2021 $ Net cash provided by (used in): Operating activities $ 312 $ 747 $ 168 $ (435) Investing activities (158) (97) (1,631) (61) Financing activities 183 (782) 1,636 965 Operating Activities Cash flow provided by operating activities is primarily generated from (1) sales and financing of VOIs and (2) net cash generated from managing our resorts, Club operations and providing related rental and ancillary services.
As of December 31, 2022, we had approximately 519,000 members across our club offerings.
As of December 31, 2023, we had approximately 529,000 members across our club offerings.
The Notes rank equally in right of payment with all of the Issuers’ and each guarantor’s existing and future senior indebtedness, are subordinated to all of the Issuers’ and guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including the Senior Secured Credit Facilities, rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated indebtedness and other obligations that expressly 62 Table of Contents provide for their subordination to the notes and the related guarantees, and are structurally subordinated to all existing and future indebtedness claims of holders of preferred stock and other liabilities of the Issuer’s subsidiaries that do not guarantee the Notes.
(the “Parent”), Hilton Grand Vacations Parent LLC, the Issuers, and each of the Issuer’s existing and future wholly owned domestic restricted subsidiaries (all entities that guarantee the Notes, collectively, the “Obligor group”). 68 Table of Contents The Notes rank equally in right of payment with all of the Issuers’ and each guarantor’s existing and future senior indebtedness, are subordinated to all of the Issuers’ and guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including the Senior Secured Credit Facilities, rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated indebtedness and other obligations that expressly provide for their subordination to the notes and the related guarantees, and are structurally subordinated to all existing and future indebtedness claims of holders of preferred stock and other liabilities of the Issuer’s subsidiaries that do not guarantee the Notes.
GAAP that reflects net income (loss), before interest expense (excluding non-recourse debt), a provision for income taxes and depreciation and amortization. 52 Table of Contents Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) other gains, including asset dispositions and foreign currency transactions; (ii) debt restructurings/retirements; (iii) non-cash impairment losses; (iv) share-based and other compensation expenses; and (v) other items, including but not limited to costs associated with acquisitions, restructuring, amortization of premiums and discounts resulting from purchase accounting, and other non-cash and one-time charges.
Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) other gains, including asset dispositions and foreign currency transactions; (ii) debt restructurings/retirements; (iii) non-cash impairment losses; (iv) share-based and other compensation expenses; and (v) other items, including but not limited to costs associated with acquisitions, restructuring, amortization of premiums and discounts resulting from purchase accounting, and other non-cash and one-time charges.
During 2021, we acquired Diamond Resorts and are in the process of rebranding Diamond properties and sales centers to the Hilton Grand Vacations brand and Hilton standards.
During 2021, we acquired Diamond Resorts and are in the process of rebranding Diamond properties and sales centers to the Hilton Grand Vacations brand and Hilton standards. On January 17, 2024 (the "Bluegreen Acquisition Date"), we completed the Bluegreen Acquisition.
Business for more information on our reportable segments and sources of revenue. 59 Table of Contents We finance our short- and long-term liquidity needs primarily through cash and cash equivalents, cash generated from our operations, draws on our revolver credit facility, our non-recourse revolving timeshare credit facility (“Timeshare Facility”), and through periodic securitizations of our timeshare financing receivables. • In April 2022, we completed a securitization of $246 million of gross timeshare financing receivables.
See Item 1. Business for more information on our reportable segments and sources of revenue. We finance our short- and long-term liquidity needs primarily through cash and cash equivalents, cash generated from our operations, draws on our revolver credit facility, our non-recourse revolving timeshare credit facility (“Timeshare Facility”), and through periodic securitizations of our timeshare financing receivables.
Non-Operating Expenses Year Ended December 31, 2022 vs 2021 2021 vs 2020 (1) ($ in millions) 2022 2021 2020 $ % $ % Interest expense $ 142 $ 105 $ 43 $ 37 35.2 $ 62 NM Equity in earnings from unconsolidated affiliates (13) (10) (5) (3) 30.0 (5) 100.0 Other loss (gain), net 1 26 (3) (25) (96.2) 29 NM Income tax expense (benefit) 129 93 (79) 36 38.7 172 NM (1) Fluctuation in terms of percentage change is not meaningful.
Non-Operating Expenses Year Ended December 31, 2023 vs 2022 Variance (1) ($ in millions) 2023 2022 2021 $ % Interest expense $ 178 $ 142 $ 105 $ 36 25.4 Equity in earnings from unconsolidated affiliates (12) (13) (10) 1 (7.7) Other (gain) loss, net (2) 1 26 (3) NM Income tax expense 136 129 93 7 5.4 (1) NM - Fluctuation in terms of percentage change is not meaningful.
We entered into a license agreement with Hilton, which was subsequently amended and restated in connection with the Diamond Acquisition, granting us the right to use the Hilton-branded trademarks, trade names and related intellectual property in our business for the term of the agreement.
We are party to a license agreement with Hilton granting us the right to use the Hilton-branded trademarks, trade names and related intellectual property in our business for the term of the agreement.
In periods where previously deferred Sales of VOIs and related direct costs are recognized upon construction completion, margin percentages will generally expand as the indirect marketing and selling costs associated with these sales were recognized in prior periods. 55 Table of Contents The following table represents deferrals and recognitions of Sales of VOIs revenue and direct costs for properties under construction: Year Ended December 31, 2022 vs 2021 2021 vs 2020 ($ in millions) 2022 2021 2020 $ $ Sales of VOIs (deferrals) $ (67) $ (112) $ (85) $ 45 $ (27) Sales of VOIs recognitions 98 245 — (147) 245 Net Sales of VOIs recognitions (deferrals) 31 133 (85) (102) 218 Cost of VOI sales (deferrals) (22) (36) (23) 14 (13) Cost of VOI sales recognitions 33 74 — (41) 74 Net Cost of VOI sales recognitions (deferrals) 11 38 (23) (27) 61 Sales and marketing expense (deferrals) (10) (17) (13) 7 (4) Sales and marketing expense recognitions 14 36 — (22) 36 Net Sales and marketing expense recognitions (deferrals) 4 19 (13) (15) 32 Net construction recognitions (deferrals) $ 16 $ 76 $ (49) $ (60) $ 125 Resort Operations and Club Management Resort operations and club management segment revenues increased $497 million for the year ended December 31, 2022, compared to the same period in 2021.
In periods where previously deferred Sales of VOIs and related direct costs are recognized upon construction completion, margin percentages will generally expand as the indirect marketing and selling costs associated with these sales were recognized in prior periods. 62 Table of Contents The following table represents deferrals and recognitions of Sales of VOIs revenue and direct costs for properties under construction: Year Ended December 31, 2023 vs 2022 ($ in millions) 2023 2022 2021 $ Sales of VOIs (deferrals) $ (39) $ (67) $ (112) $ 28 Sales of VOIs recognitions 4 98 245 (94) Net Sales of VOIs (deferrals) recognitions (35) 31 133 (66) Cost of VOI sales (deferrals) (10) (22) (36) 12 Cost of VOI sales recognitions 1 33 74 (32) Net Cost of VOI sales (deferrals) recognitions (9) 11 38 (20) Sales and marketing expense (deferrals) (6) (10) (17) 4 Sales and marketing expense recognitions 1 14 36 (13) Net Sales and marketing expense (deferrals) recognitions (5) 4 19 (9) Net construction (deferrals) recognitions $ (21) $ 16 $ 76 $ (37) Resort Operations and Club Management Resort operations and club management segment revenues increased $94 million for the year ended December 31, 2023, compared to the same period in 2022, primarily driven by greater Rental and ancillary revenue as a result of increased average daily rates.
Refer to “—Resort and Club Management” and “—Rental and Ancillary Services” for further discussion on the revenues and expenses of the resort operations and club management segment.
Refer to “—Resort and Club Management” and “—Rental and Ancillary Services” for further discussion on the revenues and expenses of the resort operations and club management segment. Real Estate Sales and Financing Segment See “Reconciliation of Profit Measures to GAAP Measure” above.
Our operations primarily consist of selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs”, “VOI”) for us and third parties; financing and servicing loans provided to consumers for their timeshare purchases; operating resorts and timeshare plans; and managing both our points-based Hilton Grand Vacations Club and Hilton Club exchange program (collectively the “Legacy-HGV Club”) and the Diamond points-based multi-resort timeshare plans and exchange programs (the “Legacy-Diamond Clubs”).
Our operations primarily consist of selling vacation ownership intervals and vacation ownership interests (collectively, “VOIs” or “VOI”) for us and third parties; financing and servicing loans provided to consumers for their timeshare purchases; operating resorts and timeshare plans; and managing our clubs and exchange programs.
Real Estate Sales and Financing Our primary Legacy-HGV product is the marketing and selling of fee-simple VOIs deeded in perpetuity and right to use real estate interests, developed either by us or by third parties.
We operate our business across two segments: (1) real estate sales and financing; and (2) resort operations and club management. Real Estate Sales and Financing Our primary deeded product includes the marketing and selling of fee-simple VOIs deeded in perpetuity and right to use real estate interests, developed either by us or by third parties.
Financing revenue increased primarily due to an increase in the weighted average interest rate and an increase in the timeshare financing receivables portfolio.
Financing revenue increased by $40 million primarily due to interest income driven by an increase in our loan portfolio and an increase in the weighted-average interest rate.
In order to estimate the standalone selling prices for products other than Collections contracts, we primarily rely on the expected cost-plus margin and adjusted market assessment approaches.
When allocating the transaction price in the arrangement, we may not have observable standalone sales for all the performance obligations in these contracts. In order to estimate the standalone selling prices for products other than trust products, we primarily rely on the expected cost-plus margin and adjusted market assessment approaches.
Sales of owned, including just-in-time, inventory generally result in greater Adjusted EBITDA contributions, while fee-for-service sales require less initial investment and allow us to accelerate our sales 47 Table of Contents growth.
The just-in-time agreements enable us to source VOI inventory in a manner that allows us to correlate the timing of acquisition of the inventory with the sale to purchasers. Sales of owned, including just-in-time, inventory generally result in greater Adjusted EBITDA contributions, while fee-for-service sales require less initial investment and allow us to accelerate our sales growth.
GAAP financial measure, to EBITDA and Adjusted EBITDA: Year Ended December 31, 2022 vs 2021 (1) 2021 vs 2020 (1) ($ in millions) 2022 2021 2020 $ % $ % Net income (loss) $ 352 $ 176 $ (201) $ 176 100.0 $ 377 NM Interest expense 142 105 43 37 35.2 62 NM Income tax expense (benefit) 129 93 (79) 36 38.7 172 NM Depreciation and amortization 244 126 45 118 93.7 81 NM Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates 2 1 2 1 100.0 (1) (50.0) EBITDA 869 501 (190) 368 73.5 691 NM Other loss (gain), net 1 26 (3) (25) (96.2) 29 NM Share-based compensation expense 46 48 15 (2) (4.2) 33 NM Impairment expense 17 2 209 15 NM (207) (99.0) Acquisition and integration-related expense 67 106 — (39) (36.8) 106 100.0 Other adjustment items (2) 65 33 26 32 97.0 7 26.9 Adjusted EBITDA $ 1,065 $ 716 $ 57 $ 349 48.7 $ 659 NM (1) NM - fluctuation in terms of percentage change is not meaningful.
GAAP financial measure, to EBITDA and Adjusted EBITDA: Year Ended December 31, 2023 vs 2022 (1) ($ in millions) 2023 2022 2021 $ % Net income $ 313 $ 352 $ 176 $ (39) (11.1) Interest expense 178 142 105 36 25.4 Income tax expense 136 129 93 7 5.4 Depreciation and amortization 213 244 126 (31) (12.7) Interest expense, depreciation and amortization included in equity in earnings from unconsolidated affiliates 2 2 1 — — EBITDA 842 869 501 (27) (3.1) Other (gain) loss, net (2) 1 26 (3) NM Share-based compensation expense 40 46 48 (6) (13.0) Impairment expense 3 17 2 (14) (82.4) Acquisition and integration-related expense 68 67 106 1 1.5 Other adjustment items (2) 54 65 33 (11) (16.9) Adjusted EBITDA $ 1,005 $ 1,065 $ 716 $ (60) (5.6) (1) NM - fluctuation in terms of percentage change is not meaningful.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. 53 Table of Contents Results of Operations Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 The following discussion and analysis of our financial condition and results of operations is for the year ended December 31, 2022 compared with the year ended December 31, 2021.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
We use a prescribed more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return if there is uncertainty in income taxes recognized in the financial statements. Assumptions and estimates are used to determine the more-likely-than-not designation.
A change in these assumptions may increase or decrease our valuation allowance resulting in an increase or decrease in our effective tax rate, which could materially affect our consolidated financial statements. 71 Table of Contents We use a prescribed more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return if there is uncertainty in income taxes recognized in the financial statements.
Financing Year Ended December 31, 2022 vs 2021 2021 vs 2020 ($ in millions) 2022 2021 2020 $ % $ % Interest income $ 235 $ 157 $ 141 $ 78 49.7 $ 16 11.3 Other financing revenue 32 26 24 6 23.1 2 8.3 Financing revenue 267 183 165 84 45.9 18 10.9 Consumer financing interest expense 47 30 31 17 56.7 (1) (3.2) Other financing expense 56 35 22 21 60.0 13 59.1 Financing expense 103 65 53 38 58.5 12 22.6 Financing profit $ 164 $ 118 $ 112 $ 46 39.0 $ 6 5.4 Financing profit margin 61.4 % 64.5 % 67.9 % Financing profit increased by $46 million for the year ended December 31, 2022, compared to the same period in 2021, driven by an increase of $84 million in financing revenue, partially offset by an increase in financing expense of $38 million.
Financing Year Ended December 31, 2023 vs 2022 Variance ($ in millions) 2023 2022 2021 $ % Interest income $ 273 $ 235 $ 157 $ 38 16.2 Other financing revenue 34 32 26 2 6.3 Financing revenue 307 267 183 40 15.0 Consumer financing interest expense 48 47 30 1 2.1 Other financing expense 51 56 35 (5) (8.9) Financing expense 99 103 65 (4) (3.9) Financing profit $ 208 $ 164 $ 118 $ 44 26.8 Financing profit margin 67.8 % 61.4 % 64.5 % Financing profit increased by $44 million for the year ended December 31, 2023, compared to the same period in 2022, driven by an increase of $40 million in financing revenue, accompanied by a decrease in financing expense of $4 million.
Key Business and Financial Metrics and Terms Used by Management Real Estate Sales Operating Metrics We measure our performance using the following key operating metrics: • Contract sales represents the total amount of VOI products (fee-for-service, just-in-time, developed, and points-based) under purchase agreements signed during the period where we have received a down payment of at least 10% of the contract price.
Increases in interest rates would increase the consumer financing interest expense we pay on the Timeshare Facility and could adversely affect our financing operations in future securitization or other debt transactions, affecting net cash flow, margins and profits. 56 Table of Contents Key Business and Financial Metrics Real Estate Sales Operating Metrics We measure our performance using the following key operating metrics: • Contract sales represents the total amount of VOI products (fee-for-service, just-in-time, developed, and points-based) under purchase agreements signed during the period where we have received a down payment of at least 10% of the contract price.
Income tax expense also increased for the year ended December 31, 2022 compared to the same period in 2021 consistent with increased pre-tax income. Liquidity and Capital Resources Overview Our cash management objectives are to maintain the availability of liquidity, minimize operational costs, remit debt payments and fund future acquisitions and development projects.
Liquidity and Capital Resources Overview Our cash management objectives are to maintain the availability of liquidity, minimize operational costs, remit debt payments and fund future acquisitions and development projects.
Real Estate Sales and Financing Segment Real Estate Year Ended December 31, 2022 vs 2021 2021 vs 2020 (1) ($ in millions, except Tour flow and VPG) 2022 2021 2020 $ % $ % Contract sales $ 2,381 $ 1,352 $ 528 $ 1,029 76.1 $ 824 NM Adjustments: Fee-for-service sales (2) (693) (424) (275) (269) 63.4 (149) 54.2 Provision for financing receivables losses (142) (121) (75) (21) 17.4 (46) 61.3 Reportability and other: Net recognition (deferral) of sales of VOIs under construction (3) 31 133 (85) (102) (76.7) 218 NM Fee-for-service sale upgrades, net 18 14 16 4 28.6 (2) (12.5) Other (4) (104) (71) (1) (33) 46.5 (70) NM Sales of VOIs, net $ 1,491 $ 883 $ 108 $ 608 68.9 $ 775 NM Tour flow 517,117 298,044 127,085 219,073 170,959 VPG $ 4,432 $ 4,332 $ 3,889 $ 100 $ 443 (1) NM - fluctuation in terms of percentage change is not meaningful.
Real Estate Year Ended December 31, 2023 vs 2022 Variance (1) ($ in millions, except Tour flow and VPG) 2023 2022 2021 $ % Contract sales $ 2,310 $ 2,381 $ 1,352 $ (71) (3.0) Adjustments: Fee-for-service sales (2) (644) (693) (424) 49 (7.1) Provision for financing receivables losses (171) (142) (121) (29) 20.4 Reportability and other: Net (deferral) recognition of sales of VOIs under construction (3) (35) 31 133 (66) NM Fee-for-service sale upgrades, net 19 18 14 1 5.6 Other (4) (63) (104) (71) 41 (39.4) Sales of VOIs, net $ 1,416 $ 1,491 $ 883 $ (75) (5.0) Tour flow 608,367 517,117 298,044 91,250 VPG $ 3,760 $ 4,432 $ 4,332 $ (672) (1) NM - fluctuation in terms of percentage change is not meaningful.
Our services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including, reports, budgets and projections, arranging for annual audits and maintenance fee billing and collections and personal employment training and oversight.
Our services include day-to-day operations of the resorts, maintenance of the resorts, preparation of books and financial records including reports, budgets and projections, arranging for annual audits and maintenance fee billing and collections and employment training and personnel oversight. 53 Table of Contents Our HOA management agreements provide for a cost-plus management fee, which means we generally earn a fee equal to 10% to 15% of the costs to operate the applicable resort.
(4) Includes adjustments for revenue recognition, including amounts in rescission and sales incentives. 56 Table of Contents Contract sales increased $1,029 million for the year ended December 31, 2022, compared to the same period in 2021.
(4) Includes adjustments for revenue recognition, including amounts in rescission and sales incentives. 63 Table of Contents Contract sales decreased $71 million for the year ended December 31, 2023, compared to the same period in 2022, primarily due to a 15.2% decrease in VPG, and partially offset by a 17.6% increase in tour flow.
We then recognize the revenue allocated to each performance obligation as the related performance obligation is satisfied. See Note 2: Summary of Significant Accounting Policies in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion.
See Note 2: Summary of Significant Accounting Policies and Note 3: Acquisitions in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information.
Real estate sales and financing Adjusted EBITDA increased by $328 million compared to the same period in 2021, primarily due to the revenue increases discussed above. Refer to “—Real Estate” and “—Financing” for further discussion on the revenues and expenses of the real estate sales and financing segment.
Refer to “—Real Estate” and “—Financing” for further discussion on the revenues and expenses of the real estate sales and financing segment.
We utilize independent valuation specialists under our supervision for certain of our assignments of fair value. We record the net assets and results of operations of an acquired entity in our consolidated financial statements from the acquisition date through period-end.
We record the net assets and results of operations of an acquired entity in our consolidated financial statements from the acquisition date through period-end. We expense acquisition-related expenses as incurred and include such expenses within Acquisition and integration-related expense on our consolidated statements of operations.
(2) For the years ended December 31, 2022, 2021 and 2020, this amount includes costs associated with restructuring, one-time charges and other non-cash items.
(2) For the years ended December 31, 2023, 2022 and 2021, this amount includes costs associated with restructuring, one-time charges, other non-cash items, and amortization of fair value premiums and discounts resulting from purchase accounting. 60 Table of Contents The following table reconciles our segment Adjusted EBITDA to Adjusted EBITDA.
Additionally, cash flow from operations will also vary depending upon our sales mix of VOIs; over time, we generally receive more cash from the sale of an owned VOI as compared to that from a fee-for-service sale.
Additionally, cash flow from operations will also vary depending upon our sales mix of VOIs; over time, we generally receive more cash from the sale of an owned VOI as compared to that from a fee-for-service sale. 67 Table of Contents The change in net cash flows provided by operating activities for the year ended December 31, 2023, compared to the same period in 2022 was primarily due to increases in cash utilized for working capital and purchase of inventory from a third party developer.

… 126 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed4 unchanged
Biggest changeThe interest rates are based on one-month LIBOR, with the exception of the Timeshare Facility which is based on one-month Secured Overnight Financing Rate ("SOFR"), and we are most vulnerable to changes in these rates. We primarily use interest rate swaps as part of our interest rate risk management strategy for our variable-rate debt.
Biggest changeWe primarily use interest rate swaps as part of our interest rate risk management strategy for our variable-rate debt. We intend to securitize timeshare financing receivables in the asset-backed financing market periodically. We expect to secure fixed-rate funding to match our fixed-rate timeshare financing receivables.
To the extent we continue to have variable-rate borrowings and continue to utilize variable-rate indebtedness in the future, any increase in interest rates beyond amounts covered under any corresponding derivative financial instruments, particularly if sustained, could have an adverse effect on our net income (loss), cash flows and financial position.
To the extent we continue to have variable-rate borrowings and continue to utilize variable-rate indebtedness in the future, any increase in interest rates beyond amounts covered under any corresponding derivative financial instruments, particularly if sustained, could have an adverse effect on our net income, cash flows and financial position.
(2) Amount excludes unamortized deferred financing costs. (3) Includes debt and non-recourse debt. Foreign Currency Exchange Rate Risk Though the majority of our operations are conducted in United States dollar (“U.S. dollar”), we are exposed to earnings and cash flow volatility associated with changes in foreign currency exchange rates.
(2) Amount excludes unamortized deferred financing costs. (3) Includes debt and non-recourse debt. 72 Table of Contents Foreign Currency Exchange Rate Risk Though the majority of our operations are conducted in United States dollar (“U.S. dollar”), we are exposed to earnings and cash flow volatility associated with changes in foreign currency exchange rates.
For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that an adverse change in exchange rates of 10% would be considered immaterial as of December 31, 2022. 67 Table of Contents
For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that an adverse change in exchange rates of 10% would be considered immaterial as of December 31, 2023. 73 Table of Contents
Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt, comprised of the term loans, Revolver and our Timeshare Facility, of which the Timeshare Facility is without recourse to us.
Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt, comprised of the term loans, Revolver and our Timeshare Facility, of which the Timeshare Facility is without recourse to us. The interest rates are based on one-month Secured Overnight Financing Rate (“SOFR”), and we are most vulnerable to changes in these rates.
We intend to securitize timeshare financing receivables in the asset-backed financing market periodically. We expect to secure fixed-rate funding to match our fixed-rate timeshare financing receivables. However, if we have variable- 66 Table of Contents rate debt in the future, we will monitor the interest rate risk and evaluate opportunities to mitigate such risk through the use of derivative instruments.
However, if we have variable-rate debt in the future, we will monitor the interest rate risk and evaluate opportunities to mitigate such risk through the use of derivative instruments.
The following table sets forth the contractual maturities, weighted-average interest rates and the total fair values as of December 31, 2022, for our financial instruments that are materially affected by interest rate risk: Maturities by Period ($ in millions) Weighted Average Interest Rate (1) 2023 2024 2025 2026 2027 There- after Total (2) Fair Value Assets: Fixed-rate securitized timeshare financing receivables 13.948 % $ 124 $ 130 $ 132 $ 134 $ 131 $ 399 $ 1,050 $ 946 Fixed-rate unsecuritized timeshare financing receivables 15.210 % 111 112 125 138 150 782 1,418 964 Liabilities: (3) Fixed-rate debt 4.428 % 266 214 159 130 93 1,526 2,388 2,126 Variable-rate debt 6.981 % 16 15 112 53 13 1,219 1,428 1,417 (1) Weighted-average interest rate as of December 31, 2022.
The following table sets forth the contractual maturities, weighted-average interest rates and the total fair values as of December 31, 2023, for our financial instruments that are materially affected by interest rate risk: Maturities by Period ($ in millions) Weighted Average Interest Rate (1) 2024 2025 2026 2027 2028 There- after Total (2) Fair Value Assets: Fixed-rate securitized timeshare financing receivables 14.275 % $ 124 $ 130 $ 135 $ 133 $ 122 $ 340 $ 984 $ 918 Fixed-rate unsecuritized timeshare financing receivables 15.070 % 154 157 170 185 202 1,009 1,877 1,371 Liabilities: (3) Fixed-rate debt 4.718 % 259 206 163 119 94 1,500 2,341 2,194 Variable-rate debt 7.641 % 13 413 451 13 1,219 124 2,233 2,244 (1) Weighted-average interest rate as of December 31, 2023.

Other HGV 10-K year-over-year comparisons